CHICAGO Kaiser Aluminum
Corp. plans to bring forward its planned capacity expansion and
maintenance outages in the wake of weaker-than-expected demand
from some sectors and an inventory overhang in the aerospace
"While the headwinds are
unwelcome, we will take advantage of the situation," Jack A.
Hockema, chairman, president and chief executive officer of the
Foothill Ranch, Calif.-based company, said during an earnings
conference call with analysts.
Kaiser has scheduled equipment
downtime at its Trentwood, Wash., facility for construction
related to capital projects, as well as "major" maintenance
projects at its operations in Newark, Ohio, he said.
The company has slated $80
million in capital spending for 2013, including a new casting
complex and a 10-percent expansion in heat-treat plate capacity
at Trentwood that should be online in early 2014, Hockema said.
Kaiser also plans to spend $15 million to boost automotive
extrusion capabilities at its facilities in Bellwood, Va.;
Kalamazoo, Mich.; London, Ontario; and Sherman, Texas.
London will remain the primary
facility for launching new automotive programs; Kalamazoo will
focus on products compatible with its primary mission of
supplying rod and bar for the general engineering market;
Bellwood will focus on driveshafts and other tubing
applications; and Sherman will provide additional capacity for
bumpers and automotive structural applications.
"Our planned investments in
automotive extrusions are a result of new programs booked and
the need to ensure that we have the breadth and depth of
capacity and capabilities ... to meet customer needs," Hockema
Kaiser expects automotive build
rates in 2013 to be roughly on par with levels seen in 2012, a
year that brought a "step change" in terms of boosted
In the near term, Kaisers
growth in the automotive sector could be hurt by lower exports
of anti-lock braking systems and a trend toward smaller
components, such as engine blocks, Hockema said. But aluminum
content in the automotive sector should grow in the second half
of 2013 and going forward as new programs are launched.
In the aerospace sector, Kaiser
continues to be hurt by an inventory overhang that has clouded
results since at least the fourth quarter and that could
"continue for a while," Hockema said. The overhang has impacted
extrusions, drawn tube, rod and bar, wire, sheet, andin
some specific instancesplate, and comes in the wake of
past concerns about supplier readiness to meet expected growth.
He said Kaiser is "cautiously optimistic" that the aerospace
inventory situation will ease in the second half of the
"Our long-term proposition
remains intact, as we expect strong secular growth for
aerospace applications and automotive extrusion applications,"
But one sector that might
continue to struggle, at least in the short term, is general
engineering and industrial applications.
"The economy continues at an
anemic pace. Exacerbating the situation, we are not
experiencing the benefit from significant supply chain
restocking that boosted demand during the first six months of
each of the prior three years," Hockema said.
Still, that cloud might have a
silver lining in the second half of the year, he said, noting
that in the past three years customers might have exhibited
"irrational exuberance" during the first half of each of those
years, which led to customer overstocking and then a
precipitous destocking during the second half of those
But examining data going back to
roughly 2000, Kaiser found no lockstep cycle of customers
consistently stocking up in the first half of the year and
destocking in the second half, Hockema said. "There really is
no pattern. Its just what happens to be going on at the
time and what peoples attitudes are about the
And with concerns about
everything from sequestration to the health of the economy,
sentiment has been anything but bullish in early 2013, Hockema
said. That means there is reason to think customers, who might
be exhibiting caution now, will restock in the second half.
"This gives us some benefit in the second half ... assuming the
economy doesnt go in the tank."