The market for automotive aluminum is rapidly consolidating with word of two separate deals involving five companies.

The first is a three-way merger between Alcan Aluminum Corp. of Montreal; Pechiney of Paris; and algroup of Zurich, creating the world's largest aluminum producer. The new company will be based in Montreal and will be temporarily referred to as Alcan-Pechiney-algroup (APA), a Canadian corporation with 91,000 employees in 59 countries and combined 1998 sales and operating revenues of $21.6 billion. The deal is expected to be closed in six months.

Within a day, rival Alcoa Inc. of Pittsburgh offered to buy No.3 producer Reynolds Metals Co. for $5.6 billion in cash and stock. Like APA, the two companies would have combined revenues of about $21 billion. Alcoa said it had been pursuing Reynolds, based in Richmond, VA, since March 22.

But the Alcoa bid was unsolicited, raising the possibility that APA could make an offer for Reynolds as well. In published remarks, Alcan President and Chief Executive Jacques Bougie and Pechiney Chairman Jean-Pierre Rodier did not rule out such an offer.

It's too early to predict the impact on the auto industry, which represents the fastest growing segment for aluminum usage. Reducing competition could result in higher aluminum prices for carmakers. Then again, prices could remain stable or actually go down if the consolidations result in significant gains in efficiency.

General Motors Corp. has been signing long-term metals contracts (including a 13-year, $1 billion deal for recycled aluminum from IMCO Recycling Inc. of Irving, TX) as a way to steady fluctuating prices.

The APA deal comes as aluminum has shown steady growth in automotive applications for more than 20 years. The average '99 model car uses 241 lbs. of aluminum, and the average '99 light truck uses 256 lbs.