PATRICIA KARVELAS, HOST: Let's begin today with big news from Australia's largest smelter, the Tomago Aluminium facility in The Hunter in New South Wales says it may be forced to close. Now, the Tomago Smelter says it's struggling with energy costs, and it's not identified a pathway that supports operations beyond 2028. Defence Industry Minister, Pat Conroy, who's electorate is in the region, told the House in question time nothing was off the table in keeping the smelter open.

 

[Excerpt]

PAT CONROY:  The Hunter has been very good to Rio for decades, and it's time for Rio to do the right thing by The Hunter. We've made it very clear to Rio Tinto and the New South Wales Government that we're here to support the facility if we have constructive partners.

We continue to be in discussions with Rio and the State Government on options for Tomago. Nothing is off the table. Let me repeat that, Speaker, nothing is off the table.

[End of Excerpt]

KARVELAS: Tim Ayres is the Minister for Industry and Science, and my guest. Welcome, Minister.

AYRES: Thanks, Patricia.

KARVELAS: Nothing is off the table. Rio has actually knocked back your offer. They say energy costs are the problem. So how are you going to solve it?

AYRES: Well, firstly, Pat Conroy is right, we have been engaged in a very disciplined way with the owners of this facility and with the trade unions and with the State Government over the future pathway through for this facility in the same way that we've been engaged in Queensland over a very similar facility near Gladstone at Boyne Island, and with the Government in Tasmania and Rio Tinto over the future of Bell Bay.

There is a different approach in each of the States from the facility, we're making    

KARVELAS: Okay. So, let's go to that. Is New South Wales the problem, the Government; are they not    

AYRES: Well, we    

KARVELAS:    coming to the table like they should?

AYRES: We are working very closely with New South Wales, there is a shared approach, and the only way that you get to a successful outcome in a disciplined way that reflects all of the pressures that there are on governments in these kind of situations is to have a shared approach between the Governments and also the company    

KARVELAS: Yeah.

AYRES:    in its investment strategy and its business plan and commercial viability.

KARVELAS: For sure. And is the New South Wales Government on the same page as you?

AYRES: Oh, we have, as has been reported, made a joint offer, a joint offer.

KARVELAS: M'mm. But the joint offer, as has been confirmed by you    

AYRES: Yeah, sure.  

KARVELAS:    was rejected.

AYRES: Well, we're working through all of those issues, and we'll keep doing it. I'd just say in Queensland, it's not - Rio Tinto is there in Queensland investing in new green energy, underwriting new green energy projects, wind projects and solar projects, contributing to the grid. That facility, we can have more confidence about. Its secured green energy contracts and the Government's $2 billion Green Aluminium Production Credit is the source of dragging that investment through for the future. As has been reflected in today's announcement by the owners at Tomago    

KARVELAS: So are you    

AYRES:    the future there is much less certain.

KARVELAS: Are you cooking up a new deal at the moment, and is floor pricing potentially subsidising power for them part of that?

AYRES: Well, we're just working it through, and I don't - I'm not not communicating these discussions because I'm trying to be unhelpful, I'm not communicating them because it's in the interests of a commercial discussion.

KARVELAS: Yeah, I understand. But just on the principle of what you're prepared to help with, one idea from industry that    

AYRES: Yeah.

KARVELAS:    my colleague, Jacob Greber, is reporting is that the Government step in between the company and renewables developers to kind of, you know, use its balance sheet to broker an energy solution. Is that something you'd consider?

AYRES: We are engaged in every discussion, we will    

KARVELAS: Including something like that, you think it would work?

AYRES:    in every discussion we will examine every opportunity. This is an important part of Australia's aluminium sector. It's not the only smelter in the country, but it's important, it's been there since 1984, employs a lot of people. We will look at every option, but the future is uncertain.

I really want to underscore this, there is not a guaranteed outcome here by any stretch of the imagination.

KARVELAS: Does that mean the Government is prepared to walk away if the cost is too high?

AYRES: Well, it's only possible to secure the right outcome if everybody lands in the right place, and we've got to explore all of the opportunities for a common approach with a commercially viable future.

KARVELAS: But is there a threshold, is really what I'm trying to get at?

AYRES: Well, we're    

KARVELAS: Well, this is just not in the national interest on the grounds of how much it will cost the Government to bail out this [indistinct].

AYRES: Well, of course there are things that we can do and things that we can't do, but I'm emphasising cooperation, landing on the one page. This is a very uncertain environment for the aluminium sector.

Of course the company's pointed to the energy questions, not being able to secure energy contracts at the prices that they need either in coal fired power or in new energy.

KARVELAS: So you need to therefore    

AYRES: It is also    

KARVELAS:    step in on energy prices then, right?

AYRES: It is also a global trading environment that is very volatile, right, where over capacity and market subsidisation in some parts of the global economy are causing oversupply, downward pressure on prices, tariffs in the United States also have an impact on the unpredictability of the global environment, and of course the viability of these facilities is not just about the price of inputs, it's about the expected market price of aluminium on the global market, and these are ageing pieces of infrastructure that require constant investment.

