Aluminum Extruded Products

SIC 3354

Companies in this industry

Industry report:

This classification covers establishments primarily engaged in extruding aluminum and aluminum-based alloy basic shapes, such as rod and bar, pipe and tube, and tube blooms, including establishments producing tube by drawing.

Industry Snapshot

The process of extruding aluminum has been compared to squeezing toothpaste from a tube, with the metal (initially in the form of extrusion billet) taking the shape of the die through which it has been pressed. While commercially pure aluminum is used in some extrusion applications, more often the aluminum is mixed with other metals--particularly magnesium and silicon--to form alloys. Aluminum extrusions are used to make windows, doors, and gates; as components in cars, trucks, and jet aircraft; in the manufacture of major appliances, furniture, and electrical equipment; and in a host of other applications, ranging from cranes to athletic goods.

Extruded aluminum is classified in one of three key markets by the Aluminum Association--the shapes market, pipe and tube, and extruded rod and bar. The construction industry is the largest consumer of extruded aluminum products. However, in the late 1990s and early 2000s, the aluminum extrusion industry made substantial gains in the automotive sector--which offered the greatest potential for the industry's expansion.

According to industry statistics, 386 establishments operated within the aluminum extrusion industry with shipments totaling $2.1 billion and industry-wide employment of 27,971 workers in 2009. On average, each establishment generated $10 million with 82 workers. States with the highest concentration of aluminum extruders were California, Florida, Ohio, Michigan, and Texas. Based on shipment values, Virginia was at the forefront with $662.1 million in product shipments for 2009.

Organization and Structure

To some extent, the extrusion segment may be divided between the commodity-like output of large producers, sold by the pound, and specialty production of smaller makers, sold by the part. As in other industries, extruders have their areas of specialization. Some work primarily in certain alloy series, while others specialize in close tolerances, miniature shapes, or extremely large shapes.

The aluminum extrusion industry consolidated substantially during the 1980s and 1990s. Between the mid-1980s and mid-1990s, about 40 aluminum extruders went out of business, and a number of independent aluminum extruders were swallowed up by the biggest players. According to the U.S. Census Bureau, 160 companies were involved in the aluminum extruding business in 1997.

The trend toward consolidation was furthered in 1996, when Alumax Inc. bought the largest privately owned extruder, Cressona Aluminum. Two years later, Alcoa Inc. acquired Alumax for $3.8 billion. In early 1997, Reynolds Metals announced that it would sell its aluminum extrusion plant in El Campo, Texas, to Tredegar Industries, which had highly profitable extruding operations. In 1999, Alcoa made a hostile bid for Reynolds, which subsequently became a subsidiary of Alcoa. In July 1999, Easco Inc. (the largest American independent aluminum extruder after Cressona was subsumed) was purchased by Caradon Inc., the U.S. division of Great Britain's Caradon PLC. By 2006, 196 establishments operated in the industry.

The manufacturing facilities of the major producers are heavily unionized; the two major unions are the Aluminum, Brick, and Glass Workers and the United Steelworkers.

Background and Development

The first aluminum extrusion press in North America was opened by Alcoa in New Kensington, Pennsylvania, in 1904. During the 1930s large strides were made in the extrusion process, permitting the formation of virtually any type of aluminum cross section for a wide variety of applications. During World War II, the use of aluminum in aerospace applications grew rapidly, as the strength of Allied air forces was key to the war effort. In the postwar period, extruders continued to expand, benefiting from the growth in the residential housing sector.

The extrusion segment has been subject to the same price volatility shown by other sectors of the aluminum industry. Moreover, the extruded aluminum products industry rides on the fortunes of its primary consumers--the construction and transportation sectors. The recession of the early 1990s, which affected the automobile and housing market, also damaged the extrusion industry. Total extruded products dropped from 3.07 billion pounds in 1988 to 2.5 billion pounds in 1991 and 2.86 billion pounds in 1992. Shipments rose steadily from 3.09 billion pounds in 1993 to 3.93 billion pounds in 1997.

After the economic downturn of the early 2000s, which undermined several major industries, historically low interest rates bolstered the automotive and home construction markets and, in turn, the aluminum extruded products industry. However, that demand in the United States coupled with growing demand from developing nations worldwide caused the cost of aluminum to escalate. Therefore, profit margins decreased for aluminum extruders as the U.S. housing market slowed to a crawl later in the decade.

