The announcement comes after substantial losses by the company over the past two years, largely a product of a 20 percent slump in coal prices since 1997, and also because of the depressed state of the domestic and international steel industry, one of the main customers for coal. Prior to the present crisis, Solid Energy was being prepared for sale by the government, following 10 years of profitability after its formation into a state-owned enterprise in 1987. Major expansion plans had been put into place, with the aim of doubling exports to 3 million tonnes within four years. After 1997, however, a new chief executive, former Brierley boss Jon Hartley, was installed to implement a harsh cost-cutting regime. One of the hardest hit of the company's operations will be at Mount Davy on the West Coast of the South Island.
Mining is to be scaled back because of unsafe working conditions there.
Three workers were killed at the mine last year. The Australian multinational BHP will make a decision this month about the future of its Glenbrook Steel mill, south of Auckland, which currently employs 1,200 workers. Glenbrook has been in financial trouble for several years, after initially being sold off by the Labour government, on the eve of the 1987 stockmarket crash, to the corporate raider Equiticorp. BHP bought the mill in 1991 when Equiticorp went under. Since then, Glenbrook has consistently failed to meet BHP's target of a 10 percent return on assets, which in turn is less than the owner's usual target for its subsidiary companies of 15 percent.