Closure may strain local labour market

    New Zealand's Aluminium Smelter at Tiwai Point. Photo: File

    AN increasingly-likely smelter closure spells a probable overload of Southland’s local labour market, a recently released report explains.

    Commissioned by Great South, the Southland Region post-Covid Scenario Analysis Report authored by Infometrics senior economist Nick Brunsdon says, during the next five years, the performance of Southland’s economy is largely dependent on the status of the Tiwai Point aluminium smelter and New Zealand’s economic recovery following Covid-19.

    Set to close in 2024, the smelter was a major contributor to Southland’s economy.

    It employed 800 workers directly in “relatively high-paying employment”, while also supporting 1500 workers throughout its suppliers in the region.

    The report states its closure is increasingly more likely, and while the delay provides the opportunity to develop alternative employment options, the loss of jobs will flood the local labour market.

    “The nature of Tiwai’s operation, with a high fixed cost base, means that the closure is likely to be abrupt rather than staggered over time.”

    This would mean the labour market would not be able to accommodate all job-seekers, at least in the short term.

    However, over time, retirement and employment growth was likely to absorb the number of workers.

    New Zealand’s Aluminium Smelter chief executive and general manager Stew Hamilton preiously said the smelter would be running at full production to 2024.

    The report also says the closure of the smelter will be followed by an estimated $350 million five-year remediation project at the site, which may provide medium term employment opportunities for redundant workers; about 300-400 jobs.

    While the alternative industry options, such as developing aquaculture or hydrogen production, were listed, these were unlikely to accommodate all Tiwai workers alone.

    “The development of employment opportunities across a range of new and old industries is more likely.”

    Any new development would also take time to complete.

    The report says the global aluminium market is becoming dominated by highly efficient and low-cost smelters in Canada and China, which Tiwai Point was unable to compete with.

    “However, there are early signs of a price premium emerging for high-purity aluminium with low carbon emissions.

    “This premium would improve the profitability of Tiwai Point and enable it to continue operating into the long term,” the report says.