Aluminum Holding Corp. is seeking a lower electricity rate in
Missouri, without which it said it will need to cut 150 to 200
jobs or ultimately close its New Madrid smelter.
Tenn.-based aluminum producer has asked the Missouri Public
Service Commission to approve a new rate of $30 per megawatt
hour (MWh), roughly 27.7 percent less than the $41 to $42 per
MWh the company now pays to St. Louis-based utility Ameren
Corp., a Noranda spokesman told AMM.
"If we arent
granted the requested reduction in an expedited manner, and if
LME (London Metal Exchange) aluminum prices dont improve,
we would have to look at more head count reduction at New
Madrid," the spokesman said, estimating potential layoffs at
between 150 and 200 employees. Thats the most Noranda
thinks it could cut its work force at New Madrid without
jeopardizing its ability to meet customers commitments, he
The company announced
plans in December to slash 190 jobs (
amm.com, Dec. 17), including approximately 70 to
75 at the 260,000-tonne per year New Madrid smelter.
But even such big cuts
would only "allow the smelter to survive for a period of time"
and wouldnt be enough to offset current high power costs,
Noranda president and chief executive officer Layle K. "Kip"
Smith said in testimony in a filing to the state Public Service
"Without the requested
rate reduction, even with our planned reductions in other
costs, the New Madrid Smelter would have insufficient liquidity
and be subject to closure ... resulting in the loss of all jobs
at the smelter," Smith said in the filing.
The lower proposed
rate would reduce Norandas aluminum production costs by 8
cents per pound annually, the company said.
Noranda wants the rate
to be approved quickly so that it will be in place by Aug. 1,
the spokesman said, without disclosing whether other operations
would be impacted by potential cuts at New Madrid.
for about one-third of smelting costs, making cheaper power
necessary due to the low aluminum prices, the spokesman said.
"With prices being what theyve been for so long and
concern about how quickly they are going to ramp up, it creates
short-term and longer-term liquidity challenges," he added.
The cash aluminum
contract ended the London Metal Exchanges official
session Feb. 13 at $1,687 per tonne (76.5 cents per pound), a
high for the month to date but down 19.2 percent from $2,087.50
per tonne (94.7 cents per pound) on the same date last year.
Prices havent risen above $2,000 per tonne since Feb. 25,
2013, and have remained well below $1,800 per tonne in 2014 to
As aluminum prices
have tumbled, rate cuts have been sought by aluminum producers
in the United States (
amm.com, Jan. 30) and Canada (
m, Oct. 30).
A lower rate for
Noranda would be "revenue neutral" to Ameren and would increase
those for other consumers by 1.8 percent, the company
said. The proposal has received support from such groups as the
Missouri Retailers Association, which includes large commercial
consumers; and the Missouri Industrial Energy Consumers, whose
members include big industrial companies, Noranda said.
Amerens largest customer, consuming about 10 percent of
the utilitys electricity output, the spokesman said. The
company isnt proposing to leave Amerens system, he
The New Madrid smelter
purchases about as much power as the city of Springfield, Mo.,
and pays $20 million per year more for power than the average
domestic smelter, according to Smith.
The New Madrid smelter
employs about 900 of the 2,300 people working at Noranda, the
company said. Part of the smelters production is
converted into aluminum rod used to make electrical
transmission products, with the balance sold to the
companys customers as extrusion billet, foundry ingot and
primary sow, according to the companys website.