In 2012, Century Aluminum rejected a plan by the WV PSC, as well as coal subsidies provided by the WV Legislature, that would have allowed the company’s Ravenswood plant to become a permanent parasite on APCo rate payers and WV taxpayers. Fortunately, those giveaways weren’t generous enough for Century.
Century stuck to its idea that APCo rate payers should pay the company’s electric bill unless prices for aluminum rose above a certain level. The lower the price of aluminum, the more electricity APCo rate payers would provide free to the company.
Century had claimed that rising aluminum prices would mean that the company would be self-supporting in no time.
Oops. Jared Hunt, in a Charleston Daily Mail story today, shows just how bad Century’s management is.
Aluminum futures were trading at about $2,300 a ton on the London Metal Exchange when Century chief executive Mike Bless announced Ravenswood restart plans last February. The price consistently fell in the months following.
Though it’s made attempts at recovery, aluminum is languishing in the $1,800 price range today.
On Monday, The Wall Street Journal reported on the grim outlook for the commodity because of a glut in global aluminum supply.
And it’s not going to get better any time soon:
“Inventories in warehouses are at record highs. Production in China, the chief source of global oversupply, is expected to increase a whopping 9 percent to 24.3 million metric tons this year,” the report said.
In light of this, other companies have tightened their belts. Rio Tinto is writing down about $25 billion worth of its Alcan aluminum assets. Aluminum market leader Alcoa is shuttering its older smelters.
But analysts said cutting supply wouldn’t turn the market around. They said the key to boosting prices will be an increase global demand.
“Prices aren’t expected to rise until Europe, Japan and other pillars of the global economy get back on their feet, propelling global demand upward,” the Journal reported.
As flawed as the WV PSC’s plan for Century was, it saved APCo from even more rate increases in the near future. APCo’s Ohio-based parent company, AEP, wants to saddle APCo rate payers with the costs of old coal fired power plants, and the PSC will likely approve new bond interest payments and fees for lawyers and investment bankers for APCo’s sale of coal bailout bonds. And APCo will soon be hitting its customers with $98 million new costs from the collapse of its distribution system.