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Outsourcing Our Aluminum?

July 28, 2012
By MIKE MYER , The Intelligencer / Wheeling News-Register

Times are not good for aluminum producers. If President Barack Obama has his way, they will get worse for companies such as Ormet, in Monroe County.

Ormet, with more than 1,000 employees at its Hannibal smelter, is reeling from a one-two punch. Company officials warned this week they plan to idle one of the plant's six aluminum potlines during the next few weeks. That will require layoffs of 30-50 workers.

Unless the financial outlook for Ormet improves, the entire plant may have to be closed - and all its employees laid off.

Management and union workers at Ormet have worked hard and effectively at producing aluminum economically. During the past few years, as other smelters closed down, Ormet has kept the Hannibal plant open - even prospering, in some ways.

That has been difficult, in part because of the recession that Obama insists ended last year. Things haven't gotten better for many Americans, however, with the aluminum industry hit particularly hard.

Aluminum was selling for around $2,500 per metric ton last July on the London Metal Exchange, the primary marketplace for the product. By last week the price had plummeted to around $1,865 a ton.

Ormet seemed to be weathering the storm that crushed some of its competitors, however. One reason for that was relatively low-priced electricity.

Aluminum smelting is an energy-intensive industry. About 40 percent of the cost of producing the metal is in electricity to keep the potlines hot.

For many years, Ormet was able to rely on the Kammer Plant, south of Moundsville, for contracts to supply power at reasonable prices. Kammer is a coal-fired generating station.

American Electric Power, owner of Kammer and the adjacent Mitchell Plant, has managed to adapt to new emissions controls in the past. Both generating stations have been retrofitted extensively to meet Environmental Protection Agency restrictions.

Success in doing that - in keeping Kammer open - occurred before the Obama administration made it clear it wanted to made coal-fired electricity prohibitively expensive. Now, AEP plans to close the Kammer Plant, as well as other coal-fired units.

AEP and other electric utilities plan to shut down coal-fired capacity and switch to new gas-fueled generating stations. Electricity from that source will be much more expensive than from coal - and that could be the straw that breaks Ormet's back.

Since 2010, prices Ormet pays for electricity have increased by 58 percent, according to the company. If new rates proposed by AEP are approved by regulators, the cost will go even higher, and Ormet may not be able to pay it.

Ormet is asking the Public Utilities Commission of Ohio to limit AEP rates to avoid placing a new, unbearable burden on the local company. We'll know by mid-August whether the PUCO - which has in the past approved plans to hold power costs for Ormet down - will go along.

It can do so only so long, however. At some point, the cost to AEP of generating power will increase to a point that the company and the PUCO will have no choice but to pass new burdens on to consumers, including Ormet ("consumers," by the way, includes millions of people in Ohio and West Virginia whose electric bills will rise by hundreds of dollars a year if Obama's war on coal continues).

Obama has spent a good deal of time and money criticizing "outsourcing" of U.S. jobs to other countries. But his policies, if pursued, will increase that.

Consider aluminum. What happens if Ormet and other U.S. smelters shut down? Production goes to other countries where draconian anti-coal policies don't drive electricity prices up.

China, for example: Already, the Chinese - who continue to build coal-fired power plants at a rapid pace - produce about nine times as much aluminum as the U.S. Rest assured, the Chinese will be happy to benefit from aluminum production outsourced, in effect, by the White House.

Myer can be reached at myer@theintelligencer.net.

 
 

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