The Flathead Valley’s Leading Independent Journal of Observation, Analysis, & Opinion. © James R. Conner.

 

20 March 2013

Clean-up time for the Columbia Falls aluminum plant

Over at the Flathead Beacon, Myers Reece has an outstanding story, Glencore has been playing us, on how Glencore AG , the current owner of the shuttered since 2009 Columbia Falls aluminum plant, has been stringing Montana’s public officials along with one unreliable assurance after another that the plant will reopen if cheap electricity can be found.

But finding cheap electricity never was enough to reopen the plant. It’s finally become obvious to everyone that Glencore AG ‘s “help us find cheap electricity” pitch was designed to stave off the day when Glencore AG , which has no compunctions against dealing with the Devil, or employing the Devil’s ways, would be responsible for cleaning up a Superfund site.

Now Montana’s public officials, especially Sen. Jon Tester, having wised-up, are exasperated and angry, recognize that the aluminum plant, old, inefficient, and in disrepair, never will reopen, and that their job is no longer pimping for cheap juice but finding a way to make Glencore AG pay for cleaning up the plant.

None of this surprises me. On 9 June 2009, I posted Requiem for an Aluminum Plant. “At this point,” I said:

the capital costs of the plant are sunk and the equipment probably has little or no salvage value. Labor, alumina, and electricity are the major production costs. As long as the equipment functions, the plant can operate. But electricity, even subsidized, is no longer cheap. The current national average for industrial customers is $0.0698/Kwhr (residential customers pay $0.1123/Kwhr). (For purposes of comparison, China’s Guangxi aluminum smelters pay around $0.05/Kwhr and have much lower labor costs.) At that price — which may be subsidized by $0.027/Kwhr — electricity costs CFAC as much as a thousand dollars per tonne of aluminum metal. Add labor and alumina and the balance sheet is written in red [when] metal prices are low.

Even another sweetheart deal on electricity might not be enough to keep the plant operating. It’s far from sources of raw material, far from markets, and less efficient than the newest plants. Swiss based Glencore AG AG, CFAC’s owner, might decide that even if CFAC could operate at a profit, Glencore AG ’s money could be more profitably invested elsewhere. Which is the outcome I expect.