Where in the hell is Australia heading?

[Starcraftmazter]

Price of labor? Irrelevant!
Lack of investment in better manufacturing technologies? Irrelevant!
Exchange rates & exchange rate manipulation by competitors? Irrelevant!
Protectionist policies of export markets? Irrelevant!
High input costs? Irrelevant!
Noncompetitive industry? Irrelevant!

And do you actually think anyone is taking your political propaganda seriously?...

Alright, can you please refrain from wasting my time from here on end? Thanks.

Not all our manufacturers are uncompetitive, and it is largely the highly energy intensive ones that ARE competitive.

For aluminium smelting, a $25 per tonne carbon tax represents about a 15% increase in total production costs for the refined metal. And it represents an even larger increase in the production cost of actual smelting (as distinct from simply selling the ore to someone else).

It's a no brainer that these industries will head overseas, especially if the carbon price is allowed to rise in future years as forecast.

I'm not saying you're wrong, but do you mind providing a source for that figure?

Additionally, who are our export markets for aluminium and who are our major competitors? If aluminium is anything like steel, then is it not the case that we have been undercut by China for a while now?

Lastly, at least until the price of carbon is determined by the market, wouldn't the aluminium industry be subsidies for their emissions?

 

[Smurf1976]

I'm not saying you're wrong, but do you mind providing a source for that figure?

Additionally, who are our export markets for aluminium and who are our major competitors?

The economics of the aluminium smelting industry have been in the public domain for 30 years now with a great deal written on the subject by industry, environmentalists and the electricity industry. Bell Bay (Tas) smelter historically has attracted the most attention, although there has been plenty written about the industry in Victoria as well.

In short, the smelters buy bulk wholesale electricity at or near the cost of production (about $40 per MWh, also a widely available figure) and this amoutns to 25% of the cost of smelting. As I said, those figures have been in the public domain for a long time now.

Also widely known is that coal-fired generation (from a typical operating black coal plant) emits about 1 tonne of CO2 per MWh. That figure has also been in the public domain from industry, government and environmentalist sources for many years now.

The rest is simple maths. A $25 per tonne tax works out to about a $25 per MWh increase in generation costs from black coal, increasing the total cost from $40 to $65 which is roughly a 60% increase in the cost of electricity, which represents 25% of smelting costs therefore the carbon tax is a 15% increase in the total cost of smelting.

Note that the other major costs are raw materials (alumina, the "half way" stage of aluminium production and also an energy intensive material to produce), petroleum coke, labour, building the plant in the first place etc. There's only limited scope to reduce those costs.

As for competition, in short it is anywhere that has cheap energy. South Africa, Brazil, Russia, Middle East, Australia, Canada etc are the relevant countries. Here's a list of operating smelters http://en.wikipedia.org/wiki/List_of_aluminium_smelters See this one also http://en.wikipedia.org/wiki/List_of_countries_by_aluminium_production

Historically, smelters tended to be built where cheap hydro-electricity was available. No surprise then to find the oldest smelter in Australia (1955) is in Tasmania and that there are lots of them in Canada and one in New Zealand too. In later times coal became a competitive alternative, hence the construction of smelters in Vic, NSW, Qld and plenty of places overseas.

Will the smelters really close? At one point Japan had a large aluminium smelting industry. Then OPEC jacked up the price of oil the Japanese were using to generate the power. There is only one very small smelter remaining in Japan today, the rest being long gone.

Much the same happened in the USA during the early 2000's when that country's energy costs became uncompetitive. If a business becomes cash flow negative on a permanent basis then ultimately it must close.

 

[sptrawler]

Also the spin off in making our own aluminium it encourages offshoot industries in aluminium casting. The auto industry sources a lot of their aluminium parts e.g heads, water pumps and wheel rims locally also a number of irrigation products are made here. I am sure there are a lot more that will be impacted.

 

[Wysiwyg]

Also the spin off in making our own aluminium it encourages offshoot industries in aluminium casting. The auto industry sources a lot of their aluminium parts e.g heads, water pumps and wheel rims locally also a number of irrigation products are made here. I am sure there are a lot more that will be impacted.

