Subscribe to the latest news from the Nordic Labour Journal by e-mail. The newsletter is issued 9 times a year. Subscription is free of charge.

You are here: Home i News i News 2016 i Labour dispute at Icelandic smelter – a threat to the country’s agreement model?
Labour dispute at Icelandic smelter – a threat to the country’s agreement model?

Labour dispute at Icelandic smelter – a threat to the country’s agreement model?

| Text: Guðrún Helga Sigurðardóttir, photo: Rio Tinto Alcan

A bitter labour dispute between trade unions and employers at Rio Tinto Alcan’s Icelandic smelter Isal is in its second year.

Workers have twice threatened to go on strike, but have pulled back at the last minute because of fears the smelter would be shut down. Six trade unions are negotiating, but most of the 500 employees at the smelter in Straumsvík belong to the Hlíf union. 

The unions want wage increases in line with what other trade unions in the industry have achieved. But the issue which have led to negotiations grinding to a halt, is Rio Tinto Alcan’s desire to outsource certain tasks. The company leadership wants to outsource just over 30 jobs. The unions oppose this, arguing that everyone should be paid the same and that this should be made a statute in the new wage agreement. 

An agreement from 1972 bans the company to outsource work without the agreement of the unions. Rio Tinto Alcan claims this weakens the company’s competitiveness. 

Negotiating without the power to do so?

The Icelandic employers’ union SA negotiates on behalf of the smelter, but the negotiation delegation is mostly made up by representatives from the factory leadership. The Hlíf union says the negotiation delegation basically does not have the power to reach an agreement with the unions. 

“Whenever we believe we are getting close to a deal, the employers’ delegation has to make international telephone calls to discuss it with the Rio Tinto Alcan top leadership. They are always told no, and the negotiations stop,” says Hlíf’s leader Kolbeinn Gunnarsson. 

The employers’ organisation SA’s lawyer Ragnar Árnason does not consider it unusual that the negotiation delegation calls the group’s leadership to discuss proposals for a deal.

“Both parties in the labour market have the right to negotiate and present their demands, but no-one is forced to reach an agreement. The employees have the right to strike, and employers have the right to impose a lockout,” says Ragnar Árnason.

Locked situation

Icelandic media have launched various theories for why the conflict is so entrenched. One is that the company really is looking to renegotiate the agreement it has with the state energy company Landsvirkjun to buy electricity. The agreement runs all the way to 2036. 

“The employees have concluded that the employer would welcome a strike, as that would give them a chance to close the factory,” says the union lawyer Ástráður Haraldsson. 

“We believe the mother company would not at all be interested in ending a strike. In which case we are locked in a situation which nobody knows how to solve,” he continues. 

The negotiations have not been helped by the fact that the Rio Tinto CEO Sam Walsh wrote an email to all employees in early 2016 announcing all wages in the gigantic raw material group would be frozen for the whole of 2016. Rio Tino is one of the world’s larges producers of iron ore and prices are record low. This means negotiations have yet again stalled. 

Possible sympathy action

Iceland’s trade union movement is discussing sympathy actions in order to force the aluminium giant back to the negotiating table. The leader of the Icelandic Confederation of Labour, Gylfi Arnbjörnsson, has said limited strike action, a ban on overtime and export bans are all measures under consideration. Other trade unions can also call for sympathy strike action.

Hlíf’s leader Kolbeinn Gunnarsson says Icelandic workers should get a 32 percent wage increase between 2013 and 2018 according to the collective agreement. Rio Tinto Alcan’s employees have so far not been part of the collective agreement for aluminium workers, but have had a separate agreement with the company. Now, Hlíf will demand a collective agreement with Rio Tinto Alcan, to secure the employees the same wage increases as Iceland’s two other aluminium companies. 


Rio Tinto Alcan is one of the world’s leading aluminium giants. The company was founded as Alcoa in 1902, but the name was changed to Aluminium Company of Canada Limited and later to Alcan in 1945. In October 2007 Alcan merged with Rio Tinto. 

Rio Tinto Alcan employs 68,000 people in 61 countries. The smelter in Iceland is one of the country’s largest employers with some 500 employees. It produces 450 tonnes of aluminium every day. Closing production at a smelter is complicated, because it is a continuous process. 

Aluminium needs vast amounts of energy, so the price of electricity is crucial to profitability. Aluminium makes up around 22 percent of Iceland’s exports. 

The smelter in Straumsvík was built in the 1960s. It is the oldest of Iceland’s three smelters.


Receive Nordic Labour Journal's newsletter nine times a year. It's free.

This is themeComment