For the second year, industrial firms aren't buying extruded shapes
By Tom Stundza -- Purchasing, 9/11/2008 2:00:00 AM
Reduced purchasing from the North American construction, motor vehicle and certain machinery industries reduced aluminum extrusion consumption by 14% in 2007 and looks to cause another 6% buying slide this year. The outlook for 2009 is yet another 6% decline, which would bring next year's volume to 3.56 billion lbs, as compared with the 2006 cyclical peak of 4.69 billion lbs.
"We've been around long enough to know that markets go up and down," says Duncan Crowdis, president of the extrusion maker William L. Bonnell Co. in Newnan, Ga. "But, we don't see things improving near-term down the line." That's because "the aluminum extrusions industry in the U.S. continues to suffer from a cyclical downturn," according to a statement by John Gottwald, CEO of Bonnell's parent firm Tredegar in Richmond, Va. "We see no rebound in sight to the current decrease in sales volume."
Bonnell's leadtimes on basic extruded products are around four weeks but can be out to six weeks for some extrusions. That matches with Purchasingdata.com's 5.2-week average for deliveries in the first half of this year.
Kaiser Aluminum management has reported first-half slippage in shipments of extruded rod and bar. CEO Jack Hockema blames reduced sales by the Foothill Ranch, Calif. firm on "operating inefficiencies in our rod/bar value stream." But market analysts suggest that slippage in demand comes from depressed production by key end-use construction and transportation markets.
Alcoa CEO Klaus Kleinfeld said in a recent statement that "North American automotive production is projected to be at its lowest level in two decades; similarly, heavy truck and trailer production are anticipated to remain below already weak 2007 levels. Commercial building and construction activity is showing signs of the decline that we have been anticipating due to the slowing business cycle and also to the tighter credit conditions."
Analyst Lloyd O'Carroll at Davenport & Co. in Richmond, Va, suggests that the latest "slippage in extrusion demand stems from significant decline in consumer and business confidence from a confluence of economic factors, high oil prices, declining house prices, increased foreclosures, job losses and the credit crunch." That's because extruded aluminum mill products are used to make such a wide variety of products (see sidebar).
"The market is soft for niche products such as architectural products and air-handling louver and damper parts," agrees Paul Mathias, vice-president of extrusion supplier Bristol Aluminum in Levittown, Pa. He adds that "sales are kind of schlepping along for all kinds of extruded parts." From a supplier's viewpoint, he says that "business is off, which is frustrating but not suicidal." Still, he tells Purchasing that aluminum extrusions go into so many industrial, commercial and consumer products that reduced sales indeed are a sign that the manufacturing economy is in decline.
This is backed up by Purchasing buyer surveys, which show that less than a quarter of buyers polled so far this year expect to increase aluminum extrusions purchasing in coming months. This doesn't surprise Aluminum Association market analysts who track bookings for aluminum mill products. The trade group's data shows that new orders for extrusions are down almost 10% from this time last year. And that supports the views from other extruders that other key end markets are sluggish. Alcoa executives tell analysts, for example, that "normal seasonal slowdowns" in demand are expected this summer with "further negative impacts expected due to the deterioration of the North American automotive markets" in the autumn months.
However, William Christopher, executive vice president of Alcoa and group president of the Pittsburgh-based company's Engineered Products and Solutions unit, sees a demand rebound from the building and construction, industrial gas turbine, jet engine and truck tractor and trailer industries in 2010 and beyond. He says, Alcoa is "working to develop aluminum systems that will produce unique capabilities in large press extrusions and forgings."
Approximately 65% of Tredegar's sales of aluminum extrusions in the U.S. are related to non-residential construction so that company is spending $24 million on a new 5,500-ton hydraulic press for startup in the last quarter of 2009. This fits with Crowdis' comments to the Platts Metals Daily subscription newsletter that nonresidential building will bounce back. "The commercial construction market is down now and it's difficult, but it will come back up again, maybe in late 2009," Crowdis tells Platts. Still, he admits that he expects a soft landing in commercial construction's fall and not the collapse that has been evident in residential construction.
That's why Ira Endres, Bonnell's director of sales and marketing, is optimistic that the new press in Tennessee eventually will provide larger extruded profiles to architects, designers, engineers and buyers. In a statement, he says the new press and its handling systems will be specifically engineered to extrude products requiring a critical surface for high profile exposed architectural applications. "Currently, this capability is not offered by any other North American manufacturer in this large size range of extrusions for curtain wall, walkway cover, storefront, and automatic entry door manufacturers."
Meanwhile, Hydro Aluminum North America of Linthicum, Md., a unit of Norway's Norsk Hydro, is adding two custom-made draw benches at its extruded tube plant in St. Augustine, Fla., and has added to parts and profiles capacity at its facility in Guaymas, Mexico. Two new fully programmable CNC (computer numerical control) lathes and a cutoff machine allow the Mexican plant to produce custom-fabricated parts from bars to exacting specifications for industries such as automotive and alternative power generation.
The cutoff machine, which performs cut-to-length and chamfering operations simultaneously, already has increased Hydro's hourly output from 150 to 600 pieces for an automobile engine mount used by one of the Detroit automakers. The machines also are being used to fabricate parts for solar collection systems used at commercial power-generation facilities. The new draw benches in Florida allow for continuous output of high-brightness used in such applications as lawn and garden equipment, recreational vehicles, and boats and marine accessories.
Hydro Aluminum's Extrusion Americas unit also has announced it will supply 7 million lbs of extruded aluminum products to Acciona, a Spanish energy company, for use in the world's newest solar power plant. However, this 50-megawatt facility is under construction in Badajoz, Spain, near the border with Portugal.
According to a Hydro statement, it will export the extruded aluminum that will be used to construct the framework for mounting parabolic mirrors in the solar thermal facility.
Those mirrors, which track the sun throughout the day, focus the sun's rays on the system's heat transfer liquid. The heated liquid generates steam, driving a turbine that creates electricity. Hydro and Acciona previously worked together on the Nevada Solar One facility in Boulder City, Nev., but that 72-megawatt power plant was completed in 2007.
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