Climate isn't great for CFAC expansion
Hungry Horse News
Talk circulating around town that Columbia Falls Aluminum Co. may start up another potline in the next few months are probably not realistic, based on recent comments by company officials and the realities of the marketplace.
Four general mechanics were recently brought back to work at the plant-an iron worker, a millwright, an oiler and a pipe fitter-amid speculation about workers preparing Potline 4 for re-energizing.
While prices for aluminum ingot have improved since the 2001 global recession to more than $1,800 per ton on the London Metal Exchange, power and raw material costs have not improved much since last year.
CFAC has been running only one of its five potlines since March 2003, when high electrical power prices collided with a global shortage of alumina, the raw material used to smelt aluminum, to create a "perfect storm" that forced the company to shut down two potlines and lay off 175 of its 330 employees.
CFAC is currently paying the Bonneville Power Administration about $34 per megawatt hour to operate Potline 5, said BPA spokesman Mike Hansen. He said CFAC has not approached the agency about taking on any additional power.
Regional open market prices for wholesale power are running more than $40 per megawatt hour, according to Energy NewsData.
Aluminum producers in the Pacific Northwest have said in the past they cannot operate profitably if power costs more than $30 per megawatt hour.
High regional power prices put CFAC at a global disadvantage, CFAC general manager Steve Knight said recently at a Columbia Falls Chamber of Commerce meeting.
"Power prices around the world average about $20 per megawatt hour," Knight said. "Each $1 difference in power costs us $3 million."
Knight said alumina shortages, aggravated by China's rapidly growing aluminum industry, also continue to be a problem.
"Alumina used to account for 12 percent of our costs, but now it's 22 percent," Knight said. "But that's a problem for all aluminum producers around the world."
Knight called for development of new natural gas, coal or nuclear power plants in the Pacific Northwest to level the playing field.
In 2001, CFAC signed a five-year "take-or-pay" power contract with the BPA for 171 megawatts - enough power to operate half the plant. The contract obligated CFAC to use all 171 megawatts or else pay the BPA for any losses the agency incurred selling unused power on the open market. Last year, CFAC used a one-time only "off-ramp" provision to reduce the amount of power in the contract, but the details are protected by a confidentiality agreement with the BPA, Hansen said.
CFAC continues to be a hardy survivor in a tough business. At one time, the Pacific Northwest's 10 aluminum smelters produced 40 percent of the nation's aluminum, and the U.S. led the world in aluminum production.
Today, Alcoa's Intalco smelter in Ferndale, Wash., using BPA-supplied power, is the only other Pacific Northwest aluminum plant currently operating. Alcoa recently announced its Wenatchee, Wash., smelter would partially restart in December using power from Alcoa's 23 percent stake in a local public utility district's hydroelectric dams.
Three aluminum companies - Kaiser, Longview Aluminum and Golden Northwest Aluminum - have filed for Chapter 11 bankruptcy protection, accounting for five of the Pacific Northwest's 10 former smelters.
At least three plants are gone for good. Clean-up work at Alcoa's Troutdale, Ore., smelter began last year. Kaiser's Tacoma, Wash., plant was sold to the Port of Tacoma for use as shipping facility. Equipment at the smelter in Longview, Wash., has been auctioned off by a bankruptcy trustee, and the 500-acre plant and its dock facilities were leased to a Canadian company for use as a lime-importing facility.