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Employment Security Department
Labor Market & Economic Analysis
Branch
Primary Metals

The primary
metals industry consists of firms engaged in the smelting and refining
of ferrous and nonferrous metals from ore, pig, and scrap; in the rolling,
drawing, and alloying of metals; and in manufacturing of castings and
other basic metal products.  Major metals included within this
industry are iron and steel, and the nonferrous metals of copper, aluminum,
lead, titanium, and zinc.  Although other primary metals firms
(e.g., steel and titanium) are operating within Washington, the state
metals industry is dominated by aluminum smelting and refining. 
About four-fifths of the states value of production in primary metals
is aluminum-related.  Hence, much of the discussion of primary
metals in Washington is focused on aluminum smelting and refining. 

Figure 1

Subsector Share of Primary Metals 1996 Value of Production: United
States and Washington

Source: U.S. Bureau of Census, Annual Survey of Manufacturers

Notes:
Total 1997 value of production of primary metals in the United States
was $178.3 billion; in Washington, $3.2 billion.  Due to problems
of disclosure, the remaining 7.3 percent of Washingtons total 1997
value of production would be in the other primary metals of blast furnace
& basic steel; secondary nonferrous metals; and miscellaneous primary
metals. 

Historically,
aluminum has garnered about two-thirds of the states about two-thirds
of the states total primary metals employment, ranging from a high
of 72 percent in 1992 to a low of 63 percent in 1975.  A significant
share of the states non-aluminum primary metals employment is in steel
works, blast furnaces, and iron and steel foundries.  Aluminums
share of employment may decrease in the future with the expansion of
other primary metals within the state; at the end of 1997, the Australian-based
BHP Coated Steel Corporation opened a new $221 million, 250-worker steel
rolling mill in Kalama. 

 

Figure 2

Primary Metals Employment in Washington, 1972-1998

Source: Washington Employment Security Department

Historical Development

Any analysis of the historical development of the primary aluminum
industry in Washington must emphasize the critical role of hydroelectric
power.  Because smelting aluminum is extremely energy-intensive, the chief location factor in siting new aluminum reduction
facilities has been obtaining a reliable source of cheap and abundant
energy.  The Pacific Northwest--and Washington State in particular--has
long held a leading role in the U.S. primary aluminum industry; a position
achieved through the development of Federally-financed hydroelectric
dams on the Columbia River system.  Equally important was the United
States entry into World War II; like aerospace, shipbuilding, and nuclear
energy, the states primary aluminum industry was forged in the crucible
of war.  With the onset of World War II, aluminum production skyrocketed
to meet the nations defense needs.

Just prior
to World War II, the Bonneville Power Administration (BPA) signed its
first industrial contract with the Aluminum Company of America (Alcoa)
for a new aluminum reduction plant in Vancouver, Washington; the plant
was the first primary aluminum facility west of the Mississippi River. 
Later, as part of the build-up in aluminum capacity required for the
war effort, additional aluminum reduction plants were built in Longview,
Mead near Spokane, and Tacoma.  Besides these reduction facilities,
the federally funded Defense Plant Corporation (DPC) built the Trentwood
rolling mill near Spokane to supply Boeing and other west coast aerospace
manufacturers.  Altogether, the Federal government spent over $180
million on nine aluminum reduction plants between 1941 and 1945. 
Built to produce aluminum as rapidly as possible for the nations defense
needs, these plants were built wherever there was a surplus of electric
power, with labor shortages, transportation bottlenecks and construction
material deficiencies also influencing location choices.  Washington
States share of U.S. aluminum production soared from 2 percent in 1940
to nearly 30 percent by 1945.

After the war, the Federal government disposed of
its aluminum reduction facilities to foster competitive conditions within
the primary aluminum industry.  Having had a virtual monopoly on
aluminum production, Alcoa was excluded from acquiring any of these
plants.  The Mead, Tacoma and Trentwood facilities were leased
to and eventually purchased by Kaiser Aluminum and Chemical Corporation.

The industrys cycle of rapid wartime build-up was
repeated during the Korean War in the early 1950s.  Between 1951
and 1955, 781,000 short tons of primary aluminum capacity was added
in the United States; about one-third of the national expansion in capacity
was in the Pacific Northwest.  In 1950, Alcoa was allocated new
plant capacity located near Wenatchee with a power supply combining
interruptible Federal power and firm power from Chelan Public Utility
District and later from new capacity added to the Federal power system. 
Kaiser and Reynolds also added capacity to their existing facilities
in Washington.

Figure 3

Annual Employment Change in Washington Total Nonfarm, Total Manufacturing
and Primary Metals, 1973-1998

Source: Washington Employment Security Department

The next distinguishable period of expansion for the regional aluminum
industry was between 1960 and 1971, with the development of additional
hydroelectric facilities on the Columbia River system.  Coupled
with the increased power supply was a resumption of a vigorous regional
industrial power sales program by the Bonneville Power Administration. 
As a result, most of the aluminum smelters within the region expanded
their production capacity significantly and two new aluminum smelters
at Ferndale (Intalco Aluminum) and Goldendale (Harvey Aluminum) came
on-line during this period.  The Goldendale plant represents the
last greenfield aluminum smelter built within the Pacific Northwest. 
[New plant construction is often termed greenfield; expansion of existing
facilities is labeled brownfield.]  Clearly, the 1960s and early
1970s were the most expansive period for the Washington State primary
aluminum industry.  Over 662,000 short tons in annual production
capacity were added within Washington State over the period--more than
double its 1960 level.  At the end of 1960s, the statewide industry
represented over one-fourth of the U.S. primary aluminum production
capacity, even though it was far removed from most of the industrys
markets.

During
the 1970s, the aluminum smelters in Washington State were relatively
isolated from the impact of changes elsewhere in the industry. 
Throughout the 1975 recession, most of the smelters in the state operated
at near-capacity levels, and they were only constrained only by the
power interruptions created by the 1977-78 winter drought.  Although
BPA rates had risen from 2 mills per kilowatt hour (kWh) to 3 mills,
the state smelters costs were still a fraction of those elsewhere. 
The rates of the Tennessee Valley Authoritys aluminum customers, for
example, were approaching 25 mills per kWh and would eventually reach
37 mills. 

Dramatic
changes within the industry occurred during the 1980s.  BPAs cost
of power to the aluminum companies jumped from 3 mills per kWh in 1979
to an average of 27 mills in 1982.  BPA later granted aluminum
companies emergency discounts (by 5 mills per kWh) in 1982 and 1983. 
By the end of 1983, the aluminum industry had seen a 700 percent increase
in its power costs.

The United
States