Headline: Copper producer Phelps Dodge scaling back operations

Source: Associated Press, 27 Mar 2001

URL: http://www.nandotimes.com/business/story/0,1032,500467718-500715174-503961911-0,00.html

PHOENIX -- Partly because of higher electricity costs, Phelps Dodge Corp. announced plans Monday to cut back operations in Arizona, New Mexico and Colorado during the coming months and warned employees that more layoffs could occur this summer.

The company laid off 85 workers as it suspended its milling operation and part of its mining operation in Hurley, N.M. Another 44 employees were reassigned to other positions.

Phelps Dodge also renewed its layoff notices for 2,265 other employees at facilities in Tyrone, N.M., Green Valley, Ariz. and Bagdad, Ariz.

Beginning in June, the Phoenix-based company will begin temporarily scaling back production at those sites, mandating that eligible employees take paid vacations so it can shorten or eliminate shifts. Others will be deployed on maintenance projects, said company spokeswoman Susan Suver.

"That will create what we think is an inconvenience versus the hardship of being without a job," she said.

Industry analysts lauded the decision as a way for Phelps Dodge to save jobs and be flexible amid power uncertainty in the West.

"Short of having 100 percent production of power, I think this is a very viable option and one that is likely to be pursued by other manufacturers," said Anthony B. Rizzuto Jr., a senior metals analyst with Bear Stearns in New York.

The company also is building a 40-megawatt power plant in New Mexico and has negotiated an additional 60-megawatt power contract with firm prices, although details have not been released.

Rizzuto said he was concerned that costs incurred in the contract may be high.

Phelps Dodge, the world's second-largest copper producer behind Chile's Codelco, will have reduced its copper production by 175 million pounds for the year once all the temporary cuts have been completed. Rizzuto said the estimated 11 percent reduction from last year is not as high as many in the industry hoped.

"The expectations were that we would see a significant sized curtailment that would take out production and lessen supply, but that's not the case here," he said.

Phelps Dodge also will reduce its total 2001 molybdenum production by 7 million pounds. Half of that figure comes from scaling back its operation at the Climax Molybdenum Company in Empire, Colo.

Molybdenum is a byproduct used for hardening steel, among other industrial uses.

Suver said the company is constantly analyzing a number of factors, including the strength of the copper and molybdenum markets, the costs of electricity sources and the global and regional economies, to determine its staff needs.

The price of copper has taken a dip this year, down about six cents per pound from one year ago.

Phelps Dodge, which employs 15,500 people in 27 countries, had 2000 sales of $4.5 billion.

Shares of Phelps Dodge were down 40 cents to close at $40.60 on the New York Stock Exchange.

-- Andre Weltman (aweltman@state.pa.us), March 27, 2001

Answers

Hmmmmmm.....Aren't we going to need more copper when all the proposed power plants being built come on line? If more windmill farms are built, copper will be needed for them too. Didn't I hear somewhere that the main transmission lines in California are old and need to be replaced? Something doesn't sound right here, it must be my "consumer confidence," studdering.

-- CAkidd (CAkidd_94520@yahoo.com), March 27, 2001.

I don't have the figures handy, but I believe the use of copper for generator windings is a very small fraction of the total use.

Also, new power transmission lines are almost always made of aluminum - - it's a somewhat poorer conductor than copper, but it's sufficiently cheaper and lighter that it makes sense to use thicker aluminum lines rather than thinner copper ones.

-- Barb Knox (barbara-knox@iname.com), March 27, 2001.

"Surging energy costs, driven by demand from power-starved California, are forcing copper, aluminum, molybdenum and precious metal operations in the western U.S. to halt or scale back output."

I'm not quite sure about the metals used in electrical conducting, but with the quote above, it looks like a lot of metal industries are being hit. I'll have to search for it, but I read recently where Aloca Aluminum in Tenessee was laying off, and POSCO Steel Mill due to cheaper overseas production and imports into this country.

There's a lot of raw materials that are used for manufacturing energy, who, what and where are the builders going to get this material if factories/mines/mills are being shut down? From overseas? I would like to know......thanks!

-- CAkidd (CAkidd_94520@yahoo.com), March 28, 2001.

The aluminum smelters in the Northwest are shutdown to sell their contract electricity or looking at moving operations elsewhere. Wholesale electricity prices is not what it use to be. I am amazed at how our economic infrastructure is being systematically taken apart. This is a parallel to how God worked with a culture, the Israelites greatest fear was the sword, and in A.D. 70 one million of them died by the sword. Our greatest fear is our economic well being, and thus we shall be judged.

-- Phil Maley (maley@cnw.com), March 29, 2001.