Most of the smelting capacity in Europe is purchasing power under long term agreements while only few smelters are purchasing power directly on the market, representing around 27 percent of smelting capacity or around 1.4m tpy. Smelters purchasing power from the market tend to secure supplies in advance for one or multiple years. For this reason, production cutbacks will not impact directly power prices since the electricity that smelters would need during 2009 would have been purchased some time ago. Consequently, production curtailments are likely to impact power prices in 2009 only in relation to the smelters that have the possibility to resell power back to the market. However, CRU understands that only some smelters have this option should they have to reduce output or close potlines. In fact, smelters in Norway as well as some German smelters can benefit from this option.
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