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                          SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C.  20549


                                      FORM 10-Q


               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                           SECURITIES EXCHANGE ACT OF 1934

                     FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000

                            Commission file number 1-9447




                             KAISER ALUMINUM CORPORATION
                (Exact name of registrant as specified in its charter)


                     DELAWARE                          94-3030279
             (State of incorporation)               (I.R.S. Employer
                                                   Identification No.)


               5847 SAN FELIPE, SUITE 2600, HOUSTON, TEXAS  77057-3010
                 (Address of principal executive offices)   (Zip Code)


                                    (713) 267-3777
                 (Registrant's telephone number, including area code)







               Indicate by check mark whether the registrant (1) has filed
          all reports required to be filed by Section 13 or 15(d) of the
          Securities Exchange Act of 1934 during the preceding 12 months
          (or for such shorter period that the registrant was required to
          file such reports), and (2) has been subject to such filing
          requirements for the past 90 days.
          Yes   x        No
              -----         ------

               At July 31, 2000, the registrant had 79,543,061 shares of
          Common Stock outstanding.



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                 KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

                            PART I - FINANCIAL INFORMATION


          ITEM 1.  FINANCIAL STATEMENTS
                   --------------------

                             CONSOLIDATED BALANCE SHEETS
                               (In millions of dollars)

          
          
                                                                            June 30,    December 31,
                                                                                2000            1999
                                                                      ------------------------------
                                                                                
                                     ASSETS                             (Unaudited)
          Current assets:
               Cash and cash equivalents                              $        19.9   $        21.2
               Receivables:
                    Trade, net                                                177.7           154.1
                    Other                                                     187.4           106.9
               Inventories                                                    479.6           546.1
               Prepaid expenses and other current assets                      106.8           145.6
                                                                      ------------------------------
                    Total current assets                                      971.4           973.9
          Investments in and advances to unconsolidated affiliates             85.4            96.9
          Property, plant, and equipment - net                              1,078.1         1,053.7
          Deferred income taxes                                               445.0           440.0
          Other assets                                                        619.5           634.3
                                                                      ------------------------------

                    Total                                             $     3,199.4   $     3,198.8
                                                                      ==============================
                       LIABILITIES & STOCKHOLDERS' EQUITY
          Current liabilities:
               Accounts payable                                       $       243.6   $       231.7






               Accrued interest                                                37.6            37.7
               Accrued salaries, wages, and related expenses                   60.3            62.1
               Accrued postretirement medical benefit obligation -
                    current portion                                            51.5            51.5
               Other accrued liabilities                                      160.4           168.8
               Payable to affiliates                                           84.1            85.8
               Long-term debt - current portion                                 1.5              .3
                                                                      ------------------------------
                    Total current liabilities                                 639.0           637.9
          Long-term liabilities                                               686.8           727.1
          Accrued postretirement medical benefit obligation                   672.0           678.3
          Long-term debt                                                      995.8           972.5
          Minority interests                                                  117.1           117.7
          Commitments and contingencies
          Stockholders' equity:
               Common stock                                                      .8              .8
               Additional capital                                             537.5           536.8
               Accumulated deficit                                           (448.4)         (471.1)
               Accumulated other comprehensive income - additional
                    minimum pension liability                                  (1.2)           (1.2)
                                                                      ------------------------------
                    Total stockholders' equity                                 88.7            65.3
                                                                      ------------------------------
                         Total                                        $     3,199.4   $     3,198.8
                                                                      ==============================

          

               The accompanying notes to interim consolidated financial
               statements are an integral part of these statements.






                 KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

                       STATEMENTS OF CONSOLIDATED INCOME (LOSS)
                                     (Unaudited)
                    (In millions of dollars, except share amounts)

          
          
                                                                     Quarter Ended                 Six Months Ended
                                                                       June 30,                        June 30,
                                                            ------------------------------  ------------------------------
                                                                      2000            1999            2000            1999
                                                            ------------------------------  ------------------------------
                                                                                                
          Net sales                                         $       542.5   $       525.0   $     1,108.2   $     1,004.4
                                                            ------------------------------  ------------------------------

          Costs and expenses:
               Cost of products sold                                443.4           473.9           924.1           933.8
               Depreciation and amortization                         20.3            24.1            39.9            48.5
               Selling, administrative, research and
                    development, and general                         27.3            26.3            55.8            54.4
                                                            ------------------------------  ------------------------------
                         Total costs and expenses                   491.0           524.3         1,019.8         1,036.7
                                                            ------------------------------  ------------------------------

          Operating income (loss)                                    51.5              .7            88.4           (32.3)

          Other income (expense):
               Interest expense                                     (28.2)          (27.4)          (56.6)          (55.1)
               Other - net                                           (6.5)            1.2             3.6             2.5
                                                            ------------------------------  ------------------------------

          Income (loss) before income taxes and minority
               interests                                             16.8           (25.5)           35.4           (84.9)

          (Provision) benefit for income taxes                       (6.4)            8.6           (13.7)           28.8






          Minority interests                                           .6             1.2             1.0             2.2
                                                            ------------------------------  ------------------------------

          Net income (loss)                                 $        11.0   $       (15.7)  $        22.7   $       (53.9)
                                                            ==============================  ==============================

          Earnings (loss) per share:
               Basic                                        $         .14   $        (.20)  $         .29   $        (.68)
               Diluted                                      $         .14   $        (.20)  $         .29   $        (.68)

          Weighted average shares outstanding (000):
               Basic                                               79,541          79,377          79,474          79,266
               Diluted                                             79,541          79,377          79,474          79,266

          

               The accompanying notes to interim consolidated financial
               statements are an integral part of these statements.






