International metals producer Nyrstar will receive a $135 million bailout from the federal, South Australian and Tasmanian governments to support its struggling businesses in Port Pirie and Hobart.
The company said that the funding would enable it — together with its parent company Trafigura — to “maintain its ongoing operations” while working on engineering planning towards a significant rebuild of its Australian smelters.
It said the money would also be targeted towards projects including critical scheduled maintenance at the Port Pirie lead smelter and the major furnace and wharf investments in Hobart.
Nyrstar Global’s CEO Guido Janssen said the support package came at a time of “extremely challenging global market conditions”.
“This support demonstrates the strategic importance of the Australian operations for sovereign capability and delivering products needed globally for modern economies,” he said in a statement.
An overhead view of Nyrstar’s Port Pirie lead smelter. (ABC News: Che Chorley)
As part of the $135 million, the federal government will contribute $57.5 million, with $55 million and $22.5 million to come from the SA and Tasmanian governments respectively.
According to Nyrstar, the company employs 1,400 direct workers in Australia and supports 6,600 indirect jobs.
“Through this investment we are making sure that these facilities are going to be here for the foreseeable future,” Trafigura CEO Richard Holtum said.
“What these two industrial sites produce … is absolutely critical to both the national security and the renewable industry, and infrastructure build-out for Australia and the western world.”
Mr Holtum said the Port Pirie and Hobart sites were crucial to global supply chains and produced materials with a range of applications, including for the US military.
“The fact that this site can produce 40 per cent of all the antimony required by the United States for critical tasks such as the hardening of bullets demonstrates the vitalness of these sites … and the absolute importance of Pirie and Hobart.”
Nyrstar in Hobart operates as a large zinc smelter in the state’s south. (ABC News: Maren Preuss)
SA Premier Peter Malinauskas said the $135 million package was “all about setting Pirie up for a more prosperous future”.
“We know there is a journey in front of us to be able to tackle the challenges we see, particularly coming out of China, but we should be up-front and honest about them,” he said.
“When people contemplate is this an appropriate investment on behalf of taxpayers, one also has to think about the counterfactual.
“The counterfactual would be to allow the western world to see China consolidate all of its smelting capacity, all of the world’s smelting capacity, which means we don’t get to participate in the … critical mineral supply chain of the future.
“That’s an unacceptable risk, particularly in the current geostrategic environment.”
How bad is Nyrstar’s financial position?
Nyrstar Australia CEO Matt Howell told the ABC in June that its Port Pirie operation was losing tens of millions of dollars a month and needed government help within “weeks, not months”.
The company also said at the time that its Hobart zinc smelter could not operate independently of Port Pirie if the latter were to go under.
In March, Nyrstar’s global parent company, Trafigura, said its Australian operations were “uneconomical”, with Trafigura’s CEO describing Nyrstar Australia as an “uncompetitive asset” that “shouldn’t be in fully private hands”.
The company says it employs 1,400 people directly and supports 6,600 indirect jobs. (ABC News: Trent Murphy)
Why is Nyrstar in this position?
The company blames “market distortion” from China for its problems.
China has, according to Nyrstar, distorted the metals market by subsidising Chinese companies to purchase Australian raw materials at prices Australian smelters cannot afford.
China then subsidises the processing of those materials into metals while also placing export controls over the finished product, the company has previously said.
The issue has also put a cloud over the future of the Mount Isa copper smelter and Townsville copper refinery in Queensland.
“It’s not just impacting South Australia or Australia, it’s affecting everybody,” Rebecca Knol, CEO of the South Australian Chamber of Mines and Energy, told ABC Radio Adelaide.
“Port Pirie require mineral concentrate to produce lead, and its operation in Hobart needs concentrate to produce Zinc.
“This is procured within Australia from Australian mining operations, however China has been strategically procuring concentrate from these Australian operations on long-term contracts at a premium.
“Which has made it very difficult for the likes of Nyrstar to obtain … feedstock, or the concentrate, at a price that makes their manufacturing competitive.”