Magnitude 7 aluminium smelter in Missouri mulling over closure

One of the last five aluminium smelters in the United States – the privately owned Magnitude 7 Metals LLC smelter in Marston, Missouri – is considering closing if a buyer is not found, Fastmarkets has learned

High energy costs have rendered the operation financially unfeasible, according to Renew Missouri, a nonprofit that advocates for clean energy. Renew Missouri hosted a meeting on December 1 to try to prevent the closure, its website shows.

“Renew Missouri is very concerned by recent developments regarding Mag 7 Metals… which faces closure by the end of 2023 if a buyer is not found,” according to the meeting invitation.  

Representatives from Magnitude 7 Metals did not reply to requests for comment by phone and email.

Matt Lucke, the founder of ARG International AG, declined to comment. The Swiss metals trading company ARG International purchased the smelter from now-defunct Noranda Aluminum Holding in 2016, with Matt Lucke listed as the founder. It restarted the smelter in 2018 following the implementation of the Section 232 tariffs. 

Magnitude 7 Metals has not initiated the 60-day notice period for the shutdown under the Worker Adjustment and Retraining Notification Act that would be necessary for its workers, who are represented by the United Steelworkers’ union (USW), according to two sources familiar with the matter.

A representative for the local USW confirmed to Fastmarkets by phone that around 450 members were employed by the smelter and that they have not received a notice regarding the possible closure of the plant.

The smelter purchases electricity from local utility company Associated Electric Cooperative (AEC). The electricity is generated using a mix of natural gas, coal, wind and solar, according to Washington-based nonprofit BlueGreen Alliance. The smelter’s yearly utility costs are estimated to be around $55 million, according to Renew Missouri.

Part of this electricity comes from AEC’s nearby coal-fueled power plant, with Magnitude 7 purchasing 53% of the plant’s output, according to Renew Missouri. With options available under the Inflation Reduction Act (IRA), using electricity generated from renewables such as wind and solar could reduce the smelter’s utility costs by 40%, according to the nonprofit’s executive director, James Owen.

“We know [the utility company] has limitations,” Owen said. “What we are saying is that they should be considering some alternatives here to help this particular customer. That is our effort; we believe this is something that will be beneficial to all parties. We urge [the power co-op] to provide relief, to consider options available to them under the Inflation Reduction Act.”

Renew Missouri’s meeting to save the smelter on December 1 included lawmakers, civic leaders and representatives from the co-op and the smelter to look at possible solutions. No resolution was reached, Owen said.

However, industry participants are hopeful a solution will be found and the smelter will remain open.

An industry source said he thought the owner might find a solution to keep the smelter going. Even if the smelter does close, he said he was not too concerned about a supply shortage. 

“The difference in [aluminium smelting] capacity can be made up from Canada,” he said. “It will not have a huge impact.” 

While there are steps being taken to ensure that the US aluminium industry has the means to afford the energy needed to operate, timing is critical to ensure primary smelters in the country do not close, according to a source close to the matter.  

“Once a smelter shuts down, it is a lot of work, time and money to restart,” this source said. “That is why we are ever so careful to not have that happen.”

The smelter’s capacity of 263,000 tonnes per year is roughly one third of the total US aluminium production of 894,000 tonnes, according to data from the Center for Strategic Industrial Materials at Securing America’s Future Energy (SAFE), a Washington-based non-partisan think tank.

However, domestic production of aluminium made up only around 15% of total US consumption of the light metal in 2022, according to data from the US Geological Survey (USGS). The US imported 5.9 million tonnes of aluminium that year, with the majority coming from Canada, the data showed. 

Magnitude 7 is one of five remaining aluminium smelters in the US, alongside Alcoa’s smelters in Massena, New York, and Warrick, Indiana; and Century Aluminum’s smelters in Mt Holly, South Carolina, and Seebree, Kentucky.

Magnitude 7 is not the only smelter to be challenged by high energy costs. Century’s Mt Holly smelter has been running at 75% capacity since 2021 due to high energy costs, and its smelter in Hawesville, Kentucky, closed in July 2022 for the same reason. 

Industry participants and nonprofits have cited access to clean, affordable energy as the biggest challenge facing the US aluminium industry. They met with Department of Energy undersecretary David Turk in late November and asked for more investments to provide the sector with clean, reliable energy.

The aluminium premium in the US has declined since reaching its highest point of the year – at 27.75-32,00 cents per lb – on February 7. Fastmarkets assessed the aluminium P1020A premium, ddp Midwest US at 17.75-18.50 cents per lb on Friday, December 22, down by 8.23% from 19.00-20.50 cents per lb one year earlier.

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