NEW YORK (Reuters) - Ormet Corp will immediately close its 270,000-tonne-per-year aluminum smelter in Hannibal, Ohio, a casualty of historically low metal prices and “uncontrollable” power costs, the company said on Friday.
The move follows a ruling on Wednesday by the Public Utilities Commission of Ohio (PUCO), which approved some major changes to Ormet’s power contract with energy supplier American Electric Power Co Inc.
The state power regulator listed a number of conditions, including requiring the company, which filed for bankruptcy protection in February, to employ at least 650 full-time workers through 2018.
Under those terms, costs would have increased by some $108 million next year, rather than falling by $54 million as outlined in Ormet’s plan.
“Due to the decision, Ormet cannot emerge from bankruptcy and must immediately shut down operations,” Ormet said in a statement.
Hannibal, which uses as much energy as the city of Pittsburgh, is one of the smaller plants in the global aluminum market, but it is the region’s largest employer and Ohio’s largest energy user.
This closure will affect about 600 people, Ormet said.
Securing a new power deal was the final hurdle in the company’s efforts to emerge from Chapter 11 protection, although it will still be unprofitable unless aluminum prices also recover, management has said previously.
London Metal Exchange prices are languishing close to or below the cost of production for many makers.
Aluminum producers, including Rusal OAO and Alcoa Inc have cut output to reduce the excess, which could be as high as 10 million tons, analysts said.
Ormet’s suspension might provide some support to prices in the United States, but it is unlikely to make a big dent in the 40-million-tonne-per-year market.
The smelter is currently producing about 90,000 tons per year. The plant has a total of six potlines with an annual capacity of about 270,000 tons per year.
Ormet would not reopen the plant unless it secured lower-priced power and aluminum prices recovered, the company said.
Aluminum prices on the London Metal Exchange are around $1,850 per ton, below the cost of production for a large portion of the global smelting capacity.
The company also has an alumina refinery in Burnside, Louisiana, which feeds the smelter. The status of the refinery was not known.
Reporting by Josephine Mason; Editing by Richard Chang, Bob Burgdorfer and Andre Grenon