Tuesday, June 06, 2000 Columbia, Washington

VANALCO TO LAY OFF 450 EMPLOYEES Monday, June 5, 2000 By MIKE ROGOWAY and CRAIG BROWN, Columbian staff writers Vanalco Inc. announced this morning that it will shut down most of its aluminum smelter and lay off 450 of its 600 employees. The company said a sudden, dramatic rise in electricity prices makes it impossible to operate the 60-year-old plant economically.

"We're considering it a temporary, partial shutdown," Vanalco general manager Chuck Reali said this morning. He said it will take about three days to shut down the plant, which is located at 5701 N.W. Lower River Road.

Vanalco will keep one of its five production lines operating and hopes to reopen the rest at some point if electricity prices fall, Reali said. However, it takes months to restart aluminum production lines once they've been shut down.

For the 450 plant workers who are losing their jobs, an equivalent position may be hard to come by, said Scott Bailey, regional economist for the state Employment Security Department.

"For a lot of those workers, it's going to be a challenge," said Bailey. "I don't think they are going to step into anything real easily."

Bailey said job growth in the county is about 2 percent this year, only slightly better than last year's 1 percent. Together, that's the slowest job growth for the county in a decade.

However, it's electricity, not the economy, that is causing the shutdown. Wholesale electricity prices are nearly 10 times higher than they have been in past years, according to Noel Shelton, a Vancouver electricity consultant who works with Vanalco.

"The power market's just gone crazy," he said. Shelton said spring prices were driven up because demand for power in California soared at the same time some major power plants were closed for maintenance.

The problem was exacerbated by a late snow melt in the Northwest, which relies on hydroelectric power, Shelton said. He said market indicators suggest power costs will remain high for the foreseeable future.

"The market's been very volatile and the trend is up, the futures market is up for the rest of the year," Shelton said. "We have looked under every rock for a solution, and the market's just too tough."

Many Northwest aluminum smelters contract to buy their electricity at fixed rates from the Bonneville Power Administration. Vanalco, however, buys almost all its power privately on the open market.

For years the open market has been cheaper than fixed contracts, according to Robin Adams, an aluminum industry analyst in Pennsylvania. Now, though, conditions have reversed and put some smelters in a tough spot.

"The problem is when the market turns, of course, they are exposed to that particular risk. And that's obviously what's happened at Vanalco."

Restarting a cold aluminum smelter is a complicated, expensive process.

"Once you've got the smelter cold, if you shut it down in an orderly manner, it will take about 90 days to restart," Adams said. "I think they probably won't start until the spring of 2001, if the power market becomes more favorable."

The Vanalco plant was built by Alcoa and commenced operations in 1940.

In 1986, a nationwide strike by Alcoa workers closed it. Vanalco reopened it on July 30, 1987, with a nonunion crew. Vanalco has operated continuously, and has never laid off an employee until today.

http://www.columbian.com/06052000/front_pa/131130.html

-- Doris (reaper1@mindspring.com), June 06, 2000