Ormet plans to cut costs, improve aluminum output

Posted by anzhuo on January 12th, 2016

    NEW YORK, Nov 14 (Reuters) - Closely held U.S. aluminum producer Ormet Corp cut its third quarter net loss to .6 million from a .6 million loss in the 2007 quarter, but higher anode costs outpaced the benefit of no longer having to pay some employee-related expenses or smelter restart costs.Having come a long way towards boosting sales and income and cutting costs since 2005 when it idled its smelter after a bankruptcy filing, Ormet will now focus on negotiating a long-term power deal, improving its smelter operations, cutting anode costs, completing its Burnside, Louisiana, land sale and selling the Burnside terminal."With our substantially committed metal position for the rest of this year and next, as well as the increased tolling fee for 2009, we can focus on our long-term energy contract and reducing carbon costs," President and Chief Executive Officer Mike Tanchuk told investors and analysts on a call.Ormet also reported third-quarter net sales from continuing operations of 7.6 million, 5.3 million of which came from a tolling agreement with Swiss-based Glencore International.Toll sales volume reached 66,675 tonnes and non-toll aluminum sales volume was 831 tonnes.In the 2007 quarter, Ormet's revenues came to 2.0 million, with non-tolling aluminum revenue of 1.7 million. Sales volume was 40,188 tonnes of aluminum sow and 6,055 tonnes of billet sales. Ormet stopped producing billet in Oct. 2007.Despite a steep drop in aluminum prices, Ormet's tolling fee is fixed for 2008 and will increase "quite a bit" in 2009, but does not vary with London Metal Exchange prices.Under the tolling agreement, Ormet's smelting operation in Hannibal, Ohio receives a fee for producing aluminum sow from alumina supplied by Glencore through 2009.Tanchuk said Ormet had not foresee a .3 million, or 43 percent, increase in anode costs, which have since come down."

    We are seeing a reduction in anode prices and an easing of payment terms going into the fourth quarter and continuing into 2009, due to falling oil prices and reduced anode demand," said the CEO, adding that its supply will come entirely from China.Increased anode supply, lower demand, reduced raw materials costs have pushed anode costs downward and Ormet revised its 2008 supply contracts to reflect the price declines.Ormet is currently negotiating 2009 anode supply contracts and estimates at least a 0 a tonne improvement in terms.Mike Griffen, vice president operations, said all six potlines have been operating at an annualized run rate above 265,000 tonnes a year since August and at a reduced failure rate, compared with five lines running in last year's quarter.Through the quarter, Griffen said, Ormet relined 259 pots, including those that failed during the 2007 smelter restart and failures that occurred from normal operations in 2008.The pot count increased by 99 to 1,019 cells over 2007 year end, and the 160 routine failures for the first nine months were fewer than the 179 forecast at the start of 2008. The number of pots needing relining fell to 69 in the third quarter from 94 pots during the second quarter.Griffen said the aluminum producer anticipates a 30 to 35 percent reduction in 2009 pot relinings.Elsewhere, Tanchuk said, Ormet signed a million contract for the sale of 300 acres of land at the Burnside operation. It expects to complete the deal by the end of November.

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