Century Aluminum to idle Kentucky smelter due to weak prices
26 August 2015
Century Aluminum Co, which is owned by Glencore PLC, said on Tuesday it will idle its Hawesville, Kentucky, smelter, the first aluminum plant to shut in years as sinking prices and increased Chinese exports harm producers.
Century said in a statement it would begin curtailing capacity on Oct. 24, blaming weak metal prices caused by low-priced exports from China. It will "completely idle the plant" on Oct. 31, a spokesman said.
The plant can produce 255,000 tonnes per year of aluminum, and its closure represents the immediate reduction of nearly 15 percent of total U.S. capacity.
The last operating U.S. smelter to shutter completely was Alcoa's Massena East plant in New York state, which was operating at a reduced capacity of 84,000 tonnes when it closed in January 2014.
The Hawesville plant is operating at about 80 percent of capacity following a lockout due to a labor dispute.
The move could lend support to the U.S. Midwest premium AL-PREM users pay for physical delivery of aluminum, which has tumbled more than 60 percent to around 8 cents a lb this year, though weak futures prices and a glut of imported metal could spell more hard times for the battered primary metal sector.
"The domestic supply base being eroded is significant," said Ed Meir, senior commodities analyst at brokerage INTL FCStone, noting that the closure could contribute to a 1-2.5 cent rise in the Midwest premium over the next two to three months and that the falling futures price could also support premiums.
Aluminum prices on the London Metal Exchange have plunged by a quarter since May and hit fresh six-year lows of $1,506 per tonne on Tuesday on concerns about a growing glut of metal and waning demand from China, the world's biggest producer and consumer of industrial metals.
China's exports of so-called "fake semis" - metal exported as fabricated products to avoid an export tax, only to be re-melted later - has drawn ire from aluminum producers elsewhere, including Century.
"Chinese overcapacity and the improper export of heavily subsidized Chinese aluminum products have undercut an otherwise viable plant," Century President and Chief Executive Michael Bless said in Tuesday's statement.
The closure comes after Century announced it would permanently close its Ravenswood, West Virginia smelter, which had been idled since 2009, and as Alcoa Inc is reviewing 500,000 tonnes of production capacity for potential sale, cutback or closure.