Australia’s last major plastics maker, Qenos, is set to close by the end of the year after creditors approved its sale to property developer Logos.
The deal will see long-term employees paid out their rights and redundancies in full, but unsecured creditors, including trade creditors, are expected to collect only 10 cents on the dollar for money owed.
Logos has contributed $250 million in funding to safeguard the assets, including $114 million to cover a percentage of Qenos’ 550 workers’ entitlements and the plant’s operating costs.
The property developer has committed another $65 million to guarantee staff are paid in full and is likely to bear the cost of up to $210 million in additional operating losses, closure, and “make safe” expenditures as Qenos operations in Sydney and Melbourne wind down throughout the rest of the year.
Qenos made ethylene and polyethylene – the key building blocks for a variety of plastic household, industrial and packaging products – and specialty polymers at plants in Altona and Botany, employing 545 workers.
However, high East Coast gas prices made the company unviable, sending it into administration last month.
Australian Industry Group CEO Innes Willox warned that high gas prices may force more manufacturers out of business.
Willox stated that Qenos’ collapse reflected the “erosion of key pillars of Australia’s industrial landscape” as well as the high costs caused by Queensland’s decade-long launch of eastern Australia’s liquefied natural gas export business.
“The long-term rise in natural gas prices eroded Qenos’ competitiveness and its prospects”, he said. “Prices rose over the past decade because of the take-off of LNG exports, the erosion of southern gas production, and the lack of adequate planning to manage these long-foreseen developments”.
Willox also warned that the consequences of shutting down such an important plastic source could cause far greater harm.
“Qenos is surely not the only industrial gas user to be unviable at these prices; and more businesses may shrink or collapse without the local product supply and demand for goods and services that Qenos provided”, he said.
Above all, the closure of Qenos and other manufacturing firms due to high gas prices mocks the Albanese government’s “Future Made” subsidies for low-emissions manufacturing.
If the Albanese government truly intends to encourage manufacturing in Australia, it should fix the gas market and ensure that energy is affordable to Australian firms and households.
Australia is a gas superpower, exporting around 80% of its gas, primarily to China.
However, because there is no domestic gas reservation policy on the East Coast, Australians pay some of the world’s highest gas prices.
These high gas prices also drive up electricity prices, raising costs for businesses and consumers.
If the Albanese government followed Western Australia and every other gas exporter on the planet and reserved a decent share of our export gas for domestic use, we would have inexpensive gas and energy prices, as well as a competitive manufacturing industry.
Manufacturing would then flourish on its own, without the need for artificial subsidies from government.
Western Australia has some of the world’s lowest gas and energy prices, despite being a significant gas exporter.
The United States is now the world’s top gas exporter, but domestic prices remain low due to its gas reservation policy. It has also reduced pollution by moving from coal to gas.
If you fix the gas market, you fix everything regarding energy costs, and you are far more likely to have a competitive domestic manufacturing industry.
Besides, where will the plastics in Labor’s Future Made solar panels come from now that Qenos has closed due to expensive gas prices?
My pick is China. So why not just import the whole panel at a lower cost than Australia could ever build?
