CHICAGO Rio Tinto Alcan hopes to maintain a presence in the United States even if it sells its Sebree, Ky., smelter, although exactly how the aluminum producer might achieve that goal remains a matter of debate within the company, according to sources familiar with the situation.
Rio Tinto Alcan, a unit of global mining major Rio Tinto Plc, announced in 2011 plans to divest the Sebree site (amm.com, Oct. 17, 2011), with market sources recently pegging Monterey, Calif.-based Century Aluminum Co. as the most likely candidate (amm.com, Feb. 8).
But even if the company presses forward with plans to sell, Rio Tinto Alcan has plenty of reasons to stay a key player in the United States, sources said. The Montreal-based company already has a well-established customer base and brand presence in the country, and the U.S. automotive and construction sectors are expected to drive an uptick in aluminum demand. In addition, low natural gas prices make operating a smelter in the United States more economically feasible than in the past, sources said.
If Century or another bidder were to acquire Sebree, Rio Tinto Alcan might consider taking on a greenfield project in the United States, temporarily restarting an older U.S. facility, relocating equipment abroad to the United States or perhaps retaining a stake in the Kentucky smelter, sources familiar with the matter said.
Century and Rio Tinto Alcan declined to comment.
Sources have cited Century as the most likely bidder due to the fact that it operates its own smelter in Hawesville, Ky., and might be able to negotiate a better power deal if it were buying electricity for both facilities. Sebree and Hawesville together account for about 70 percent of Henderson, Ky.-based utility Big Rivers Electric Corp.s power, sources have said.
Century is currently pushing for legislation that would allow its Hawesville smelter to access power on the open market. President and chief executive officer Michael Bless said during the companys last earnings conference call that the smelter "is not viable" without a better power deal from Big Rivers (amm.com, Feb. 22).
The legislation faces an uncertain future given that the Kentucky legislatures regular session ends March 26, a source familiar with the matter told AMM March 19. Tuesday is the last day the bill could be voted on unless the governor were to call a special session, he said. "The bill is in limbo and teetering on the edge of oblivion," the source said. "It cant be said to be dead. But its a big question what (the legislature) will take up in the final days."
The bill has strong proponentsespecially in western Kentucky, where the smelters are locatedbut it has staunch opponents as well. While some legislators see the bill as potentially saving jobs, others worry that it could set a bad precedent of governmental involvement in contract disputes, the source said. Several associations have joined Big Rivers in opposition to the proposed legislation (amm.com, March 6).