US aluminium producers to go slow on their smelter capacity cut plans

Aluminium producers across the United States have eased plans to cut primary aluminium smelting capacity, helping to slightly soften the blow to US anode-grade petroleum coke markets.

The cuts still shrink the US aluminium industry's demand for coke by nearly one-third from 2014 levels.

Early fourth quarter plans by US aluminium producers Alcoa and Century Aluminum to slash domestic smelting capacity would have cut the US industry's demand for petroleum coke by about 37 percent compared with 2014. But recent announcements to keep some of that capacity operating have lowered that figure to about 32 percent.

Pittsburgh-based Alcoa on November 24 scrapped plans to idle its 130,000t/yr Massena West smelter in New York. And Chicago-based Century on 17 December retracted its plans to cut one-third of the capacity at its 205,000t/yr Sebree plant in Kentucky. It instead will resume full operations there. But Century on 18 December said it will reduce capacity by 50pc at its 224,000t/yr Mt. Holly smelter in South Carolina.

Alcoa had said on November 2 that it would cut 503,000t of its US primary aluminium capacity by the first quarter of next year. Combined with Century's earlier announced cuts, the companies planned to remove about 632,000t of US aluminium output from the domestic market next year.

The latest revisions will keep 86,000t/yr of aluminium in the market, reducing the planned cuts to about 546,000t/yr. Those cuts will reduce the US industry's demand for calcined petroleum coke by about 218,000t/yr and green coke by about 290,500t/yr.

Global aluminium producers have been hurt by falling metal prices and premiums, but US producers have also struggled against high energy costs and a strong US dollar that benefits their global competitors. A recent rise in metal prices from six-year lows may help support decisions to keep capacity operational.

The US midwest transaction price, which includes the London Metal Exchange price and premium that buyers pay to take delivery of the metal, has risen steadily this month to $1,736/t on December 24, up from $1,599/t on 28 October, which was its lowest point since May 2009.

Global metal prices have been supported by a decision by Chinese producers to curtail output. The China Nonferrous Metal Industry Association (CNIA) said this month that Chinese smelters plan to have shuttered nearly 5mn t by the end of this year. China's 11 largest aluminium smelters, including Chinalco and Shandong Weiqiao, have promised they will not restart closed capacity next year, according to CNIA. But market analysts are skeptical that promise will hold true and note that new capacity may already be offsetting production cuts.