Kaiser Aluminum reports $24 million in additional costs due to magnesium and molten metal shortages

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Diving brief:

  • Kaiser Aluminum is working to stabilize production after magnesium and molten metal constraints contributed to a $24 million cost drop in the third quarter, chairman and chief executive Keith Harvey said during a briefing. a earnings call.
  • The The aluminum producer secured alternative suppliers of magnesium and molten metal, allowing it to reopen a rolling mill in Warrick County, Indiana. The plant declared a force majeure event earlier this year to deal with sudden stoppages in deliveries from its main magnesium supplier, US Magnesium.
  • Harvey said the plant is now positioned to operate at a more normalized operating rate for the remainder of the year. Kaiser also reopened its Trentwood plant in Spokane, Washington, which had been closed due to a planned outage, which is expected to further increase production levels.

Overview of the dive:

Kaiser Aluminum is working to insulate its supply chain from future disruptions after problems at some of its major raw material suppliers prompted the manufacturer to look for alternatives.

In addition to US Mag’s shutdown of magnesium shipments, the Warrick plant increased costs and lost efficiency over several quarters due to operational difficulties. its molten metal supplier Alcoa was familiar with its adjacent smelter, executives said on the earnings call.

Although smelter performance has returned to acceptable levels, the CEO said the company continues to add sources of molten metal to ensure a diverse supply base. This includes incorporating recycled materials as a percentage of its raw materials as they strive to use more sustainable supplies at Warrick over the long term.

Kaiser Aluminum is also finalizing magnesium agreements for 2024 and beyond.

“We believe that our supply base is well diversified and that we are no longer dependent on a single supplier or a single geographic region,” Harvey told investors. “US Mag is no longer a factor in the future of our magnesium supply base.”

The magnesium supplier itself declared force majeure in September 2021 due to equipment failure at one of its smelters, but did not specify a repair timeframe, according to a Report of the United States Geological Survey. Concern about a shortage of magnesium mounted for aluminum manufacturers last year when several suppliers announced force majeure.

When Kaiser first announced his strength majorthe company predicted customer shipments would be reduced by about 50% for the remainder of the third quarter, although Harvey said shipments were ultimately “better than expected.” Nevertheless, Kaiser Aluminum does not expect a significant recovery before 2023.