A union is calling for the Government to step in to ensure the future of the Tiwai Point smelter following an announcement that jobs are to be axed.
But the Government says a watertight deal between New Zealand Aluminium Smelters and Meridian Energy may prevent it from intervening in negotiations.
New Zealand Aluminium Smelters, owned by Rio Tinto, announced the cuts at its plant near Bluff in Southland on Wednesday, saying they would take effect by November this year.
The cuts were to have occurred over five years through natural attrition, but are now being fast-tracked. Thirty-five jobs have been lost since August last year and a further 65 are expected to go.
Falling aluminium prices worldwide and high energy costs forced the company to reduce output by 15% earlier this year. In the last financial year, the Tiwai smelter lost $20 million.
On 9 August this year, Meridian Energy said the owner of the smelter wanted to change the terms of a new power contract, due to start in January 2013. New Zealand Aluminium Smelters said on Wednesday that renegotiating its contract with Meridian Energy is now crucial.
The Engineering, Printing and Manufacturing Union believes the job cuts are just the tip of the iceberg. Organising director Alan Clarence says the news is shocking, particularly after state-owned company Solid Energy last week suspended operations at its Spring Creek mine near Greymouth.
Mr Clarence says the Government must now take a lead role in contract negotiations between New Zealand Aluminium Smelters and Meridian Energy.
"Meridian being a state-owned asset and with (shareholding minister) Bill English responsible for those shares, we think it's high time that the Government stepped in and helped Tiwai smelter and Meridian Energy come to a deal."
But Prime Minister John Key says the contract between the parties is rock solid and it would be difficult for the Government to intervene. Mr Key says the job losses reflect what is happening in the industry.
"International aluminium prices are weaker and the company is looking to cut its costs to maintain the rest of the operation in more difficult trading conditions."
Every aspect of business being looked at
New Zealand Aluminium Smelters general manager Ryan Cavanagh says Tiwai is losing money and everything must be done to ensure the future viability of the plant.
Mr Cavanagh says every aspect of the business is being looked at - from employees to suppliers and working with customers "to try and make sure that we're viable and to ensure that we're here for the long term."
Workers are being consulted over redundancy options and some will be offered other jobs at the site, he says.
Invercargill mayor Tim Shadbolt says the job losses are a devastating blow to the region.
The Tiwai Point smelter began operating in 1971 and employs about 700 people. According to the company's website, New Zealand Aluminium Smelters is 79.36% owned by Pacific Aluminium and 20.64% owned by Japan's Sumitomo Chemical Company.