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An Article from the February 2002 JOM: A Hypertext-Enhanced Article
The author of this article are with S C Systems in Moraga California.
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Figure 1. The plant as it looks today.
Figure 2. The plant as it looked in August 1953.
What would it cost, at this turn of the new millennium into the 21st century,
to build a typical aluminum reduction plant with an annual production capacity
of 250,000 tonnes? Based on the most recently completed plants, an estimated
$1.5 billion would be required. Add to this the requirement that this new smelter
have its own electricity-generating facilities to service it. This would increase
the installation cost by $300 million to $406 million. All of this assumes that
a suitable site location can be found with the necessary support services. Today,
in the United States, it would take several years to get the required permits
and clearance. This would involve the need for environmental impact reports,
hearings with regulatory agencies and local and national governments, with no
guarantee that final approval would not be challenged by appeals to court jurisdictions.
Such cumulative considerations, when combined with the availability of needed energy at a competitive price, lend some credence to the often heard statements that another aluminum smelter will not be built in the United States. Hopefully, a successful breakthrough in the ongoing research to develop an inert anode and a more efficient electrolytic cell technology with greatly reduced energy usage will challenge this projection.
Many of the issues challenging todays U.S. aluminum smelter, including the preliminary danger signs, are epitomized in the birth, life, and dismantlement of the Kaiser Aluminum smelter at Chalmette, Louisiana. It was located on the Mississippi River, seven miles downstream from New Orleans.
Today, the plant is a rusted skeleton (Figure 1). A generation ago, it was a state-of-the-art plant. For a long time, it was the largest aluminum smelter in the world, at 275,000 annual tonnes (Figure 2), before being shut down in 1983. The principal reason was an impending major price escalation of its energy source, natural gas, supplied to it under a 30 year contract, which was nearing expiration. This was not to be just a temporary cessation of operations until natural gas prices would decline, or aluminum market demand would increase resulting in a rise of aluminum prices. It was not to be kept on standby status as happened periodically with other marginal U.S. smelters when market demand declined, the so-called Lazarus plants. It was a total closure and dismantlement.
An examination of the associated circumstances that led to its rise and fall can provide constructive insight.
THE ENERGY CRISIS ERA: 19742001
|||The author had no reservations about the quality effect because of his earlier experience. His first aluminum job assignment was in a direct chill ingot casting plant employing 16 dual-hearth melting furnaces, all coal fired, where the products of combustion, including the fly ash, impacted directly on the molten metal in the hearth. Aircraft quality products subjected to restrictive ultrasonic quality specifications were successfully made there. It was a dirty, smoky operation, hauling in the coal, tending the stoker firebox, pulling and transporting the resultant hot ashes, but good quality metal was produced. Subsequent conversion to oil, and then gas, seemed like a gift from heaven from an operations standpoint.|
If no new plants are on the horizon, then what is the future of the existing
plants in the United States as they confront extraordinary pressures from myriad
fronts, not the least of which is energy supply, particularly in the Pacific
The Chalmette plant was planned in 1950, soon after the outbreak of the Korean conflict hostilities. The United States was experiencing a deficit in aluminum availability for military purposes, and the government encouraged existing U.S. companies to construct additional reduction plant facilities. Kaiser Aluminum, already in an expansion mode, proposed a greensite plant, with four potlines, 100,000 annual tonnes capacity. Initially, it hoped for a Northwest location where Bonneville hydroelectric power would be available. But the Secretary of the Interior, Oscar Chapman, together with the Federal Munitions Board, demurred on the location. A variety of reasons was proffered, not the least of which was that the availability of Bonneville power was already in short supply. Also, there was opposition to another aluminum plant in the area by the resident representatives who wanted an industrial operation that would provide more jobs per consumed kilowatt hour than another aluminum smelter.
The secretary of the interior, somewhat forcefully, suggested that the new reduction plant be located in the Texas or Louisiana coastal region, where a plentiful supply of cheap natural gas was available. He advised that he would immediately approve such a location.*
The government had considerable leverage. The incentive it offered involved a five-year amortization of loans and a guarantee of purchasing for the government stockpile all of the plants surplus aluminum production that the general market would not absorb. In other words, such incentive plants could be operated at full production capacity for seven years with a guaranteed customer, the U.S. government stockpile, at the going market price. The government ultimately reached several hundred thousand tonnes and proved to be disruptive to the market in later years, when the government periodically sold portions off to bidders who typically paid market price.
The Chalmette plant construction began in February 1951 by Kaiser Engineers (an affiliate but separate company), and the first metal was tapped on December 11, 1951barely ten months after groundbreaking. This was an amazing construction record of achievement for that period.
