Alcoa Intalco Works survives tough market conditions

It's been a year since Alcoa Intalco Works signed a 10-year power supply deal and two years since management and employees reached a new labor contract, avoiding a potentially crippling strike. For years uncertainty about the power supply cast a shadow over Alcoa's future in Whatcom County.

Having those issues settled has allowed the facility west of Ferndale to focus on becoming more efficient, continuing some environmentally friendly initiatives and reaching out to strengthen relationships with employees, said plant manager Barry Hullett.

Aluminum manufacturing is strongly tied to global markets, however, and the current issues are leaving the remaining U.S. plants in a precarious position. Globally the market is in a strange situation where demand is increasing, but prices have hovered at multi-year lows. That's because the industry still has plenty of inventory left over from the global recession.

"This would normally be a prosperous time," said Hullett, referring to what would typically happen to prices given this type of growing demand.

As a result, Alcoa and other aluminum producers have cut output this year, hoping to eat into the extra inventory. It appears to be working: Alcoa's stock price recently jumped on speculation that aluminum prices will rise. Last week the stock price reached $9.56 a share, up from $7.72 in early September.

During this time the Intalco facility has remained at about 80 percent capacity, operating two-and-a-half of its three potlines, producing about 230,000 metric tons of aluminum per year.

Intalco doesn't have the highest costs among the smelters, but not the lowest costs, either. Hullett has asked his 604 employees to come up with suggestions on making the facility more efficient and has received good suggestions, including using wireless technology to help operate a crane.

Aluminum smelters are known for using a lot of electricity. Intalco's deal with Bonneville Power Administration provides 300 average megawatts of power through September 2022.

Three hundred megawatts is equivalent to about one-fourth of the power supply at Seattle City Light. Hullett points out that the aluminum products are known for being renewable.

Alcoa has increased the amount of value-added products it sells in order to add customers, from billets (shaped like logs and can be formed into items like bike frames) to Ferrari wheels.

Hullett said they've also worked hard to be a greener neighbor at the Intalco facility.

Hullett expects global aluminum inventory to remain high for the next three years, a period where he expects smelters, particularly in the U.S., to be in a survival mode.

Once that extra inventory has shrunk, he believes there will be an opportunity to grow because of the rise in demand in this country, which has about 10 operating smelters left.