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Market divided on impact of Felman power rate

Keywords: Tags  Felman Production, silicomanganese prices, West Virginia Public Service Commission, PSC, Appalachian Power, APCo, Georgian American Alloys, GAA silicomanganese


NEW YORK — Silicomanganese traders are divided on whether free-market spot prices will be negatively impacted after Felman Production LLC won a special electricity rate for its New Haven, W.Va., smelter.

The West Virginia Public Service Commission (PSC) has authorized a plan that would give Felman a discount of up to $9 million per year off its full electricity rate from supplier Appalachian Power Co. Inc. (APCo).

Letart, W.Va.-based Felman began idling furnaces at its New Haven plant in May, citing the "decline in silicomanganese prices over the past several months combined with rising manufacturing costs, such as electricity" (amm.com, May 20), and proceeded with a full shutdown of New Haven smelting operations in June (amm.com, June 28).

Felman, a wholly owned subsidiary of Miami-based Georgian American Alloys Inc. (GAA), subsequently applied to the PSC for a special electricity rate, arguing that the plan’s approval would enable it to restart production at the New Haven plant (amm.com, Sept. 3).

Silicomanganese spot prices have gained steadily in the months following the idling of the New Haven plant, rising from a range of 49 to 51 cents per pound at the end of September to 59 to 61 cents per pound Feb. 27.

Prior to the PSC’s announcement April 3, market participants told AMM that they saw spot prices as stable, with the supply-demand dynamic somewhat "in balance." Traders are now divided on how Felman’s expected return to the market will impact spot prices down the road.

"I think it’s already factored into the market," one trader said. "Most people expected them to restart at some point, so the U.S. market will price with less of a premium to global markets going forward."

"We do not see any change in the market based on this information," a second trader said. "Felman had increased their Georgian imports and purchased material from elsewhere to cover their commitments. The restart of (the smelter) will just replace what Felman had to cover elsewhere. Felman has long-term contracts which have already been concluded for which they can now supply from the plant in West Virginia."

A third trader speculated that Felman would not want to get too "aggressive" in the spot market, with prices having improved significantly since it idled domestic production.

However, two other traders contacted by AMM forecast that prices would definitely drop if and when Felman restarts production. "Prices weaken as they open furnaces," one of them said.

Felman’s special power rate plan will incorporate a monthly discount "based on the actual gross margin available in the silicomanganese market," the PSC said. "The gross margin is calculated to be the difference between the market price of silicomanganese and the market price of the major raw materials that go into silicomanganese: manganese ore, coke and coal. The plan satisfies the policy goals of the legislature, addresses the concerns of Felman regarding the reopening of its plant, balances the interests of APCo, APCo’s present and future customers and the state’s economy, and was designed not to cause an additional financial burden on other APCo customers, including residential customers."

As an inducement for Felman to operate for at least five years, the special rate plan requires that a portion of the discounts given in each of the first five years be subject to recapture until the end of the fifth year, the PSC said.

Representatives of GAA could not be reached for comment.


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