NEW YORK Rio Tinto Alcan
may shut its Sebree, Ky., aluminum smelter if it cannot secure
lower power rates.
Shutting the smelter "is a
possibility" if the company cannot find a solution for its
power costs and make the facility profitable, a smelter
spokesman told AMM, although this would be a "worst
The company has already started
to discuss ways to keep the smelter operating, including
purchasing power off the spot market, the spokesman said.
The Montreal-based company gave
its power provider, Big Rivers Electric Corp., 12 months
notice Jan. 31 that it will terminate the power contract for
the smelter, representatives for both parties told
AMM. The notice came six months after Century Aluminum
Co. gave Big Rivers Electric a 12-month power termination
notice for its 250,000-tonne-per-year smelter in Hawesville,
amm.com, Aug. 20).
Rio Tinto Alcan decided to
terminate the power contract because the utility proposed rate
increases that would make Sebree "unsustainable," the
company spokesman told AMM. The smelter employs around
Big Rivers Electric confirmed
that Rio Tinto Alcans overall power price will increase
by around 16 percent, largely as a result of Century ending its
own power contract in August 2013. "We have to plan for life
without (Century). We had a rate filing on Jan. 15 that would
force rates to increase, and the bulk of that is (due to)
Century leaving the system," a spokesman for the power provider
Rio Tinto Alcan and Century
Aluminum together consume 70 percent of Big Rivers power,
so losing both would mean the utility eventually would have to
idle some of its generating plants, the Big Rivers spokesman
"Well have to shut some
plants. We dont know which plants it will be. We just got
notice last week, but were doing a cost analysis now and
trying to figure out which ones well idle," he said,
adding that the plant shutdowns would be temporary.
Rio Tinto Alcan previously
announced its intention to sell the Sebree smelter, along with
12 other global aluminum and alumina assets, as part of a
cost-cutting initiative (
amm.com, Oct. 17, 2011).
If no interested parties step
forward, Rio Tinto Alcan could potentially purchase power off
the spot market to keep Sebree running, the spokesman for the
smelter said. Century Aluminum has said that it also is mulling
using the spot market for Hawesville (
amm.com, Nov. 14).
Power costs are a huge concern
for domestic producers, whose profits have dwindled with the
decline in the aluminum price.
Most analysts estimate aluminum
smelters breakeven point at $2,100 per tonne. London
Metal Exchange aluminum prices stayed under the
$2,000-per-tonne mark for much of 2012, hitting a low of $1,849
per tonne on Aug. 27, but they have since rebounded. LME
three-month aluminum ended the Feb. 4 official session at
$2,118 per tonne.