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CFAC May Cut Back Production

by Nancy Kimball
Daily Inter Lake, May 24, 2008

Columbia Falls Aluminum Co. gave a 60-day notice of pending layoffs Wednesday.

How many people could lose their jobs has not been made public. About 340 people work at the plant, including hourly and salaried workers, with about 225 of them union members.

Wednesday's notice to the Aluminum Workers Trades Council fulfills the company's obligation to let the union know that workers will be laid off sometime on or after the 60-day notice period elapses.

"The price of power has brought this situation about," CFAC Manager of External Affairs Haley Beaudry said Friday. "It's just way out of range, it's just not out there at a decent price. So we're looking at curtailing some of the production - not all of it, but some."

In a press release issued later in the day Friday, he announced that the company "is exploring the possibility of reducing its aluminum production at the aluminum smelter in Columbia Falls, Montana, by as much as two-thirds."

Glencore AG, the Swiss-based company that owns the plant, is analyzing "the likely course of action and the determination of its scope and timing," the release said.

It could result in both union and salaried workers losing their jobs.

Because the possible cutback qualifies for notification under the Worker Adjustment and Retraining Notification Act, "CFAC provided this notification as quickly as possible."

"I just don't know yet how many people" will be affected by the layoffs, Beaudry said. Conditions could change before the 60 days are over, he added, but "you know at the time you give notice that there will be a layoff."

Three aluminum potlines are in operation right now.

The company had been running only one potline until just over a year ago, when it fired up two more idled potlines. The plant has five lines in all.

Under a five-year contract with Bonneville Power Administration, CFAC buys its power on the open market, supplies Bonneville with the proof of cost, then BPA sends a financial benefit to the aluminum plant.

Bonneville used to supply the physical power directly from its hydroelectric generation plants, but contracts were changed after California's rolling power blackouts of 2000.

Beaudry said open-market price quotes for power from now through next spring, when there will be more runoff, are in the range of $100 per megawatt hour.

"It's over $100 some of the time and in the 90s a little of the time," he said. Electric power is the largest cost input at any aluminum smelter.

When pressed to estimate a reasonable price to make production pencil out, Beaudry put it at about $50 per megawatt hour.

"But I don't even know that," he added. "All of those things go together - the power, other raw materials that we buy and the selling price of the aluminum metal that we make."

He said CFAC's aluminum is selling at about $1.20 a pound now, a good price in a typical power market.

"But that's not enough for us to even break even on it," he said of the current economic climate.

The press release attributed the possible cutback to high energy prices, higher-than-normal costs of raw materials and the "stagnant worldwide price of aluminum."

At the time the extra two potlines were fired up last year, Beaudry said a good price on the open market for the metal was $2,800 a metric ton.

The aluminum plant "continues to investigate every avenue for a potential supply of reliable, reasonably priced power with the hope of continuing operations long into the future," the press release said.

"The CFAC plant has been a proud part of the Flathead community and economy for over 50 years and expects to continue into the future."

Nancy Kimball
CFAC May Cut Back Production
Daily Inter Lake, May 24, 2008

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