Alcoa to Take Smelter Offline December 19

Nov. 27, 2005
High power costs make Eastalco uncompetitive

Alcoa reports it will "curtail" primary aluminum production at the Eastalco aluminum smelter in Frederick, MD, on December 19, because it cannot secure a new electrical-power supply it considers competitive. The move had been expected since October when Alcoa warned the plant’s 600 employees that a shutdown was possible if a new power supply was not arranged.

Smelters require considerable amounts of electricity on a constant basis to power the electrolytic cells used to convert alumina to aluminum. The need to keep the plants operating on a constant basis also requires careful forward planning, which partly explains the October warnin. But, in regard to electricity costs Alcoa took a similar stand for its smelters in the Pacific Northwest, most of which are idle now.

Eastalco has a electricity-supply agreement with Allegheny Power that expires December 31. According to Alcoa, those rates are approximately 40% higher than the global average for primary aluminum production. It added that the rates offered by local (Pennsylvania, New Jersey, and Maryland) power suppliers would increase Eastalco's rates to over three times the global average.

Alcoa owns 61% of the Maryland smelter and is the managing partner. Japanese trading house Mitsui & Co. Ltd. owns the remaining 39%. Eastalco is a former Alumax Inc. operation acquired by Alcoa in its 1998 takeover of that company.

According to reports, Eastalco has been operating at about two-thirds capacity, or roughly 10,000 metric tons/month. Alcoa said the plant’s billet homogenizing, cutting to length, and distribution functions would continue with metal supplied by other Alcoa smelters. "While the smelter is curtailed, the company will continue to work with government and local officials to seek ways to secure a competitively-priced, long-term power supply," Alcoa stated.

Geoffrey Cromer, Alcoa’s v.p. operations, U.S. Primary Metals, stated: "Many people -- our union, elected representatives, members of the community, and, first and foremost, our dedicated, loyal employees -- have worked to help us find a short-term legislative option that would allow us to pursue a longer-term solution to save the plant and these jobs. We appreciate every bit of effort that they have put into that challenge. Despite all that work, a legislative solution has not succeeded yet, and we have received no indication that, if we were to get a successful vote, that it would be signed into law.

"We will continue to work with those in the community to pursue longer-term power options and take steps to ease the impact on our employees and the community as much as we can," said Cromer.