An Integrated Aluminum Company

Noranda USA

Noranda Aluminum Holding Corporation is a North American, fully integrated aluminum producer. Supported by operations at its bauxite mine and alumina refinery, its New Madrid smelter produces primary aluminum. Meanwhile, the company’s downstream business produces flat rolled sheets and foils.
Aluminum is an important part of any strong economy, and in the U.S., aluminum drives $152 billion of economic activity. It is the perfect metal for an enormous variety of applications, with recyclability being a major factor in its popularity.

During 2011, the company’s New Madrid smelter produced twenty-nine percent of the aluminum rod and thirteen percent of the primary extrusion billet produced in North American smelters. Molten aluminum that is not used in these product lines is produced as primary ingots for transfer to its downstream business or for sale to other aluminum fabricators.

Noranda’s other businesses support the production of its aluminum. Its bauxite mining operation in St. Ann, Jamaica provides the closest source of bauxite to the U.S. and its refinery in Granmercy, Lousiana is the closest source of alumina to its primary aluminum smelter. According to Vice President John Parker, “Owning our own supplies of bauxite and alumina – being an integrated aluminum producer – is the cornerstone of our strategy.”

It is this combination of its upstream primary metals division and a downstream rolled products division that makes Noranda unique. Its vertically integrated upstream division incorporates the aluminum smelter near New Madrid, Missouri, with its bauxite mine and alumina refinery while its downstream business is made of four rolling mill facilities across Tennessee, North Carolina and Arkansas. Its rolling mills are one of the largest North American foil and light gauge sheet producers.

“That’s where we fit in,” says Mr. Parker. “As a company, we have built our role as producer of approximately five percent of the primary aluminum consumed in the U.S. The value added products we make at New Madrid find their way into products as wide ranging as stadium seating, power transmission units and lines, golf carts and boats and component parts for automobiles.”

As a value added aluminum producer, Noranda does not want to sell any product as merely aluminum ingot if it can be manufactured into something else. Most of the aluminum it produces is fabricated into shapes or sheets to make it more useful for further manufacturing purposes.

“The sales division is headquartered in New Madrid with regional sales offices located in Tennessee and Texas,” Mr. Parker explains. “From New Madrid, the company’s aluminum is transported to customers, throughout the U.S., by rail or by truck. Aluminum is also sold to overseas customers and transported by rail or truck to seaports for placement on ocean going vessels.” The New Madrid facility is the glue that holds the entire company and community together.

The aluminum industry is fraught with major challenges; the cost of power is a major one. China has the highest energy costs in the world followed by Europe and the U.S. China keeps its smelters open because they provide so much employment whereas smelters in Europe have been closing and is not a growth area for aluminum.

“No smelter can survive long term without a competitive power rate. There are nine smelters remaining in the U.S., and we pay the second highest rate of those nine. Thirty years ago there were thirty-two smelters in the U.S. The Public Service Commission and the state recognize the benefit to the system that Noranda provides.”

Power is bought from Ameren Missouri, but the rate is set by the Missouri Public Service Commission. Noranda consumes as much power as the city of Springfield Missouri which makes power the largest of the company’s costs. Further complicating matters, in February, aluminum prices tanked.

“At the same time that prices were at their lowest since the recession, we realized that we were paying higher than all but one of the nine aluminum smelters, so we got together with groups like the industrial customer group in Missouri and the state’s largest retail group. We went to the Public Service Commission and asked for a rate reduction.”

That request was ultimately denied mainly due to Ameren and a power company that had filed for a rate increase. Noranda was first denied in August of 2014. A rehearing was denied in September, but the company believes that there will be another opportunity between now and May.

Ultimately, the Public Service Commission laid out several things of which Noranda had to convince it for the rate case filed in February: that getting the power rate altered was the only way to address the issues and that other consumers were better off with the change then without it. As far as the commission is concerned, only one of these has been proven. Although it is an uphill battle, it is certainly not over.

“There is still an opportunity for the Public Service Commission to address the high rates. We also want to address the fact that Ameren’s consumers are better off with us in the system then without us.” Noranda provides jobs to one of the poorest regions of the country.

Noranda sees itself as a product of the communities within which it works and supports these communities in a number of ways. It actively participates in the United Way and also supports communities through the economic benefit of its operations. For example, the New Madrid smelter has been an integral part of the economic landscape of southeast Missouri for over forty years. It provides hundreds of skilled jobs with stable wages and medical and retirement benefits. Taxes paid by the New Madrid smelters help to keep school systems viable and help to maintain infrastructure and needed government institutions.

Mr. Parker believes that, over the next several years, aluminum growth rates will be at seven to eight percent and that this will be due in large part to building and construction which will remain strong as the economy continues to recover. There are many applications for aluminum in that area.

As U.S. manufacturing expands, demand for aluminum will expand along with it. Aluminum has been making its way into the automotive sector for some time now. “It’s referred to as the automotive body sheet, but it goes all the way from aluminum strips to aluminum in the wiring and the HVAC system.” Ford recently announced that it will be using the aluminum body sheet in its new F150. Says Mr. Parker, “There is also a great opportunity for aluminum applications in high pressure die-cast systems and other automotive components.” The demand for aluminum is growing rapidly, and Noranda wants to grow with it.

“We are not trying to take over the world, but how do we keep growing with our customers? As a long term goal, we do want to continue embracing the fact that we are a primary aluminum producer,” emphasizes Mr. Parker. “We want to be part of a growing U.S. aluminum business.”

July 21, 2018, 3:34 AM EDT

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