July 22, 2015 / 4:57 PM / 2 years ago

UPDATE 2-Noranda delays smelter ramp-up due to aluminum price rout

(Adds sector background, details on power deal)

NEW YORK, July 22 (Reuters) - Noranda Aluminum Holding Co has delayed efforts to ramp up production at its New Madrid, Missouri, smelter due to a sharp decline in aluminum prices, President and CEO Kip Smith said on Wednesday, as the company’s quarterly losses widened.

The company had previously expected the 253,000 tonne-per-year smelter to reach full capacity by the third quarter.

It is currently operating at about 85 percent of capacity, down from 90 percent in May, Smith said on a conference call to discuss the company’s second-quarter earnings.

“The economics of ramping up production changed,” Smith said, noting that the company would focus on achieving “operating stability” and “prudently” increasing production at the smelter through the fourth quarter of 2015.

The company announced a loss of 25 cents a share for the second quarter, compared with an eight-cent loss in the same period of 2014.

Smith said “reliability issues” at the smelter during the second quarter limited its production and cost the company 8 cents per pound. He has previously blamed higher-than-expected pot line outages for the slower ramp-up.

The caution in bringing on new capacity is the latest sign of the pain felt across the global industry as prices on the London Metal Exchange remain below cost of production for a big portion of the world’s smelters.

Alcoa Inc and Rusal have both cut output in recent years.

Prices have plunged 20 percent since September and were at $1,657 per tonne on Wednesday afternoon. Premiums AL-PREM, which are paid on top of the benchmark LME price for physical delivery, have also fallen at an unprecedented rate this year, further hurting smelters’ margins.

Executives said they had no update on the strategic review announced last month.

The slow ramp-up is the latest headache for Noranda’s only primary aluminum smelter after a dispute with its power supplier Ameren Corp over electricity rates earlier in the year.

The issue was resolved in April after the Missouri state regulator forced Ameren to lower Noranda’s power prices by 14 percent.

Ameren has informed the company that it does not intend to extend the current power contract after it expires in 2020, meaning Noranda will either have to negotiate a new contract or find a different provider to keep the smelter running.

Reporting By Luc Cohen; Editing by Peter Galloway and Andrew Hay

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