                 KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

                        STATEMENTS OF CONSOLIDATED CASH FLOWS
                                     (Unaudited)
                               (In millions of dollars)

          
          
                                                                             Six Months Ended
                                                                                 June 30,
                                                                      ------------------------------
                                                                                2000            1999
                                                                      ------------------------------
                                                                                
          Cash flows from operating activities:
               Net income (loss)                                      $        22.7   $       (53.9)
               Adjustments to reconcile net income (loss) to net cash
                    used by operating activities:
                    Depreciation and amortization (including deferred
                         financing costs of $2.2 and $2.1)                     42.1            50.6
                    Gain on sale of interest in AKW joint venture              -              (50.5)
                    Equity in loss (income) of unconsolidated
                         affiliates, net of distributions                       7.9            (4.2)
                    Minority interests                                         (1.0)           (2.2)
                    (Increase) decrease in receivables                       (104.1)           11.0
                    Decrease in inventories                                    66.5            18.8
                    Decrease (increase) in prepaid expenses and other
                         current assets                                        30.4           (37.4)
                    Decrease in accounts payable (associated with
                         operating activities) and accrued interest           (12.1)          (25.2)
                    (Increase) decrease in payable to affiliates and
                         other accrued liabilities                            (10.1)            4.3
                    Increase (decrease) in accrued and deferred
                         income taxes                                           4.7           (36.5)
                    (Decrease) increase in net long-term assets and
                         liabilities                                          (49.1)           11.1
                    Other                                                       1.2             1.3
                                                                      ------------------------------






                         Net cash used by operating activities                  (.9)         (112.8)
                                                                      ------------------------------

          Cash flows from investing activities:
               Capital expenditures                                           (85.8)          (30.3)
               Accounts payable - Gramercy-related capital
                    expenditures                                               23.9           -
               Gramercy-related property damage insurance recoveries           24.0           -
               Net proceeds from disposition of property and
                    investments                                                15.5            70.9
               Other                                                            1.6             (.3)
                                                                      ------------------------------
                         Net cash provided (used) by investing
                              activities                                      (20.8)           40.3
                                                                      ------------------------------
          Cash flows from financing activities:
               Borrowings under revolving credit facility, net                 27.2            -
               Repayments of long-term debt                                    (4.3)            (.3)
               Capital stock issued                                            -                1.3
               Decrease in restricted cash, net                                -                 .8
               Redemption of minority interests' preference stock              (2.5)           (1.4)
                                                                      ------------------------------
                         Net cash provided by financing activities             20.4              .4
                                                                      ------------------------------

          Net decrease in cash and cash equivalents during the period          (1.3)          (72.1)
          Cash and cash equivalents at beginning of period                     21.2            98.3
                                                                      ------------------------------
          Cash and cash equivalents at end of period                  $        19.9   $        26.2
                                                                      ==============================

          Supplemental disclosure of cash flow information:
               Interest paid, net of capitalized interest             $        54.5   $        53.0
               Income taxes paid                                                7.6             8.8

          





               The accompanying notes to interim consolidated financial
               statements are an integral part of these statements.

                  NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
            (In millions of dollars, except prices and per share amounts)

          1.   GENERAL

               Kaiser Aluminum Corporation (the "Company") is a subsidiary
          of MAXXAM Inc. ("MAXXAM").  MAXXAM and one of its wholly owned
          subsidiaries together own approximately 63% of the Company's
          Common Stock with the remaining approximately 37% publicly held.
          The Company operates through its subsidiary, Kaiser Aluminum &
          Chemical Corporation ("KACC").

               The foregoing unaudited interim consolidated financial
          statements have been prepared in accordance with generally
          accepted accounting principles for interim financial information
          and the rules and regulations of the Securities and Exchange
          Commission.  Accordingly, these financial statements do not
          include all of the disclosures required by generally accepted
          accounting principles for complete financial statements.  These
          unaudited interim consolidated financial statements should be
          read in conjunction with the audited consolidated financial
          statements for the year ended December 31, 1999.  In the opinion
          of management, the unaudited interim consolidated financial
          statements furnished herein include all adjustments, all of which
          are of a normal recurring nature, necessary for a fair statement
          of the results for the interim periods presented.

