Noranda Aluminum

Over the last 30 years, Noranda has developed a thriving aluminum division in the southern United States. The division is small but has developed a profitable niche, according to Bill Brooks, president of Noranda Aluminum, Inc., based in Nashville, Tenn.

The company comprises one primary aluminum plant (where alumina is smelted to form aluminum metal), three foil plants, and four automotive wheel plants. “We make about 500 million pounds [226,000 tonnes] of primary aluminum, but we sell about 1 billion pounds of fabricated aluminum, so we have to buy about 500 million pounds of ingot,” says Brooks.

The Aluminum Group brought in Cdn$155 million (13%) of Noranda Inc.’s $1,202 million cash operating margin in 1999, and is already achieving better than 12% return on shareholder’s equity.

Three years ago, the aluminum market was forecast to grow by 2.75% per year. That market has actually grown by 6% annually, fuelled by expansion into the automotive sector but also by increased construction.

To a growing extent, aluminum alloys are replacing steel in cars and trucks due to aluminum’s high strength-to-weight ratio and its resistance to corrosion. “Every kilogram of aluminum that replaces a kilogram of a heavier metal in an automobile saves 20 kilograms of global warming gases through its efficiency,” says Brooks.

However, aluminum costs more than steel. Brooks admits, “People need some convincing to switch to aluminum. High strength aluminum alloys have been used for some time in fighter aircraft. We want to move them next into car bodies. For this we will need consistent costs at the bottom of the range.”

In recognition of the division’s profitability and the rosy expectations for growth in the aluminum market, Noranda is investing substantial capital in its facilities, particularly at its foil plant in Huntingdon, Tenn., and its New Madrid, Mo., smelter.

New Madrid Primary Aluminum Plant

Location is important in more than just residential real estate. The mid-west U.S. location of the New Madrid, Mo., smelter allows it to guarantee eight-hour delivery to 70% of its customer base in the United States, and to bump up the base price (LME) by a mid-west premium of 4-5 US per pound.

Business is going so well that the smelter can barely keep up with orders, sending out almost 1,000 trucks per month. It worked at capacity last year, making a record 222,000 tonnes of primary aluminum, comprising 100,000 tonnes of billet, 46,000 tonnes of rod, 36,000 tonnes of foundry aluminum and 40,000 tonnes of P1020 grade ingot.

New Madrid is somewhat unique among Noranda’s divisions, having its own in-house sales force. Says Steve Heddle, president of Noranda Aluminum’s primary products: “We’re a follower of aluminum technology but a leader in marketing. We can’t compete on volume [with Alcoa/Reynolds and Alcan], so we have to niche ourselves.” This they have done by selling good service and fast delivery to relatively small manufacturers.

The aluminum is made using an electrolytic process in three double lines totalling 508 pots (or reduction cells) each. Each pot is a horizontal cylinder lined at the bottom with charcoal blocks (the cathode), and with baked charcoal-and-tar “marshmallows” (the anodes) on steel rods inserted through the lid into the cavity of the pot. The anodes need to be replaced every 21-24 days.

Alumina powder and flux are poured into the pot and heated to 590C, and a 150,000-190,000-A current (depending on the potline) is passed through, causing the molten aluminum to migrate to the bottom. About 1,400 kg of it is drawn off daily from each pot into ladle-like cruces, which are transported by overhead cranes and small trucks. A small percentage of the aluminum is cast into pigs or sows (ingots) as commodity product. The rest is purified in furnaces, and then made into the value-added products – extrusion billet, EC rod or automotive foundry ingot.

The billet product is cast in molds the shape of a telephone pole and cut into a number of lengths in the cast house. (Billet is used in extrusion processes to form shapes such as window and shower frames.) In the separate rod mill building, a purification furnace feeds the two rod lines where Properzi rod-making machines continuously cast square rod and draw it into round rod of various diameters. The rod is primarily sold to electrical cable manufacturers. The second continuous cast rod line, installed and tested the end of 1999, has added 30,000 tonnes (60%) to the annual rod capacity, increasing the proportion of value-added aluminum sold.

The large amount of electricity that feeds the plant, especially the potlines, is supplied by an independent coal-fired generating station adjacent to the smelter.

Constant improvement is an ongoing theme at New Madrid, whether it be through the QS9000 certification obtained a year ago, the Continuous Improvement Process or the more recent Six Sigma program. Heddle has been at New Madrid for four years, following twelve years at the CCR copper refinery. He says that the two operations are very similar culturally and organizationally. “The key is getting 1,130 employees rallied round the same tools,” says Heddle. One of the methods is the profit-sharing plan implemented at the smelter in 1986. “That kind of carrot gets their attention,” he says.

The plant is completing a major expansion program to the tune of US$73 million over three years. The two-part anodes on each aluminum or copper rod are being replaced by a single-piece anode, which will increase the amount of charcoal in each anode and allow a higher electric current (170,000-215,000 A) to pass efficiently through each cell. In addition, US$15 million has been spent on environmental improvement in the last two-and-a-half years. “The owners have invested in this facility,” says Heddle. “It’s up to us to show Noranda we can make something with this.”

