By Frank Enright
Before the damming of the Franklin River became a national issue in the early '80s, Comalco would boast that its aluminium smelter at Bell Bay in northern Tasmania consumed as much power as the city of Adelaide. Although the company no longer makes the boast, it still uses the power. More recently, Victorian Premier Jeff Kennett complained of the huge subsidies paid to Alcoa, the other aluminium producer, in that state, declaring that Victorians "simply cannot afford it." However, they continue to pay.
In New Zealand a new contract was signed in December following six years of negotiations between Comalco and the government. It gives the company access to greater amounts of electricity production. Comalco's smelter at Tiwai already uses 17% of that country's electricity, paying only a fraction of the price charged to the general public. The two smaller parliamentary parties, the Alliance and New Zealand First, opposed the deal, which was rushed through parliament just before Christmas.
"The Alliance opposed the contract because Comalco's windfalls are paid for by low income people who face higher prices for their electricity, as do small businesses and exporters.
"Why should the rest of us pay more for our daily power to extend a multinational's quarter of a century of windfalls?", asked Alliance leader Jim Anderton.
Everywhere, the level of public subsidy to the aluminium smelting industry is a closely guarded secret, which is cause for suspicion, if not alarm, from the outset. When Â鶹´«Ã½ Weekly contacted the various state electricity commissions supplying Australia's six smelters, officials were prepared only to confirm that "concession rates" were granted to the companies — but no details.
A Queensland Electricity Commission spokesperson said that the rate was "confidential" because it was part of a contract between a Comalco consortium and the state government. The state government does not release details of the cost and consumption rates of the Comalco contract but has no objection doing so with Queensland Rail. Why?
But it was in Victoria in January that the aluminium industry was thrust into the glare of daylight. Jeff Kennett claimed that the Victorian public contributes directly to the huge profits posted by Alcoa, the world's largest producer of aluminium.
Alcoa recorded a net profit of $449 million for 1993. The Victorian public provides the company, 67% owned by Conzinc Riotinto Australia (CRA), with a $200 million a year subsidy.
The lucrative contracts were drawn up between Alcoa and the state Labor government in 1985. Kennett makes the point: "So when Victorians say why do we not spend more on schools, hospitals, whatever, each and every one of us is paying ... Alcoa ... almost $50 per individual [annually]".
Looked at another way, Alcoa's nine years of subsidies have netted it $1.8 billion in Victoria alone.
Further, nearly $60 million of Alcoa's profit came from a reduction in company tax rates, courtesy of the federal Labor government. Alcoa, which earns most of its profits from refining alumina, is almost 50% owned by Western Mining Corporation.
"The group's strong balance sheet has allowed it to continue to pay out big dividends to its handful of shareholders", commented economics writer Barry Fitzgerald. It is expected that Alcoa will record a $320 million profit this year.
Victorians aren't the only ones paying through the nose. Michael Gill, writing in the Financial Review, says: "Absolute detail is secret in all but Victoria ... [but] since the industrial prices for power in other states are generally higher than Victoria's, it must be assumed that similar deals have been done elsewhere."
When confronted, Alcoa finance director Phil Spry-Bailey said, "I think the point is that ... it is not something that we want to discuss on the radio or with the public. It is between the two parties involved, in this case ourselves and the [Victorian] government."
Blackmail
The industry has always played one state off against another to site these "prestigious" smelters; each state has tried to outbid the others, leaving the companies to rake in the money. "Competition", say the so-called free marketeers, but at times it borders on blackmail.
Â鶹´«Ã½ Weekly reported in September that Comalco threatened that if the Tasmanian government refused to sell a group of small power stations, it would close its Bell Bay smelter by 2001.
"Tasmanian Premier Ray Groom said Comalco's offer for the stations was hundreds of millions of dollars less than the government's assessment of their value", wrote Anthony Brown. Finally, the state government decided that the sale option was no option at all. To date, the company has not announced any intention to quit Tasmania.
