Justine Coyne Reporter- Pittsburgh Business Times
On a recent conference call with analysts following the release of the company’s earnings, Horsehead Corp.. CEO Jim Hensler said it is “very likely” Shell Chemical LP will exercise the land-option agreement the company has to purchase the Monaca facility. Back in March 2012, Shall announced the Beaver County site was its preferred site for a potential Appalachian ethane cracker, however a final decision has yet to be made. At the end of June, the company extended Shell’s option agreement to the end of this year.
Ali Alavi, senior vice president of corporate and environmental affairs for Horsehead, said the company’s view has been that based on the level of effort Shell is putting into their due diligence and project investigation, and from the perspective of a company the size of Horsehead, it seems more likely than not that Shell may be headed toward a decision to exercise the option.
Horsehead has not announced a date for the closure of its Monaca facility, but said it will have to make the announcement 60 days before the closure.The company plans to close the facility once it begins ramping up production at its new North Carolina zinc facility. Hensler said as the company is trying to dovetail the closure of the Moncaca facility with the new facility, he expects production at Monaca will continue until the end of the 2013. But he doesn’t see it continuing into next year.
Hensler said since the beginning of the year the Monaca plant is down 34 employees, and while it isn’t a significant decrease to the total of 550 employees at the plant, it is still impacting production to the tune of about a 5 percent to 10 percent reduction in tons of zinc produced per furnac”I think by the end of August we would have come through the worst period and we’ll see less attrition issues moving forward,” Hensler said. Hensler said there is incentive for employees to stay through the closure of the facility as if they quit now they will lose certain benefits. The company plans to keep the operation at six furnaces until its closure.
The site is under evaluation from Shell to determine the economic viability of the site for a petrochemical facility. Alavi said any predictions about the future of the site must be tempered with the knowledge that a company of the size and stature of Shell is able to expend a large amount of resources on the due diligence phase of a project and ultimately decline to proceed.
Hensler said if the Shell does not exercise the option, Horsehead will look into alternative uses for the site. “We haven’t put a lot of focus into looking at other options because we don’t want to commit any resources until we know what Shell is going to do,” he said. “We think it is very likely that they will exercise the option and that outcome does monetize Monaca and generate some income.”