Century-Old Bond for Aluminum Smelters and Utilities Falls Apart – by Harry Weber and Sonja Elmquist (Bloomberg News – July 14, 2016)


The business of making aluminum in the U.S. is collapsing — and no other industry has watched the demise as closely as the one that supplies the power used to create molten metal in giant pots.

For more than a century, America’s aluminum processors and the electricity generators grew together. Utilities sought out smelters that, in some cases, became their largest consumers. And the metal makers counted on utilities to supply an energy source that accounts for as much as a third of their costs.

Their fates were so linked that, “if the smelters were not built, then the power plants wouldn’t have gotten built,” said Lloyd O’Carroll, a Richmond, Virginia-based commodities analyst with CRU Group.

But rising exports from China have forced all but two companies — Alcoa Inc. and Century Aluminum Co. — out of the U.S. aluminum business for now. That’s dismantling the industry’s once symbiotic relationship with local electricity producers.

On July 6, Century said it would start buying most of the power for its South Carolina complex from a third-party supplier instead of the local utility, after breaking ties with a utility in Kentucky. Alcoa’s plant in Washington, historically the Northwest’s biggest electricity consumer, has cut purchases from its utility in search of lower prices elsewhere.

While power suppliers have grown less dependent on smelters over the decades, losing their business only adds to the woes of a utility industry already facing weakening residential consumption and rising operational costs. Across the country, low electricity prices and mounting environmental regulation are forcing power plants capable of producing thousands of megawatts of power to retire early.

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