Australian aluminium giants back federal’s energy price cap bill to contain surging costs

Australia’s aluminium biggies reportedly support a federal plan to cap coal and gas prices to contain high energy bills, claiming energy-intensive industries are at risk until provided immediate price relief.

The proposed price cap is $12 a gigajoule, which gas producers think will deter vital future investments and jeopardise energy security. But nonetheless, Australian aluminium giants like Rio Tinto, Alcoa, and Tomago welcome Albanese government’s plan.

Australian Aluminium Council chief executive Marghanita Johnson said the industry saw a four-fold increase in energy prices in the past one year, given the effect of Russia-Ukraine conflict on global energy resulting in supply crunch.

“Currently, the pendulum has swung too far in favour of exports, to the detriment of domestic consumers,” Johnson said.

Australia’s aluminium sector employs 17,000 people and is highly dependent on gas. Australian aluminium industry alone accounts for nearly 7 per cent of east-coast gas demand.

Tony Dragicevich, chief executive of Capral Aluminium, said: “The government’s recent actions to address gas prices in the short and medium term are an excellent step forward. Still, we need a longer-term solution to provide stability for Australian manufacturers reliant upon gas for production.”

However, the government’s emergency gas market bill leads to many large energy producers call off agreement with their prospective clients. In an email, Shell notified onshore gas business QGC that they would not accept any new offers to supply the 50 petajoules of gas they had been offering.

On Tuesday, Woodside, which supplies 20 per cent of east-coast gas demand from the Gippsland Basin gas operations, confirmed it stopped a sales process for 50 petajoules of gas in 2023 and 2024 and other domestic marketing activities.

Woodside chief executive Meg O’Neill urged the Prime Minister to reconsider the proposed reforms entirely.

“We need to unlock gas supply now,” O’Neill said. “Unfortunately, the proposed market intervention will make it very difficult for industry to economically invest to increase supply.”

But the Minister of Industry and Science, Ed Husic, cautioned the energy companies to watch their steps carefully. “These companies have made big profits when gas prices were way lower, and they can continue to make profits ... but we have a responsibility as a government for the broader community as well,” he told the ABC.