Tennessee-based Kaiser Aluminum Corp. (Nasdaq: KALU) announced Thursday it has declared force majeure at its Warrick Rolling Mill in Newburgh. The company says the move is due to the limited availability of magnesium used in the production of some of its aluminum beverage and food packaging products.
Kaiser, which acquired the Warrick Rolling Mill business from Pittsburgh-based Alcoa Corp. (NYSE: AA) in April 2021, says the lack of magnesium has reduced its ability to make the products at this time.
Force majeure is a legal provision in a contract that “frees both parties from obligation if an extraordinary event directly prevents one or both parties from performing,” according to the Legal Information Institute at Cornell Law School.
Kaiser says its largest magnesium supplier, US Magnesium LLC, declared force majeure in September 2021, but continued to supply about 50% of its contractual commitment to Kaiser Warrick. However, the company says deliveries have recently stopped.
“Kaiser Warrick has been unable to immediately source additional magnesium from alternative sources and has begun adjusting production levels based on the amount of magnesium currently available and otherwise scheduled for delivery from other suppliers,” the company said Thursday in a news release. “Kaiser Warrick is working with its customers to minimize the impact on planned deliveries.”
The company says it expects production and deliveries to be reduced by 30% to 40% for July, and approximately 50% during the remainder of the third quarter. Those numbers are based on currently contracted deliveries of magnesium and assuming it will not receive further deliveries from US Mag.
Kaiser Warrick, the company says, will continue to operate at lower production levels until US mag resumes deliveries or another magnesium replacement becomes available.
The company did not specify if any jobs would be affected.
Earlier this month, Alcoa announced it had curtailed one of three operating smelting lines at its Warrick Operations facility due to “operational challenges.” Kaiser says it does not expect Alcoa’s move to affect the current or anticipated output at Kaiser Warrick.
Kaiser says it will provide an update during its second quarter earnings call, which is scheduled for July 26.
In March, Kaiser broke ground on a $150 million addition to its Warrick operation. The project includes a 100,000-square-foot production bay that will house a new coating line and is expected to create 10 jobs.