               The preparation of financial statements in accordance with
          generally accepted accounting principles requires the use of
          estimates and assumptions that affect the reported amounts of
          assets and liabilities, disclosure of contingent assets and
          liabilities known to exist as of the date the financial
          statements are published, and the reported amounts of revenues
          and expenses during the reporting period. Uncertainties with
          respect to such estimates and assumptions are inherent in the
          preparation of the Company's consolidated financial statements;
          accordingly, it is possible that the actual results could differ
          from these estimates and assumptions, which could have a material
          effect on the reported amounts of the Company's consolidated
          financial position and results of operations.

               Operating results for the quarter and six-month periods
          ended June 30, 2000, are not necessarily indicative of the
          results that may be expected for the year ending December 31,
          2000.

          LABOR RELATED COSTS
               KACC has been operating five of its U.S. facilities with
          salaried employees and other workers as a result of the September
          30, 1998, strike by the United Steelworkers of America ("USWA")
          and the subsequent "lock-out" by KACC in January 1999.  As
          previously announced, in June 2000, KACC and USWA representatives
          agreed to a methodology to resolve the remaining differences
          between the parties.  During July 2000, the USWA announced that
          its members had voted to accept this methodology.  Under the
          agreement between KACC and the USWA, the parties continued to
          negotiate certain matters until mid-August.  Since KACC and the
          USWA were unable to reach a complete agreement, the parties
          will proceed with binding arbitration.  The arbitration will be
          completed by mid-September 2000 and it is expected that the USWA
          workers will return to the plants during September and October 2000.

               As certain financial terms remain to be arbitrated,
          the Company cannot currently estimate the financial
          statement impact of the pending labor settlement.  While KACC
          expects that many of its labor and financial objectives will be
          achieved in the pending settlement, it is anticipated that the
          labor settlement will result in certain one time charges and re-
          integration costs.

               The Company has continued to accrue certain benefits (such
          as pension and other postretirement benefit costs/liabilities)
          for the USWA members during the period of the strike and
          subsequent lock-out. For purposes of computing the benefit-
          related costs and liabilities to be reflected in the accompanying
          interim consolidated financial statements, the Company based its
          accruals on the terms of the previously existing (expired) USWA
          contract.  Any differences between the amounts accrued and the
          amounts ultimately agreed to as a result of the above-described
          process will be reflected in future results during the term of
          any new contract.

          RECENT ACCOUNTING PRONOUNCEMENTS
               In June 1998, the Financial Accounting Standards Board
          ("FASB") issued Statement of Financial Accounting Standards
          ("SFAS") No. 133, Accounting for Derivative Instruments and
          Hedging Activities.  SFAS No. 133 requires companies to recognize
          all derivative instruments as assets or liabilities in the
          balance sheet and to measure those instruments at fair value.
          Under SFAS No. 133, the Company will be required to "mark-to-
          market" its hedging positions at each period-end in advance of
          recording the physical transactions to which the hedges relate.
          Changes in the fair value of the Company's open hedging positions
          will be reflected as an increase or reduction in stockholders'
          equity through comprehensive income.  The impact of the changes
          in fair value of the Company's hedging positions will reverse out
          of comprehensive income (net of any fluctuations in other "open"
          positions) and will be reflected in traditional net income when
          the subsequent physical transactions occur.  Currently, the
          dollar amount of the Company's comprehensive income adjustments
          is not significant so there is not a significant difference
          between "traditional" net income and comprehensive income.
          However, differences between comprehensive income and traditional
          net income may become significant in future periods as SFAS No.
          133 will result in fluctuations in comprehensive income and
          stockholders' equity in periods of price volatility, despite the
          fact that the Company's cash flow and earnings will be "fixed" to
          the extent hedged.  This result is contrary to the intent of the
          Company's hedging program, which is to "lock-in" a price (or
          range of prices) for products sold/used so that earnings and cash
          flows are subject to reduced risk of volatility.

               Adoption of SFAS No. 133 is required on or before January 1,
          2001.  The Company will likely implement SFAS No. 133 as of
          January 1, 2001.

          EARNINGS (LOSS) PER SHARE

          Basic - Basic earnings (loss) per share is computed by dividing
          net income (loss) by the weighted average number of shares of
          Common Stock outstanding during the period including the weighted
          average impact of the shares of Common Stock issued during the
          year from the date(s) of issuance.

          Diluted - The impact of outstanding stock options was excluded
          from the computation of diluted earnings (loss) per share for the
          quarter and six-month periods ended June 30, 2000 and 1999, as
          its effect would have been antidilutive.

          2.   INCIDENT AT GRAMERCY FACILITY

               In July 1999, KACC's Gramercy, Louisiana alumina refinery
          was extensively damaged by an explosion in the digestion area of
          the plant.  A number of employees were injured in the incident,
          several of them severely.  As a result of the incident, alumina
          production at the facility was completely curtailed.
          Construction on the damaged part of the facility began during the
          first quarter of 2000.  Initial production at the plant is
          currently expected to commence during the third quarter of 2000.
          Based on current estimates, full production is expected to be
          achieved during the first quarter of 2001.  KACC has received the
          regulatory permit required to operate the plant once the facility
          is ready to resume production.

