Alcoa warns on shortage of gas and skilled labour

Labour shortages and concerns about the availability of future gas supplies were a major threat to further investment in WA's alumina industry, mining giant Alcoa warned yesterday.
  
Alcoa already supplies 13 per cent of the world's alumina needs from its three WA refineries and hopes to approve a further $1.5 billion-plus expansion at its controversial Wagerup site to make it the world's biggest in the next few months.
  
But Alcoa Australia director of projects Craig Walkemeyer yesterday warned the timing of the expansion was "a little bit uncertain" because of spiralling construction costs and doubts about future access to low-cost gas supplies.
  
Mr Walkemeyer said although the grade of WA's bauxite resources were not as high as in other parts of the world, it had always enjoyed a competitive edge over rival locations because of low-cost energy, skilled workers and the stable environment.
  
But those advantages were quickly being eroded.
  
"The skills shortage is a global trend to some extent but we've seen it much more acutely in Western Australia, particularly in engineering and the construction trades, and that is leading to cost escalations rates that are significantly higher in Western Australia than elsewhere in the world," Mr Walkemeyer said at the WA Chamber of Commerce and Industry Resources Conference.
  
"I think the other thing that has been a differentiating factor in the past is Western Australia's ability to get access to low-cost energy. In the last year, (gas) prices have doubled and it's becoming increasingly difficult to secure competitively priced long-term contracts.
  
"So what I see happening in Western Australia is some of those differentiators that have made WA attractive, we are at risk of losing unless we put in place a response."
  
Mr Walkemeyer said Alcoa had already been forced to adopt "phasing strategies" during construction and expansion work to cope with labour shortages in WA, and warned that State and Federal initiatives to boost the pool of skilled workers was not keeping pace with industry's needs.
  
It was also unlikely that Alcoa would be able to maintain local content rates of more than 80 per cent on future construction as it was forced to undertake more work offshore to counter the labour shortage.
  
Mr Walkemeyer said Alcoa was a strong supporter of the WA Government's domestic gas reservation policy and any initiatives to encourage producers to develop new sources of supply for the domestic WA market.