NEW YORK Aug 15 Century Aluminum Co. (CENX.O) plans to restart the idled potline at its Hawesville, Kentucky, smelter by year-end and begin construction on the Helguvik, Iceland, smelter in early 2012 at the latest, company executives told analysts on a recent conference call.
"Bottom line, we now believe the plant will be operated at graded capacity by the end of this year," said Chief Executive Officer Logan Kruger of the 244,000 tonne-per-year aluminum smelter at Hawesville, Kentucky.
The Monterey, California-based primary aluminum smelter expects efforts to restart the fifth of five potlines at Hawesville will leave third-quarter shipments for Century's entire U.S. operations essentially flat compared with second quarter. Second quarter U.S. shipments were up 7 percent.
"We're looking at a third-quarter estimate of cash operating costs to be about $300 per tonne higher than we had estimated back in February," the executive said.
Century curtailed the potline in March 2009 to contain plant costs while faced with depressed aluminum prices. It had planned to bring the potline back online during the first quarter, adding about 4,370 tonnes a month of production.
But restarting the potline meant adding 130 new workers, many of whom were inexperienced and needed training. Management issues also delayed progress, the executive said.
Planned technical improvements and floods along the Ohio and Mississippi Rivers that caused logistic challenges exacerbated delays caused by staffing issues.
Speaking generally, the CEO said, market conditions were stable and demand growth in BRIC countries "encouraging."
In the United States, metal remains tight, with the Midwest aluminum premium holding close to record levels. Certain products are in short supply, "with end markets like automotive continuing to exhibit relative strength," he said.
Kruger also said alumina spot prices look like they are coming down a bit, but supply and demand was fairly balanced, and Century's own supply was secure for three or four years.
"It seems to us, from what we hear and see, that alumina destined to go into China is now staying out of China."
With China out of the market the spot price has fallen to around $400 to $380 a tonne in recent few weeks or months, similar to a price figured as some percentage of LME aluminum.
In Iceland, he said, the Helguvik smelter should produce its first 90,000 tonnes of aluminum by early 2014, or about 24 months after planned construction starts in early 2012.
But first, Century needs to negotiate a power agreement.
"It does no good to have a smelter ready to go if the power isn't there. As important as getting the pricing finalized is getting delivery commitments from these two power providers finalized," said Michael Bless, chief financial officer.
He added that Century thinks it can get a satisfactory power deal by year-end, with construction starting soon after.
It met with HS Orka, one of two power companies, in May.
"We were pleased on how it went. We will hear at the end of September. We have also made some progress with discussions with OR (the second power company)," Kruger said.
To complete Helguvik's Phase I, pipes need to be sunk, the turbine needs connecting and transmission lines must be built. The smelter has all necessary permits and contracts in place.
Its Mt. Holly, South Carolina plant returned to its 220,000 tonne-per-year operating rate, running several percent above its nameplate capacity after surmounting management and other challenges during the second quarter.
To restart its curtailed Ravenswood, West Virginia, plant, Century would need a labor contract, a competitive power contract -- which it continues to negotiate -- and "some view of this market for three to five years," the CEO said. (Reporting by Carole Vaporean; editing by Jim Marshall)