I know you will find 80% of Aluminium produced in Australia is exported and parts are predominantly imported.

 

[sptrawler]

Also if the carbon tax costs $520 a year per household and that is modelled on full employment(apparently all jobs lost will be replaced by new renewable jobs cough).
How much will it cost per household if unemployment goes to 10% and the compensation has to be payed to those that are now unemployed.
What would the resultant cost to the working taxpayers be. Can anyone run those numbers through the model, please.

Well starcraftmazter, what happens to Wayne and Julia's story of a better future if it goes "pear shaped" and unemployment goes through the roof. There are experts out there that think it will turn to s#!t.
http://www.theaustralian.com.au/nat...ng-on-carbon-tax/story-fn59niix-1226113382565

http://www.abc.net.au/pm/content/2011/s3239080.htm

But as has been shown in parliament recently, truth, honesty, integrity and looking after the people you represent, are not a high priotity.

 

[sptrawler]

I know you will find 80% of Aluminium produced in Australia is exported and parts are predominantly imported.

That is probably true, however the aluminium rolling stock is a bulk product, so therefore 80% would be sent elsewhere.
I am talking about the 20% we use locally I am sure R.O.H wheels export all over the world. Also many components for our cars and locally produced export engines are cast here e.g the Ford Falcon heads and numerous auto parts.

 

[Smurf1976]

That is probably true, however the aluminium rolling stock is a bulk product, so therefore 80% would be sent elsewhere.
I am talking about the 20% we use locally I am sure R.O.H wheels export all over the world. Also many components for our cars and locally produced export engines are cast here e.g the Ford Falcon heads and numerous auto parts.

A classic example would be the aluminium powder plant at Bell Bay. They take hot metal (molten) directly from the smelter straight into the powder plant thus saving the energy otherwise used to re-melt previously cast metal. Some years ago they used to make automotive wheels on site as well (most notably for Mazda).

There's also the point that even if we're only using 20% of the stuff here, the other 80% is a valuable export that's roughly 20 times as valuable as the raw bauxite (that figure's a few years old but presumably it's still a similar ratio).

From a bigger perspective, I could also point out that the Bell Bay smelter, the first aluminium smelter in Australia, was in fact established specifically for the purpose of national security given the importance of aluminium metal. It was originally owned by the Australian government for this reason and was privatised some years later.

 

[sptrawler]

Smurph, you give examples how the carbon tax will impact on our industries, read back through the thread and try to find anything starcraftmazter puts forward that validates the fiscal credibility of the tax.
He constantly says renewables are a requirement(which no one disagrees with)but cannot say where the jobs are going to come from.
We put forward that renewable energy jobs e.g solar hot water and photo voltaic cell manufacturing is moving off shore.
Where in all his posts does he once supply any evidence of the jobs created as a counter arguement for the obvious job losses that have been put forward.
Just read his posts, they are evasive and general with no substance, just passive agression to undermine your argument.
You put forward valid arguement with statistical validity, he says he doesn't belive it but puts forward nothing to dispute it.

 

[Smurf1976]

He constantly says renewables are a requirement(which no one disagrees with)but cannot say where the jobs are going to come from.

If you go back a few years then one of the arguments against hydro-electric development, and hydro is still the largest source of renewable energy in Australia and most countries, was that it creates virtually no ongoing employment.

You put perhaps 3000 people into construction then, once it's built, it's pretty much over in terms of employment. The same applies to solar - once built it just sits there. It's the same with most other renewables too - lots of jobs during construction but minimal ongoing employment.

I'm not arguing that we shouldn't go renewable in order to preserve jobs in coal-fired power stations. But the notion that renewables will offset massive job and export losses in other industries from aluminium to steel to zinc just doesn't add up.

 

[sptrawler]

If you go back a few years then one of the arguments against hydro-electric development, and hydro is still the largest source of renewable energy in Australia and most countries, was that it creates virtually no ongoing employment.

You put perhaps 3000 people into construction then, once it's built, it's pretty much over in terms of employment. The same applies to solar - once built it just sits there. It's the same with most other renewables too - lots of jobs during construction but minimal ongoing employment.

