Metals: Aluminum Regains Its Shine

Few industries took the 1960 recession harder than that postwar wonder child of the metal business—aluminum. Its for tunes sagged along with the sagging fortunes of its major users: automakers and home builders. For the industry as a whole, profits last year slipped 27%, to $88 million. Last January, Reynolds Metals Co. President Richard S. Reynolds Jr., who had predicted that aluminum sales would be substantially up in 1960, dejectedly confessed: “My guess was just wrong.”

Last week, after long months of price cuts and production gluts, the aluminum industry was shining brighter again. Following the lead of frdnt-running Alcoa, which commands just over one-third of the domestic market, producers boosted prices of building sheets by 2¢ to 3¢ a lb. Kaiser Aluminum, the third biggest manufacturer, raised its production to 90% of capacity (v. $2% in April). And second-ranking Reynolds, risking prediction once again, forecast that the industry’s output would rise from 2,000,000 tons last year to a record 2,550,000 tons for 1961.

In snapping back from their sharpest slump, aluminum makers have learned many a hard lesson—most notably that their days of growth by quantum leaps are behind them. Says Vice President Howard Holmes of Kaiser Aluminum: “The future looks good, but it’s going to be tougher for our industry to grow. We’re going to have to spend more for research and promotion to build acceptance of new products. The plums have pretty well fallen off the tree.”

New Competition. Such a change was inevitable for an industry that has more than tripled production (and doubled prices) since World War II. As aluminum has penetrated more and more key markets, three vital factors in the industry’s fortunes have changed: 1) the Government has steadily withdrawn the big buying contracts that fed the industry’s early expansion; 2) the metal itself has become closely pegged to the gyrations of the U.S. economy; and 3) fresh competition has arisen both inside and outside the industry.

Rising to challenge aluminum’s Big Three have come a trio of fast-moving smaller producers, who now hold 13% of the market: Anaconda Aluminum, Harvey Aluminum and Ormet Corp., a subsidiary of Olin Mathieson. At the same time, the plastics industry has developed new products to compete with aluminum in pleasure boats, packaging and auto trim. And steel has started to offset aluminum’s inroads by bringing out lighter, tougher and cheaper alloys and tin plates.

New Products. The men who make and market aluminum are fighting back with a broad range of new products that take advantage of their metal’s lightness and resistance to rust. Among them:

∙HOME BUILDING: Akron’s Alside Homes Corp. fortnight ago showed off a new line of all-aluminum houses, plans to produce them at the rate of 200 a day by December 1962. With aluminum curtain walls in 12-ft. sections, the Alside houses can be built to any size the buyer wants. Also featured: aluminum interior walls, ceilings, doors. Price for a fully equipped, seven-room, 1,512-sg.-ft. house: $12,000.

∙INDUSTRIAL CONSTRUCTION : Hard-marketing Kaiser has sold 400 aluminum transmission towers to the Appalachian Power Co. for a 122-mile line that will rise this fall between Roanoke, Va., and Glasgow, W. Va. Two all-aluminum highway bridges are now abuilding on Long Island.

∙PACKAGING: While U.S. Steel’s new. lighter tin plate put a dent in the aluminum can market, the aluminum men came back with aluminum labels for bottles, aluminum tops for soapboxes, and aluminum-coated cardboard containers for bottles (that are said to keep beer cold twice as long).

∙APPLIANCES : Kaiser will test-market an aluminum water heater in the Kansas City area this November, claims that it will produce 50% more hot water than others, but cost no more.

∙AUTOS : Reynolds and Alcoa have set up plants right next to auto assembly lines, sell hot metal to the automakers at 10% discounts. The use of aluminum in cars has more than doubled since 1955 to an average 63 lbs. on new models (mostly in automatic transmissions and pistons), is expected to double again in the next five years. One new U.S. car in eight now has an aluminum engine block, and aluminum bumpers are expected to come in by 1964.

With all these promising new markets opening up. Kaiser Aluminum Vice President Ward C. Humphreys last week told a House subcommittee (which is studying the impact of aluminum imports that have captured 10% of the U.S. market) that the domestic industry will double in size by 1970. For the shorter range future, Harvey Aluminum’s energetic Chairman Lawrence A. Harvey pointed to the industry’s current 82% operating rate and said: “Any modest upturn in the economy will dry up the so-called excess capacity. The aluminum companies are not tearing down any plants—are they? In fact, everyone is building up a little something extra right now.”