Energy crisis forces Labor to mull 'band aid solutions' for failing metal smelters as energy crisis plagues manufacturers

Sky News AU

4 days ago

The Albanese government has been accused of considering 'band aid solutions' for major manufacturers struggling to stay afloat amid soaring power prices under Labor's renewable energy transition.
Industry Minister Tim Ayres said Labor could provide taxpayer funds and long-term loans to assist ailing smelters crippled by energy costs and China-instigated trade distortions.
'The truth is, if these facilities didn't exist, governments would be trying to build them,' Mr Ayres told The Australian Financial Review.
It comes as many smelters and refineries struggle to stay afloat in Australia.
Rio Tinto-owned Tomago, which is Australia's largest aluminium producer, is seeking billions of dollars from the federal and NSW governments amid high power prices and as cost-effective and consistent renewables remain largely unavailable.
Two Australian smelters owned by international minerals and metals producer Nyrstar are also under threat and the local CEO has begged various state and federal governments for a handout as losses mount to "tens of millions a month".
Meanwhile, Glencore's local smelters and refineries similarly struggle in a massive blow to the Albanese government's Future Made in Australia plans.
Centre for Independent Studies policy analyst Zoe Hilton told SkyNews.com.au this revelation from Mr Ayres showed how Labor's net zero plans were hurting local industries.
'The government has shot itself in the foot on energy policy,' Ms Hilton said.
'The consequences of its commitment to a wind- and solar-dominated grid are being acutely felt by smelters and the pain will continue until the root cause is addressed.
'Equity injections and long-term loans for smelters are merely band aid solutions that will force taxpayers to pay twice – first for underwriting renewable energy projects and second for propping up industries that can't afford electricity price hikes driven by renewables.'
Labor has vowed to make the nation a 'renewable energy superpower' with an energy mix of 82 per cent renewables by 2030 and green energy driving local manufacturing.
The Albanese government is looking to boost this through production tax credits for leading Australian aluminium smelters, including Tomago, and give $2 billion back to help with the energy transition.
Concerns over Australia's long term manufacturing capabilities also arose from AI Group chief executive Innes Willox who warned that 'bailouts cannot be for business as usual'.
'Short-term relief measures must be complemented by a long-term perspective that addresses the energy, skills and technology challenges weighing on our metals sector,' Mr Willox told SkyNews.com.au.
He said the upcoming productivity roundtable hosted by Treasurer Jim Chalmers, where the Albanese government's second term economic agenda will come under the microscope, is crucial for examining problems plaguing manufacturing in Australia.
'It is a seminal moment for industry and a legacy moment for the country as a whole,' the AI Group boss said.
'We just can't keep going as we have been because what's got us to this point isn't going to make us successful in the future.'
Soaring energy prices have particularly hurt the metals industry in Australia since the pandemic.
Mr Willox said manufacturer gas costs are up 48 per cent for the past five years and for trade exposed industries like metals, passing these customers onto consumers is not possible.
Other concerns about metal smelting in Australia come from Nyrstar boss Matthew Howell, who recently asked the government for help upgrading the company's facilities to make it more competitive in the global market.
Mr Howell said the Chinese government subsidises companies to purchase Australian materials at prices local smelters could not afford.
China then subsidises the processing of these materials and enforces export controls on the finished metals, hurting Australian producers in the process.
Meanwhile, Glencore's head of corporate affairs Cass McCarthy lamented the company's ability to compete while high energy and labour costs hurt its profitability.
'This is bigger than Glencore and goes to the heart of state and federal government critical minerals policies when you have a number of smelters and refineries across Australia clearly at breaking point,' Ms McCarthy said, per The Australian.
The NSW government in June confirmed it was in talks to save Tomago, which uses about 10 per cent of the state's power supply and makes about 37 per cent of the nation's aluminium.
Premier Chris Minns stressed Tomago was a 'big employer in NSW, it's a dynamic part of the state, the Hunter and manufacturing is a big part of its future'.
'It's difficult for me to speculate about what the next steps are,' Mr Minns told reporters.
'In order for us to have an effective intervention, we need to have commercial discussions with the owners and operators of (Tomago). That's what we're doing.'
Rio Tinto's chief executive Jakob Stausholm earlier this year flagged concerns about the producer's electricity costs where he warned power price contracts beyond 2028 would render Tomago unviable.