Aluminum billet market to see no impact from Ohio Valley closure

The shuttering of Ohio Valley's aluminum billet remelt plant in Niles, Ohio, is expected to have limited effect on the market, according to market sources.

Ohio Valley had sought major labor concessions to reduce operating costs at Niles, a United Steelworkers union official told Platts Monday. Kirk Davies, a USW staff representative, said the union was notified Friday by the Shelbyville, Kentucky-based company that the Niles facility will be idled by mid-December.

According to aluminum market sources, the closure is not expected to tighten up the already loose billet market. "There's not an extruder out there today who is short metal," said a trader, noting that some annual billet contracts are not starting until February or March because "extruders have too
much metal. they pushed back their November/December into January/February. This is very unusual for the market."

Market players said the billet market unexpectedly started slowing down in October. "After that time, no one wanted any billet," said the trader. "It was all of a sudden." The Platts aluminum 6063 upcharge has fallen to 8-9 cents/lb plus P1020, delivered Midwest, as of December 7 from 9.5-10 cents on September 7. Upcharges gradually fell since then.

"Producers cannot sell enough billet and no one wants any," said an extruder, noting that the decline in the building and construction sector was a major reason for the significant decline in extrusion demand. An extruder said the extrusion "is very slow now. Some are shutting down between Christmas
and New Year's."

By sector, extruders said the commercial/architectural markets are strong, while truck/trailer is flat. Market players said they expected the market to remain loose through the first quarter. "Q2 might be a different ball game," said a trader. He suspected demand in January will be weaker than
expected. "No one will come back January 1 and rush out and buy metal," he said. But another extruder said there is a "fair amount of quoting going on," so he expected the market to improve soon.

The USW's Davies said Ohio Valley claimed the decision to shut the plant was not related to its attempts to negotiate wage and benefit concessions with the USW. Sixty-six hourly employees will be affected by the closing. In mid-November, the company laid off 10 workers at Niles.

According to Davies, Ohio Valley said it intended "to move work [from Niles] to other plants" in Kentucky and Indiana. Specific plants were not disclosed and attempts to reach Robert Gamba, Ohio Valley president and CEO, were unsuccessful this week.

Davies said he was told Ohio Valley believes it can save money by transferring production to its other facilities even though the company's plant at Shelbyville also is unionized. Ohio Valley asked the union earlier this fall for a 20% across-the-board pay cut, saying the move was necessary to
significantly cut the plant's operating costs. The union rejected that demand, calling it excessive.

The existing labor agreement between the USW and company was signed two years ago and runs through August 2008. Gamba previously backed off a threat to close the plant October 31.