Electricity cost forces shutdown

By CHRIS DANIELS

Pacific Steel, New Zealand's only producer of steel reinforcing for the building industry, has been shut for two days, leaving 350 workers with nothing to do.

The South Auckland plant, part of Fletcher Building, buys about 70 per cent of its power on the volatile spot market, where prices have risen dramatically in the past few days.

Fletcher's building production and steel group chief executive, Andrew Reding, said Pacific Steel had decided to buy its power this way after the power firms could not offer long-term contracts at reasonable prices. "It is an extremely serious situation for New Zealand industry as a whole," said Reding.

"We are seeing massive variability in power prices for industry, when consumers in the houses are seeing no change. The danger is you are going to kill industry."

Pacific Steel could not have operated at the power prices being offered in the long-term hedges, said Reding.

Another company affected by the high prices is New Zealand Aluminium Smelters, which yesterday announced it was downgrading production further at its Tiwai Pt smelter.

Spot prices have soared recently, rises attributed to a combination of high demand, thermal stations being unavailable and low water flows into the southern hydro lakes.