Cransberg Says

ETS and the Aluminium Industry May 08

“While the future for aluminium is strong, Australian industry is facing significant challenges and, across the country, manufacturers are under immense pressure because of rising costs.”

Alcoa of Australia’s Managing Director, Alan Cransberg, used his address at the AWU Aluminium Industry Delegates conference on Thursday 22 May to highlight the challenges facing Australia’s manufacturing industries.

In particular, these include the current escalating cost environment, the pressures of increased global competition and the critical need for any national emissions trading scheme to maintain investment and jobs in Australia.

“While the future for aluminium is strong, Australian industry is facing significant challenges essentially because of escalating industry costs,” said Mr Cransberg during his address to the AWU delegates in Newcastle.

“Rising raw material and construction costs, escalating labour costs, the high Australian dollar and increased overseas competition are contributing to the immense pressure that Australian manufacturers are currently experiencing.

“For industry and jobs to survive in Australia the whole way we do business needs to change and that means keeping costs down and continuing to find smarter and cleaner ways of making aluminium,” he added.

Since 2002 the aluminium industry has faced an increase in shipping costs by 400 per cent, in addition to a rise in the cost of essential commodities including caustic which has risen by 370 per cent, fluorspar which has increased by 170 per cent and calcined coke which has climbed by 110 per cent.

Climate challenges and the introduction of a national emissions trading scheme in Australia were also raised as areas for industry concern.
“Alcoa absolutely supports emissions trading but it will be critical for any scheme to support greenhouse improvements while ensuring investment and jobs,” he said.

“From a global greenhouse perspective, it’s critical that any scheme passes the fundamental test of reducing global emissions.

“For example every tonne of alumina Alcoa makes in Western Australia uses around half the energy and produces around half the greenhouse emissions than if it was made in China, and so it makes no sense to force investment and jobs offshore if this leads to higher global emissions.

“We need to ensure the competitiveness of Australian industry until such time that industry in China, India and Russia face similar carbon costs,” he added.

Alcoa is a major national employer, providing around a third of the aluminium industry’s workforce.

ETS and Energy Security on CNBC May 08

“We can make a tonne of aluminium in Australia with 60 per cent of the energy that is used elsewhere in the world, and if we don’t make the commodity here it will be made elsewhere with an adverse environmental outcome.”

Alcoa of Australia’s Managing Director Alan Cransberg addressed a global audience as part of CNBC’s debate show Questions for the Future , which was filmed in Perth on 22 April.

As a member of an expert panel of four, Mr Cransberg helped lead the engaging debate which focused on energy use in Australia and explored how the country should move forward with an emissions trading scheme.

Mr Cransberg was adamant that action was needed to curb C02 emissions, an issue which it was agreed would be on the international agenda for decades to come, but that recognition had to be given to the economic impact if the price of an Emissions Trading Scheme (ETS) was set too high.

“We must remember that we compete on a global stage,” he told the studio audience, which consisted of over 100 representatives from industry, government and the not for profit sector.

“Alcoa believes that raising energy prices will lead to a lose-lose situation. If we look at Australia’s economy, which is based heavily on the mining, manufacturing and the minerals sector, 80 per cent of our export income comes from those sectors and 80 per cent of this is reinvested back into Australia.

“These sectors employ around one million Australians in well paying jobs, many in regional areas, and these jobs wouldn’t be replaced easily if they were forced to shut as part of the efforts to curtail the nation’s greenhouse emissions.

“Alcoa thinks it important to consider the impact on the Australian economy of higher industry costs.  Raising energy prices will make our businesses uncompetitive compared to where they are at currently, and these businesses compete on a global environment.”

Mr Cransberg said it was essential for the economy to remain strong and robust, and while Alcoa was committed to taking action to stem emissions, the reality was that people would continue to consume energy in increasing amounts.

However there was no doubt that climate change was an issue that needed to be addressed and addressed urgently.

“Industry accepts climate change has to play a leading role within businesses, in fact it’s a business imperative,” he said.

“What we need to do is to make sure there is aggressive research and development to continuously improve our technology growth in the energy, manufacturing  and industrial sectors.

“Australia must also take a long term perspective of its industry and we very much need to boost the debate when it comes to preserving our energy resources, not only for this generation but for future generations.”

The Cleaning up Carbon episode on CNBC Questions for the Future will be aired throughout Australian, Asia and Europe on 6 and 7 May 2008.