ALUMINIUM
Sparking Interest in US Smelters
September 2017
The last few years have seen the US primary aluminium production facing significant cost pressures as depreciating currencies conspire with old technology and high power costs to make producers in other countries more cost effective primary aluminium producers. Which begs the question – is there still hope for US aluminium smelters? The recent interest in capacity restarts from both Century Aluminium and Alcoa, highlights the importance of power cost in the viability of reviving smelting operations, despite outdated technology in use.

Surprises in US primary aluminium 

In July, AME released a feature article outlining the current conditions in the US aluminium smelting industry. It highlighted the decline, in terms of absolute primary smelting capability, within the US on a production tonnage basis. The permanently closed capacity contributing to the decline since 2005 is shown in the table below.  

 

 

 

Currently, only two smelters in the US are considered to be operating at near full rates—Sebree (Century Aluminium) and Massena West (Alcoa) for a total of 440ktpa primary aluminium. The other ~330ktpa which make up the forecast 2017 production for primary  US aluminium comes from smelters operating at between ~40 and ~75% of available capacity. 

A major issue facing the US smelter fleet is its aggregate aging technology resulting in higher emissions, labour intensity and energy use—all of which impact the economic viability of production against newer rivals. How technology sits in terms of industry rivals, along with a number of considerations when forecasting what the future holds for the US aluminium industry, is outlined below.  

One aspect where US smelting suffer is that they now exist in a developed electricity demand market competing with other consumers willing to pay more for limited electricity whereas they were underpinning a base load demand when initially developed. Also, additional grid operator charges to supply power through transmission systems are being levied and further restricting competitiveness. 

This contrasts to the aggressive Chinese push over the last few years for minimising power cost either by developing integrated power stations, upgrading power stations to increase efficiency,  and gaining of direct supply contracts to power suppliers which has the impact of creating a low cost energy supply to the already modernised smelting industry. 

 

Resurrection of existing capacity in the US is possible 

The AME July feature article had included guidance on Alcoa’s 270ktpa Warrick smelter in Indiana, which was curtailed in early 2016, as closed and not expected to return to production. This assessment was based on its age and relatively low amperage cell technology resulting in a high production cost. 

 

 

Subsequent to the publication of the article, Alcoa announced the planned restart of three of Warrick smelter’s five potlines (~161ktpa). Further, Century Aluminium maintains the stance that if competitive power is obtainable it may also restart currently idled capacity, ~110ktpa, at its Mount Holly operation. At a third US primary smelting site, the new owners of the 270ktpa New Madrid smelter, ARG International, are in discussions for a power contract to allow a partial restart. 


 

The above chart indicates the current fleet of US smelter potlines and the status of operation. It is important to note the potline amperage, a key indicator of energy efficiency and environmental performance, for the US potlines. 

 

Resurrection not necessarily a sustainable situation 

 The introduction of very large volumes of high amperage primary aluminium production (>400kA) in China, has pushed the US smelting base into the lowest technology end of producers .

The total power cost of an aluminium smelter is a function of its energy use and power price, as such; the viability of a smelter derives from both its potline energy efficiency, which is dependent on technology, along with its power price. For US aluminium smelters with dated operating technology, to compete globally, need a comparatively lower power price than smelters operating more recent and efficient reduction technology.