Figure 3. The first aluminum is poured at Chalmettes ceremonial opening.
The dedication ceremony and the first pour of metal involved the U.S. Director
of Defense Mobilization, Charles E. Wilson, a national figure who, for the previous
ten years, had been president of the General
Electric Company. He and the indomitable and irrepressible Henry J. Kaiser,
both of them with eye shields and asbestos gloves, pulled the crucible tilt
lever to start the first metal flow from the new facility (Figure
3). Ultimately, millions of tonnes of aluminum would be produced during
the plants comparatively short lifetime.
The plant represented the first greensite endeavor of the Kaiser Aluminum and Chemical Corporation. The company invited 500 guests from around the United States to the dedication ceremony and related events. Eight airliners were chartered for the guests transport. Present were the Louisiana governor, both Louisiana senators, the entire congressional delegation, church leaders, the president of General Motors, and essentially everybody who was anybody in industry and government. The mayor of New Orleans, deLesseps S. Morisson, declared Kaiser Aluminums new plant here is the greatest thing since the Battle of New Orleans in 1815. The young, not quite five year old Kaiser Aluminum, wanted to make a statement and it certainly did.
The planned 100,000 tonne, four potline capacity was doubled to 200,000 tonnes and then to 275,000 tonnes and nine potlines before construction was completed.
The Chalmette Plant was built with the Söderberg cell technology (Figure
4), a decision that was later to be lamented. However, in the early 1950s,
the Söderberg cell was considered to offer lower operating costs and a
higher metal purity than the alternative choice, the pre-bake cell. Söderbergs
notorious atmospheric emissions were not a concern at that time. The other U.S.
producers, Alcoa and Reynolds,
were also installing Söderberg cells in expanding their reduction facilities
during that period. Indeed, Alcan
in 1954 installed vertical stub Söderberg cells at its new Kitimat smelter
in Western Canada.
While the Söderberg cells emitted copious fumes, no initial effort was made to collect and dispose of them. In 1956, a $6 million, 170-meter tall smokestack (Figure 5) was built and incorporated into the plant process to collect atmospherically dispersed cell emissions. By 1976, due to continuing regulatory restrictions, the stack became obsolete and was replaced by a dry scrubber system that cost $32 million.
Today, the smokestack still stands. This one-time symbol of industrial prowess now serves as a mounting tower for the areas burgeoning cell phone usage and is a source of revenue to the St. Bernard Port Authority.
Figure 4. The Chalmette plant potroom in August 1953.
Figure 5. The smokestack, added in 1956 to disperse emissions, now stands as a silent sentinel to a long-gone industrial giant.
When the Kaiser Chalmette
smelter was built, it produced its own electricity. The first two potlines used
11-cylinder Nordberg radial natural gas engines since these were immediately
available during the hectic mobilization at that time. As subsequent potlines
came into operation, the preferred steam turbines powered the electric generators.
At the time of the smelter closure, 85% of its electric power was by the steam
from a boiler plant fueled by the natural gas. While the pending expiration
of a very favorable natural gas supply contract was a major element in Kaiser
Aluminums decision to close the Chalmette smelter in 1983, there obviously
were other considerations involved, including a generally rough economic period
for the aluminum industry. Such business actions are never single-element, straightforward
black and white decisions. Still, in relation to current events pertinent to
energy supply for todays U.S. aluminum producers, the energy equation
with regard to Chalmettes situation is intriguing. Certainly there was
energy supply available to extend the contract, but the new rate would have
been enormously, perhaps prohibitively, expensive. All the physical assets of
the plant represented a replacement cost approaching $2 billion. Add to this
the investment costs in a highly skilled work force. A few years remained on
the natural gas contract, and Kaiser
was able to negotiate a favorable supplier buyback of it for a very substantial
sum of money.
One also wonders why Kaiser didnt install a coal-fired steam plant to replace the use of natural gas. Kaiser owned coal properties and cheap transport river barges could get the coal from the Midwest down the Mississippi River to the Chalmette riverside dock facilities. After all, in the 1900s Alcoa built aluminum smelters with adjacent coal-fired power plants at Warrick, Indiana,and Rockdale, Texas and they have operated quite successfully ever since.
Additional speculation concerns natural gas supply. In the mid-1970s, Kaiser Aluminum was a supplier of massive welded prismatic aluminum tanks, which were placed into the holds of specially built ships. The intent was to transport liquid natural gas (LNG) from Africa to the United States. The special ships were built, the aluminum tanks were installed, sea trials were conducted, but the commercial operation was never completed. From a technical standpoint it would seem straightforward to bring such a ships cargo directly to the existent Chalmette slip (dock), which can accommodate several ships. (It should be mentioned for the readers information that such ship deliveries of LNG into the harbor at the city of Boston have been routine operations for years.)
