CHICAGO Aleris International Inc. might not make a potential investment at its Lewisport, Ky., facility if it cannot secure a better power rate from Big Rivers Electric Corp., according to a letter from the aluminum companys top executive to Kentucky Gov. Steven Beshear.
Possible investment would be spurred by insufficient capacity in the downstream aluminum industry to meet expected demand in North America, according to the Oct. 10 letter signed by Aleris chairman and chief executive officer Steven J. Demetriou and obtained by AMM. The supply deficit is particularly acute in the aerospace and automotive sectors, where producers are looking to slash weight with aluminum to boost fuel economy, and as building and construction activity rebounds.
"As a result, we have been considering potential projects to expand our capabilities in the United States, and specifically weve been considering a potential investment in our Lewisport facility," Demetriou said. "This investment would further solidify our strong position in our industry, and enable us to have a strong, stable presence in the region for years to come."
The letter did not specify the amount of the potential investment, what exactly it might entail or a timeframe.
The letter acknowledges Aleris interest in growth prospects in North America, including Kentucky, a company spokesman said in an Oct. 18 e-mail to AMM. But "theres no investment amount to discuss at this time because no project has been defined."
The Cleveland-based company has criticized proposed increases by Henderson, Ky.-based Big Rivers in the past. But Big Rivers has said the increases are necessary, in part, given Chicago-based Century Aluminum Co.s decision to seek power on the open market for its Kentucky smelters (amm.com, Oct. 11)
Aleris employs 800 people at its Lewisport facility and more than 100 workers at its Morgantown, Ky., facility, Demetriou said in the letter to Beshear. Big Rivers "unprecedented proposed rate increases may jeopardize the regions strong industrial position, which is unfortunate as manufacturing is beginning to gain strength once again in North America," he said.
"We must now consider the possibility of other locations for our potential investment," Demetriou said, noting that the proposed rate increases could potentially double electricity costs at Lewisport. "An increase of this magnitude would substantially change the economics of our potential investment, and erode our confidence in the future stability of electricity rates in the region. As a result, we are beginning to explore other options."
The Lewisport facility makes aluminum sheet for a variety of industries, including building and construction, metal distribution, transportation, automotive and specialty products, Demetriou said in the letter. The Morgantown operation makes secondary ingot and molten aluminum, according to Aleris website.
"Given your commitment to sustaining a favorable business environment in Kentucky, I want to make you aware of the potential serious consequences that these rate increases may pose for our continued investment in our Kentucky operations and, by extension, the community in which we operate," Demetriou told Beshear.