Incitec Pivot boss Jeanne Johns says gas market ‘more difficult’ than ever as group closes Brisbane plant
Incitec Pivot will close its 50-year-old Brisbane manufacturing plant, which boasts 170 staff, blaming high gas prices.
Incitec Pivot will close its Gibson Island manufacturing centre at the end of 2022 at a cost of 170 jobs, blaming high gas prices for the decision.
The manufacturing giant said on Monday it had “reluctantly” made the decision to shutter the 50-year-old fertiliser plant after failing to land a long-term gas contract at acceptable rates.
The decision looks set to reignite the debate over domestic gas prices in Australia, and the success of the federal government’s “gas-fired” recovery strategy from the coronavirus pandemic as a federal election looms in 2022, with Queensland seats again likely to be critical to Scott Morrison’s chances of being returned as Prime Minister.
Incitec had been seeking a supply agreement to provide gas between 2023 and 2027, and managing director Jeanne Johns said the company was disappointed it could not find affordable gas for the plant, saying it had pursued every available avenue to secure an affordable supply of the feedstock.
“We kept our promise to pursue every possible avenue to continue with gas as a feedstock for our manufacturing operations at Gibson Island, but despite significant efforts over recent months we have been unable to secure affordable gas supply beyond the end of our current gas contract,” she said.
“We are deeply disappointed that this will impact our loyal employees and their families. The wellbeing and safety of our employees is our key priority during the next 14 months, and we will be offering our people whatever assistance we can, including redeployment opportunities where possible.”
The closure of Gibson Island looms as a fresh front in the debate between manufacturers and producers over domestic gas prices after a temporary reprieve during the pandemic.
Energy Minister Angus Taylor said the company’s decision was “disappointing”.
“Fifteen commercial gas arrangements have already been struck this year, showing there is supply and competitive terms available,” he said.
“Australia’s gas users have been protected from the significant price spikes seen overseas. Our prices are internationally competitive and remain well below the over 400 per cent increase that has been seen in the UK. The gas-fired recovery is working. Business turnover in the manufacturing sector has now grown every month for the past five months.”
Gibson Island was threatened with closure ahead of the expiry of its last gas contract in 2019, until the Queensland government stepped in with a rescue package.
“The Queensland government’s support of domestic manufacturing helped us secure our existing contract, and we are grateful for their support during the past few years as we have sought to bridge to a long-term sustainable manufacturing base at Gibson Island,” Ms Johns said.
Incitec said it would continue with feasibility studies with Fortescue Metals to look at the potential for producing green ammonia at the facility.
Gas makes up more than half of the costs of running Gibson Island, and Ms Johns told analysts the Australian gas market had become far more difficult since the company last negotiated a supply deal in 2019.
“The decision was made after extensive effort over a number of years to secure affordable long term gas supply. This included vigorously pursuing innovative gas supply solutions, engaging with Australian gas producers and extensive advocacy efforts with the government,” she said.
“Unfortunately, the domestic gas market has only become more difficult.”
Ms Johns said that even at the prices in Gibson Island’s current gas contract the operation was only at break-even levels on a cash flow basis, despite recent strong fertiliser prices.
Incitec said it would look to turn its Gibson Island facilities into an import terminal, retaining some of the plant’s employees.
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