I'm not arguing that we shouldn't go renewable in order to preserve jobs in coal-fired power stations. But the notion that renewables will offset massive job and export losses in other industries from aluminium to steel to zinc just doesn't add up.

Exactly Smurph, the other problem is the technology isn't there to try and replace base load. So how can you tax base load untill there are alternatives, it's beyond stupid.
What's your call on molten salt storage, they don't seem to have a lot of data regarding reliability and maintenance. Also they only appear to be building a maximum of 20MW, yet they seem to be expecting this technology to be the answer.

 

[Starcraftmazter]

....

Much the same happened in the USA during the early 2000's when that country's energy costs became uncompetitive. If a business becomes cash flow negative on a permanent basis then ultimately it must close.

We make more aluminium than USA? Jesus....well if those free-market deregulation libertarians can't compete, then I don't see any hope for us, carbon pricing or no carbon pricing.

I suppose it all depends on margins, and if their revenue can't take the cost of carbon then it is unfortunately inevitable that they shut down, unless they can figure out a way to use less energy or produce their own energy (put up some windmills?). The latter is of course preferred.

 

[sptrawler]

We make more aluminium than USA? Jesus....well if those free-market deregulation libertarians can't compete, then I don't see any hope for us, carbon pricing or no carbon pricing.

I suppose it all depends on margins, and if their revenue can't take the cost of carbon then it is unfortunately inevitable that they shut down, unless they can figure out a way to use less energy or produce their own energy (put up some windmills?). The latter is of course preferred.

Well this sums up your ideology, if it can't make a profit when the price of carbon is added to it's base line shut it down.
Can we apply the same theory to your company, if it can't make a profit with the added cost of putting fibre to the office, shut it down. Jeez what a d!!k
That is the problem with being idealistic, it all works out well when you apply your own parameters.

 

[Smurf1976]

We make more aluminium than USA? Jesus....well if those free-market deregulation libertarians can't compete, then I don't see any hope for us, carbon pricing or no carbon pricing.

Australia is competitive at electricity generation whereas the US is not. That's the crux of it. Electricity is one of the few things we're actually good at in this country, and it underpins a substantial share of our industry and wealth creation.

There's a lot of history behind it all, but suffice to say this fact was recognised and acted upon almost century ago. The HEC (Tas) was always about industry and employment - dams and power stations were just the means of generating the power. ETSA (SA) was much the same and to a slightly lesser extent so were the authorities in Vic, NSW and Qld.

All of them were built absolutely on one very simple notion - cheap power and lots of it as a means of attracting industry to their respective states and bringing about broader economic benefits. All that differed was the means of generation.

The industry structure has changed (for the worse in my opinion) but we're still reasonably competitive at generating electricity from coal. Not as good as we used to be in international relative terms, but we're still in the game.

 

[Smurf1976]

What's your call on molten salt storage, they don't seem to have a lot of data regarding reliability and maintenance. Also they only appear to be building a maximum of 20MW, yet they seem to be expecting this technology to be the answer.

I'd put it in the same category as nuclear power. We probably can make the molten salt storage idea work at least well enough to be practical (it's not as though the older coal-fired plants didn't have lots of problems and a ridiculous number of breakdowns) but the question is cost.

If it costs, say, $100 per MWh for generation then the load just isn't there so there's no point in it. A huge chunk of the total load exists only whilst electricity is cheap - increase the price and that load goes offshore.

 

[sptrawler]

What I don't think is practicle is the size of the solar mirror field that will be required to produce the required output.
Together with that is the requirement for a biomass m.c.r boiler to be available for the times the sun isn't shinning. Then there is the problem of sourcing the biomass feedstock, it will take up land that may be required for food production.
The problems aren't insurmountable but they are beyond us at this stage I would think.

 

[Starcraftmazter]

Well this sums up your ideology, if it can't make a profit when the price of carbon is added to it's base line shut it down.

I've already laid out a list of other factors which are more important, so perhaps you could address them instead of perpetuating your strawman argument.

