What were the real reasons behind the closure of Anglesey Aluminium?

Excuse my tardiness in posting on this topic - but please remember that the Druid has been dead for most of the past 2000 years so better late than never!

There has been of late much gnashing of teeth from Anglesey's Labour MP, Albert Owen, over the recent closure of Anglesey Aluminium with the loss of over 400 jobs. Here he is in the House last week carefully covering his back hailing the Government's failed intervention:

"The decision by Rio Tinto Alcan to cease production at Anglesey Aluminium has left a massive hole in the regional economy of north-west Wales, but I put on the record my thanks to the Wales Office and, indeed, to the Government for their efforts with their generous offer and intervention to keep production going. Unfortunately, the company's internal matters took precedent."

Albert Owen is right to be despondent. The jobs which have been lost at Anglesey Aluminium were of the highly-skilled and high-value-added variety - in other words ones which Anglesey can most ill afford to lose. 

In fact so highly skilled are the AA ex-workers that they are now being headhunted by Dubai's new state-of-the-art Aluminium smelter 4000 miles away. So we can be sure these jobs will never return to Anglesey.

So how did the Island lose its jewel in the crown? The apparent reason was the demise on September 30th, 2009, of the cut price electricity deal which the company enjoyed with the nearby Wylfa nuclear power station. Aluminium smelting is a vastly power hungry process and AA used 12% of the Wales' electricity supply daily - making it the largest single user of electricity in the whole of the United Kingdom. AA was able to access cheap electricity as it provided a permanent base load for Wylfa and thus saved the National Grid the cost of keeping a power station on standby. A win-win situation one would have thought.

Electricity Supply planning failure

So why and how did it go so wrong?  The Welsh Office did offer AA a grant of £48 million to stay open after all - was that not evidence of the Government's best of intentions? One not so charitable to the Government as Albert Owen - the Druid for instance - might ask why was not more done earlier? The Nuclear Decommissioning Authority (NDA), which owns the Wylfa power station, said "There's been no breakdown in the relationship between ourselves and Anglesey Aluminium but we have explained to them the situation. We cannot extend the current contract with them due to new European legislation on providing subsidies to private companies." That doesn't sound very helpful.  Indeed the company management says it had "worked intensively with the UK Government and others" to find an alternative power supply, "but had been unable to do so". And this surely is the crux of the matter: the government has for too long prevaricated about rebuilding a series of power stations which are all about to be decomissioned. As the admirable EU referendum blog says on this subject:

That - EU interference apart - is the reality of the Government's failure to deal with one of the most fundamental requirements of a modern society – a secure and sufficient electricity supply.

While it has been pratting around with its obsession with "renewable energy" – with the support, one might add of the Blue-Green Conservatives - pushing the proliferation of useless windmills across the land, it has taken its eye off the ball and let vitally needed supplies run down. This is nothing short of criminal negligence that will cost our economy – and us – dear.

Quite. Wylfa B may well be commissioned (though that is still far from certain - this is a subject the Druid will be returning to shortly) but it in all likelihood will not come into service for another 10 or more years. A bit bloody late for Anglesey Aluminium then.

There is little point in Albert Owen and the UK Government wailing that they did everything they could to save AA. Their failure to address the issue of power supply sooner has directly lead to the loss of 400 plus skilled jobs in an area which can least afford it. That's criminal.

But there is more to this story.

EU Import Tariffs

Step forward Peter Mandelson. As a Druid it could be said I know something of supernatural forces, but even my not inconsiderable powers pale in comparison to those of the Dark Lord.

We have already noted that EU legislation prevented the NDA providing a cut-price electricity deal to AA. But it also transpires that in 2007, when Mandelson was still the Trade Commissioner, the EU decided to cut duties on the import of raw aluminium into the EU from 6% to 3%. A prime beneficiary of this move was the Russian metals giant Rusal which has been estimated to have saved them up to £117 millon a year in import duties ever since. Who is the owner of Rusal? One Oleg Deripaska - on who's yacht Mandelson enjoyed such well publicised hospitality last summer. The Druid can put it no more eloquently that David Jones MP, Shadow Wales Minister, who said:

“The lack of reliably-priced electricity was the principal cause of Anglesey Aluminium’s demise, but the 2007 duty decision put further pressure on them at the worst possible time.”

The closure of Anglesey Aluminium is metaphorically beginning to resemble one of the War Elephants employed by Hannibal which the Druid remembers so vividly. Sadly these proud beasts died not of one fatal wound, but of a thousand small pricks.

So, predictably, there is one more.


Carbon Trading

The final point we need to consider in this tragedy is the World's current obsession with Carbon. As you may know, the current Government has rushed to pledge that it will cut the UK's carbon emissions by a staggering 80% by 2050. An until recently little documented 'side effect' of this obsession strategy has been to make the closing of heavy industrial plants, such as the Corus steel works in Northern England, more profitable than keeping them open. Dominic Lawson writes:

"The owners of the Corus steel company stand to gain up to $375m (£234m) in European Union carbon credits for closing their plant in Redcar, only to be rewarded on a similar scale by the United Nations’ Clean Development Mechanism fund for switching such production to a new “clean” Indian steel plant."

Could something similar also be behind the closure of AA here in Anglesey? Indeed Robert Goodwill MP, the Shadow Transport for Minister, said the following during last week's Anglesey Aluminium debate in the House:

"is not the fundamental problem the operation of the European Union emissions trading system, which is making it increasingly difficult for primary metallurgical industries to operate in the EU? It would be all well and good if it resulted in the reduction of global CO2, but it merely results in carbon leakage to other economies such as China and India, which are not constrained in the same way."

It sounds to the Druid that he is hitting the nail squarely on its head. But he will leave the last word to Dominic Lawson:

"the three main British political parties — under the mistaken impression that CO2 is itself a pollutant — are asking us to vote for them on the promise that they are committed to subsidise the closure of what is left of our own industrial base."

Pithily put.

In conclusion perhaps Albert Owen and his Labour Government, despite their bleating, are not so blameless in the closure of Anglesey Aluminium as they would like us to think.