Century Aluminum of South Carolina (CASC), a wholly owned subsidiary of Chicago-based Century Aluminum Co., says it has finalized and received all necessary approvals for a new, three-year power contract with the South Carolina Public Service Authority (also known as Santee Cooper) for the company’s Mt. Holly aluminum smelter. With the contract, the smelter will be able to increase production at the site by 50 percent. This and the completion of the company’s restart project will allow the Mt. Holly site to operate at 75 percent of full capacity, according to a news release issued by the company.
Restart work at the Mt. Holly smelter is underway and is on schedule to be completed in the fourth quarter of 2021. The smelter contains casting equipment used to cast molten aluminum into standard-grade ingot, horizontal directchill casting ingot, extrusion billet and other value-added primary aluminum products, according to the company's website.
The new power contract begins April 1 and runs through December 2023. The contract provides a minimum 290 megawatts of electric power. As a result of this contract, CASC has rescinded its outstanding WARN notice for all employees.
“We are thrilled to have reached final agreement on this new contract which, most importantly, allows us to immediately lift the WARN notice at Mt. Holly,” says Michael Bless, Century president and chief executive officer.
Bless says the company has begun the investment and on-site work necessary to expand operations, which includes rebuilding cells and hiring new employees. “We all look forward to that day in the near future when additional metal will be rolling out of the newly restarted potline.”
“We would also like to thank our colleagues at Santee Cooper for their commitment to finalizing our agreement,” says Jesse Gary, Century executive vice president and chief operating officer. “We look forward to building on the momentum and teamwork we’ve established, turning our attention now to creating a pathway to allow us to return the plant to full production.”
Gary also recognizes the support of Gov. McMaster, Commerce Secretary Hitt and the legislative members of the Santee Cooper Oversight Committee.
Revised 2021 outlook
Century says it continues to anticipate that the London Metal Exchange (LME), regional premiums, alumina and power prices will, in aggregate, have a negative impact on its adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, of approximately $5 million to $10 million when compared with its fourth-quarter result, primarily as a result of the extreme power price spike in February 2021.
Given that a substantial portion of the company’s revenue is already priced (due to the normal lag in contract pricing), Century also has provided considerations regarding prospective Q2 financial performance. Assuming today’s LME, regional premium and alumina prices persist for the remainder of the Q2 pricing period, Century says it expects these items taken together would result in a net increase in adjusted EBITDA of approximately $45 million versus Q1. Based upon current forward price indications, the company says it expects its Q2 power cost to decrease by approximately $25 million versus the Q1 level. Therefore, the company expects an increase in Q2 adjusted EBITDA of approximately $70 million versus Q1.
Century says its experienced several equipment issues in late December at its Hawesville, Kentucky, smelter that affected production. The smelter is now stable, and the process of returning to its planned operating level of 80 percent of capacity will begin in a matter of weeks. The company says it expects the various maintenance and other projects will result in approximately $10 million to $12 million in one-time additional operating costs during the last three quarters of 2021; over half of this amount will be spent during the second quarter (which will negatively impact the expected increase in Q2 adjusted EBITDA), with declining amounts in each of the third and fourth quarters. Hawesville’s shipments for the last three quarters of the year in total are anticipated to be 20,000,000 to 25,000,000 metric tons lower than previously forecast.