Friday, 9 March 2012

What's Wrong with this Picture: Rio Tinto Locks out Workers and Hydro Quebec Must Buy the Electricity That Isn't Being Used

Aluminum is made from electricity and bauxite. The former ingredient is by far the most important, aud since bauxite is more easily transported than electricity, big aluminum foundries are built where electricity is cheap.

That's why Rio Tinto Alcan (just Alcan before its recent purchase by the Anglo-Australian mining giant) has some of its biggest plants in the Saguenay Fjord where there is a lot of water for producing electricity. Quebec governments of all stripes have encouraged this for decades, but just how much support they've given recently has only just come out.

Rio Tinto has locked out its workers for nearly two months in a classic labour dispute. Interestingly enough, this production hiatus comes when aluminum companies are reducing stocks in order to raise prices. That probably is questionable, but what is more worrying is the fact that under secret agreements arranged in recent years between Hydro Québec and the company, excess electricity produced by the aluminum company's dams MUST be bought by Hydro Québec whether or not it is needed.

Le Devoir estimates that the utility was forced to by at least $15 million in February, and if the lockout continues, the bill could run to $175 million. In other words,the utility is helping to finance the cost of the lockout, which isn't such a bad thing for the aluminum company anyway. But it sure isn't good for the rest of us.

Photo: Alcan's power dam facilities at Alma

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