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Charleston Daily Mail
July 1, 2014
By Jared Hunt

Felman to restart idled Mason County plant

Felman Production announced Tuesday it plans to immediately resume operations at its idled Mason County plant, a day after filing a new power contract with Appalachian Power.

The New Haven steel additive maker received approval from state regulators earlier this year for a special power rate plan that would give the plant up to $9 million in annual discounts on its power bill over the next decade.

Felman executives said Tuesday they now plan to resume operations at the plant, beginning with immediately restarting one of its three electric arc furnaces. A second furnace will be brought online by the end of this month.

Felman shut down most of its operations last June due to poor market conditions for the ferroalloy silicomanganese, a deoxidizer that allows steel companies to produce a purer type of steel.

The company was one of two domestic producers of the material. It’s made by taking three raw ingredients — manganese ore, coke and coal — and heating them to 3,000 degrees Fahrenheit in an electric arc furnace.

Oversupply in the world steel and silicomanganese markets pushed prices significantly lower early last year, forcing Felman to cut costs and eventually idle its operations.

With electricity making up 20 percent of total production costs, Felman asked the PSC last August for a more favorable power rate plan that would help it restart operations and compete in the global market.

In crafting its request, the company made use of a law that was originally crafted in an attempt to help restart the shuttered Century Aluminum smelter in Ravenswood. The law allows large manufacturers to receive special power rates based on the costs of goods involved in their manufacturing processes.

The state Public Service Commission approved a modified version of Felman’s request in April.

The PSC-approved plan ties the company’s power rate to the price of silicomanganese and other raw materials. When prices are low, the company’s power rate will go down. When they go up, Felman will pay a premium on its power bill.

The company had initially asked for up to $9.5 million in annual discounts — discounts that would be paid for by other ratepayers. Felman officials said the full discount would increase the average residential customer’s bill by about 55 cents a month.

The $9.5 million figure came from the amount Felman had been paying each year to cover Appalachian Power’s fixed costs of providing power. Should Felman shut down permanently, those costs would be shifted to other ratepayers, so company officials said their plan left consumers no worse off than if the plant shut down forever.

Under the PSC-approved plan, the company is eligible for up to $9 million in annual discounts. Felman will be required to pay at least $500,000 in power company fixed costs each year. The company also has to pay for all of the power company’s variable costs of providing electricity, including its fuel costs.

Felman and Appalachian Power were required to draw up a revised power contract for the plant that reflected the framework laid out by the PSC. The two companies filed that revised contract with state regulators Monday.

Felman CEO Mordechai “Motti” Korf said he was pleased the company was able to begin restarting the plant.

“Our special rate provides us with the necessary flexibility to continue operating during periods of weak commodity prices, while ensuring that we pay more than 100 percent of variable costs over the life of the contract,” Korf said in a statement.

More than 140 employees were laid off when the plant shut down last year. The company did not immediately specify how many of those workers would be recalled as part of the restart.

The United Steelworkers union has lobbied in support of Felman’s special rate contract. In April, union members approved a new labor contract with the company.

“I want to acknowledge everyone in the local community that provided their positive feedback and support during the plant shutdown, and I want to thank the West Virginia Public Service Commission, APCo, and the United Steelworkers Local Union 5171 for their efforts to strengthen Felman’s long term viability,” Korf said. “We look forward to continuing to provide our customers with high-quality product at competitive market prices.”

The Foote Mineral Co. originally built the New Haven plant in 1952. Over its 61-year history, the plant has closed and reopened numerous times as various plant owners declared bankruptcy and sold it to new owners. Felman, a subsidiary of Georgian American Alloys, Inc., paid $20 million to buy the plant from bankrupt Highlander Alloys in 2006.