The excellent article by Francis Vailles on aluminum smelters (The Press, December 12) made me go back to the time when I was in charge of the SGF (1991-1997). When I arrived, Quebec was already a privileged host country for aluminum smelters. Société Générale de Financement held 25% of the Bécancour plant and we launched Alouette in Sept-Îles at that time.
Quebec had granted advantageous conditions to attract primary production plants in the following context:
- The abundance of surplus electricity. It happened that the surplus of the reservoirs was dumped over the dams. This unturbined water was equivalent to unproduced electricity, the marginal cost of which was zero.
- Regional economic development: high salaries, occupation of the territory, world-class factories.
- Hope to establish processing plants, which create many more jobs than primary production.
At the time, we didn’t have much success in attracting processing plants, despite sustained efforts. Economic reality often favored locating plants near consumer markets rather than near sources of primary aluminum.
Now the context is completely changed, we cannot look at the contribution of the industry with the eyes of the 1980s and 1990s.
If we do nothing, we are heading towards a shortage and not a surplus of electricity, and the marginal cost of production is more than twice as high as the price paid by the aluminum smelters.
Subsidies
So we are talking about economic development grants, which is not bad in itself. Indeed, regional development has many positive effects. When we set up the Alouette plant in Sept-Îles, there was an immediate revival in the region, which was then experiencing an economic downturn.
On the other hand, the cost of these subsidies is rising sharply, if we consider the cost of “new” electricity. Moreover, this cost is not apparent; it’s not a check handed out at a press conference.
As for the location of processing plants, as we saw in the 1980s and 1990s, their location is often independent of the origin of the aluminum supply. Just think of aluminum auto parts or cans. Also, it must be taken into account that at the time, job creation was a priority, whereas we are now in a situation of labor shortage.
Furthermore, Mr. Vailles raises two other concerns that were less acute 30 years ago. Either the emission of GHGs and the very low tax contribution of the industry (if we are to believe the example of Rio Tinto).
We see that the whole socio-economic context has completely changed since the 1980s and 1990s. Wouldn’t it be appropriate for the government to go back to square one and review the whole situation? I believe that a rigorous and transparent evaluation is desirable.