Low Power Prices Save Jobs

Canadian aluminum workers are breathing a sigh of relief that cheap electricity has so far shielded the country from job cuts as Alcoa and Rio Tinto Alcan look to trim production in the wake of dwindling global demand.

Daniel Roy, Quebec director of the United Steelworkers of America, said workers are relieved as they watch thousands of their union colleagues lose their jobs in the United States.

"There are worries since nothing is guaranteed in life, but our members... are pretty confident in the situation we face," he said.

The union represents about 900 workers at ABI Becancour, a joint venture between the two North American-based aluminum companies that used to operate as one entity. It also represents another 800 to 900 workers at Alcan's facility in Alma, Que.

Roy said Quebec workers are benefiting from electricity contracts that with rates that make the facilities very competitive with other countries.

"Canada has come off pretty well," said analyst Tony Robson of BMO Capital Markets in Toronto.

While thousands of aluminum jobs are being shed around the world, Canadians are protected because the country's smelters in Quebec and British Columbia are among the lowest-cost in the world.

Also helping is the reduced value of the Canadian dollar, which has fallen well below the U.S. dollar after spending the last quarter of 2007 at historic highs and the early part of 2008 near parity.

"I wouldn't expect to see any significant cutbacks from Canada," said Robson, although he added costly projects may be deferred by both companies.

Rio Tinto Alcan has already indicated spending delays for upgrades at Kitimat, B.C., and the Saguenay, Que. Alcoa is looking to chop capital costs in half in 2009.

Metal companies around the world are struggling to reduce costs in the wake of dwindling demand and near-record low prices.

Alcoa announced that it will cut 13,500 positions, or 13 per cent of its workforce. It has more than 4,200 workers in Canada, mostly in Quebec and Ontario, but a spokesperson at the headquarters in Pittsburgh said that they aren't the target of the job cuts.

Last month, Rio Tinto Group, a diversified mining company, said it will cut 14,000 jobs worldwide, or 12.5 per cent of its overall employee base.