Commissioned by Great South, the Southland Region post-Covid Scenario Analysis Report authored by economics consultants Infometrics Nick Brunsdon says, over the next five years, the performance of Southland’s economy will be largely dependent on the status of the smelter and New Zealand’s economic recovery following Covid-19.
Set to close in 2024, the Tiwai Point aluminium smelter is a major contributor to Southland’s economy.
It employs 800 workers directly in "relatively high-paying employment", while also supporting 1500 workers through its suppliers in the region.
The report says its closure is increasingly likely, and while the delay provides an opportunity to develop alternative employment options, the local labour market will be flooded with job seekers when the smelter closes.
"The nature of Tiwai’s operation, with a high fixed cost base, means that the closure is likely to be abrupt rather than staggered over time."
This means the labour market will not be able to accommodate all job-seekers, at least in the short term.
However over time, retirement and employment growth are likely to absorb the number of workers.
New Zealand Aluminium Smelter (NZAS) chief executive and general manager Stu Hamilton previously said the smelter would be running at full production through to 2024.
The report also noted the closure of the smelter will be followed by an estimated $350million five-year remediation project at the site, which may provide medium-term employment for redundant workers; about 300-400 jobs.
While the alternative industry options, such as developing aquaculture or hydrogen production, are listed, these are unlikely to accommodate all Tiwai workers alone.
"The development of employment opportunities across a range of new and old industries is more likely."
Any new development would also take time to complete.
The report also says the global aluminium market is becoming dominated by highly efficient and low-cost smelters in Canada and China, with which Tiwai Point is unable to compete.
"However, there are early signs of a price premium emerging for high-purity aluminium with low carbon emissions.
"This premium would improve the profitability of Tiwai Point and enable it to continue operating into the long term."
