He Kōrero PākahiTīwai, Southland’s economic anchor?

Opinion nā Brett Ellison

If you take a back road into Dunedin, via Waitati, over the hill and into Port Chalmers, you may notice an old farm shed overlooking the harbour. The shed itself is rather nondescript; corrugated iron with a slight coating of rust. But painted along the shed are the words: “Aramoana, save it”, preceded by an arrow sign (pointing towards the village of Aramoana).

The sign refers to a 1970s public campaign that resisted the establishment of an aluminium smelter at the entrance to Otago Harbour. The campaign gained significant attention. The acclaimed artist Ralph Hotere (Te Aupōuri, Te Rarawa) produced a series of political artworks, one of which sold at auction for $183,000 in 2012.

Ōtākou whānui also had concerns. A smelter on the opposite side of the harbour would have been an eyesore, whilst mahinga kai resources could have been impacted, particularly the rich tuaki beds.

The smelter was part of former Prime Minister Rob Muldoon’s series of “Think Big” projects – large-scale initiatives that were envisaged to act as economic anchors. The planning for Aramoana was advanced enough for Fletchers and Alusuisse (a Swiss industrial company) to form a joint venture, in anticipation of preferential supply from the yet-to-be-built Clyde Dam. Ultimately, the economics tipped the balance as the price for aluminium dived sufficiently to discourage a project of this size and location, particularly considering Te Waipounamu already had one down the road.

Tīwai Point (opened in 1971) remains New Zealand’s only aluminium smelter. The location was selected as aluminium requires a large and very reliable power source. The proximity to the proposed Manapōuri Power Station, therefore, made it an attractive location. In addition, Tīwai Point was close to the deep sea port of Bluff, an economic engine for Awarua whānau for generations.

The scale of the smelter is impressive. It remains one of the largest industrial facilities in New Zealand. Tīwai Point contributes $525 million to the Southland economy, employing close to 750 people, whilst supporting an estimated 3000 additional jobs. Export revenue is around $1 billion each year, whilst the smelter consumes nearly 15 per cent of all the power produced in New Zealand.

In recent months, there has been some uncertainty in negotiations between the owners of the smelter (Pacific Aluminium) and Meridian Energy in respect to the contract for 18 years electricity supply. Since that contract was signed in 2007, the returns from the aluminium market have decreased by nearly 40 per cent. Aluminium is the world’s second most-used metal, and the market is very vulnerable to fluctuations in pricing and volume in export markets, and to commodity price risks.

There has been significant debate on the future of the smelter, particularly as the Government prepares Meridian for partial privatisation. Perhaps too much attention has been focused on the assumption that the mining giant Rio Tinto really gives a proverbial. It is widely known that Rio Tinto is interested in selling its Pacific Aluminium unit, which includes Tīwai Point, and smelters in Australia, which are the worst-performing and most challenging of its global aluminium interests.

So, what would be the impact on Southland should the smelter be shut down? There are claims a closure could ruin the regional economy. The closure of Tīwai Point would certainly hurt. The loss of 750 direct jobs, and the impacts on their families (about 1600 children have parents who work at the smelter), would have a significant impact.

But the Southland economy is not dependent on aluminium. The dairy sector is strong, and Southland is rich in seafood resources with very high demand. In fact, the agriculture and fishing sectors are easily the largest employers in Southland, accounting for nearly 18 per cent of total employment in 2010 (the aluminium sector shed jobs in this period).

While the smelter has been around for more than 30 years, it would be naive to assume that Tīwai Point will remain an economic anchor for Southland. Economic anchors are stoic, stay the test of time, and continue to contribute to community well-being. Pacific Aluminium’s short-term focus is about making profits, the higher the better, and positioning Tīwai Point for sale.