Can we apply the same theory to your company, if it can't make a profit with the added cost of putting fibre to the office, shut it down. Jeez what a d!!k

No it's not. One is a market limitation on environmental damage and the other is a mass capital infrastructure investment. The two are nothing alike.

Australia is competitive at electricity generation whereas the US is not. That's the crux of it. Electricity is one of the few things we're actually good at in this country, and it underpins a substantial share of our industry and wealth creation.

Is it?
http://en.wikipedia.org/wiki/Electricity_pricing

Or do you suggest that mineral processing industries get preferential pricing well below retail?

The industry structure has changed (for the worse in my opinion) but we're still reasonably competitive at generating electricity from coal. Not as good as we used to be in international relative terms, but we're still in the game.

That is all well and good (if true), but what is your assessment of our exchange rate in particular as a bigger factor than electricity pricing? The steel industry for instance is shedding jobs now. It has been in trouble for a while. Surely the ETS is not a factor at this stage?

 

[Garpal Gumnut]

Unless we get rid of this dud government, we will all be rooned.

gg

 

[sptrawler]

I've already laid out a list of other factors which are more important, so perhaps you could address them instead of perpetuating your strawman argument.



No it's not. One is a market limitation on environmental damage and the other is a mass capital infrastructure investment. The two are nothing alike.





Is it?
http://en.wikipedia.org/wiki/Electricity_pricing

Or do you suggest that mineral processing industries get preferential pricing well below retail?



That is all well and good (if true), but what is your assessment of our exchange rate in particular as a bigger factor than electricity pricing? The steel industry for instance is shedding jobs now. It has been in trouble for a while. Surely the ETS is not a factor at this stage?

The carbon tax and the N.B.N are both financial imposts on the Australian tax payer, that the majority obviously don't want. You can try putting lipstick on a pig but it is still a pig and that is your carbon tax (market limitation on enviromental damage)LOL
As for the steel industry, if you check I think you will find that bluescope made a profit in 2008 and we were running at close to parity then. The problem post g.f.c is lack of demand in the U.S and Europe due to a prolonged recession, you may have missed it tin man.

 

[Starcraftmazter]

The carbon tax and the N.B.N are both financial imposts on the Australian tax payer

These two are completely separate and different fundamentally. NBN is an incredible and impressive infrastructure project - and Australia desperately needs infrastructure investment after 25 years of malinvestment in the non-productive asset of property.

that the majority obviously don't want.

Not only is this ad-populum, but there is no data to prove your claim. In fact there is data to the contrary.

You can try putting lipstick on a pig

You can try to be original instead of using cliche american nonsense.

As for the steel industry, if you check I think you will find that bluescope made a profit in 2008 and we were running at close to parity then. The problem post g.f.c is lack of demand in the U.S and Europe due to a prolonged recession, you may have missed it tin man.

Then you agree that your "carbon tax" has nothing to do with it.

 

[sptrawler]

These two are completely separate and different fundamentally. NBN is an incredible and impressive infrastructure project - and Australia desperately needs infrastructure investment after 25 years of malinvestment in the non-productive asset of property.



Not only is this ad-populum, but there is no data to prove your claim. In fact there is data to the contrary.



You can try to be original instead of using cliche american nonsense.



Then you agree that your "carbon tax" has nothing to do with it.

The Labor party went to the last election with the N.B.N as one of its main policy objectives and was hammered. You can't get a better poll than that, also its carbon tax wasn't on the ajenda.
The N.B.N is an incredibly expensive infrastructure project, with dubious benefits, other than to businesses that move lots of data.
This was highlighted the other day when Oakeshott asked Conroy to start and explain what benefits and jobs it is going to create.
Obviously Oakeshott didn't know and he is the chairman of the committee in charge of its implementation.
As long as the network provides super high speed data transfer to commercial sites that require it there is no need to supply the same speeds to all residential areas. It is just an absolute waste of taxpayers money. But as shown this government is exceptionally good at wasting tax payers money.
Anyway most of the discussion regarding the carbon tax and N.B.N will die away with the demise of this government. Which with luck won't be too far into the future.