Aluminum Holding Corp. is laying off workers at a North
Carolina rolling mill and scaling back a planned expansion at
its New Madrid, Mo., smelter as it looks to cut costs and
The moves come as the
Franklin, Tenn.-based aluminum producer grapples with low
London Metal Exchange aluminum prices, import competition and
higher electricity costs, company executives said during an
earnings conference call Oct. 30.
"Were not just
sitting around waiting for the LME to get better," Noranda
president and chief executive officer Layle K. "Kip" Smith
Noranda has "initiated
a work force reduction" at is Salisbury, N.C., rolling mill in
response to import competition on certain light-gauge foil
products also made at the companys Newport, Ark., rolling
mill, Smith said. The move, which should save the company about
$4 million to $6 million per year, is necessary to "match
production with demand."
Other changes include
offsetting a drop in demand for extrusion billet and redraw rod
by meeting market demand for high-purity metal, Smith said.
facility, which has an annual production capacity of about 95
million pounds, makes light-gauge sheet and foil products for
the heating, ventilation and air conditioning (HVAC), flexible
packaging and food container markets, according to
Smith did not disclose
where the import pressure was coming from or specify the number
of workers impacted by the cuts at the Salisbury plant. And he
stressed that the light-gauge products facing import
competition represented only part of Norandas overall
stable of flat-rolled products. "We believe we will be able to
replace the majority of the lost flexible packaging volume with
other products within our portfolio," he said.
Noranda also has
"significantly reduced" its spending on a project to boost
capacity at its New Madrid smelter, Smith said, and the planned
expansion likely will not be completed until 2016. "That
project we anticipate would come on later than we originally
forecast. But that would be commensurate with a return to a
more cycle-average level LME," he said.
The company had
announced plans to spend $38 million to boost metal production
capacity at New Madrid by about 35 million pounds, with the
project initially forecast to be completed by mid-2015,
according to Norandas website.
But while Noranda may
be slowing that project, it is pressing ahead with work on a
new rod mill in New Madrid and expansion of its port in
Jamaica, in part because they are expected to sport "largely
LME-independent" returns, Smith said, noting that the rod mill
expansion remains on track to be completed in early 2015 and
the dredging project by late 2013 or early 2014.
Noranda is investing
$45 million in New Madrid to build a facility to make redraw
rod for electrical infrastructure applications (
amm.com, July 29), and is spending $10 million to
$15 million on the dredging project in Jamaica (
amm.com, July 24), where it sources bauxite for
its alumina refinery in Gramercy, La.
On the pricing front,
Smith largely ducked a query about the potential impact of
proposed changes to LME warehouse policies and possible
knock-on impacts on Midwest premiums when an analyst asked
whether 10- to 12-cent premiums were sustainable or whether
premiums might fall as low as 5 cents per pound, where they
have been in the past.
"We would not venture
a forecast for the premium," Smith said. But Noranda views the
premium as a "fundamental market" of North American demand.
"When it comes to pricing, the end-user demand is really a
primary driver as opposed to a secondary driver of how that
number is arrived at. So to the extent that demand remains
strong, we think that tends to provide support for where the
premium is," he said.