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Low-priced gas not a factor to ease pressure on smelter
Edited by : AL CIRCLE
1 min read
Low natural gas prices are unlikely to relieve the pressure on the aluminum smelting sector, which is facing major structural changes as relatively low prices and rising operating costs are forcing the most uneconomic producers to shut down, thus eliminating a large amount of spare market capacity, Barclays Capital said in a report Tuesday.
Analyst Nicholas Snowdon explained that to take advantage of low-cost gas, smelters that rely on self-generation would need to build new gas-fired capacity or shut their current self-generation capacity in order to access the power grid.
Additionally, those that run on outside power generation are reliant on the generators themselves to make the switch to gas.
Snowdon said that while US gas prices have fallen by about 60% between 2008 and the present, the average electricity cost for smelters has risen by 32%.
Snowdon noted that "natural gas has historically been in the minority as a power source for smelters in North America, representing just 2% in 2011 versus 28% for coal and 68% for hydro."
Further, smelter power tariffs are typically locked into long-term, fixed-price arrangements or are linked to aluminum prices, which have increased by 30% between 2009 and 2011, he added.
Analyst Nicholas Snowdon explained that to take advantage of low-cost gas, smelters that rely on self-generation would need to build new gas-fired capacity or shut their current self-generation capacity in order to access the power grid.
Additionally, those that run on outside power generation are reliant on the generators themselves to make the switch to gas.
Snowdon said that while US gas prices have fallen by about 60% between 2008 and the present, the average electricity cost for smelters has risen by 32%.
Snowdon noted that "natural gas has historically been in the minority as a power source for smelters in North America, representing just 2% in 2011 versus 28% for coal and 68% for hydro."
Further, smelter power tariffs are typically locked into long-term, fixed-price arrangements or are linked to aluminum prices, which have increased by 30% between 2009 and 2011, he added.
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