"We are beyond the tipping point in terms of industrial demand destruction. And when capacity is closed and plants are shut down, they don't come back.

"As an aside," Freyberg added, "nationalising gas production is not the solution.

"Making sure that the incredible resources in the ground are developed is a solution. Short-term intervention is not going to fix a problem. Until gas is drilled in NSW and Victoria we will be in deep, deep trouble."

Being challenged

Glencore's North Queensland copper business stretches from the legendary Mt Isa copper mines to a copper refinery and export facility at Townsville and it currently counts 3200 Australians as employees and $1.1 billion as its annual contribution to the state economy.

But each arm of the Glencore business is being challenged by high energy prices and an inability to either secure gas supply contracts or to make any sort of bankable power price forecasts.

Glencore is said to have taken the opportunity of Tuesday's prime ministerial visit to the company's Townsville copper smelter to offer a frank assessment of the state of national energy markets and the imminence of hard decisions that the current crisis is generating.

For the record, the average price of power in Queensland through the March quarter more than doubled against the same period last year. To put firm numbers around that price increase, the average spot price of electricity in Queensland through the March quarter was $173.98 a megawatt hour. The March quarter average in 2016 was $80/MWh.


The accounting of that average is telling. In January, while other state markets circled averages of $80/MWh, the Queensland average was $197.65/MWh. Through January 2016, Queensland's average price was $51.55/MWh. A wildly hot February saw Queensland's average price shoot up to $239.59/MWh, again about twice what it was the previous year.

Through January and February this year there were at least 44 separate occasions when Queensland's generators pushed prices to the market maximum of $14,000/MWh. And a series of reviews of price peaks by the market regulator revealed that many of those peaks were unexpected and the result of generators removing capacity and then re-bidding back into the system.

To be fair, the review findings were not consistent. The regulator also found that the integration of Queensland's generators with other state markets saw peak pricing migrate from NSW and South Australia into the Sunshine state.

Perilous opportunism

Nonetheless, many major industrial customers continue to maintain that Queensland's state-owned generators have been acting with enriching but perilous opportunism in pushing prices to the regulated ceiling when demand is high.

It is understood that Glencore recently stopped importing copper anode to support cathode production at its Townsville plant because of those surging power prices. And the company is said to have baulked at investing something less than $50 million in a re-lining of its Mt Isa copper smelter because of uncertainty over the availability and price of gas.

Pushed to confirm delays of reinvestment in the Mt Isa smelter and that Townsville had ceased importing feed-stock, the asset manager of Glencore's copper assets in North Queensland, Louis Chiat, said: "We have started to make decisions [in response]. Future investment decisions are [going to be] of a much bigger nature."

Importantly, the fate of copper mining at Mt Isa does not necessarily swing on the economics of Glencore's copper processing chain with production able to be shipped directly to customers in a marketable concentrate. But like so many mature copper mines around the globe, Mt Isa faces a cost challenge given that its underground network has to reach ever deeper to extract ore of ever lower grades.


The Glencore position is that the erosion of Australia's base load capacity caused by a policy preference for intermittent renewable options has left the national market critically exposed to peak-demand shortages. And Freyberg's forthright criticism completes an unwelcome trifecta for our federal and state governments.

After power interruptions brought BHP Billiton's Olympic Dam to a halt for a second time in a month late last year chief executive Andrew Mackenzie warned the energy insecurity threatened new and existing investments and Australian jobs.

Just 24 hours before the Freyberg broadside Rio Tinto's new boss, Jean-Sebastien Jacques, called for regulation of the Queensland power market because of the miner's inability to secure financially viable power prices for supply of one of its Queensland aluminium smelters.

In March, Rio shut 14 per cent of its production at the Boyne Island smelter for want of an acceptable electricity supply contract. Rio generates 86 per cent of its own power for the Gladstone-based smelter but had been acquiring the balance of its needs from the spot market. A two-year effort to replace that spot exposure with contracted supply proved unsuccessful and, as a result, an equivalent quantum of Boyne production was closed.

'Absolutely wrong'

That meant more than 100 Australians lost their jobs and Rio surrendered 80,000 tonnes a year of aluminium exports. It is worth digesting in full the transcript of Jacques's spiky post-annual general meeting contribution to the national energy debate. His frankness announces, with equal force, the depth of Rio's anxiety and the difference in style Jacques will bring to Rio.

"I was in Canberra four weeks ago and we met quite a few government officials," he started. "The Queensland situation needs to be fixed. What's happening is absolutely wrong at this point in time."

Jacques said the power price Boyne was paying "was so high that it didn't make any sense any more for us to produce".


"As a result, 100 of our colleagues lost their jobs," he said.

"You've got endless power capacity in Queensland and the regulation, the regulatory environment, doesn't work. I'm happy to be quoted on this one to say, it's time for the federal government to step in and to sort this one out. Because at the end of the day you can't say, on one side, you want to create jobs, create economic benefits in Australia, and [then] not sort out the power [supply], and it's absolutely wrong.

"We had a very open conversation, very blunt conversation with the government, and the opposition on this one, that this has to be fixed for the benefit, not only Rio Tinto.

"Forget about Rio Tinto for one minute here. It's for the benefit of the people in Queensland, for the short, medium, and long term. Power is essential. Power in Queensland needs to be fixed, and it's not a lack of capacity. It's a question of regulation here."