Kentucky's knack for attracting aluminum investment

Braidy Industries Inc.'s plan to invest $1.3 billion in a greenfield aluminum rolling mill in northeastern Kentucky is a major auto supply chain project. But it is part of an ongoing phenomenon for the state.

Since 2014, Kentucky has attracted more than $3 billion in aluminum-related investment - triple the investment in the segment there in the 12 years prior.

The sector is growing as U.S. fuel economy regulations drive a widespread trend in reducing vehicle weight - a pressure that is fanning the demand for more aluminum capacity. The new mill will supply the aluminum sheet metal necessary for lightweighting vehicles by 2020.

Braidy Industries CEO Craig Bouchard said he is already sold out of the first seven year's production capacity, with six automakers now part of the customer base.

Why is Kentucky attracting the investment?

A key reason is that the state offers some of the lowest U.S. power rates east of the Mississippi River. Low-cost electricity is central to aluminum production.

But Bouchard said the area also was an ideal logistical fit for Braidy's plans. The mill's site, just outside of Ashland, Ky., is about the same driving distance to Detroit and to the automakers around the Southeast, he said. Scrap from a coil of aluminum delivered to a customer in either location that morning can be brought back to Braidy's furnace the same night. 

That timing is important since more than a third of coil typically returns to a mill as scrap for reuse, he said.

"How you handle the scrap for the automakers determines your operating margin and determines their cost structure," Bouchard said.

The investment represents the first greenfield aluminum rolling mill built in more than 40 years. Bouchard said he picked Ashland because of its particularly high unemployment rate and the availability there of skilled metal workers and miners. The project has drawn more than 5,500 applications for 600 jobs so far.

"There's a lot of energy and expertise in the area," Bouchard said. "Anywhere else, we would've had to steal the 600 people from other companies. In Ashland, they're just knocking down the door to come work for us."