               The cause of the incident is under investigation by KACC and
          governmental agencies.  In January 2000, the U.S. Mine Safety and
          Health Administration ("MSHA") issued 21 citations and in March
          2000 proposed that KACC be assessed a penalty of $.5 in
          connection with its investigation of the incident.  The citations
          allege, among other things, that certain aspects of the plant's
          operations were unsafe and that such mode of operation
          contributed to the explosion.  KACC disagrees with the substance
          of the citations and has challenged them and the associated
          penalty.  It is possible that other civil or criminal fines or
          penalties could be levied against KACC.  However, as more fully
          explained below, based on what is known to date and discussions
          with the Company's advisors, the Company believes that the
          financial impact of this incident on operating results (in excess
          of insurance deductibles and self-retention provisions) will be
          largely offset by insurance coverage.  Deductibles and self-
          retention provisions under the insurance coverage for the
          incident total $5.0, which amounts were charged to Cost of
          products sold in the third quarter of 1999.

               KACC has significant amounts of insurance coverage related
          to the Gramercy incident.  KACC's insurance coverage has five
          separate components: property damage, clean-up and site
          preparation, business interruption, liability and workers'
          compensation. The insurance coverage components are discussed
          below.

               Property Damage.  KACC's insurance policies provide that
          KACC will be reimbursed for the costs of repairing or rebuilding
          the damaged portion of the facility using new materials of like
          kind and quality with no deduction for depreciation.  In 1999,
          based on discussions with the insurance carriers and their
          representatives and third party engineering reports, KACC
          recorded a minimum expected property damage reimbursement amount
          of $100.  The amount was classified as a receivable in Other
          assets, as such proceeds, when received, will be invested in
          property, plant and equipment.

               During the quarter ended June 30, 2000, there was
          approximately $48.0 of Gramercy-related capital spending.  During
          the quarter ended June 30, 2000, $24.0 of the insurance proceeds
          received were reflected as a reduction of the minimum property
          damage receivable based on the percentage of minimum expected
          costs to be funded by insurance proceeds to total rebuild costs.
          The balance of the minimum property damage receivable of $76.0
          will be reduced during the last six months of 2000 as insurance
          recoveries are received and construction continues.

               Clean-up and Site Preparation.  The Gramercy facility
          incurred incremental costs for clean-up and other activities
          during 1999 and has continued to incur such costs during 2000.
          These clean-up and site preparation activities have been offset
          by accruals of approximately $24.9, of which $6.6 and $10.9 were
          accrued during the quarter and six-month periods ended June 30,
          2000, for estimated insurance recoveries.

               Business Interruption.  KACC's insurance policies provide
          for the reimbursement of specified continuing expenses incurred
          during the interruption period plus lost profits (or less
          expected losses) plus other expenses incurred as a result of the
          incident.  Operations at the Gramercy facility and a sister
          facility in Jamaica, which supplies bauxite to Gramercy, will
          continue to incur operating expenses until full production at the
          Gramercy facility is restored.  KACC will also incur increased
          costs as a result of agreements to supply certain of Gramercy's
          major customers with alumina, despite the fact that KACC had
          declared force majeure with respect to the contracts shortly
          after the incident.  KACC is purchasing alumina from third
          parties, in excess of the amounts of alumina available from other
          KACC-owned facilities, to supply these customers' needs as well
          as to meet intersegment requirements.  The excess cost of such
          open market purchases is expected to be substantially offset by
          insurance recoveries.  However, if certain sublimits within
          KACC's insurance coverage were deemed to apply, the Company's and
          KACC's results could be negatively affected. In consideration of
          the foregoing items, as of June 30, 2000, KACC had recorded
          expected business interruption insurance recoveries totaling
          $106.8, of which $40.5 and $65.8 were recorded during the quarter
          and six-month periods ended June 30, 2000, as a reduction of Cost
          of products sold.  These amounts substantially offset actual
          expenses incurred during the periods.  Such business interruption
          insurance amounts represent estimates of KACC's business
          interruption coverage based on discussions with the insurance
          carriers and their representatives and are therefore subject to
          change.

               Since production has been completely curtailed at the
          Gramercy facility, KACC has, for the time being, suspended
          depreciation at the facility.  Depreciation expense for the first
          six months of 1999 was approximately $6.0.  Once production of
          the facility is restored, depreciation will re-commence.  Such
          depreciation is expected to exceed prior historical rates
          primarily due to the increased capital costs on the newly
          constructed assets.

               Liability.  The incident has also resulted in more than
          sixty individual and class action lawsuits being filed against
          KACC alleging, among other things, property damage and personal
          injury.  In addition, a claim for alleged business interruption
          losses has been made by a neighboring business.  The aggregate
          amount of damages sought in the lawsuits and other claims cannot
          be determined at this time; however, KACC does not currently
          believe the damages will exceed the amount of coverage under its
          liability policies.

