Tough times for Rio Tinto's Bell Bay plant

A PROTRACTED union battle and soft aluminium prices could pose a tough year for Rio Tinto's Bell Bay operation.

The company wouldn't say whether the aluminium smelter was profitable but said there were no plans to downsize the 550-person workforce or cut production.

Plans to offload the ageing smelter - as part of Rio's Pacific Aluminium business - are also on hold until the market picks up.

``In the meantime, it is business as usual at Bell Bay,'' a Rio spokeswoman said.

For aluminium prices it's far from business as usual.

Since the global financial crisis aluminium prices have dropped 15 per cent contrasting with other metals such as copper and magnesium, the latter having soared by nearly 200 per cent.

The Bell Bay smelter is also old and small meaning a higher operating cost, according to economist Saul Eslake.

``If they were struggling with their overall profitability ... the Bell Bay plant may be more vulnerable than other ones they have elsewhere in Australia and around the world,'' Mr Eslake said.

But Pacific Aluminium would be unlikely to shut the smelter, he said.

``Pacific Aluminium knows that closing it down would be fraught with all sorts of political difficulties,'' he said. ``And no doubt if it came to that the Tasmanian government would be exploring various opportunities to keep them here because of the jobs and because they take a fair chunk of the electricity that Hydro Tasmania produces.''

Financial troubles are likely to be compounded by the Australian Workers Union's plan to negotiate a collective agreement at Bell Bay in the coming months. If successful it would be the smelter's first union pay agreement in a decade.

The agreement has ``faced fierce opposition from Rio Tinto management'', according to the union's Tasmanian branch secretary Ian Wakefield. In response Rio said it ``respected the decision by our employees to choose to belong or not belong to a union''.