Cause of Kaiser Plant Explosion Still Unclear

By Catherine Tymkiw

NEW YORK, July 15, 1999 (Reuters) - One week after an explosion shut down
Kaiser Aluminum's Gramercy, La., alumina refinery, the cause is still under
investigation, according to a Kaiser spokesman.

Three people remain hospitalized with injuries received in the fiery blast,
Kaiser spokesman Scott Lamb said. A total of 24 were hurt in the Louisiana
plant explosion.

``Of the six people originally hospitalized, as of today, three have been
released from the hospital,'' Lamb told Reuters.

Only one of the three Kaiser workers still hospitalized after the incident
is in critical condition, with burns over 50 percent of his body.

The plant, with a capacity of one million metric tons per year, was brought
to a complete halt on July 5 when explosions destroyed around 10 ``flash
tanks'' in a section of the plant where processes were carried out at high
temperatures and pressures.

Lamb said the investigation is expected to take some time, but that Kaiser
is fully cooperating with the federal Mining, Safety and Health
Administration (MSHA) authorities to discover the cause.

``We very much want to learn the cause of this, but there is no information
yet about the cause of this explosion,'' Lamb said. ``In terms of business
impact or financial impact, there's nothing more specific.''

MAXXAM Inc., a Houston-based holding company whose business interests
include aluminum, timber and real estate, owns a 63 percent stake in Kaiser

Kaiser previously had stated it anticipated that most of the damage and
losses from the explosion would be covered by property and business
interruption insurance.

The Gramercy plant processes bauxite to make alumina, the raw material for
aluminum smelters. Roughly 80 percent of the plant's output is sold under
contract to Southwire Co. in Hawesville, Ky., and Noranda Inc. in New
Madrid, Mo.

The remaining 20 percent of lesser quality alumina was sold to
approximately 15 customers in the chemical industry.

Kaiser declared force majeure on July 7, but said it had arranged
alternative supplies for the two major smelters for the next 30 to 60 days.
``It's coming from a number of sources,'' Lamb said.

Some market sources had speculated that Kaiser was getting its alternate
supply from its 65 percent owned Jamaican operations, Alpart. But Lamb said
the refinery already has contractual obligations both internally and

``In any given year, roughly half of the Alpart alumina production goes
internal and roughly half goes external,'' he said.

``There may be a little bit of 'flex' in the system. But for the most part,
we were attempting to identify sources outside of the company,'' Lamb added.

The world market for alumina is roughly 40 million metric tons with only
around 5 percent available to the spot market, according to Lamb.

He also said alternate coverage for Kaiser's chemical customers had not
been quantified yet, but Kaiser is working to address their needs.

Spot alumina prices were quoted at around $160 to $170 a metric ton at the
time of the explosion. Industry sources said they anticipate some balance
to return to the surplus marketplace and prices to increase.

``No one has visibly traded anything. All the surplus that was out there
will now go to Kaiser,'' one trader said.

Prices have been quoted above $200 a metric ton. But people are still
sorting out their internal needs, with no confirmed selling taking place,
market participants said.

Wednesday afternoon, Kaiser stock was trading at $8.125 a share, down 12.5
cents, in composite New York Stock Exchange trading. The stock of majority
stakeholder MAXXAM was down 62.5 cents at $61.75 in trading on the American
Stock Exchange, a division of Nasdaq.

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