In Queensland, Comalco plans to double the size of the Boyne Island operation, where it refines alumina from its mine at Weipa and elsewhere. In order to do this, it secured a deal with the compliant Goss Labor state government to buy the adjacent Gladstone power station. A guarantee of low electricity prices is regarded as essential for profitability by the company.
Comalco is negotiating a loan package worth $650 million to purchase the Gladstone power station. The consortium of banks financing the purchase is awaiting the outcome of the Wik people's native title claim to determine the security of Comalco's Weipa mining leases before concluding the deal.
Premier Wayne Goss is siding with the industry against the Aboriginal community's claims over land that includes Comalco's bauxite mines at Weipa. "The best interests of the state and the country will be served by Commonwealth and state legislation to validate the Comalco title, and we will be asking the Commonwealth to support that course of action", Goss claimed last year.
World production of aluminium has outstripped demand over the past five years. The international market is glutted with a stockpile of four to five years' production. This is partly a result of the countries of the former Soviet Union selling on the international market aluminium once produced for the military machine. This over supply has necessarily depressed prices (metal prices on London Metals Exchange have fallen 10% below 1992 prices).
To counter this situation, the industry has in effect formed an international cartel to cut production and drive up prices. This has been achieved through the aid and intervention of the governments of the six major aluminium producing countries, including Australia.
Negotiations during January in Brussels set parameters for world aluminium production for 1994, with Russia being asked to cut production by 500,000 tonnes and the Western producers collectively agreeing to a cut of 1.5 million tonnes.
This multilateral deal has the sole aim of raising prices, and is in conflict with US national trade practices legislation and probably in breach of other international agreements. Again, it is the public that pays through higher prices for aluminium products.
Full details of the international deal remain confidential, of course, but it is believed that up to US$1 billion was offered to the Russian producers to cut production. Much of this money will come out of the public coffers of those six countries, in the form of "aid".
Alcoa has announced an immediate cut of 26,000 tonnes, and Comalco chipped in with 36,000 tonnes; prices have risen 20% over the past three months in expectation of the cut in production.
Australia is the world's largest producer of aluminium, most of which is exported, providing about one-third of world production. Alcoa and Comalco therefore stand to gain the most from the new arrangements. Production will be cut at the same time as revenues rise; that is known by the industrial relations club as a win-win situation.
Comalco announced in early February that reduced production will result in a reduced work force at Bell Bay, cut by at least 120 to around 750. Internationally, the industry shed 5% of its workers in 1993.
Environmental costs
The industry's environmental record is an inglorious one. The mining of bauxite by giants CRA and Western Mining Corporation has been no less damaging than that of other branches of the mining industry.
The truly massive amounts of energy used in smelting come with a heavy environmental price tag: how many rivers might still run free in Tasmania but for this industry? In addition, smelting is a direct source of carbon dioxide from the alumina reduction process.
These smelters make for unhealthy workplaces too, with workers suffering respiratory problems and showing loss of lung function after relatively short periods of employment.
In industrial relations, the aluminium companies fall well short of being model employers. In many areas their parent companies lead the fight against union organisation. Back in April 1991, CRA's Comalco threatened to bring in scabs recruited from its staff in New Zealand to keep its plant operating after workers at Boyne Island struck over sackings.
In May 1992 Comalco first attempted to import New Zealand-style employment contracts to its Boyne Island and Bell Bay plants. Now, flushed with its successes at Hamersley Iron in Western Australia, where many workers have signed individual contracts, freezing unions out, it is renewing the push throughout the aluminium industry. Comalco plans to convert the 350 wage workers at the Weipa mine to salaried staff and is attempting to persuade workers at Bell Bay to make individual contacts.
The company's tactic is to offer higher wages — for now — to encourage workers to sign an individual contract with the company. But as one union official noted, a one-to-one relationship between an individual worker and one of the world's largest mining companies is hardly built on equality. In New Zealand the company has excluded unions from any negotiations on behalf of the work force.
