Century Aluminum takes power issue to Kentucky lawmakers

Sun Mar 10, 2013 9:59am EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Carole Vaporean

NEW YORK, March 10 (Reuters) - Kentucky state lawmakers are set to decide whether to let U.S. aluminum producer Century Aluminum Co buy power on the open market in its bid to save its money-losing smelter in the Bluegrass state from closure.

With metal prices low and production costs high, U.S. aluminum producers struggle with razor-thin margins. In its attempt to cope, Century has taken the dramatic step of pushing for legislation that would exempt smelters from a state law requiring consumers to take power from only one supplier.

"We're losing money every month. What the bill would do is get me out from under that exclusive service contract," said Michael Early, Century's energy director, in testimony last month before Kentucky's House Natural Resources and Environment Committee.

The bill could have bigger implications for the troubled U.S. aluminum industry, where high-cost electricity for aging plants has challenged many producers to seek ways to operate more efficiently, especially as benchmark aluminum prices have come down by more than 30 percent in less than two years.

Century's drive for the legislative change coincides with Ormet Corp's filing for bankruptcy protection at its Ohio aluminum facility, crippled by high costs.

Reuters data shows U.S. aluminum output has fallen by 20 percent over the past decade to 2.03 million tonnes last year, and the number of smelters has dropped by more than 30 percent to 10 plants over the same period.

At current aluminum prices, close to 4.3 million tonnes of production outside of China is unprofitable, according to Barclays base metals analyst Nick Snowdon. That is about 8 percent of global output.

The Kentucky situation may force aluminum makers who cannot lower their production costs in the United States to shift operations to other parts of the world, as some have done already.   Continued...