               Workers' Compensation.  Claims relating to all of the
          injured employees are expected to be covered under KACC's
          workers' compensation or liability policies.  However, the
          aggregate amount of workers' compensation claims cannot be
          determined at this time and it is possible that such claims could
          exceed KACC's coverage limitations.  While it is presently
          impossible to determine the aggregate amount of claims that may
          be incurred, or whether they will exceed KACC's coverage
          limitations, KACC currently believes that any amount in excess of
          the coverage limitations will not have a material effect on the
          Company's consolidated financial position or liquidity.  However,
          it is possible that as additional facts become available,
          additional charges may be required and such charges could be
          material to the period in which they are recorded.

               Timing of Insurance Recoveries.  From the date of the
          Gramercy incident through June 30, 2000, KACC had expended or
          incurred costs or losses associated with the Gramercy incident
          (that were not capital expenditures) totaling $131.7, consisting
          of clean-up, site preparation and business interruption costs.
          From the date of the Gramercy incident through June 30, 2000,
          $88.1 of insurance recoveries related to these costs had been
          received.  In addition, during the second quarter of 2000, KACC
          spent approximately $48.0 on Gramercy-related construction
          activities and received insurance recoveries of $24.0 for capital
          expenditures related to the minimum property damage receivable.
          Gramercy-related capital spending prior to the second quarter of
          2000 was not significant.  KACC continues to work with the
          insurance carriers to maximize the amount of recoveries and to
          minimize, to the extent possible, the period of time between when
          KACC expends funds and when it is reimbursed.  However, KACC will
          likely have to continue to fund an average of 30 - 60 days of
          property damage and business interruption activity, unless some
          other arrangement is agreed with the insurance carriers, and such
          amounts will be significant.  The Company believes it has
          sufficient financial resources to fund the construction and
          business interruption costs on an interim basis.  However, no
          assurances can be given in this regard.

          3.   WASHINGTON SMELTERS' OPERATING LEVEL

               As previously announced, as a result of unprecedented high
          market prices for power in the Pacific Northwest, the Company has
          temporarily curtailed approximately 128,000 tons of its annual
          primary aluminum production at the Tacoma and Mead, Washington
          smelters and has sold 100 megawatts of power that it had under
          contract through June 30, 2001.  As a result of the curtailment,
          the Company will avoid the need to purchase power on a variable
          cost basis.  Additionally, the sale of power is expected to
          substantially mitigate the cash impact of the potline curtailment
          over the contract period for which the power was sold.  To
          implement the curtailment, the Company has temporarily curtailed
          the two and one-half operating potlines at its Tacoma smelter and
          two and one-half out of a total of eight potlines at its Mead
          smelter.  One-half of a potline at the Tacoma smelter was already
          curtailed.

               As a result of the sale of the power, the Company recorded a
          net pre-tax gain of approximately $15.8, which amount was
          composed of gross proceeds of $31.3 offset by incremental excess
          power costs in the second quarter, employee termination expenses
          and other fixed commitments.  The net gain was recorded as a
          reduction of Cost of products sold.

          4.   INVENTORIES

               The classification of inventories is as follows:
          
          
                                                                          June 30,    December 31,
                                                                              2000            1999
                                                                    ------------------------------
                                                                              
             Finished fabricated aluminum products                  $         92.3  $        118.5
             Primary aluminum and work in process                            166.0           189.4
             Bauxite and alumina                                              96.0           124.1
             Operating supplies and repair and maintenance parts             125.3           114.1
                                                                    ------------------------------
                  Total                                             $        479.6  $        546.1
                                                                    ==============================

          

               Substantially all product inventories are stated at last-in,
          first-out (LIFO) cost, not in excess of market. Replacement cost
          is not in excess of LIFO cost.

          5.   CONTINGENCIES

          ENVIRONMENTAL CONTINGENCIES
               The Company and KACC are subject to a number of
          environmental laws, to fines or penalties assessed for alleged
          breaches of such environmental laws, and to claims and litigation
          based upon such laws.  KACC currently is subject to a number of
          claims under the Comprehensive Environmental Response,
          Compensation and Liability Act of 1980, as amended by the
          Superfund Amendments Reauthorization Act of 1986 ("CERCLA"), and,
          along with certain other entities, has been named as a
          potentially responsible party for remedial costs at certain
          third-party sites listed on the National Priorities List under
          CERCLA.

               Based on the Company's evaluation of these and other
          environmental matters, the Company has established environmental
          accruals primarily related to potential solid waste disposal and
          soil and groundwater remediation matters.  At June 30, 2000, the
          balance of such accruals, which are primarily included in Long-
          term liabilities, was $46.6.  These environmental accruals
          represent the Company's estimate of costs reasonably expected to
          be incurred based on presently enacted laws and regulations,
          currently available facts, existing technology, and the Company's
          assessment of the likely remediation actions to be taken.  The
          Company expects that these remediation actions will be taken over
          the next several years and estimates that annual expenditures to
          be charged to these environmental accruals will be approximately
          $3.0 to $9.0 for the years 2000 through 2004 and an aggregate of
          approximately $20.0 thereafter.

