Kaiser sees strong aero, auto demand

Kaiser Aluminum Corp. will continue to boost capacity as it looks to seize expected growth in the automotive and aerospace sectors, Kaiser chairman, president and chief executive officer Jack Hockema said during a conference call July 25.

The Foothill Ranch, Calif.-based aluminum company can, for example, supply aluminum-lithium applications to the aerospace sector from a developmental caster at its plant in Newark, Ohio, Hockema said.

"We can supply aluminum lithium today, and we could grow that," Hockema said. "It’s really a matter of casting. ... If the market ever develops to be a substantial (one), we will make the investments required to participate."

Aluminum-lithium alloys are expected by some experts to gain traction in the aerospace market as an alternative light-weighting material to composites. While Kaiser did not announce plans to boost aluminum-lithium capacity, the company said it is moving forward with a $45 million investment to increase heat treat plate capacity by about 10 percent at its Trentwood, Wash., facility, as well as a $35 million project to add a new casting unit at the plant, Hockema said. The heat treat expansion is slated for completion by the end of the year and the casting facility by the end of the second quarter of 2014, he said.

The new casting operation at Trentwood should reduce costs associated with externally sourcing rolling ingot, Hockema said. Kaiser is also "on track" with investments to support new automotive extrusions programs contracted and scheduled to launch over the next three years, he said.

The company expects to spend $15 million to add processing capability necessary for the new auto programs.

"We see as much or more growth in automotive over the next several years as we do in aerospace," Hockema said.

Automotive build rates are expected to be off slightly in the second half of 2013 but the dip should be "more than offset" through recouping better margins per vehicle from aluminum extrusions as new vehicle programs ramp up in the remainder of 2013, Hockema said.

Aluminum companies expect automotive demand for aluminum to increase in coming years in response to customer demand and government requirements for lighter, more fuel-efficient vehicles.

But while Kaiser maintained its optimistic outlook on aerospace and automotive, it remains cautious about general engineering and industrial applications, Hockema said. The sector benefitted from "modest" supply chain restocking in the second quarter, but its prospects are limited given the fact that the U.S. manufacturing recovery continues to be "feeble," he said.