WA feeling the heat from gas crisis

June 15, 2008

June 15th (The Age) – WESTERN Australia’s gas crisis will hit the market hard this week as high energy costs force some businesses to shut down and lay off workers.

The WA Chamber of Commerce and Industry has estimated 14% of 83 companies it has surveyed may shut down or will be shutting down soon.

Apache Energy says it will be two months before partial gas supply is resumed from its Varanus Island gas plant, where a June 3 explosion cut off one-third of the state’s domestic gas supply.

BHP Billiton has brought forward a planned four-month shutdown of its Kalgoorlie nickel smelter, a move that may cut its nickel sales by 25,000 tonnes in the next financial year.

With a cut of 3000 tonnes estimated for this financial year, the halt equates to a loss of $US65.8 million ($A70.3 million) at current nickel prices.

Rio Tinto is also bringing forward planned maintenance shutdowns at its WA iron ore operations.

While WA miners face difficulty, the Australian share market is expected to continue its rally after buyers returned to Wall Street at the end of last week. Another pointer is in the June share price index futures contract, which improved just over 1% during trading on the Sydney futures exchange on Friday night. CommSec chief equities economist, Craig James, tipped a 50 to 60 point gain on the ASX after US stocks ended last week higher.

Mr James said the sell-off at the start of last week on the ASX, which resulted in its biggest one-day fall in almost three months, had been unwarranted.

“Valuations have come down to the lowest levels we’ve seen in 15 or 16 years,” Mr James said.

WA Premier, Alan Carpenter, said businesses which switched from gas-fired electricity to diesel fired electricity will face far higher electricity costs. “Diesel-fired electricity is far more expensive than gas-fired electricity, so businesses will be making the decision as to whether the increased cost they are going to have to pay for energy warrants them shutting down for a while, or scaling down their production for a while, or standing down their staff for a while,” he said.

Unions WA secretary Dave Robinson has said hundreds of workers have already been laid off at laundries, in the meat industry and in timber-related industries.

He has predicted the number could soon run into the thousands.

Federal Resources Minister Martin Ferguson has met with Mr Carpenter and said Centrelink was on standby to help out if the situation worsened and large numbers of workers were laid off.

Mr Carpenter said the next two weeks would be very hard.

“It’s taken a while for the impact to wash through, but it’s really coming upon us now, economically.

“This week, I think will be very difficult.”

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