And, you know, one of the things that troubles me about some of these facilities is some of that investment, not because people are doing the wrong thing, but because they haven't had the confidence to invest; some of the investment that should have occurred, hasn't occurred.

You can see it in Gladstone, you know - I mean I spend a lot of time in these communities and in these facilities. You can see the optimism and the commitment and the investment. I want to see that in every facility. We're working hard to try and secure the best outcome.

KARVELAS: It seems to me in terms of negotiating muscle that Rio has you over a barrel given this, you know, where this smelter is, and the political sensitivity of that region?

AYRES: That's not    

KARVELAS: No?

AYRES: That's not my experience. I know this community really well.

KARVELAS: They've got the hand out and they just want more and more; isn't that what's happening?

AYRES: I know this community really well. It's got experience with these kind of questions, they should have confidence, the Government is on their side working as hard as we can, responsibly working with the New South Wales Government, and all of the other parties, including the trade unions; everybody's been engaged in this discussion, that's a good thing, but I do want to say the outcome is uncertain.

KARVELAS: So, there's no guarantee is what you're saying?

AYRES: Of course there is no guarantee. This is a responsible government working through these issues in the national interest for one of our aluminium smelters    

KARVELAS: Isn't that a bit at odds with, "Everything is on the table, we're prepared to do anything"? You're saying - you're sending a different message, which is, this is not a fait accompli, we're not going to save this if we think it's too high a cost.

AYRES: Both of these things are absolutely true. We will    

KARVELAS: They are at odds, as a principle.

AYRES:    look at every responsible option, that means engaging with every option, and working them through. And    

KARVELAS: Okay. Let me ask this then, 'cause I do want to sort of get to whether you think they should build, or kind of jointly fund, perhaps with the Government, a sort of renewable energy entry to back, to, you know, roll energy into this smelter; is that the only way?

AYRES: Well, I don't know want to - I don't want to endorse one option. I just make this point about that: what we need is more generation capacity and more transmission. That's what the Government is trying to do. And you have these characters, Barnaby Joyce, and Matt Canavan campaigning against wind developments, campaigning against solar developments.

What they are doing is killing blue collar jobs. They are stopping enterprises like Tomago getting access to the clean power that they need, that their company policy demands, because they know that they have to compete in global markets that will demand low emissions products. That's their corporate plan. They're not a group of hippies that are making this up.

KARVELAS: I get [indistinct].

AYRES: They are hard focused on their future, and it's these sort of, you know, National Party led campaigns    

KARVELAS: All right. That's the politics and I get      

AYRES:    that are a growing problem.

KARVELAS:       where you're going there, but just back to the sort of substance of this policy. Do you think the Government should demand an equity stake, to sort of get value for money for our investment here?

AYRES: A valiant effort to draw me into all of the different options that are available. We are looking at all of them, but as I said, and you're right to point to, the future is uncertain here, and I have - I'm deeply concerned about the future of that facility.

KARVELAS: So are Rio playing fair? They rejected the offer that you put to them.

AYRES: Well, I'm not inclined to get emotional in    

KARVELAS: All right.

AYRES:    in negotiations about    

KARVELAS: I'm not asking you [indistinct] feelings    

AYRES:    what's fair otherwise    

KARVELAS: It's not so much - I don't think it's an emotional answer, it's a    

AYRES: Yeah.

KARVELAS:    an answer about whether you think    

AYRES: But I just say, we take a clear-eyed approach to what is in the national interest and what is in the interests of this important regional industrial economy    

KARVELAS: You couldn't get your offer on    

AYRES:    and I would prefer - I would prefer that all of these companies, you know, made an assessment about how profitable they have been over the years and what the policy settings are, and they get on board with it.

The truth is some of them are making difficult decisions about their future, about where their investment is going to be, not just in a global context, but within Australia. You know, are they going to be focused in all three States or one, or two? That is the challenge that we're working through. We're going to keep working through it in a disciplined way, that's what people would expect.

KARVELAS: Yeah, and what sort of timeframe are we talking about now, because recent deal was rejected, there are obviously talks of workers, there's a timeframe, but how urgent is this in your sort of inbox?

AYRES: Well, it's    

KARVELAS: Number one?

AYRES:    of course each of these facilities is - you know, there is a set of pressing issues across these smelters around Australia, there are issues that they're facing in terms of securing input prices, but the common thread here is a global trading environment that is very challenging    

KARVELAS: But the other common theme is    

AYRES:    and a set of national interest considerations.

KARVELAS:    unsustainable energy prices, that's what they're identifying in their statement. So that's where you have to step in, isn't it, ultimately?

AYRES: Well, this is what we're working through, in a careful way, in a disciplined way, I've - you know, we don't put timetables on ourselves in these processes, and you know, they have indicated that they're undergoing a process over the course of a month. We will continue to work with them, and we will continue to look at the future of that facility and the region's economy.

We have made substantial investments securing industrial investment in The Hunter, whether it's Orica Kooragang Island, a range of these facilities, we're going to keep doing that because it is our proudest and our biggest industrial region in the economy, and it's got a big industrial future.

KARVELAS: Minister, I'm really, really pleased you came in. Thank you.

AYRES: Thanks PK.

 

ENDS.