Aluminum price drop stalls plant reopening
The world isn't doing Century Aluminum any favors. Just over one year ago, the company announced one of its top priorities for 2012 was reopening its shuttered Ravenswood plant, creating about 370 jobs in the process.
That didn't happen.
And, by all indications, it doesn't look like we should hold our breath for it to happen in 2013.
Yes, the company still says it is "committed" to reopening the Ravenswood plant. And yes, the state still has $20 million in annual tax credits on the table to help it do so.
But the global aluminum market has stacked the odds against the company's favor over the last year.
Aluminum futures were trading at about $2,300 a ton on the London Metal Exchange when Century chief executive Mike Bless announced Ravenswood restart plans last February. The price consistently fell in the months following.
Though it's made attempts at recovery, aluminum is languishing in the $1,800 price range today.
On Monday, The Wall Street Journal reported on the grim outlook for the commodity because of a glut in global aluminum supply.
"Speculators are busy shorting aluminum ... causing turmoil in the broader mining and metals sector," the Journal reported. "More than 20 mining CEOs have lost their jobs over the past 18 months. Massive mining projects are being suspended or put on hold.
"Inventories in warehouses are at record highs. Production in China, the chief source of global oversupply, is expected to increase a whopping 9 percent to 24.3 million metric tons this year," the report said.
In light of this, other companies have tightened their belts. Rio Tinto is writing down about $25 billion worth of its Alcan aluminum assets. Aluminum market leader Alcoa is shuttering its older smelters.
But analysts said cutting supply wouldn't turn the market around. They said the key to boosting prices will be an increase global demand.
"Prices aren't expected to rise until Europe, Japan and other pillars of the global economy get back on their feet, propelling global demand upward," the Journal reported.
So it looks like we'll have to wait on Europe to get its act together before we see the potlines heat up at Century.
Meanwhile, a little good commodity news for consumers: Wholesale gasoline prices took a nice tumble last week, dropping below the $3 level for the first time since January.
Gasoline futures began trading last week at nearly $3.10 a gallon; yesterday, they were trading around $2.89 a gallon.
The decline was fueled - pun intended - by increases in gas inventories as refineries come back online following spring maintenance shutdowns.
The price reprieve follows a surge in gas prices during the first quarter, which was caused in part by some of those maintenance shutdowns.
Of course, 20-cent wholesale price drops won't hit the pumps overnight - they never do. But it's good comfort to know price pressures are working the downside right now, rather than increasing our collective pain at the pump.