The challenges of labor and power supply
Century Aluminum (CENX) has seen a steady improvement in its financial performance. But it also faces several challenges when it comes to labor and power supply contracts. The construction of its plant in Helguvik, Iceland, is stalled since it hasn’t been able to secure a power supply. The plant, which has an annual capacity of 250,000 tonnes of aluminum, could substantially increase Century’s production capacity.
The above chart shows Century Aluminum’s various power supply agreements. Its plant in Ravenswood was idled in 2009 in response to the global financial crisis. Market conditions have improved since then, but the plant is still closed since CENX is yet to finalize the power supply agreement for this plant.
According to Century Aluminum, the company has submitted a final proposal to the power supply company. The power supply company has not responded yet to Century’s proposal. The restart of this plant would be positive for Century Aluminum.
The power supply agreement for the Mt. Holly smelter that CENX acquired from Alcoa (AA) is also expiring this year. Alcoa currently forms 0.89% of the iShares North American Natural Resources ETF (IGE) and 2.8% of the Materials Select Sector SPDR ETF (XLB). Allegheny Technology (ATI) forms 0.68% of XLB.
Century Aluminum has signed a new five-year labor agreement with the labor union at its Grundartangi plant in Iceland. It hasn’t yet reached an agreement at its Hawesville plant. According to a report from Reuters, CENX has issued a lockout notice effective May 11 if the labor union doesn’t approve its final offer.
In the next part, we’ll take a look at Century Aluminum’s outlook.