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Century Aluminum threatens closure over power contract

Staff //November 2, 2020//

Century Aluminum threatens closure over power contract

Staff //November 2, 2020//

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Legislation. Lawsuits. Job cuts. Mt. Holly Century Aluminum in Goose Creek has run out of options to acquire cheaper electricity rates and said it would close by Dec. 31 if a new power arrangement couldn’t be reached with Santee Cooper.

While the news isn’t a total surprise after a similar tug-of-war in 2015, the finality will be devastating for Goose Creek and the smelter’s remaining 300 employees, said Frank Knapp, president and CEO of S.C. Small Business Chamber of Commerce, late last month.

Under an agreement made in 2012, Santee Cooper provides 25% of electricity to Century Aluminum, and the plant is permitted to buy the remaining 75% from the open market — a deal that saved Mt. Holly $130 million at the time.

Now Century Aluminum is pushing back again on the 25%, which equates to $16 million, saying in a news release that it is the highest market value of any U.S. smelter and nearly twice as high as open market costs. 

Santee Cooper said in a statement that its prices are 20% below the national average. 

If a more competitively priced agreement can’t be made with Santee Cooper and Century Aluminum continues to be denied the option to buy 100% of its electricity from third parties, the company said it will curtail operations. 

“The closure of Mt. Holly would be a distressing and totally unnecessary tragedy for our 295 employees, their families and the broader community in South Carolina. With competitively priced power, Mt. Holly would return to full capacity, employing 600 persons, supporting over 2,000 total jobs and creating $1 billion in economic activity,” Michael Bless, Century Aluminum Co. president and CEO. 

While Century Aluminum has one cheaper option that could keep them with Santee Cooper, Knapp said, it would mean downgrading to an interruptible service that could curtail power from the plant at any time — a detriment to the kilns that need to run 24/7. 

Will history repeat itself?

After previous warnings in December 2015 that it would shut down over power contract disputes, Century Aluminum reached an agreement with Santee Cooper to run at half capacity and keep one pot line running. As a result, 300 employees were let go. 

Santee Cooper has worked with the Mt. Holly plant since 2012 to find a solution that would help them cut costs, the company said in a statement.
“The issue is that there is only so much capability to import electricity from off system, and it is not easily or quickly expanded,” Santee Cooper said. “We use our capability to benefit Century and other industrial customers across the state, along with about two million South Carolinians who get their power directly or indirectly from us.”

Should a compromise not be made by Dec. 31, another 300 employees could lose their jobs, which average a salary of $90,000, the S.C. Small Business Chamber of Commerce said. 

Last ditch efforts

In 2016 and 2018, Century Aluminum pushed for bill in the Senate and House, respectively, that would allow it to buy power from competitive, third-market providers. Both failed to move forward.

Another effort by Goose Creek came earlier this year when the town tried to form a new municipal electric utility to sell third-party electricity to one client: Century Aluminum. In October, S.C. Circuit Judge Roger Young sided with Santee Cooper, saying it had exclusive rights to supply electricity to the plant. 

Century Aluminum has five other plants worldwide. Its headquarters are in Chicago. 

“Mt. Holly is the newest, most efficient and, except for its power costs, the lowest-cost aluminum smelter in the United States, with a dedicated and highly skilled workforce and a reputation for quality production as assessed by a world-class customer base,” Bless said.

Santee Cooper said much of the financial problem stems from the decline in aluminum prices following the Great Recession, although the Wall Street Journal reported prices are surging once again with increasing demand from China. 

“We are working on new ideas that we hope to discuss with Century soon… We hope that our offer to extend the current Mt. Holly contract for a year will provide time for aluminum prices to continue to improve, to avoid the threatened shutdown,” Santee Cooper said.