               As additional facts are developed and definitive remediation
          plans and necessary regulatory approvals for implementation of
          remediation are established or alternative technologies are
          developed, changes in these and other factors may result in
          actual costs exceeding the current environmental accruals.  The
          Company believes that it is reasonably possible that costs
          associated with these environmental matters may exceed current
          accruals by amounts that could range, in the aggregate, up to an
          estimated $41.0.  As the resolution of these matters is subject
          to further regulatory review and approval, no specific assurance
          can be given as to when the factors upon which a substantial
          portion of this estimate is based can be expected to be resolved.
          However, the Company is currently working to resolve certain of
          these matters.

               The Company believes that KACC has insurance coverage
          available to recover certain incurred and future environmental
          costs and is actively pursuing claims in this regard.  No
          assurances can be given that the Company will be successful in
          attempts to recover incurred or future costs from insurers or
          that the amount of recoveries received will ultimately be
          adequate to cover costs incurred.

               While uncertainties are inherent in the final outcome of
          these environmental matters, and it is presently impossible to
          determine the actual costs that ultimately may be incurred,
          management currently believes that the resolution of such
          uncertainties should not have a material adverse effect on the
          Company's consolidated financial position, results of operations,
          or liquidity.

          ASBESTOS CONTINGENCIES
               KACC is a defendant in a number of lawsuits, some of which
          involve claims of multiple persons, in which the plaintiffs
          allege that certain of their injuries were caused by, among other
          things, exposure to asbestos during, and as a result of, their
          employment or association with KACC or exposure to products
          containing asbestos produced or sold by KACC.  The lawsuits
          generally relate to products KACC has not sold for at least 20
          years.  At June 30, 2000, the number of such claims pending was
          approximately 110,000, as compared with 100,000 at December 31,
          1999.  During 1999, approximately 29,300 of such claims were
          received and 15,700 were settled or dismissed.  During the
          quarter and six-month periods ended June 30, 2000, approximately
          8,300 and 14,700 of such claims were received and 3,600 and 4,700
          of such claims were settled or dismissed.  The foregoing claim
          and settlement figures as of and for the quarter and six-month
          periods ended June 30, 2000, do not reflect the fact that as of
          June 30, 2000, KACC had reached agreements under which it expects
          to settle approximately 71,800 of the pending asbestos-related
          claims over an extended period.

               The Company maintains a liability for estimated asbestos-
          related costs for claims filed to date and an estimate of claims
          to be filed over a 10 year period (i.e., through 2009).  The
          Company's estimate is based on the Company's view, at each
          balance sheet date, of the current and anticipated number of
          asbestos-related claims, the timing and amounts of asbestos-
          related payments, the status of ongoing litigation and settlement
          initiatives, and the advice of Wharton Levin Ehrmantraut Klein &
          Nash, P.A., with respect to the current state of the law related
          to asbestos claims. However, there are inherent uncertainties
          involved in estimating asbestos-related costs and the Company's
          actual costs could exceed the Company's estimates due to changes
          in facts and circumstances after the date of each estimate.
          Further, while the Company does not presently believe there is a
          reasonable basis for estimating asbestos-related costs beyond
          2009 and, accordingly, no accrual has been recorded for any costs
          which may be incurred beyond 2009, the Company expects that such
          costs may continue beyond 2009, and that such costs could be
          substantial.  As of June 30, 2000, an estimated asbestos-related
          cost accrual of $377.8, before consideration of insurance
          recoveries, has been reflected in the accompanying interim
          consolidated financial statements primarily in Long-term
          liabilities.  The Company estimates that annual future cash
          payments for asbestos-related costs will range from approximately
          $75.0 to $100.0 in the years 2000 to 2002, approximately $35.0
          for each of the years 2003 and 2004, and an aggregate of
          approximately $50.0 thereafter.

               The Company believes that KACC has insurance coverage
          available to recover a substantial portion of its asbestos-
          related costs.  Although the Company has settled asbestos-related
          coverage matters with certain of its insurance carriers, other
          carriers have not yet agreed to settlements.  The timing and
          amount of future recoveries from these and other insurance
          carriers will depend on the pace of claims review and processing
          by such carriers and on the resolution of any disputes regarding
          coverage under such policies. The Company believes that
          substantial recoveries from the insurance carriers are probable.
          The Company reached this conclusion after considering its prior
          insurance-related recoveries in respect of asbestos-related
          claims, existing insurance policies, and the advice of Heller
          Ehrman White & McAuliffe LLP with respect to applicable insurance
          coverage law relating to the terms and conditions of those
          policies.  Accordingly, an estimated aggregate insurance recovery
          of $319.9, determined on the same basis as the asbestos-related
          cost accrual, is recorded primarily in Other assets at June 30,
          2000.  However, no assurance can be given that KACC will be able
          to project similar recovery percentages for future asbestos-
          related claims or that the amounts related to future asbestos-
          related claims will not exceed KACC's aggregate insurance
          coverage.