Maurie Hill, the Tasmanian state secretary of the Automotive, Food, Metals and Engineering Union (AFMEU) told Â鶹´«Ã½ Weekly that Comalco has devised a voluntary redundancy scheme to account for the elimination of some of the 120 jobs to go at Bell Bay. Workers have until March 21 to apply; then the sackings begin. The company has refused to discuss the scheme with the union.
The AFMEU was advised by an industrial relations commissioner not to push too hard against Comalco on the individual contracts because the new manager at Bell Bay might be open to discussion. But Hill says the new manager is just the same as his predecessor.
New Zealand
Comalco signed a new long-term deal with the New Zealand government of Jim Bolger before Christmas for its Tiwai smelter; it was certainly a gift for the company.
The progressive Alliance, which polled nearly 20% of the vote in last year's general election, was in a position to demand access to the proposed new contracts. What it found led it to conclude: "The practical result of the Comalco deal going ahead will in fact be that home owners and small business people will face a steady and sharp series of electricity power price increases to subsidise Comalco's windfall".
The new contract is designed to run for 29 years from January 1994. Comalco's power bill will rise 10% over the 10 years to 2004, after which it will rise incrementally by equal annual payments to reach the "market price" only in 2010. This industry market price itself attracts a bulk-user rate discounted by 11%, giving an indication of just how little Comalco currently pays.
Even some Â鶹´«Ã½ of the media were concerned at the continuing rort. An Evening Post editorial noted, "[T]axpayers will be concerned at the comment of ECNZ generation manager Keith Turner that Comalco would begin 'paying its way', the implication being that it hadn't done so until now".
The Alliance was informed by well-placed sources that Comalco could stand immediate and significant increases in its power prices; instead, with the signing of the contracts, the company will save an estimated NZ$3 billion.
The new deal also guarantees the company the extra 35 megawatts of power it requires to increase output by 11%. The proposed expansion of Comalco's output will not create any lasting jobs in New Zealand.
The Alliance argued that when gas production is no longer available for electricity generation after 2008, the Comalco contract will demand significant new power station construction. "Well before Comalco is paying a fair price New Zealand will be faced with investing large amounts of capital in new power stations", the Alliance claimed.
"It has been suggested that Comalco's investment in upgrading the smelter would reduce atmospheric fluoride emissions and leachate from cathode dumps, both of which are causing concern locally. Redressing these problems should not depend on an increased allocation of electricity. If present emissions are unsatisfactory they should be reduced anyway", the Alliance argued in its submission to the government.
These issues led the Alliance to question publicly the attractiveness of allowing the smelter to continue past 2007. Similar questions need asking here.
Disreputable
Gill, in the Financial Review, notes, "If the generations of aluminium executives passed on any sage advice, it would almost certainly contain one well-worn maxim: 'Capitalise profits, socialise losses'".
The industry is thoroughly disreputable. Its large mining corporation owners wield political power either directly with governments or by dint of their vast financial resources — running sensationalist and misleading advertising campaigns opposing land rights, for instance. The boardrooms of these companies are filled with notorious right-wing corporate chiefs such as Western Mining Corporation's Hugh Morgan.
With a single-minded ruthlessness, these companies pursue profits no matter what the human cost: witness the war being waged by the Australian and Papua New Guinean governments on Bougainville to reopen the CRA-owned Panguna copper mine.
The industry pays scant regard to the health and welfare of its workers, the environment or the lives of indigenous Australians. It is perhaps the ultimate poor "corporate citizen".
Environmental Youth Alliance spokesperson Francesca Davidson questions the industry's worth. She told Â鶹´«Ã½ Weekly: "In return for the enormous public subsidies the aluminium companies attract from state governments, we get a degraded environment but precious few jobs. If government funds, currently boosting the balance sheets of this industry, were redirected into labour-intensive and environmentally sensitive employment, many thousands could leave the dole queue behind and we'd see an improvement in our environment."
CRA announced on March 2 a profit of $786.7 million in the year to December 31; one is left to wonder how much of this came from the public purse.
It is high time that the secrecy surrounding the dealings between these companies and government utilities was ended and the full extent of the decades-long public subsidies revealed. With a million Australians out of work, Australia cannot afford these handouts.