Charleston area aluminum smelter left behind in wake of Trump’s tariffs

Post and Courier
March 13, 2018

By David Wren

Electricity at the Mount Holly aluminum smelter remains too expensive to bring the plant back to full capacity and restore jobs despite tariffs on foreign imports that have buoyed the U.S. metals industry, the top executive for its owner said Monday.

Mike Bless, president and CEO of Century Aluminum , told analysts during a conference call that the company expects increasing demand for its aluminum as the tariffs President Donald Trump approved last week — 10 percent on aluminum, 25 percent on steel — go into effect.

The company will hire about 300 workers at its Hawesville, Ky., plant as production there returns to full capacity.

But the Berkeley County site, where Century slashed capacity to 50 percent and laid off 300 workers at the end of 2016, won’t benefit from the resurgence, Bless said.

“The confidence to restart Hawesvile is that you have a competitive power price there,” he said. “The commodity price is going to go up and down over time, but you’ve got a competitive power price so you know you’re going to be all right. At Mount Holly, we don’t have a competitive power price … it doesn’t work.”

Century can buy all of its power for the Hawesville plant on the open market from providers who use cheap natural gas to produce electricity. At Mount Holly, the company must buy a quarter of its electricity from Moncks Corner utility Santee Cooper, which uses more expensive coal plants. Bless said Santee Cooper’s rate is 35 percent to 40 percent higher than what the Hawesville smelter pays.

“Without a sensible power arrangement, it doesn’t make sense because ultimately you’re going to have a plant that’s not competitive as the commodity price moves up and down,” Bless said.

Santee Cooper has said it can’t let Mount Holly get all of its electricity from a third party because the 25 percent it sells covers the cost of transmitting 100 percent of the smelter’s power needs. If Century were to get all of its electricity on the open market, the utility has said, other Santee Cooper customers would have to subsidize the transmission.

State-run Santee Cooper has served the smelter since it opened in 1980.

Bless said the company “is working daily” on finding a solution “through legislative and other means.” He said negotiations with Santee Cooper are “complex” because the utility is focused on “ancillary issues” such as its role in the failure of a $9 billion nuclear plant expansion and Gov. Henry McMaster’s efforts to sell the state-owned power provider.

“We’re trying as hard as we can,” Bless said. “We would love nothing more than to bring that capacity back.”

At full production, the Mount Holly plant can make about 231,000 metric tons of aluminum.

Nearly two dozen South Carolina lawmakers have signed on as co-sponsors of legislation that would let Mount Holly get its power from the cheapest source it can find. The bill was introduced in the state’s House of Representatives on Feb. 7 and was sent to a committee.

Century has also gone to court in its attempts to resolve the power dilemma. Last year, a federal judge in Charleston rejected the manufacturer’s claims that Santee Cooper is violating anti-trust laws. Century Aluminum is appealing the decision.

“I’d say we’re optimistic, but very cautiously so given the history here.” Bless said.

A study by the University of South Carolina shows the Mount Holly smelter has an annual economic impact of nearly $1 billion on the Charleston region when operating at full capacity.

The Hawesville smelter isn’t the only aluminum plant bringing workers back in the wake of Trump’s tariffs. The owner of a shuttered smelter in Missouri said on Friday the plant would restart two of its three production lines in a move that’s expected to create 400 jobs.

Analysts see plenty of upside for Century as the tariffs help eliminate cheap aluminum imports from foreign countries. For example, David Gagliano, an analyst with BMO Capital Markets, upgraded Century shares to “outperform” and increased the price target from $20 to $28 in a note to investors.

Shares of Century closed at $20.81 Monday, up more than 3 percent from Friday’s closing price.


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