Winter Park, Florida 29/04/2016 - Century Aluminum will have to make a long-term decision on its Mt. Holly primary aluminium smelter in South Carolina by early July, company president and CEO Michael Bless said.
Century currently purchases 75 percent of the smelter's power from the competitive market and 25 percent from state-owned power utility Santee Cooper at a standard rate. The current arrangement will be in place until August 31 but there is a two-month termination clause.
"Regrettably, the average price achieved by this arrangement puts Mt. Holly's power price in the fourth quartile of global power costs for smelters," Bless said during a conference call.
The 244,000-tonne-per-year plant smelter now runs at 50 percent of capacity and the company will idle all production without a more favourable power deal. In addition to standard P1020 aluminium ingot, Mt. Holly also produces HDC ingot, extrusion billet and other value-added primary aluminium products.
"Otherwise, this would be a very competitive plant due to its modern technology and an extraordinarily able group of employees. But the power price simply makes the plant uncompetitive and thus not viable over the long term," Bless said.
In the second half of 2015, Century asked Santee Cooper for permission to buy 100 percent of its power from market sources while the local utility would still provide transmission services for a fee. But that request was denied because it would lead to higher rates for other industrial customers.
More recently, Century has approached the South Carolina state legislature. There is now a pending state Senate bill that would have let Century Aluminum buy all of its electricity on the open market but that proposal did not get past a subcommittee hearing on Thursday.
"I never want to definitively say something is dead because as long as we're in session there's always a possibility," state Sen. Larry Grooms, one of the bill's sponsors, told The Post and Courier. "But I don’t see a reasonable possibility at this point."
Mt. Holly is "obviously running out of time", Bless said, adding that the company will have to make a decision on its long-term future within the next two months.
Century has also been looking at the significant expansion of its two smelters in Kentucky through the movement of production equipment from Mt. Holly.
In 2013, it convinced Kentucky state agencies to allow the Hawesville and Sebree smelters to purchase power on the open market via the Midcontinent Independent System Operator (MISO) - a regional transmission organisation that provides power across 15 states.
The major advantage of MISO is that it is an open market - one that is traded on the IntercontinentalExchange (ICE) at the Indiana Hub and Northern Illinois Hub.
The situation in South Carolina is significantly more complicated because that region is covered by the Virginia-Carolinas Reliability Agreement (VACAR), which is a bilateral market. This means that Century will have to broker an individual deal instead of buying from a publicly traded marketplace.
"We've done a preliminary engineering study and the results were interesting enough that we’re now doing a more detailed analysis," Bless said about the possibility of moving the equipment to Kentucky.
"Obviously, we'd only contemplate something like this in the worst case if you weren’t able to find a way to make Mt. Holly competitive," he added.
(Editing by Mark Shaw)