MINIMILLS PRODUCE 20% OF American steel, and they are one of the few bright spots in a dismal industry. Now a similar trend toward minimills is also underway in the battered aluminum business. Three minimills are already operating, and prospects for the industry are bright enough to have attracted venture capitalists who are financing the start-up of a fourth minimill near Chicago.
Energy and labor costs continue to knock out many of the huge primary aluminum plants, which turn raw materials into aluminum ingot. As business has moved offshore, the primary aluminum industry on the Gulf Coast has shut down; the U.S. share of free-world capacity, which was 45% in 1970, may sink to 26% by 1990.
That leaves fabrication from scrap and other sources as one of the best bets for U.S. suppliers. Some major companies are investing heavily. Kaiser Aluminum & Chemical Corp. is spending $230 million to modernize one plant. But some analysts think that minimills enjoy certain "reverse economies of scale" over large plants in fabricating aluminum: A mini's aluminum is cheaper pound for pound in labor and capital investment. For around $20 million, minis can leap into local markets, where they can take advantage of local scrap supplies, low shipping costs, and specialized products for their customers.Not so the big companies, which remain committed to large-scale operations. Says one mini operator, "The majors have placed their bets for the next 10 years."
Barmet Industries, Alflex, and Adolph Coors have opened minis in the past few years. And now, three former executives of American Can Co. are going ahead with a mill in the Chicago area. Joseph Lamb, president of the Coors mill, says the industry may make a serious commitment to minimills." One or two big successes, and it will happen worldwide."