Spokane Journal of Business

Kaiser takes cautious view on market buildup

Other aluminum projects in the region have raised speculation about rebound

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Kaiser Aluminum & Chemical Corp., one of the Spokane areas largest employers, is taking a cautionary attitude toward reports that aluminum-industry activity appears to be rebounding in the Pacific Northwest.

Kaisers two facilities here, the Trentwood rolling mill and the Mead Works smelter, are operating at full capacity, with combined employment of about 2,600 people, but the company doesnt have any plans to expand those operations or boost the size of its local work force, says Scott Lamb, a Houston, Texas-based company spokesman.

To the contrary, Kaiser trimmed 50 jobs here earlier this year for cost-competitiveness reasons, and Lamb says the company is going to continue to look at those things that add to cost in an effort to keep expenses as low as possible.

Questions about what expansion plans Kaiser might have on the drawing board arose after the Seattle-based Marples Business Newsletter suggested in an issue this spring that the aluminum industry is making a comeback in the region despite continuing weak prices.

The newsletter reported that Reynolds Metals Co. planned to resume full production by the end of this year at its Troutdale, Ore., smelter, which had been essentially shut down since mid-1991. It noted that Reynolds earlier this year had resumed full production at its Longview, Wash., smelter by restarting two of six pot lines also shut down since 1991.

The newsletter also reported that Columbia Ventures Corp., of Vancouver, Wash., had selected two other potential sites besides Boardman, Ore., for a proposed $200 million aluminum mini-smelter. It said the company signed letters of intent with the Washington Public Power Supply System for a site on the Hanford Nuclear Reservation and with the province of British Columbia for a site at Trail, British Columbia, about 120 miles north of Spokane. Marples quoted a Columbia Ventures official as saying that that the companys intention is to choose the site that can obtain permits most rapidly and successfully.

Aluminum plants in the Northwest account for an estimated 39 percent of U.S. production, and Washington is the top aluminum-producing state in the nation, both due largely to abundant cheap hydroelectric power. However, no new aluminum smelters have been built in the region in more than 30 years. Meanwhile, market competition from outside the U.S. has continued to climb.

Marples acknowledged that aluminum prices have fallen off substantially from the 80-cents-a-pound level of about a year ago (since the newsletter article was published, theyve fallen even further, to less than 60 cents a pound), but it cited industry forecasts for increased demand.

Kaisers Lamb says market indicators suggest that raw aluminum, which sometimes is referred to as the middle-class metal, has a bright future over the long term and that consumption is going to keep going up.

One industry expert predicts that global consumption will increase from 2.5 percent to 4 percent a year for the next five years.

Over the near term, though, things look a little bit cloudy, due to the current low aluminum prices, Lamb says. He adds, I think theres a little of a bearish feeling right now on the part of investors.

What also needs to be kept in mind, Lamb says, is that aluminum has become truly a world commodity, meaning its basically the same material no matter where its made, and therefore its subject to intense market competition.

Aluminum companies that are adding production capacity these days likely are looking for ways to improve their competitive stance, but theyre nevertheless having to keep a close eye on costs, he asserts.

He points out, for example, that Kaiser is in the midst of a $10 million project at its Mead smelter here that includes rebuilding an older carbon-bake furnace to make the plant more efficient. Lamb says the project is indicative of our feeling that Mead has a very good opportunity to remain a competitive plant, but he adds, The pressure is never off. Its always on us.

Kim Crompton
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