Former Noranda Smelter In Missouri Again Faces Closure Due To Tepid Market And Weak Tariff Enforcement

Former Noranda Smelter In Missouri Again Faces Closure Due To Tepid Market And Weak Tariff Enforcement

An executive at a Missouri aluminium smelter that reopened after the Trump Administration’s blanket tariffs on imported aluminium told Reuters last week that its operations are in jeopardy, warning that smelting at the site may not last through the spring.

On Thursday the CEO of Magnitude 7 Metals LLC told the news agency that the tariffs that originally made reopening the 50-year-old plant profitable have been circumvented to such a degree that continued production of the more lucrative value-added products is now no longer profitable.

“The rest of the world has gamed the tariffs, in our opinion,” explained CEO Charles Reali. “The Commerce Department tried to help, but missed the mark.”

To make matters worse, COVID-19, or the coronavirus, has taken a heavy toll on aluminium prices specifically and the market in general. Due to softer demand by illness-weakened buyers and production problems in similarly-affected alumina refineries and aluminium smelters in China, the price of the metal on the London Metal Exchange plummeted to an over-three-year low this week.

“We are in prayer,” admitted Reali to Reuters. “If things don’t turn around in the next 60 days, I don’t know.”

The plant primarily produces aluminium P1020, for which Reali says the market is “absolutely terrible.” It was initially reopened in 2018, bringing scores of jobs to an economically-weak corner of Missouri. The plant was shuttered two years prior after previous owner Noranda Aluminum filed for bankruptcy.

When it first reopened, Magnitude 7 was commanding up to US$2,100 per ton, just a few hundred dollars short of the prices projected by buyer Matt Lucke. However, with prices for the plant’s aluminium down to US$1,680 per ton, the business scenario for the plant is radically different.

“These prices are 1988 and 1989 prices, dollar for dollar. Obviously, the costs are a hell of a lot more today than they were then. […] We can’t sustain what we are doing at the current price. Our costs are much higher. We’re seeing red numbers every month.”

In addition, due to a settlement with the National Labor Relations Board, Magnitude 7 recognizes unions at the site. But their flexibility with their labor force is slight, as there is no collective bargaining agreement in place, and laying off hourly workers during contract negotiations is forbidden.

“We’re here today,” Reali concluded. “Can’t speak for next week. It’s a day-to-day thing.”