SIC 3334 Primary Production of Aluminum
SIC 3334
This classification includes establishments primarily engaged in producing aluminum from alumina and in refining aluminum by any process. Excluded from this classification are establishments primarily engaged in rolling, drawing, or extruding aluminum, which are classified in the following product groups: SIC 3351: Rolling, Drawing, and Extruding of Copper; SIC 3353: Aluminum Sheet, Plate, and Foil; SIC 3354: Aluminum Extruded Products; SIC 3355: Aluminum Rolling and Drawing, Not Elsewhere Classified; SIC 3356: Rolling, Drawing, and Extruding of Nonferrous Metals, Except Copper and Aluminum; and SIC 3357: Drawing and Insulating of Nonferrous Wire.
331312
Primary Aluminum Production
With global production of 32 million metric tons in 2001, aluminum is the world's second most used metal, following steel. Divided into product groups, the aluminum industry comprises three distinct segments: primary aluminum manufacturers, semi-fabricated aluminum manufacturers, and secondary, or scrap aluminum manufacturers. Of these segments, the primary aluminum industry is the smallest, based on its number of manufacturers.
To produce aluminum, primary aluminum manufacturers first process bauxite (an ore that is the basic raw material of aluminum) to create alumina. A powerful electric current is then passed through a solution containing alumina to produce aluminum in its most basic form. This type of aluminum, shaped into either a mass of metal in a bar or a block shape (referred to as an ingot) or a smaller rectangular bar (referred to as a billet), serves as the raw material for manufacturers engaged in producing aluminum products. Primary aluminum manufacturers supply aluminum to semi-fabricated aluminum manufacturers and to a diverse array of manufacturers outside the aluminum industry who utilize aluminum to make their products.
Throughout much of its existence, the primary aluminum industry comprised fewer than 10 manufacturers, but approximately 21 manufacturers were involved in producing primary aluminum at the turn of the century. In 2001 these companies generated $5.5 billion in sales, an aggregate value of shipments substantially derived from the production of aluminum ingot, which accounted for over 80 percent of the industry's total shipments. Billet primary aluminum, the only other type of aluminum produced by the industry that accounted for any appreciable revenue, represented 19.7 percent of the industry's shipments.
These shipments were purchased primarily by participants in a few discrete industries. In the early 2000s the bulk of the industry's aluminum was utilized by manufacturers involved in the building and construction, container and packaging, and transportation industries, which when combined accounted for 65.7 percent of the industry's total shipments.
Recently, the growth of aluminum has been driven by the automotive industry. Car makers continue to produce lighter passenger vehicles and trucks in order to conform to the Corporate Average Fuel Economy (CAFE) regulations. By substituting one pound of aluminum for steel parts, the auto designers are able to remove 2.0 to 2.5 pounds of cast iron, making the use of aluminum very attractive. Significant growth in the industry is not expected until at least 2004 as the industry awaits the slow recovery of the U.S. economy.
Although the industry consists of relatively few manufacturers, the size of a primary aluminum manufacturing facility, when defined in terms of the number of people employed per establishment, was comparatively large when measured against other manufacturing industries. All of the 21 establishments involved in producing primary aluminum in 1997 employed 20 or more employees, and 19 of these establishments employed over 1,000 workers. Geographically, a majority of the establishments involved in the primary aluminum industry in 1998 were located in the Pacific Northwest. These firms accounted for 38.4 percent of total U.S. shipments. The Ohio Valley was the country's second most productive region, generating 31.9 percent of shipments.
Primary aluminum producers faced high overhead costs. In fact, the average cost per facility for the raw materials necessary to operate is higher in the primary aluminum production industry than in any other manufacturing industry. This disparity is mainly due to two key factors. First, aluminum production requires a tremendous amount of electrical energy, meaning that producers face staggering utility bills. Second, very little bauxite is found in this country, and, as a result, aluminum producers incur high costs for importing this essential ore. Consequently, running a primary aluminum manufacturing facility is very expensive: operating expenses are sometimes 14 times higher than an average manufacturing establishment. According to 1997 figures, the average cost for materials per establishment in the primary aluminum industry was $71 million. The average investment per establishment (that is, the average expense earmarked for purchasing and maintaining manufacturing facilities and machinery, as well as paying for production retooling) was also significantly higher in the primary aluminum industry. In 1997 primary aluminum manufacturers paid an average of $16.9 million for such expenditures.
In 1886, the concurrent development in the United States and France of an economical electrolytic process for refining aluminum immediately spawned widespread optimism. Many manufacturers regarded the discovery as the new metal of the future. Aluminum would continue to be regarded as the metal of the future throughout its first century of existence, indeed well past the time its future should have arrived. All of this optimism led aluminum manufacturers and government officials to overestimate demand for the metal on occasion. But the creation of a process to economically produce aluminum did, however, warrant its fair share of hyperbole, even if the expectations associated with its production sometimes ran too high. The metal possessed desirable conductive and thermal properties, was lightweight, and could be used to form many hard, light, corrosion-resistant alloys. As American manufacturing industries slowly moved toward creating products that were lighter in weight, aluminum would prove to be an integral component in a wealth of manufacturing processes, eventually establishing a pervasive, global presence that would validate the hopeful projections held by aluminum's early proponents.
But in 1886, there was really no clear plan regarding how aluminum could become, in practical terms, the metal of the future. Discovery of the myriad applications for the new wonder metal fell entirely to the only aluminum manufacturing company of any consequence at the time, the Pittsburgh Reduction Company, later renamed the Aluminum Company of America, and more commonly known as Alcoa. Indeed, Alcoa would remain the only manufacturer of any consequence for the aluminum industry's first 60 years, establishing a monopoly over the U.S. aluminum market during the interim and, consequently, solely guiding the industry's direction for the first half of the twentieth century.
Under the partial stewardship of Charles Martin Hall, a young chemist who discovered the more economically feasible process of aluminum production while working in his woodshed, Alcoa faced the daunting chore of first creating both a need and a demand for aluminum. Initially, the company utilized aluminum to manufacture a line of cooking utensils, which later, in 1901, were successful enough to merit the organization of a cookware subsidiary named American Cooking Utensil. The biggest market for aluminum, however, proved to be the automobile industry, a market that would fuel the industry's growth for its first five decades of operation. By 1915, 65 percent of all primary aluminum was utilized in automotive parts.
At this time, Alcoa still stood alone in the U.S. aluminum market, with the only competition coming from foreign manufacturers, whose penetration of the U.S. market was limited by high tariffs and comparatively higher energy costs. America's entrance into World War I quelled the negligible affect foreign manufacturers had on Alcoa and provided the opportunity for America's uncontested primary aluminum giant to begin exporting aluminum to Great...
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