               Management continues to monitor claims activity, the status
          of lawsuits (including settlement initiatives), legislative
          developments, and costs incurred in order to ascertain whether an
          adjustment to the existing accruals should be made to the extent
          that historical experience may differ significantly from the
          Company's underlying assumptions. While uncertainties are
          inherent in the final outcome of these asbestos matters and it is
          presently impossible to determine the actual costs that
          ultimately may be incurred and insurance recoveries that will be
          received, management currently believes that, based on the
          factors discussed in the preceding paragraphs, the resolution of
          asbestos-related uncertainties and the incurrence of asbestos-
          related costs net of related insurance recoveries should not have
          a material adverse effect on the Company's consolidated financial
          position or liquidity.  However, as the Company's estimates are
          periodically re-evaluated, additional charges may be necessary
          and such charges could be material to the results of the period
          in which they are recorded.

          LABOR MATTERS
               In connection with the USWA strike and subsequent lock-out
          by KACC, certain allegations of unfair labor practices ("ULPs")
          have been filed with the National Labor Relations Board ("NLRB")
          by the USWA.  As previously disclosed, KACC responded to all such
          allegations and believes that they were without merit.  In July
          1999, the Oakland, California, regional office of the NLRB
          dismissed all material charges filed against KACC.  In September
          1999, the union filed an appeal of this ruling with the NLRB
          general counsel's office in Washington, D.C.  In April 2000, KACC
          was notified by the general counsel of the NLRB of the dismissal
          of twenty-two of twenty-four allegations of ULPs previously
          brought against it by the USWA.  In June 2000, the general
          counsel of the NLRB directed the Oakland Regional Office to issue
          a complaint on two allegations for trial before an administrative
          law judge.  The Regional Office issued such a complaint in late
          June 2000.  A trial date has been set for November 2000.  Any
          outcome from the trial before the administrative law judge would
          be subject to an additional appeal either by the USWA or KACC.
          This process could take months or years.  If these proceedings
          eventually resulted in a definitive ruling against KACC, it could
          be obligated to provide back pay to USWA members at the five
          plants and such amount could be significant.  However, while
          uncertainties are inherent in the final outcome of such matters,
          the Company believes that the resolution of the alleged ULPs
          should not result in a material adverse effect on the Company's
          consolidated financial position, results of operations, or
          liquidity.

          OTHER CONTINGENCIES
               The Company or KACC is involved in various other claims,
          lawsuits, and other proceedings relating to a wide variety of
          matters.  While uncertainties are inherent in the final outcome
          of such matters, and it is presently impossible to determine the
          actual costs that ultimately may be incurred, management
          currently believes that the resolution of such uncertainties and
          the incurrence of such costs should not have a material adverse
          effect on the Company's consolidated financial position, results
          of operations, or liquidity.

               See Note 10 of Notes to Consolidated Financial Statements
          for the year ended December 31, 1999.

          6.   DERIVATIVE FINANCIAL INSTRUMENTS AND RELATED HEDGING
          PROGRAMS

               At June 30, 2000, the net unrealized loss on KACC's position
          in aluminum forward sales and option contracts, (excluding the
          impact of those contracts discussed below which have been marked
          to market), energy forward purchase and option contracts, and
          forward foreign exchange contracts, was approximately $24.9
          (based on applicable quarter-end published market prices).  As
          KACC's hedging activities are generally designed to lock-in a
          specified price or range of prices, gains or losses on the
          derivative contracts utilized in these hedging activities will
          generally be offset by losses or gains, respectively, on the
          transactions being hedged.

          ALUMINA AND ALUMINUM
               The Company's earnings are sensitive to changes in the
          prices of alumina, primary aluminum and fabricated aluminum
          products, and also depend to a significant degree upon the volume
          and mix of all products sold.  Primary aluminum prices have
          historically been subject to significant cyclical price
          fluctuations.  Alumina prices as well as fabricated aluminum
          product prices (which vary considerably among products) are
          significantly influenced by changes in the price of primary
          aluminum but generally lag behind primary aluminum price changes
          by up to three months.  Since 1993, the Average Midwest United
          States transaction price for primary aluminum has ranged from
          approximately $.50 to $1.00 per pound.

               From time to time in the ordinary course of business, KACC
          enters into hedging transactions to provide price risk management
          in respect of the net exposure of earnings and cash flows
          resulting from (I) anticipated sales of alumina, primary aluminum
          and fabricated aluminum products, less (ii) expected purchases of
          certain items, such as aluminum scrap, rolling ingot, and
          bauxite, whose prices fluctuate with the price of primary
          aluminum.  Forward sales contracts are used by KACC to
          effectively fix the price that KACC will receive for its
          shipments.  KACC also uses option contracts (I) to establish a
          minimum price for its product shipments, (ii) to establish a
          "collar" or range of prices for KACC's anticipated sales, and/or
          (iii) to permit KACC to realize possible upside price movements.
          As of June 30, 2000, KACC had entered into option contracts that
          established a price range for 136,000, 362,000 and 161,000 tons*
          of primary aluminum with respect to 2000, 2001 and 2002,
          respectively.

