Union says smelter closure will blast a $400m hole in Southland's economy - 'You're playing with people's lives'

An E tū union negotiator says the closure of Invercargill's Tiwai smelter is "playing with people's lives", as it is expected to impact thousands of Southlanders.

Yesterday morning it was announced the aluminum smelter at Tiwai Point was to close, affecting 1000 jobs directly, and many more indirectly, among Invercargill's 60,000 population. Its well-paid workforce earns between $80,000 and $100,000 a year.

The smelter had been running at a loss for numerous years, and in 2013, then-Finance Minister Bill English made a $30 million sweetheart payment to the Rio Tinto-owned business.

He said then that "they certainly won't get a second bite of the cherry from this Government".

However, E tū union negotiation specialist Joe Gallagher told TVNZ1's Breakfast this morning it could and should be saved.

"If you look at the economics of these types of big smelters and steel mills, most of the money earned is spent within their communities so you're talking upwards of $400 million that potentially could be leaving that economy and that is a huge hole to replace," he said.

"I think there is an opportunity to save it. I think it is one of the largest employers in Southland and I think everyone must do everything in their power to save it. I think it can be saved."

Rio Tinto made a profit of $8 billion last year, despite the loss of $46 million loss at Tiwai Point.

Mr Gallagher said Rio Tinto had done quite well out of Southland's economy and should show the people of Southland respect by coming to the table with "genuine intent to deliver for themselves and that workforce".

He also said it needed to find a way to future-proof the smelter because "we can't keep having these threats about if its closure. It's too important to that economy" in Southland.

"We need to build a longer-term plan for the future for that plant and that economy. You just can't turn that $400 million off in 14 months and those people, you expect them to retrain? That's pretty hard. I think you've got to have a longer term plan and a longer term vision to achieve.

"This is a high-stakes game. You're playing with people's lives, you know, some people have worked there for 25 and 30 years. You're talking about generations of families that have worked at that Tiwai smelter - you can't just turn that off overnight, so I think they do have a duty of care to their employees and their families to kind of really look at how they can try and build a long-term plan."

Meanwhile, the closure also has major implications for the electricity market.

Contact Energy has criticised the move, saying it could push power prices up and that Rio Tinto could have done more.

Meridian Energy has the contract to provide power to Tiwai Point. Contact Energy is a sub-contractor and supplies about a third of the smelter's power needs.

"They have a good deal on power, that's about as much as we can say," Contact Energy's chief executive Mike Fuge later told Breakfast.

"Meridian have been leading the negotiations and it's a package of deals. Obviously transmission pricing was a real sore point for them over the last few years. They felt that they were paying between $10- and $40 million too much.

"Obviously we've been in commercial negotiations but we feel that collectively, between Meridian and Contact, there was a good deal on the table."

Mr Fuge said he believes Rio Tinto, which has aluminum smelters around the world, was looking to get out of aluminum, which is "a tough business".

"I think a 14-month exit is not a good outcome for anyone but they've got a good deal on the table right now," he said. "We gave a very serious deal."