Greg Combet (Charlton, Australian Labor Party, Minister for Climate Change and Energy Efficiency) Share this | Hansard source

I appreciate the question because it gives me the opportunity to put on the record once again a number of the difficulties that are confronting the aluminium-smelting sector in particular. Essentially, there has been a very significant fall in aluminium prices on the London Metal Exchange—in fact, a 40 per cent depreciation in prices over the last few years—and that is impacting on the profitability of much of the aluminium industry within our domestic economy. Added to that, given the strength of the economy and the investment in the resources sector in particular, we have been experiencing a high dollar, above parity with the US dollar, for some months, and for an extended period of time the value of the dollar has been well above its historical average. It could be that that situation will be sustained for a significant period of time, given the strength of the economy and the drivers of the high valuation of the Australian dollar in the marketplace. Those two factors alone—low prices, associated with oversupply in the international market, and the high value of the Australia dollar—are impacting significantly.

Added to that, of course, are pressures arising from the fact that long-term electricity contracts that had been negotiated between various state governments or state instrumentalities with the aluminium smelters, as is the case particularly in New South Wales and Victoria, in recent times and in the coming years are expiring. They are contracts that have had perhaps a 25- to 30-year term. Many of those contracts have involved a discounted electricity price for supply for the aluminium smelters involved, and the repricing of those electricity contracts by the relevant generators or state instrumentalities is a very material factor in the viability of these businesses. There has been extensive discussion between the aluminium industry, and the smelters in particular, and the various state governments and state instrumentalities in relation to that issue, including in Victoria. It was one of the key issues behind the decision by Norsk Hydro a month or so ago to close the aluminium smelter at Kurri Kurri in my own region, the Hunter. To put that into a fair historical perspective, it was a decision of the New South Wales government, followed by a decision of the O'Farrell government, that they would not renew the electricity contract on terms sufficiently favourable to Norsk Hydro to allow the continued operation of that smelter.

All of that—low prices, the high dollar and electricity contracts—is yet again being completely misrepresented by the coalition in a misleading way. They are trying to attribute these problems to carbon pricing, which is completely fallacious. To put that in context, aluminium smelting is an industry that in 2012-13 will attract for free an average of 94.5 per cent of the permits it will require under the carbon price, reducing the effective average carbon price in aluminium smelting to $1.30 a tonne. It is a trade-exposed industry, and that is why the government has taken a significant step. That is the assistance that has been provided. Aluminium companies are in constant discussion with the government about these issues and, particularly with my other portfolio hat on, it is not surprising that I would be having discussions pretty regularly with the aluminium sector and others who are feeling some of these pressures—for example, the steel industry—and continuing to monitor the situation.

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