Related topics

Alumimum Prices Up, Industry Healthy After Companies Trim

August 7, 1988

EVANSVILLE, Ind. (AP) _ Ron Gerhardt says the upturn in the aluminum industry can be measured in the extra bales of beer and soda-pop containers coming through the doors of his Evansville recycling business.

U.S. aluminum makers, buoyed by high prices and a worldwide shortage of products, mostly have recovered from the depths of a slump two years ago and are posting record profits.

Tzschoppe Industries Recycling sends more than 10,000 pounds of aluminum per week to Aluminum Company of America’s nearby Warrick Operations, the largest aluminum smelter in the United States.

″Recycling started kind of as an oddity, but now it’s getting to be the normal thing to do,″ said Gerhardt, company president.

The aluminum turnaround is welcome news in the lower Ohio Valley, where major aluminum producers, lured to the region by plentiful coal supplies and excellent river transportation, have put three smelters within a 40-mile radius. The plants represent about 16 percent of the country’s aluminum smelting capacity.

Pittsburgh-based Alcoa is completing a four-year, $300 million modernization at the southern Indiana plant. A similar program is under way at the company’s Alcoa, Tenn., smelter just outside of Knoxville.

Other nearby smelters include National-Southwire Aluminum in Hawesville, Ky., and Alcan Aluminum in Sebree, Ky., where $15.5 million in plant improvements have begun. The company shut down four production lines in 1985-86.

″Aluminum was going down the same path as steel was in the 1980s,″ said Mike Deshaies, Alcoa spokesman in Indiana. ″So we started cutting back the high-cost, low-profit end of the business.″

Alcoa, the nation’s largest producer, announced a 25 percent reduction in smelting capacity three years ago and other producers took similar steps, closing less efficient plants and idling production lines.

″The industry was trimming down to fighting weight, so to speak,″ said Frank Rathbun, spokesman for the Aluminum Association in Washington.

Foreign countries with large reserves of raw material or electric power - a major cost component of aluminum - could produce the metal more cheaply.

But recovering aluminum prices, up from about 40 cents per pound two years ago to around $1.20 in late July, have generated record profits for some of the major producers.

Alcoa reported profits of $200.1 million, or $2.25 per share, on sales of $7.77 billion for all of 1987 and profits of $416.3 million, or $4.71 per share, on sales of $4.59 billion in the first six months of this year.

Reynolds of Richmond, Va., reported 1987 net earnings of $219.5 million, or $4.33 per share, on sales of $4.32 billion and net earnings of $204.9 million, or $3.84 per share, on revenue of $2.65 billion in the 1988 first half.

Labor unions that agreed to concessions during the slump also have noticed the boom times, and will be looking to share in the profits when they negotiate their next contract.

The current two-year pacts with the United Steelworkers of America and the Aluminum, Brick and Glass Workers International Union lowered benefits by 95 cents per hour for their members at Aluminum Company of America and Reynolds Metals Co.

Talks on a new contract are scheduled to begin Monday in Cincinnati. The old pacts expire May 31, 1989.

″This is a very good time from the standpoint of bargaining,″ said Larry E. Sigler, president of Local 104, which represents workers at the Newburgh plant.

While celebrating the boom, industry leaders are cautious about competition from steel producers and also warn that metal prices are cyclical.

A weakening of the western economies that use aluminum in housing, containers and construction could send prices tumbling again. No one knows how long the good times will last.

″If you find 15 aluminum analysts in New York who want to talk to you about what’s happening, you’ll come up with 17 different explanations,″ said Alcan spokesman Stan Lampe.

Update hourly