Rusal chief warns that carbon tax will drive jobs offshore

Russian aluminium tsar Oleg Deripaska has attacked the Gillard government's carbon tax, saying it is leading towards higher energy costs that come with the danger of driving local manufacturing and minerals processing jobs overseas.

Mr Deripaska, chief executive of the world's biggest aluminium company Rusal, has first-hand experience of the carbon tax impact through Rusal’ s 20 per cent stake in the Rio Tinto-managed Queensland Alumina joint venture.

In an extensive interview with The Australian, Mr Deripaska said that since acquiring the interest in Queensland Alumina in 2005, there had been a "big decline" in Australia's competitive position, with the nation's past competitive advantage in energy costs eroded.

"The carbon tax will have a significant long-term impact on the operations at our QAL joint venture. As a consequence of rising costs, including energy and a carbon tax of around $23 million a year and rising, coupled with a renewable energy charge, the company has shed around 200 jobs since the introduction of the carbon tax," Mr Deripaska said.

Mr Deripaska said he could not understand why the government taxed Queensland Alumina heavily because of its dependence on coal, even though the joint venture had lower emissions than the average overseas competitor's refinery. He also cited the inconsistency of the government imposing a carbon tax while, at the state level, aged and ailing coal-fired smelters such as Alcoa's Point Henry smelter near Geelong had received taxpayer funds to continue operating.

"In Victoria, the government has rewarded the Point Henry smelter with additional compensation, while having emissions far above the world smelting average. It appears to be an irrational policy that is applied inconsistently," Mr Deripaska said.

"The net effect of the government's carbon policy is to give preference to the export of unprocessed raw materials. Rusal believes that local processing is in Australia's self-interest and should be preserved."

Mr Deripaska's comments come as the global industry struggles due to low metal prices and, in the case of the Australian industry, a high exchange rate. Rusal's global response has been to curtail 300,000 tonnes of annual production from the end of the year, with Mr Deripaska calling on other producers to do the same.

He estimated that as much as 30 per cent of global aluminium production was at or below break-even.

"The key priority and the only investment now should be in curtailing capacity in order to raise efficiency," he said.

The industry needed to cut output by 10-12 per cent to have a situation in three years where "demand will justify the price". That will be of cold comfort to Rio, which is trying to offload a portfolio of Australian smelters and the Gove alumina refinery, now held by its loss-making Pacific Aluminium subsidiary.

Mr Deripaska's advice was that it was a big mistake to be selling aluminium assets "right now," saying it simply changed ownership of the asset without tackling market oversupply.