Glencore disputes Ormet's claim about aluminum deal

NEW YORK, April 17 (Reuters) - Glencore International AG GLEN.UL disputed Ormet Corp's contention that the Swiss-based commodities marketer and producer broke their tolling agreement by using force majeure to suspend alumina deliveries to Ormet's Hannibal, Ohio aluminum smelter. In a statement sent to Reuters, Glencore said on Friday it would defend against any legal action begun by Ormet. On Thursday, privately held U.S. aluminum producer Ormet said it started legal action to enforce its tolling agreement with Glencore, by filing an injunction with the U.S. District Court for the Southern District of Ohio to prevent Glencore from interrupting alumina deliveries to its smelter. A Glencore spokesman said Friday that "A portion of the alumina that Glencore delivers to Ormet for tolling comes from the Windalco refinery in Jamaica. The Windalco refinery has been temporarily shut down." On April 1, Jamaica-based West Indies Alumina Co, or Windalco, majority owned by United Company RUSAL of Russia, suspended bauxite mining in response to a global downturn in aluminum demand. Raw material bauxite ore is turned into alumina, which is then smelted into aluminum. Windalco produces 1.2 million tonnes of alumina annually at its two Jamaican plants, but announced earlier this year it would suspend bauxite and alumina production for a year, because of the recession-induced decline in aluminum demand. With Windalco shut, Glencore said its "invocation of the 'force majeure' clause in the contract was thus fully in accordance with the agreement Glencore negotiated with Ormet." The Swiss company added it "rejects Ormet's statements to the contrary and will vigorously defend the legal actions commenced by Ormet." Under a deal set last May, Ormet had an exclusive agreement for Glencore to supply its smelter with alumina. Ormet received tolling fees to turn the alumina into aluminum sow. In Ormet's quarterly update issued Monday, the aluminum producer said it disagreed with Glencore's use of force majeure, arguing it must find other alumina supply to keep Hannibal's potlines running through 2009. Failure to prevent Glencore from breaking its contractual obligations could force Ormet to shut its operations, it said. Glencore's spokesman said its reading of the contract allowed for use of force majeure with Windalco's closure. "The toll conversion agreement Glencore has with Ormet provides that, because of the shutdown, Glencore's obligation to provide that portion of alumina to Ormet for tolling is suspended until the refinery reopens, and Glencore is not required to provide alumina from another source," he said. With the steep drop in aluminum prices caused by a fall off of global demand for the metal, Ormet said on Thursday that Glencore invoked force majeure, "to try to escape a binding contract that it no longer finds desirable." At $1,480 per tonne, London Metal Exchange benchmark aluminum's MAL3 closing price on Friday was well above the 7-1/2 month low of $1,275 hit in February, but down sharply from last July's record peak at $3,375 a tonne. In addition to the legal filing, Ormet said it also demanded arbitration as a means to resolve the dispute according to a provision in the tolling agreement. (Reporting by Carole Vaporean; Editing by John Picinich)