Magnitude 7 Metals in danger of closing

MARSTON, Mo. -- Just two years after opening in Marston, Magnitude 7 Metals is losing money at such a fast pace it could close within 60 days. This is according to a story released by Reuters Friday morning.

In an interview with Reuters, Magnitude 7 Metals chief executive Charles Reali said, "we are in prayer mode. If things don't turn around in the next 60 days, I don't know."

New Madrid City Manager Richard McGill said it wasn't the news he expected to hear Friday morning. "I was very disappointed to hear that," McGill said. "When Noranda closed, it had a major economic impact."

Noranda Aluminum closed in the spring of 2016, cutting about 900 jobs and a payroll that was estimated as $95 million in 2013. It was a huge blow to the local economy with funding cut to the New Madrid County R-1 School District as well as police and ambulance budgets and the overall budget of New Madrid County. The R-1 school district also saw a drop in enrollment as some former employees of Noranda had to relocate to find employment.

McGill said of the 900 employees that lost jobs, about 110 to 120 were New Madrid residents while another 260 or so were from Sikeston. He said Noranda had employees from a four-state area around the Bootheel.

"This isn't just a New Madrid issue, this is a regional issue," McGill said. "We need these jobs. I would hate to lose over 500 jobs."

Two years after Noranda closed, Magnitude 7 Metals opened in 2018 with help from President Donald Trump imposing a 10% tariff on imported aluminum. But the price of aluminum has continued to drop, made worse by the coronavirus, which is raising fears of a global recession. On Friday, the price of aluminum fell to $1,676 per ton on the London Metal Exchange. That is the lowest price it has been since October of 2016.

Reali described the market for the plants aluminum product as "absolutely terrible."

"These prices are 1988 and 1989 prices, dollar for dollar," Reali said in the interview. "Obviously, the costs are a hell of a lot more today than they were then."

Reali told Reuters that Magnitude 7's aluminum earns about $1,680 a ton on the metals market, which is down from about $2,100 a ton last year. The original business plan factored in a price of $2,300 to $2,400 per ton.

"We can't sustain what we are doing at the current price," Reali said in the interview. "Our costs are much higher. We're seeing red numbers every month."

The Reuters story said Trump's trade policies protect the product made by Magnitude 7, but the tariffs often do not cover the value-added aluminum products being shipped to the United States by foreign competitors, which undercuts the company's position.

McGill said he hasn't spoken to a Magnitude 7 Metals official since the end of 2019 but he was aware of the struggles the company was having trying to get started. The plant itself has old equipment that needs repairing, adding to the problems with aluminum prices.

Currently, Magnitude 7 employs 515 workers. According to Reuters, Reali said there is no collective bargaining agreement with union workers that were recognized last year with a settlement with the National Labor Relations Board. Federal law prohibits the company from laying off hourly workers during contract negotiations, which limits the plant's flexibility, according to Reali.

It could be a huge blow for the area as McGill said New Madrid has been working for years to bring in jobs and were beginning to see some progress.

"We wanted to pair those with existing jobs," McGill said. "While they don't have as many employed as Noranda did, it still impacts over 500 workers and that's what we are focused on right now."

While the news isn't promising, there still is room for hope.

"We're here today," Reali said in the interview. "Can't speak for next week. It's a day-to-day thing."