The result of the expansion will increase primary smelting capacity by 15% to 253,000 tonnes per year, reduce overall costs by US$0.02 per pound (from the 45th to the 40th percentile of world producers), and increase energy efficiency.

Aluminum Foil Plants

Norandal USA, Inc. has three foil plants, all in the southeast United States, that manufacture light- and heavy-gauge foil. The operations in each plant involve melting, casting, rolling, annealing, slitting, packaging and shipping.

CMJ visited the Huntingdon, Tenn., plant in early April. The plant makes mainly fin stock (for heating, ventilation and air conditioning), transformer strip and heavy foil.

The foundry aluminum (from New Madrid as well as other suppliers) contains at least 99.5% Al, and is melted in furnaces with a small amount of silica, iron or copper to form various alloys in the 1000 series, mainly 1100 and 1145. Four twin-roll continuous casters cast the molten aluminum into 6.4-mm-thick sheet (strip). “This is the best cast house in the world,” says casting superintendent Cayce Wyatt, but he admits that it is the bottleneck right now, due to market demand. This is also the area where the extra quality is added: before casting, the molten aluminum is filtered and degassed to remove impurities, so the foil can be rolled thinner without faults.

The aluminum strip passes through the rolling mills an average of five times until it is reduced to the desired gauge. Annealing procedures are implemented to soften the metal between rolling passes and to meet physical property requirements in the finished products. The foil, on large coils, goes to the slitter where it is cut to the desired customer widths, then packaged and shipped.

In response to a growing demand for these products, the company is building the Quantum Leap (QL) foil plant right next to its Huntingdon, Tenn., plant.

QL is the first new foil plant to be built in North America in the last 25 years, and will incorporate the newest technology. It will run lighter, faster equipment, make wider coils (rolls) of foil, cast thinner strips, and include an automated storage and retrieval system (ASRS) between the process equipment. The ASRS is a narrow hall with shelves almost up to the ceiling, used for the automated warehousing of coils.

With respect to automated material handling, “In the US, this is leading edge, although the technology has already been used in Europe,” says Tom Stines, Huntingdon plant manager, who will also manage the QL operation. “It is only robotic from the standpoint of material handling: material will be moved throughout the plant using computer-controlled overhead equipment, but we will still use mobile equipment. The ASRS will cut down on scrap loss and there will be some savings in personnel, plus an improved safety factor.”

The benefits of the new technology will go straight to the bottom line: QL will add 90,000 tonnes of additional volume annually, increasing Norandal’s total foil production by 75%, and the QL fabricating costs will be only 60% of those of the 30-year-old existing Huntingdon plant.

The 29,300-m2 QL plant, slightly smaller than its next-door neighbour, is being built in phases. Construction of the US$238-million plant began in late 1998; by April 2000, most of the concrete work was completed and the building was enclosed. The commissioning of the equipment for Phase 1 will take place in the third and fourth quarters of 2000, and product will be shipped the first quarter of 2001. The operation will be ramped up until it reaches full capacity by 2004.

Construction personnel peaked in mid-February 2000 at 468. Under operation, the QL plant will add 150-175 new jobs at Huntingdon.

“What we’re going to be doing is very exciting,” says Stines. “It will give us the opportunity to be a major competitor in the products we make. We already have a good quality record. We will be able to further improve that quality at QL. It will give us the capacity to meet the needs of our customers.”

Automotive Wheels Plants

Another way to reduce weight in cars is to replace the steel in the wheels with aluminum alloys. American Racing Equipment, Inc. (ARE), 100%-owned by Noranda Aluminum, makes wheels of aluminum alloys at four plants in the southern United States and Mexico, and is the leading after-market wheel producer in the United States. This company was purchased by Noranda in 1992, and has since been turned around to a positive cash operating margin. ARE manufactured 2.9 million wheels in 1999.

Aluminum alloy wheels are expensive and therefore currently serve specialty markets, but the company’s objective is to reduce the cost to make them suitable for the family car, according to Brooks.

At the Noranda Technology Centre in Pointe-Claire, Que., ARE is working with Noranda Magnesium to develop a magnesium alloy wheel that will be even lighter than the aluminum wheel. The company is also seriously considering using a proprietary process to make a coating on aluminum that looks and acts like chrome but costs only 20% as much, and avoids the hazardous aspects of chrome technology. As Brooks says: “Bright and shiny is what’s selling right now.”

Future Projects

Standing still is not an option in the competitive aluminum business, and Brooks’ division has several initiatives under consideration.

A major project is being considered in southern Chile that would involve building a 438,000-tonne-capacity aluminum smelter and three hydroelectric generating stations for power. Noranda already owns the property, but the size and cost of the project requires the inclusion of large, competent partners. Also under consideration is another smelter project, the details of which are still secret.

Building a fourth double potline at New Madrid is a possibility. “This looks very viable,” says Brooks. Another major initiative being considered is acquiring another aluminum-producing company. And the last major initiative is to build a coil-coating plant for painting aluminum, at a cost of US$40-75 million.

Brooks anticipates that before year-end 2000, the company will have gone ahead with at least two of these plans.