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Cold chills Noranda output, could inflate energy costs

Keywords: Tags  Noranda Aluminum Holding Corp., severe weather, disruptions, smelter, Franklin, Tenn., alumina refinery, Gramercy La.


CHICAGO — Unusually cold and wet weather in the United States has hampered production and could drive up natural gas costs as well, Noranda Aluminum Holding Corp. executives said.

The severe weather chilled Noranda’s operations in New Madrid, Mo., and Gramercy, La., Noranda president and chief Layle K. "Kip" Smith said during a conference call with reporters and analysts Feb. 19.

"We have seen an incredibly cold and difficult winter, particularly in the month of January," he said. "Extreme cold is not necessarily expected in Gramercy."

The Franklin, Tenn.-based aluminum producer operates a 260,000-tonne-per-year smelter in New Madrid and a 1.2-million-tonne-per-year alumina refinery in Gramercy, according to its website.

Harsh weather has hit much of the United States this winter, with freezing temperatures—and associated production and logistics disruptions—reaching as far south as the Gulf Coast (amm.com, Jan. 29).

While the cold weather hurt production at Noranda, it hasn’t cooled demand, Smith said. "We see strength in our order book, especially in the flat-rolled business. So it was not a demand issue, it really was those two facilities and it really was cold-weather driven," he said.

But the cold—and resulting higher natural gas prices—could drive up costs in 2014, Noranda chief finacial officer Dale Boyles warned.

Noranda uses roughly 18 trillion British thermal units (Btu) of natural gas per year and estimates that it will pay about $4.50 per million Btu for gas in 2014, Boyles said. The company currently has no hedging program "of any significance" in place for either aluminum or natural gas prices, he said.

"The recent rise in prices could have a material impact on the full year. We don’t control the weather, but we do control our response to it and are committed to making up the difference," Boyles said.


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