Jack Mintz: Corporate welfare for those that don’t need it
In case you missed the news, our indebted federal government is forking out $220 million from its Strategic Innovation Fund to Quebec’s Rio Tinto to increase the production of critical minerals and reduce carbon emissions.
Rio is not the first multi-billion company to be enriched by Canadian taxpayers nor will it be the last. Whether it’s Ontario’s electric vehicle companies, B.C. and Alberta’s film industries or Atlantic Canada’s pulp and paper plants, thousands of companies over the years have received federal and provincial “corporate welfare,” a colourful term highlighted by federal NDP leader David Lewis in his “corporate welfare bums” election campaign of 1972.
Rio Tinto is expecting to quadruple its production of scandium, which is used in aluminum alloys — even though aluminum production is already heavily subsidized in Quebec via favourable electricity pricing, as the OECD reported in 2019. It will also increase its output of titanium, which is used in aerospace and autos, and boost its capacity in lithium for battery production.
It’s not that Rio Tinto is going bankrupt. According to its latest financial report, in the first six months of 2022 its after-tax profits were US$8.9 billion with an underlying return to employed capital equal to 34 per cent. Despite the recent global slowdown, prices for these critical materials are far higher than just five years ago. Lithium, for example, is trading at US$70 per kilogram, seven times its price before 2020. Titanium is at US$11,000 per kg, three times higher than previously.