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7-2010 Kaiser Kalamazoo
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Kaiser Debuts Kalamazoo

Kaiser Aluminum sees its new Kalamazoo plant as the key to becoming the low-cost provider of soft alloy extrusion in the Midwest.

By Myra Pinkham, Contributing Editor

Kaiser Aluminum Corp., Foothill Ranch, Calif., sees its new $100 million Kalamazoo, Mich., facility as a way to more efficiently supply service center customers east of the Rockies with rod and bar type products, a move that seems to be welcomed by aluminum distributors, who see this as evidence of Kaiser’s continued commitment to the aluminum soft alloy extrusions market.

“Kalamazoo is our latest step in accomplishing our vision of not only being a supplier of choice in all of the products we supply, but also being a low-cost producer,” says Jack Hockema, Kaiser’s chairman, president and chief executive officer.

Kaiser plans to achieve this cost advantage by leveraging the new technology in the plant. Kaiser claims it is the only supplier with such equipment all under one roof. These technologies include a bag house that enables Kaiser to process very low-cost raw materials, such as painted scrap; world class melting and casting operations; two large 4,000-ton and 6,000-ton extrusion presses; and a lean manufacturing approach that ensures very efficient work flows.

Currently, Kalamazoo is in the initial stages of startup, with its remelt facility beginning limited production but still primarily sending billet to Kaiser’s other extrusion plants. Company executives expect to soon begin producing extrusions for commercial consumption on the 6,000-ton press, with the 4,000-ton press to start up shortly thereafter.

Once fully operational later this year, Kalamazoo will be Kaiser’s primary site for manufacturing its proprietary Kaiser Select rod and bar product. Kaiser Select is designed for higher machining rates and better end quality because of its physical and metallurgical properties, Hockema says.

Despite the economic downturn, which hit the extrusions market hard, Kaiser never considered shelving the Kalamazoo expansion, first announced in 2007 prior to the recession. “We went full-speed ahead with Kalamazoo because it fits our business strategy so well and positions us where we want to be,” Hockema says.

Asked how the new Kalamazoo facility is likely to affect the competitive dynamics in the soft alloy extrusions market, one East Coast distributor says the plant will make it easier for service centers to get metal, but he is unsure what impact it will have on industry pricing.

Hockema played down any effects on market dynamics, noting that most of Kalamazoo’s capacity will be used to make rod and bar that was previously supplied by its Tulsa, Okla., facility, which Kaiser shuttered at the end of December, and its Bellwood, Va., facility, which now exclusively produces seamless tubing. The balance of the capacity will be used to produce automotive rod and bar, therefore preventing the need for Kaiser to expand production capacity at its London, Ontario, facility.

“Kalamazoo was not built to let us participate in new markets or to increase our market share in existing markets,” Hockema says. Rather, its goal is to more efficiently provide service centers with general engineering rod and bar products east of the Rockies, much as Kaiser’s Los Angeles facility does in the West.

The aluminum extrusions market that Kaiser serves (which does not include building and construction applications) actually bottomed out early last year, Hockema notes, and has been growing steadily ever since now that both service centers and OEMs have moved past their destocking phase.

“I think we are now in a position where the supply chain is in equilibrium and we are starting to see some demand,” he says. “What happens with the industrial economy will determine demand for Kalamazoo.”

Automotive demand is especially promising, especially as automotive build rates accelerate, and aluminum and aluminum extrusions make further inroads into automotive applications, Hockema says.

Over the last seven to eight years, aluminum extrusions have penetrated the automotive market at about an 8.5 percent compound annual growth rate. Kaiser forecasts double-digit growth in the use of extrusions in automotive designs as automakers prepare for the new, more-stringent fuel economy standards to take effect in 2016.

“As the automotive business continues to grow, we will offload some of the mature products out of London that happen to fit our manufacturing scheme at Kalamazoo,” Hockema says, freeing up capacity at the London plant for new automotive programs. Kaiser is currently working on a number of new programs that will launch about three years from now. “The automotive industry is very keen to convert a number of applications to aluminum in order to lightweight vehicles so they can meet the new fuel-efficiency standards,” he adds.

While not in the extrusions business when the company was founded by Henry J. Kaiser in 1946, Kaiser has been in the extrusions market since the early 1950s, beginning with a hard alloy extrusions plant in Halethorpe, Md., and a soft alloy extrusions plant in Dolton, Ill. The company has since opened extrusion plants throughout the United States and Canada (see “Kaiser Facilities”).

Its last greenfield extrusion projects prior to building Kalamazoo were in the early 1990s when it built its London soft alloy extrusions plant and its Tennalum cold-finished rod and bar plant in Jackson, Tenn. In 1997, it acquired its Bellwood facility from the former Reynolds Aluminum, a move that substantially increased its presence in the service center and general engineering products business.

Kaiser supplies a diverse portfolio of products to service centers, not just extrusions. They include heat-treated sheet and plate products, both for general engineering and defense markets, out of its Trentwood, Wash., facility; cold-finished rod and bar from Tennalum; seamless tubing from Bellwood; heat-treated welded tubing from Chandler, Ariz.; and general engineering rod and bar from Los Angeles and now Kalamazoo.

Although it had a strong market position in service center general engineering rod and bar products prior to opening its new Kalamazoo facility, Kaiser’s manufacturing value stream was inefficient in getting those products to market, Hockema says. For example, in the Bellwood value stream, extrusion billet from London would be shipped to Bellwood, the former Reynolds facility, which was not a very efficient producer of extrusions. Then the product would be shipped to a warehouse in Chicago, which would send it on to service center and OEM customers.

“With Kalamazoo, we have eliminated those very inefficient logistics by putting the melting, casting, extrusion and warehouse operations all under one roof right on I-94, midway between Detroit and Chicago, two of the major business hubs east of the Rockies,” Hockema says.

Distribution executives look forward to the improved service level Kaiser’s new plant should provide. “As it better positions Kaiser to serve the Midwest service center market, which is a huge market, Kalamazoo should be a positive both to Kaiser and its customers,” says Bill Sales, senior vice president for nonferrous operations at Reliance Steel & Aluminum Co.

  
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Thursday, October 30, 2014