Kaiser 3Q margins squeezed by tariffs, freight costs

California-based rolling mill Kaiser Aluminum expects steady demand from the auto and aerospace industries to carry over into 2019 as its margins continue to face headwinds from US aluminum tariffs and rising freight costs.

The company maintained its positive outlook for the remainder of 2018, anticipating "mid-single-digit" growth in shipments and strong demand across end markets.

Kaiser's third quarter shipments were up by 6pc at 159mn lbs from a year earlier, while sales rose by 18pc to $393mn and profits rose from $16mn to $24mn. Year-to-date shipments were up by 4pc to 494mn t from the same period in 2017.

Higher year-over-year results largely reflect a lower corporate tax rate in 2018, partially offset by aluminum tariff costs.

Kaiser's average selling price rose by 12pc to $2.48/lb in the third quarter amid a 23pc rise in metal costs. Year-to-date average selling price was up 10pc by $2.42/lb.

Although demand has stayed strong, the company's sales margins have been driven to historical lows under pressure from aluminum tariffs and high freight costs, Kaiser said. The company is awaiting government approval of "countermeasures" to "eliminate nearly all" tariff costs and recover costs already incurred, according to chief executive Jack Hockema. Kaiser also anticipates a future price increase to further bolster their compressed sales margins.

The week-long planned downtime for maintenance on the hot line and large stretcher at Kaiser's Trentwood rolling mill in Spokane, Washington, has been rescheduled from the fourth quarter of 2018 to mid-2019.