In addition to the high costs aluminum extruders had to deal with from aluminum producers, U.S. companies faced increased competition from China in particular. China increased exports almost 70 percent through the first seven months of 2006, with the United States being the largest consumer of China's aluminum extruded exports. The loss of business from the U.S. housing sector prompted many companies to restructure in the late 2000s after a period of growth in the middle of the decade.

Aluminum leader Alcoa was among the first to respond to changing conditions in 2006. In addition to announcing plans late in 2006 to cut 6,700 jobs worldwide from its overall aluminum operations by the end of 2007, Alcoa formed a joint venture with the Sapa Group of Norway's Orkla ASA to combine Alcoa's soft alloy extrusion business with Sapa's Profiles extruded aluminum business. However, Alcoa plants not included in the joint venture were those in Warren, Ohio; Tifton, Georgia; and Plant City, Florida. These plants were to be sold. The move by Alcoa paved the way for Golden Aluminum Extrusion, which opened operations in Plant City in October 2007. "We're now in a position to be competitive to the point where we're taking business away from China," President Allen Cain told US Business Review in January 2008.

Indalex Holding Corp. underwent a number of changes from 2006 to 2008, first agreeing in November 2006 to sell its drawn tube plant in Winton, North Carolina, to Spectube Inc. with contract terms that would allow Indalex to continue to supply the operation with extruded aluminum. Indalex then closed an extrusion plant in Watsonville, California, to consolidate operations in Modesto. At the same time, Indalex announced plans to invest $20 million in manufacturing upgrades in 2007. Among the improvements were the installation of a 6,000-ton extrusion press at its facility in Connorsville, Indiana, plus a press upgrade at its plant in Burlington, North Carolina. Despite the optimism with new expenditures, Indalex still had to trim operations elsewhere. It planned to close an aluminum extrusion plant in Girard, Ohio, in the first quarter of 2008 after shipments to the building and construction sector were estimated to be down anywhere from 15 to 20 percent in 2007. Production from the Girard plant was redistributed to facilities in Gainsville, Georgia; Montreal; and Toronto.

While forecasts in the housing sector prompted aluminum extruders to consolidate or close plants, those dealing more with the automotive sector were in a better position to expand. Extruded Aluminum Corp. planned a $10 million expansion to its plant in Belding, Michigan, that it expected to increase annual sales from $50 million to $100 million. Besides production of aluminum extrusions for the automotive sector, the plant also provides shipments for the military, recreation, housing, and furniture sectors.

Current Conditions

The initial meltdown in residential construction forced aluminum extruders to concentrate within the automotive sector. However, that was short-lived when the economy took a turn for the worse, bringing the automotive industry to a crawl. The overall industry was about to experience the cyclical deterioration of the market demand for aluminum extrusions.

Aluminum extruders were not expected to experience any immediate relief in the near future, or at least until the automobile industry rebounds from the increasingly difficult stagnant economy. The Aluminum Association reported aluminum extruded product shipments fell to 187.6 million pounds or 36.9 percent in March 2009 compared to 297.5 million pounds in March 2008. "The recession hit the extrusion industry particularly hard, given that nearly half the extrusions made in North America go into the automotive and construction sectors," one analyst noted in American Metal Market in May 2009.

Thus, aluminum leader Alcoa was once again forced to restructure as the market conditions worsened in 2009. The company announced the sale of its Wisconsin-based automotive wheel casting sector by June 1, 2009, as well as three additional business units displacing some 22,600 employees. Other measures included a decrease in production, shedding its worldwide workforce by 13 percent, reducing capital expenditures by 50 percent, and looking for new raw material resources as the metal prices remained highly volatile.

While some companies were undergoing consolidation, others were filing for Chapter 11 Bankruptcy protection. Still others were gone for good. Unfortunately, demand for "commercial building and construction--the largest end-use for aluminum extrusions--continues to lag," according to American Metal Market in March 2010. Some industry participants painted a bleak outlook with no real turnaround until possibly 2013.

Industry Leaders

Alcoa is the world's leading extruder of aluminum, operating numerous extrusion facilities around the world. With 2007 sales of more than $30.7 billion, Alcoa employed approximately 107,000 workers, roughly 4,000 more than it had a decade earlier. In 1998, Alcoa acquired Alumax and handily increased its extrusion capacity with the transaction. Two years earlier, Alumax had acquired Cressona Aluminum, which at the time was the largest independent extruder in the United States.

Alcoa's sales figures fell to $26.9 billion in 2008 before plummeting to $18.9 billion in 2009, a reflection of a stagnant national economy. The company employed 59,000 employees in 2009.

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