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Ohio senator voices support for Ormet

Keywords: Tags  Ormet, Michael Tanchuk, Sherrod Brown, Public Utilities Commission of Ohio, PUCO, American Electric Power, AEP, aluminum smelter power rates


CHICAGO — Sen. Sherrod Brown (D., Ohio) is calling on the Public Utilities Commission of Ohio (PUCO) to support Ormet Corp. as the bankrupt aluminum producer testified recently in a regulatory hearing before the commission that could determine whether it remains operational.

Brown’s backing comes as the Hannibal, Ohio-based company’s top executive predicted it could return to profitability in late 2014 or 2015.

High electricity costs and low aluminum prices have forced Ormet to consider a permanent closure of its Hannibal smelter, a move that could see some 1,000 workers lose their jobs, Brown wrote in a letter to PUCO dated Aug. 27.

"I strongly support these workers and their efforts to save the plant," he wrote. "As the third-largest aluminum smelter in the United States, a closure could significantly impact our country’s aluminum production capability."

PUCO kicked off a hearing Aug. 27 as it looks to mediate a power dispute between Ormet and Columbus, Ohio-based utility American Electric Power Co. Inc. (AEP) ( amm.com, Aug. 19).

For Ormet to break even, it would require a London Metal Exchange aluminum price of about $2,000 to $2,200 per tonne while operating at full capacity, Ormet president and chief executive officer Michael Tanchuk said during the Aug. 27 hearing.

The company is operating only two of six potlines at the Hannibal smelter but is preparing the other four potlines for a restart, Tanchuk said. "People are digging the pots, getting them ready," he said. But returning the idled potlines to operations will take two to three months and depend on the outcome of the PUCO hearings as well as LME prices, he said.

Asked if Ormet could survive an extended drop in aluminum prices below $2,000 per tonne, Tanchuk indicated this was unlikely. "This is a cyclical market, and that’s not ... what we believe will happen with metal pricing going forward," he said.

The LME’s cash primary aluminum contract ended the official session at $1,775.50 per tonne (80.5 cents per pound) Aug. 30, down 16.4 percent from a 2013 high of $2,123 per tonne (96.3 cents per pound) on Feb. 15.

Ormet expects to return to profitability in late 2014 or early 2015 based on its LME price forecasts, and assuming the company is able to build its own power plant ( amm.com, July 16). The generating facility could be in operation as soon as June 2015, Tanchuk said.

Ormet filed for bankruptcy protection in February, citing high power and legacy costs ( amm.com, Feb. 26). It has been at loggerheads with AEP over the terms of its power agreement, and contends that a better deal is imperative for it to emerge from bankruptcy as an ongoing concern ( amm.com, Aug. 22).


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