Tacoma smelter to stay closed

Kaiser says it will wait for more affordable power

THE ASSOCIATED PRESS

SPOKANE -- Kaiser Aluminum Corp. will not reopen its Tacoma smelter until more affordable electrical power becomes available, Vice President Pete Forsyth said.

Only a rod-making operation at the Tacoma plant will remain open, Forsyth said Wednesday. Molten aluminum for that facility will be trucked across state from Kaiser's Mead smelter near Spokane.

The Tacoma mill has been closed since June, idling about 300 workers. About 90 of those worked at the rod operation. It was not clear how many workers will lose their jobs. Kaiser's workforce has been in flux since the two-year labor dispute that ended in early October.

Kaiser and the region's other four aluminum producers signed five-year contracts Monday with the Bonneville Power Administration for low-cost electricity.

Under the new pact, just 291 megawatts will go to Kaiser's three plants, Forsyth said. One megawatt can power more than 600 homes.

The Trentwood rolling mill near Spokane will remain at full production with 50 megawatts. The Tacoma rod plant uses only a few megawatts. The rest, about 240 megawatts, will go to Mead, Forsyth said.

Kaiser employs just over 900 people at Trentwood and about 700 at Mead.

Mead consumes 410 megawatts of electricity at full capacity. Since July, only 340 megawatts have been available for all three Kaiser plants, so two of Mead's eight production lines have been closed.

Forsyth said the new contract will force Kaiser to cut back to 4.75 lines unless the company can find another source of electricity.

"We're facing some make-or-break decisions," he said.

Kaiser currently pays 2.25 cents per kilowatt-hour of electricity. The new contract will raise the price to 2.65 cents.

Forsyth said it's possible BPA could increase the price even more to cover repayment of the agency's debt to the U.S. Treasury. Any adjustment that takes the cost of a kilowatt-hour above 3 cents could be trouble, he said.

"The future of these plants is at stake," Forsyth said. "It's that urgent a matter to us."

Kaiser President Ray Milchovich underscored his remarks.

"High power rates and low operating rates simply do not add up to acceptable long-term economics," he said in a statement. The rate under the new contract is 30 percent more than the average paid by other smelters worldwide, Milchovich said.

Forsyth said Kaiser has no other electricity sources. The company sold the power it had under contract from other sources to take advantage of recent unprecedented high prices.

Wholesale prices remain above 4 cents for extended contracts, he said.

Recent power cost increases have forced most smelter operators in the Northwest to scale back production or shut down plants.