Century Aluminum still hopes state lawmakers will find a way to cut electricity costs at its Mount Holly smelter, but a shutdown by the end of May is looming.
“We are working intently to produce a power-supply arrangement that makes this world-class plant competitive for the long term,” Mike Bless, the company’s president and CEO, said Thursday after Century announced its quarterly and annual earnings.
Bless told investors during a conference call that Century must know by the end of next month whether there will be a legislative solution to Mount Holly’s electric costs. The company has arranged to buy power for the Berkeley County site only through May and could give the required 60-day notice to cancel its contract with state-owned electric utility Santee Cooper by the end of March.
“This really is an exceptional plant, for decades a supplier of high-quality billet, with a terrific group of highly motivated employees,” Bless said. “The loss of this plant would be a real tragedy for South Carolina and, particularly, for Berkeley County.”
Bless said he was “quite encouraged by the support we’ve been encountering by state legislators and other officials” working to save the Mount Holly plant and that Century will “do everything in our power to find an acceptable solution.”
He acknowledged that the time frame is tight.
“It’s difficult to predict how this sorts itself out,” he said.
Century currently buys 75 percent of its power on the open market and the rest from Moncks Corner-based Santee Cooper. Bless said that arrangement can’t work long-term because Century needs to get all of its power from out-of-state utilities that produce electricity with cheaper natural gas rather than the more costly coal that Santee Cooper mostly uses.
Century initially planned to close Mount Holly at the end of last year. It shut down just one of its two pot lines after several state legislators said they would work to find a way to let the company buy all of its power on the open market. Century also renewed its contract with Santee Cooper days before it was set to expire.
No legislation has yet been filed to address the Mount Holly situation.
Bless said he hopes to eventually bring Mount Holly back to full production and rehire the nearly 300 workers — half of the company’s normal workforce — who were laid off at year’s end if a new power deal can be reached.
“It’s clear some type of change needs to take place,” he said. “We don’t require any (financial) aid from the state. We simply need the free market to be allowed to operate.”
Santee Cooper has said it can’t let Century buy all of its power from a third party because other customers would then have to subsidize the utility’s transmission of that power to Mount Holly. Century has said it would pay those transmission costs, but Santee Cooper has said the amount offered — about $12 million per year — still would require a subsidy.
Bless told investors that Mount Holly has the highest electricity costs of any U.S. smelter, but it could reduce those costs by up to 40 percent if it could buy electricity on the open market. Electricity is Mount Holly’s largest single expense, other than payroll, because it takes roughly 400 megawatts to produce aluminum at full capacity.
In addition to electricity, Bless cited overproduction by China’s smelters as a reason for Century’s poor financial performance. For 2015, Century reported a net loss of $43.1 million during the fourth quarter and an annual loss of $59.3 million. That compares with net income of $75.8 million for the fourth quarter a year earlier and net income of $126.5 million for all of 2014.
China’s production of aluminum increased 10 percent in 2015, well above demand growth, and the country exported about half that amount at prices that were lower than what it costs U.S. smelters to produce the same product. Bless wants the U.S. government to sanction China for what he terms illegal dumping of aluminum onto the market.
“Evidence continues to mount that the illegal government subsidies and other practices underlying this supply growth are in violation of China’s World Trade Organization obligations and have materially injured the industry around the globe,” Bless said. “This behavior simply won’t stop until it is forced to do so. We continue to work with industry participants, including our labor partners, to encourage government action before it is simply too late.”
In addition to the Mount Holly smelter, Century operates smelters in Kentucky and Iceland.
Reach David Wren at 843-937-5550 or on Twitter at @David_Wren_