Kaiser may leave Northwest

POWER COSTS: Aluminum maker will lay off 130 more in Spokane and may decide to abandon region altogether because of costs

11/21/2000

Al Gibbs; The News Tribune

Kaiser Aluminum will further cut production at its Spokane-area smelter, bringing the company closer to a decision on whether to abandon its operations in the Northwest entirely.

"We've been weighing a lot of scenarios, including a complete shutdown," said Pete Forsyth, the company's Northwest vice president for external affairs.

Faced with continuing spikes in the price of electricity on West Coast wholesale markets, the company decided Monday to reduce production further at its Spokane plant. The price of electricity traditionally has been about one-third of the cost of producing aluminum.

But Kaiser said the average price of energy from the Bonneville Power Administration will rise 35 percent next October. The latest cutback will take Kaiser to the production level it would have to adjust to in October.

About 130 people will be laid off in the process. In June, Kaiser laid off 130 workers at its Mead plant in Eastern Washington, and about 270 in Tacoma, where production was shut down altogether.

The company said it will sell power it doesn't use into the same energy markets whose soaring prices forced Kaiser to shut down some production.

The company expects to make some $47 million selling into the market, but its contract with Bonneville requires it to use the money to pay benefit costs for employees, cover other continuing costs and help pay increased power costs next year, not add to its profit margin.

Several other Northwest aluminum plants already have shut down because of high prices for electricity.

The worldwide average price aluminum smelters pay for power is about $20 a megawatt hour. In the Northwest, the cost now is above $30. And the world market for aluminum has fallen, in many cases below the cost of producing the product.

Kaiser, whose plants are among the oldest and least up-to-date in the region, once employed 4,500 workers in Washington state.

The latest cuts will bring total employment to about 1,600, Forsyth said.

Still, Forsyth said shutting down completely is far from a certainty.

"We looked at that," he said. "We think we can still work through the (energy price) issues while continuing to hold on."