Alcoa will wait and see about Northwest magnesium output
Staff -- Purchasing, 7/5/2001 2:00:00 AM
Alcoa says it will have access to the power it needs to run the Northwest Alloys magnesium plant in Addy, Wash., but is preparing for possible magnesium output cuts based on power costs and magnesium demand. Pittsburgh-based Alcoa has signed a new electricity power contract for the Addy plant with the Bonneville Power Administration for Oct. 1, 2001, through Sept. 30, 2006, but has declined to discuss reports that it will pay $45 or more per megawatt hour.
Industry sources had estimated that if the Addy plant were shut, Alcoa would have to buy magnesium from traders to meet existing supply contracts. Alcoa buyers reportedly have been testing the waters for possible magnesium purchases, but the company has declined to discuss these reports. "The magnesium market and the cost of power will, to a large extent, determine the future operating level of Addy," says Alcoa. Northwest Alloys has an annual capacity of 45,000 metric tons, but has been running well under capacity due to high power costs under the company's old contract, weak magnesium demand and high imports from Russia, Israel and China.
Alcoa's decision about magnesium production could be influenced by dumping complaints against imported magnesium, which could trigger punitive duties and boost magnesium market tags. Sources suggest that a jump in U.S. magnesium prices might outweigh high power costs. Magnesium tags have averaged $1.26/lb in the U.S. so far this year, compared to an average $1.39 over the previous three years.
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