Ormet says shutting Ohio aluminum smelter immediately


NEW YORK, Oct 4 (Reuters) - Ormet Corp willimmediately close its 270,000-tonne-per-year aluminum smelter inHannibal, 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 PublicUtilities Commission of Ohio (PUCO), which approved some majorchanges to Ormet's power contract with energy supplier AmericanElectric Power Co Inc.

The state power regulator listed a number of conditions,including requiring the company, which filed for bankruptcyprotection in February, to employ at least 650 full-time workersthrough 2018.

Under those terms, costs would have increased by some $108million next year, rather than falling by $54 million asoutlined in Ormet's plan.

"Due to the decision, Ormet cannot emerge from bankruptcyand must immediately shut down operations," Ormet said in astatement.

Hannibal, which uses as much energy as the city ofPittsburgh, is one of the smaller plants in the global aluminummarket, but it is the region's largest employer and Ohio'slargest energy user.

This closure will affect about 600 people, Ormet said.

Securing a new power deal was the final hurdle in hecompany's efforts to emerge from Chapter 11 protection, althoughit will still be unprofitable unless aluminum prices alsorecover, management has said previously.

London Metal Exchange prices are languishing close to orbelow the cost of production for many makers.

Aluminum producers, including Rusal OAO and AlcoaInc have cut output to reduce the excess, which could beas high as 10 million tonnes, analysts said.

Ormet's suspension might provide some support to prices inthe United States, but it is unlikely to make a big dent in the40-million-tonne-per-year market.

The smelter is currently producing about 90,000 tonnes peryear. The plant has a total of six potlines with an annualcapacity of about 270,000 tonnes per year.

Ormet would not reopen the plant unless it securedlower-priced power and aluminum prices recovered, the companysaid.

Aluminum prices on the London Metal Exchange arearound $1,850 per tonne, below the cost of production for alarge portion of the global smelting capacity.

The company also has an alumina refinery in Burnside,Louisiana, which feeds the smelter. The status of the refinerywas not known.

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