The Chalmette smelter, built with the latest post-World War II state-of-the-art technology in 1950, was barely 30 years old at the time of its closure, basically in the adolescent period of its projected life. By comparison, the Alcoa reduction plant at Badin, North Carolina continues to operate 85 years after purchase of the facility from the Southern Aluminum Company.
THE SOCIAL COSTS OF A PLANT SHUTDOWN
By the mid 1980s, the aluminum industry executives and the Aluminum
Association were railing at the U.S. imports of both metal and fabricated
products. There was a short-lived profitability respite in 1988, when smelter
metal prices reached over $1 per 0.5 kg. But by the early 1990s, the massive
metal imports from Russia had a destabilizing effect on the world wide aluminum
industry and this required the intervention of the governments of aluminum-producing
countries. This resulted in the signing of the Memorandum of Understanding (MU).
Integrated U.S. producers actually reported financial losses during this period.
By the late 1900s, the aluminum business was again languishing. Shortly afterward,
major U.S. integrated producers, Reynolds and Alumax, relinquished control of
their corporate entities and agreed to be acquired by Alcoa. In Europe, an attempted
consortium of Alcan, Alusuisse,
and Pechiney was thwarted
by European antitrust considerations, which allowed only the Alcan-Alusuisse
combination. Even now, other consolidations among European corporations are
being discussed. While the influence of the changing energy component is seldom
mentioned, its effect is present and substantial.
Meanwhile, the aluminum industrys incessant complaints about the edicts of the regulatory agencies and other regulations was given some apparent relief when the state of California deregulated its utility power industry in 1998. The subsequent business dealmaking among energy brokers and energy providers created real or artificial shortages and enormous price increases of magnitudes ten times, or in some cases, 100 times. California was the primary victim and some businesses closed, several utilities were forced into bankruptcy, and power shortages in the state resulted in repeated power blackouts in many areas. It is beyond the scope of this paper to analyze this ongoing dilemma and it is mentioned because of its associated effects on the aluminum industry.
The associated energy shortages and the resultant high prices in the west provided an opportunity for the Northwest aluminum smelters to market their contracted Bonneville electric power to the highest bidders. This was an opportunistic move on the part of the smelters who saw more profit in shuttering the plants, laying off their workers, and selling their relatively low-cost contract power. In some cases, hundreds of millions of dollars were involved in the transactions. Such actions were entirely legal, but the ethics involved have been questioned. A public outcry was that the aluminum plants obtained cheap government power and profited exorbitantly at the expense of the taxpayers whom will bear the final bill. This is a public-relations disaster and will be mentioned time and again in future years, especially when new power contracts are negotiated and the evolving energy conditions are analyzed and reanalyzed over the years.
The state of California has had to borrow nearly $40 billion to obtain guaranteed energy supplies for its citizens and industries. Final costs will be borne by the taxpayers. It will be years before events associated with this occurrence are resolved. There are those who maintain that this is the result of a California legislature action and the state alone should bear the financial burden that has accrued. As simplistic as this may sound, the problems are quite profound and will involve the entire United States. It is well to remember that one out of every eight people in the United States lives in California. Also, the California economy is the fifth largest in the world, behind only the United States as a whole, Japan, Germany, and Great Britain. It will wield considerable influence in resolving the energy problems. By the end of 2001, there is already a surplus of electricity available to California, and the state is selling some of its expensively acquired contract power at a considerable loss. The building of some planned energy supply plants has been placed on hold.
The ironies and commonalities between the circumstances that led to the dismantling of the Chalmette reduction plant and the existing conditions in the aluminum industrys northwest U.S. plants is striking. Hopefully, this cumulative historical experience will provide the basis for avoiding such adverse dilemmas in the future.
|*||The primary reason cited by the 1950 government agencies for not approving Kaisers preferred Northwest location was the shortage of Bonneville power in the area. In retrospect, this is somewhat perplexing when additional reduction plants were later built or substantially expanded in the area. Notably, these were at Wenatchee in 1952, the Dalles in 1958, Columbia Falls in 1955, Ferndale in 1966, and Goldendale in 1979, together with expansions at the Vancouver and the Longview facilities.|
For more information, contact G.J. Binczewski, S C Systems, P.O. Box 6154,
Moraga, California 94570; (925) 284-5007; fax (925) 376-1654; e-mail
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