Opposition leaders say job cuts at the Tiwai Point smelter are a warning shot across the bows of Meridian Energy and the Government that its owner is serious about its desire to renegotiate its power contract.

Smelter owner NZ Aluminium Smelters (NZAS), which is 79.4 per cent owned by mining multinational Rio Tinto, yesterday said it was accelerating plans to axe 100 jobs from the Bluff plant in the face of depressed global metal prices. The jobs were to go over five years but that will now happen by November.

As the consumer of around one-seventh of all electricity generated in New Zealand, NZAS also wants to renegotiate terms of a 27-year contract with Meridian Energy, which is due to take effect from next year.

Labour leader David Shearer said the job cuts would be seen as making it "very clear that they want to renegotiate their electricity contract given that's by far the biggest expense they have".


"Given the smelter plays such a huge role in both exports and in the economy of the South Island, I would have thought they're playing hardball here."

Green party co-leader Russel Norman said the announcement raised questions about motives.

"Is this part of a bigger game that Rio Tinto are playing in order to put pressure around the contract? Is it a shot across the bow of Meridian, saying we're serious this time?" Norman said.

"It says the threats around potential closure or significant reduction in demand are real."

Prime Minister John Key said the job losses were disappointing but a matter for the company.

"Unfortunately it reflects what is happening, which is international aluminium prices are weaker and the company is looking to cut its costs to maintain the rest of its operation in more difficult times."

Key said while it was well known Rio Tinto was seeking to sell the smelter, it remained an important asset to the company.

He indicated Rio Tinto would find it difficult to renegotiate short-term changes to what was a "pretty rock solid" contract for the next three years.


"It's a very well constructed contract from the Government's point of view."

He said he expected issues around the contract would be resolved.

General manager Ryan Cavanagh said 35 positions of the 100 had already gone through attrition.

* Employs 750 directly.
* Employs a further 3200 indirectly by company estimates.
* Contributes $500m to the Southland economy annually.