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Thursday, 10 March 1966

Mr HAYDEN (Oxley) .- Tonight I want to raise a few points in relation to the production of primary aluminium at the smelters in this country. Before I do so, I must apologise to the Minister for National Development (Mr. Fairbairn). There is a form of courtesy in this House which requires that before one rises to speak on the adjournment debate one announces to the appropriate Minister the subject that one intends to raise so that he may be able to throw some light on the points raised or give his point of view. This I neglected to do, through an oversight.

I turn to the question of the investment that is taking place in this country today in the production of primary aluminium. I think that what is taking place, having regard to the present capacity of this industry and its potential capacity, clearly shows the necessity for planning of the economy of this country. It is, in itself, a clear exhibition of the way in which lopsided investment can take place in a sector of the economy. Of course, this is very much to the detriment of the economy. I shall give some details to support my contention, but it seems to me that what could easily happen in the production of primary aluminium in this country is that one of the big three smelters which will be operating by about 1970 could fold up.

These smelters have a capital investment which varies between £25 million and £30 million. Those are the figures that I have been able to obtain. At present we have two smelters producing primary aluminium in Australia. They are Alcoa of Australia Pty. Ltd., at Geelong, which has 51 per cent, foreign ownership, and Comalco Aluminium (Bell Bay) Ltd., at Bell Bay, which has more than 90 per cent, foreign ownership. The capacity of these two smelters is approximately 90,000 tons, which is one and a half times Australia's present consumption. In 1964 the production of primary aluminium in Australia was approximately 79,000 tons, and last year it rose to 86,000 tons. In 1964 the domestic consumption of primary aluminium was 64,000 tons. I have not got the figures for 1965.

It is significant to note that the surplus has to be sold overseas. The home price for primary aluminium is £260 per ton and the world price is £245 per ton. That means that on these flat prices there is a loss of £15 per ton on the primary aluminium that we have to sell overseas. Of course, we must add freights to this. I have estimated that we export somewhere between 15,000 and 20,000 tons of primary aluminium a year. In addition, the Australian Aluminium Co. Ltd., known as Australuco, which is a totally owned subsidiary of Aluminium Ltd. of Canada - Alcan - in a tariff submission said that, in comparison with the price on the Australian market, selling on the world market involves a loss of between £40 and £50 a ton. A little quick estimating reveals that losses in exports vary between £600.000 and £800,000 or £750,000 and £1 million, depending on whether the loss is taken at £40 a ton or £50 a ton. This is significant, and a little later I will elaborate on my suspicion that the domestic consumer will be expected to prop up the surplus capacity of this industry, if it is to be sustained.

The production at Bell Bay is 52,000 tons of primary aluminium a year. Alcoa produces 40,000 tons a year. Australuco the totally owned subsidiary of Alcan, intends to establish at Newcastle a smelter that will be in operation by 1969 and will produce between 30,000 and 40,000 tons of primary aluminium a year. But by then we will be using only the full capacity that is now available in the existing two smelters - those operated by Comalco and Alcoa. I stress that even if we lift the home consumption of primary aluminium from 12 lb. a head to 18 lb. a head, the output of the Alcan smelter at Newcastle, or its equivalent, will be surplus to the community's needs. In recent times, some rapid manoeuvring has occurred in this industry. Alcoa made an application for tariff protection. It was supported by Comalco with some qualifications. Then Alcan made the sudden announcement that it would establish a smelter at Newcastle. In addition, Comalco announced in late December that it would spend another £4,500,000 to lift the production of its Bell Bay smelter by 1 7,500 tons a year by 1 967. This is a one-third increase in the output of this smelter. Further, the consortium that will be exploiting the Gove reserves has undertaken to produce alumina, as distinct from primary aluminium, by 1971. A production capacity of 500,000 tons is planned. I expect the answer to a question I have placed on notice to confirm that this consortium has given an undertaking that it too will establish a smelter for the production of primary aluminium.

We then have the position that the productive capacity of which Alcan is capable will be surplus to requirements, the extra 17,500 tons that Comalco will produce will be surplus to requirements and the Gove production will be surplus to requirements. Where will we sell all this material? Will we sell it overseas at a much lower price than we are getting on the home market and at a time when there is a world surplus of aluminium? To give a clear indication of the existence of this surplus I have only to direct attention to the treatment that President Johnson handed out to the United States aluminium cartel when it endeavoured to raise the price of aluminium.

Knowing that there is a world surplus of aluminium, he threatened to release the Government's stockpile, which was significantly large, and, realising the effect that this would have on the world's surplus of aluminium, the monopoly group withdrew its proposal to increase the price. I point out that Australuco, which is owned by Alcan, has been responsible for 50 per cent, of the sales in Australia of semi-fabricated aluminium. Since 1964, first as a result of import licensing policies and then as a result of tariff policies, it has been using about 20,000 tons of Australian primary aluminium. When it produces its own aluminium at this smelter, capable of an output between 30,000 and 40,000 tons, we will find that Comalco or Alcoa, or both, are going to suffer a fairly severe setback. Their best market because of cost disadvantages is going to be in this country. The largest single demand for their output has come from Australuco, but it is going to produce its own primary aluminium and will have a surplus capacity. So we can see that excessive investment is taking place in the production of primary aluminium in Australia.

In 1964 Alcoa had a loss of £1.6 million. It has paid up capital of £25 million. Comalco - I have seen it variously quoted - had a profit of £684,000 or £437,000 in 1964. It has a paid up capital of £30 million. That is a pretty poor return. What concerns me, first, is that we are going to have a situation where the consumer is going to have to pay a high price to subsidise a low price gain in export. Secondly, I want to know why this sort of investment is taking place willy nilly. I cannot see where there is any advantage to this country or its economy in this situation. The Parliament is entitled to a report from the Treasury or the Department of National Development indicating whether the losses presently sustained by the established smelters, the increased capacity of production and so on, can be integrated into the economy without any cost disadvantage to the community or whether we are going to have to prop up, again, an uneconomic position in which there is disproportionate investment in this sector of the economy while starving other sectors.

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