CAW asks gov’t to stop Xstrata smelter closure

The Canadian Auto Workers union has called on both the Ontario and the federal governments to investigate Xstrata‘s (XTA-L, XSRAF-O) decision for closing the Kidd metallurgical site in Timmins, Ont., this coming May.

The CAW believes the closure of the Kidd smelter, which will put 670 union members out of work, is unnecessary and that Xstrata could be violating parts of the Investment Canada Act. The act says foreign corporations operating in Canada must provide a net benefit to the economy. (Xstrata, based in Switzerland, bought out Canadian miner Falconbridge in 2006).

Meanwhile, the Ontario Mining Act requires that ore and minerals should be treated and refined in Canada. Xstrata plans to start shipping copper concentrate to the Horne smelter in Rouyn-Noranda, Que., and zinc concentrate to the CCR refinery near Montreal once the Timmins operation has been closed. However, over the last two years both the Horne and the Kidd smelters have operated at close to capacity and the CAW suggests that closing Kidd could create a situation where Canadian miners have no option but to ship concentrate elsewhere to be refined.

Ben Lefebvre of CAW Local 599, which represents Xstrata workers in Timmins, says the union isn’t looking for protectionist measures to be put in place to keep the smelter open.

“We are looking at having these jobs preserved in Northern Ontario in the most environmentally-friendly, and cost-effective copper and zinc plants in Canada,” he says. “Why would we shut it down in favour of one that is far less productive, less cost effective and less environmentally friendly?”

The CAW points out that the federal Industry Minister Tony Clement has the power to force a foreign corporation that’s no longer a benefit to the local economy to remedy the situation or even sell some of its assets,.

“I would go further,” Lefebvre says. “I think Xstrata should divest all of their Canadian assets.”

Lefebvre says the Xstrata facilities in Sudbury, Timmins and Rouyn-Noranda are already an integrated group of facilities in terms of feed supplies.

“There is enough concentrate feed in the immediate region to keep us full,” he says.

Anne-Marie Flanagan, a spokeswoman for the Ontario Ministry of Northern Development, Mines and Forestry, says that Minster Michael Gravelle will be meeting with Xstrata in the near future but she says it would be difficult for the government to force Xstrata to keep the Kidd smelter running.

“I’m not sure how you force a company to do something that’s unprofitable for them,” Flanagan says. “We have to keep an environment here that makes companies want to invest and do business,” Flanagan says.

Emily Russell, a spokeswoman for Xstrata’s copper division says the company has been very transparent about the reasons behind the decision to close the Kidd metallurgical plants.

The primary reason is due to a serious challenge of global smelting overcapacity, Russell says.

“Global smelting capacity now far exceeds the availability of concentrate due to the rapid expansion of Chinese smelting capacity, driving treatment and refining charges near all time lows,” Russell said in an email exchange.

Russell says the situation is compounded by a strong Canadian dollar, lower revenues from key smelting by-products such as sulphuric acid, and the requirement for further investments in these plants.

However, the CAW views it differently. They union says the recent drop in profit that Xstrata has experienced appeared worse than it was because of the boom years of 2006-2008 when metals prices were high. The union points out that during the sharp downturn in late 2008-early 2009, Xstrata was still able to remain profitable.

On top of that, Xstrata was criticized for taking on too much debt to acquire Falconbridge in the first place and has had to focus on reducing debt levels ever since to improve the its net asset position.

“After reaping the benefits of one of the industry’s strongest booms and seeing strong profit levels through the downturn, Xstrata has now excuse to betray its workforce and the community,” the CAW says in statement.