CHICAGO Kaiser Aluminum
Corp. has seen an inventory overhang develop across a host of
products consumed by the aerospace sector, despite robust
backlogs for products such as commercial airframes.
The excess inventory has hit
"across the spectrum," Kaiser chairman, president and chief
executive officer Jack Hockema said, including not only
aerospace extrusions but also drawn tubes, cold-finished bar
and even sheet. Plate appears to be the only product not to
have been hit by the supply overhang.
But Hockema said during an
earnings conference call that he expects the inventory
situation to adjust in the next few months and not drag on
quarter after quarter, as a plate overhang did several years
ago. In fact, the backlog in aircraft demand should continue
into the next decade, he said, brushing off concerns about the
grounding of Boeing Co.s 787 Dreamliner (
amm.com, Jan. 22). Commercial airframe build rates
should continue to grow by double-digit percentages in 2013
before slowing to single digits in future years, Hockema
On the automotive front, Kaiser
expects to see light-vehicle production growth drop into the
single digits for the next few years after surging 17 percent
in 2012, Hockema said. But Kaisers participation in the
automotive aluminum market should grow faster than the build
rate as auto platforms integrate increasing amounts of
Demand for aluminum extrusions
from the automotive industry should grow at roughly 5 percent
per year, Hockema said, which could help to make facilities
such as Kaisers extrusion plant in Kalamazoo, Mich., "the
gifts that keep on giving."
However, the general engineering
and industrial sector remains a concern, he noted.
While Kaiser expects a
less-than-stellar first half to 2013, it remains bullish on the
second half of the year and the long term, Hockema said.
Given that outlook and the
companys financial position, "we have the financial
strength and flexibility to pursue additional capital-efficient
investment opportunities and potential value-creating
acquisitions," he said. Asked what Kaiser might target, Hockema
said the company likely would look first toward "adjacent"
acquisitions but also might consider downstream
Pressed on when the company might move forward on the next
phase of a planned expansion of heat-treat plate capacity at
the companys Trentwood, Wash., facility, Hockema pointed
to 2013 capital expenditure estimates in a range of $50 million
to $80 million. That suggests the expansion could be undertaken
this year, but Kaiser also could wait until as late 2016 to
"pull the trigger," he said.