Friday June 8, 3:46 pm Eastern Time
Alcan to cut Kitimat output to 50 percent of capacity
biz.yahoo.com
By Charles Grandmont
MONTREAL, June 8 (Reuters) - Alcan Inc. (Toronto:AL.TO - news) (NYSE:AL - news) said on Friday it will again cut production at its Kitimat, British Columbia, aluminum smelter, a move prompted by low water levels at
its generating reservoirs and the chance to sell more power to the electricity-starved western United States.
The second production cutback in six months will reduce output to 50 percent at the 275,000 tonne-capacity facility on Canada's Pacific coast, and is expected to last until at least next spring but not result in any layoffs, company officials said. Alcan, the world's second-biggest aluminum producer, has struck a deal to sell an unspecified amount of electricity to Powerex, a division of provincial electric utility B.C. Hydro that markets power to the United States, a utility official said. Alcan approached Powerex ``a couple of months ago'' to sell more electricity and take advantage of market conditions that saw wholesale prices skyrocket earlier this year on heavy demand from California, a B.C Hydro official said.
``By cutting back additional production we can meet our contractual commitments to B.C. Hydro, generate income from additional power sales and keep all employees on the payroll,'' Emery LeBlanc, president of Alcan Primary Metal Group, said in a release. The reduction will start the week of June 18 and should last at least until next spring, when Alcan will determine if the winter snowfalls have brought enough spring runoff into its reservoir. ``The condition that has to be in place is more water and we don't expect that until the spring of next year,'' Alcan spokesman Richard Prokopanko told Reuters. The snowpack in the mountainous area that feeds water to Alcan's massive reservoir and dam system is 75 percent lower than the average of the last 50 years, he said.
Low water also prompted Alcan to reduce production at Kitimat in January and delay shipments of the 140 megawatts of electricity it is contracted to supply to B.C. Hydro each year. ``It is now clear that the spring runoffs have not provided enough water to maintain the current reduced level of aluminum production,'' LeBlanc said in the release. Electricity shipments to B.C. Hydro resumed June 1. The planned sales to Powerex are in addition to the 140 MW already scheduled to be supplied. Deutsche Banc Alex Brown analyst Thomas Van Leeuwen said he did not expect the move would have a huge impact on aluminum prices or Alcan's earnings, given the large size of the company. The Kitimat smelters account
for about 12 percent of Alcan's worldwide primary aluminum production capacity of 2.3 million tonnes. ``The sentiment will be delicately balanced between inventory increases we have seen on the (London Metal Exchange) and the capacity curtailments we've seen not only in British Columbia but also in Brazil,'' Van Leeuwen
said.
``At today's power price in the Pacific Northwest, it's most likely that they'd be better off selling power (than using it to produce aluminum),'' he said. British Columbia-based metals producer Cominco Ltd.(Toronto:CLT.TO - news), which like Alcan supplies most of its own electrical needs through hydro facilities, has also reduced its refinery operations to take advantage of high power prices in the region.
California, which is at the center of the power-crisis storm, has claimed a measure of victory over high prices. Wholesale electricity jumped to as high as $1,900 per megawatt hour during the spring but has dropped to about $50 per megawatt hour - down from $500 in May. Industry waters credit the turnaround to the resumption of operation at a number of power plants that had been taken off-line for repairs earlier in the year.
($1 equals $1.52 Canadian) |
