Economic Recovery

Tiwai Point closure to hit 2,600 jobs

Rio Tinto finally pulls pin on Tiwai Point smelter, which employs 2,600 directly and indirectly, uses 13 percent of NZ's power, and exports $1.2b of aluminium each year

This time they weren't bluffing.

Rio Tinto has finally announced it will close the Tiwai Point aluminium smelter at Bluff by August 2021 with the loss of 1,000 jobs directly and a further 1,600 jobs indirectly. 

It is a massive shock to the Government's post-Covid-19 recovery strategy and its hopes the big privately-run electricity generators (Meridian, Mercury, Genesis, Contact and Trustpower) would build significant amounts of extra renewable electricity in the coming decades. They have warned for years they would stop building new wind and geothermal plants if Tiwai Point was to close, to avoid a collapse in prices. 

The decision is a massive blow for the Southland economy, will remove $1.2 billion of export receipts from the current account and will shock the electricity industry, given Tiwai Point uses around 12 percent of New Zealand's electricity supply.

The decision is a major headache for the Government, which must decide now how to use the infrastructure at Tiwai Point, possibly for some other electricity use, including producing hydrogen.

The decision will also significantly increase net global greenhouse gas emissions because the aluminium produced by Tiwai Point is likely to be replaced by plants in Asia that use coal-fired electricity to smelt bauxite into the metal used in jets, cars and other industrial users.

Aluminium at the Tiwai Pt smelter. Photo: Marc Daalder

The previous Government managed to avoid a closure in 2013 when then-Finance Minister Bill English agreed to a $30 million payment to the Rio Tinto-controlled NZ Aluminium Smelters (NZAS) and Meridian agreed to another secret power supply deal with the smelter selling it discounted power in bulk.

The deal helped protect the values of the three then-state-owned power companies as they were floated on the stock exchange in 2013 and 2014. The deal was done after the sale of Mighty River (Mercury), but just before the Meridian sale and the Genesis. It also removed the issue ahead of the 2014 election.

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