Domestic cement production secured

The Government is acting to maintain New Zealand’s ongoing domestic cement manufacturing capacity and ensure our economy remains resilient to global supply chain shocks.

“We have agreed to grant Golden Bay Cement (GBC) up to $60m to continue cement manufacturing at its Whangarei plant, maintain domestic clinker manufacturing capability, and undertake at least $150m in investments needed to support cost-effective domestic cement production through to at least 2040.”

“Ministers were advised that due to rising costs Fletcher Building Limited was considering closure of the GBC clinker facility in Whangarei, in favour of switching to a cheaper import-only model. 

“The Golden Bay factory is New Zealand’s only fully integrated cement manufacturing plant and plays a vital role in our economic supply-chain. 

“In May Cabinet carefully considered the case for targeted, time-limited financial support to secure its ongoing operation.   

“Ultimately the Government determined that losing domestic cement production would leave us massively exposed to potential global supply disruptions. Cement has no practical substitutes. It is needed for the building of homes, hospitals, schools, roads, and other nationally significant infrastructure.  Any reductions in its availability could bring essential construction and infrastructure development, and the economic activity they support, to a standstill.

“Cabinet therefore agreed to enter negotiations to keep the GBC plant operating, with a limited envelope of funds set aside for this purpose and strict conditions for support. The agreement we are announcing today meets those conditions within the funding envelope determined by Cabinet.   

“Our Government did not take this decision lightly. Before entering negotiations we undertook a rigorous supply chain assessment of the role domestically produced cement plays in the economy, analysed the underlying financial factors at-play, and gave careful consideration to potential precedent risks. Ultimately, we concluded that this is an exceptional case, which meets the very high bar needed to justify taxpayer support.  

“As part of our deliberations, we commissioned an independent open-book financial assessment of the GBC operation.  This concluded that there were binding constraints on the financial viability of domestic cement production, primarily due to emissions costs. 

“While we considered alternative forms of regulatory relief, we were concerned to take a lowest-cost approach that did not undermine the effective operation of the Emissions Trading Scheme.  The agreed approach strikes the right balance, preserving a strategically significant domestic capability without creating a precedent for wider support, or undermining the integrity of the ETS.

“Under the terms of the deal, GBC must maintain domestic manufacture of cement until at least 31 December 2040, commit at least $150m of its own investment, maintain jobs, and submit to additional reporting and auditing requirements, with the Government able to claw back funds if obligations are not met.

“In an uncertain world, the Government has acted to secure New Zealand’s national economic resilience.” ...