               Additionally, as of June 30, 2000, KACC had also entered
          into a series of transactions with a counterparty that will
          provide KACC with a premium over the forward market prices at the
          date of the transaction for 2,000 tons of primary aluminum per
          month during the period July 2000 through June 2001.  KACC also
          contracted with the counterparty to receive certain fixed prices
          (also above the forward market prices at the date of the
          transaction) on 4,000 tons of primary aluminum per month over a
          three year period commencing October 2001, unless market prices
          during certain periods decline below a stipulated "floor" price,
          in which case, the fixed price sales portion of the transactions
          terminate.  The price at which the October 2001 and later
          transactions terminate is well below current market prices.
          While the Company believes that the October 2001 and later
          transactions are consistent with its stated hedging objectives,
          these positions do not qualify for treatment as a "hedge" under
          current accounting guidelines. Accordingly, these positions will
          be "marked-to-market" each period.  For the quarter ended June
          30, 2000, the Company recorded mark-to-market pre-tax charges of
          $6.0 and for the six months ended June 30, 2000, recorded mark-
          to-market pre-tax gains of $8.4 in Other income (expense)
          associated with the transactions described in this paragraph.

               As of June 30, 2000, KACC had sold forward virtually all of
          the alumina available to it in excess of its projected internal


          -----------------
          * All references to tons in this report refer to metric tons of
          2,204.6 pounds.


          smelting requirements for 2000, 2001 and 2002 at prices indexed
          to future prices of primary aluminum.

          ENERGY
               KACC is exposed to energy price risk from fluctuating prices
          for fuel oil, diesel oil and natural gas consumed in the
          production process.  KACC from time to time in the ordinary
          course of business enters into hedging transactions with major
          suppliers of energy and energy related financial instruments.  As
          of June 30, 2000, KACC held option contracts for the purchase of
          approximately 13,500 MMBtu of natural gas per day for the period
          October 2000 through  December 2000 and 9,500 MMBtu of natural
          gas per day for the period January 2001 through June 2001.  As of
          June 30, 2000, KACC also held a combination of fixed price
          purchase and option contracts for an average of 232,000 barrels
          per month of fuel oil for the remainder of 2000.

          FOREIGN CURRENCY
               KACC enters into forward exchange contracts to hedge
          material cash commitments to foreign subsidiaries or affiliates.
          At June 30, 2000, KACC had net forward foreign exchange contracts
          for the purchase of 149.5 Australian dollars from July 2000
          through July 2001, in respect of its Australian dollar dominated
          commitments from July 2000 through July 2001.  In addition, KACC
          has entered into option contracts that establish a price range
          for the purchase of 30.0 Australian dollars for the period July
          2000 through June 2001.

               See Note 11 of the Notes to Consolidated Financial
          Statements for the year ended December 31, 1999.

          7.   SIGNIFICANT ACQUISITIONS AND DISPOSITIONS

               In May 2000, KACC, through a wholly-owned subsidiary,
          acquired the assets of a drawn tube aluminum fabricating
          operation in Chandler, Arizona.  Total consideration for the
          acquisition was $16.1, consisting of cash payments of $15.1 and
          assumed current liabilities of $1.0.  The purchase price was
          allocated to the assets acquired based on their estimated fair
          values, of which approximately $1.1 was allocated to property,
          plant and equipment and $2.8 was allocated to receivables,
          inventory and prepaid expenses.  The excess of the purchase price
          over the fair value of the assets acquired (goodwill) was
          approximately $12.2 and is being amortized on a straight-line
          basis over 20 years.  The acquisition is part of the Company's
          continued emphasis on its Engineered products business unit.
          Total revenues for the Chandler facility were approximately $13.8
          for the year ended December 31, 1999 (unaudited).

               During the quarter ended March 31, 2000, KACC, in the
          ordinary course of business, sold certain non-operating
          properties for total proceeds of approximately $12.0.  The sale
          did not have a material impact on the Company's operating results
          for the six-month period ended June 30, 2000.

               In February 2000, KACC completed the previously announced
          sale of its Micromill assets and technology to a third party for
          a nominal payment at closing and future payments based on
          subsequent performance and profitability of the Micromill
          technology.  The sale did not have a material impact on the
          Company's operating results for the six-month period ended June
          30, 2000.

          8.   SUBSEQUENT EVENT

               During August 2000, KACC agreed to sell certain power that
          it had under contract for the third quarter of 2001.
          The power being sold is in excess of KACC's current and expected
          future operating requirements.  The power sale, which is subject
          to final documentation, will yield net proceeds, and is
          expected to result in a pre-tax gain, of approximately $40.0
          during the third quarter of 2000.

          9.   INTERIM OPERATING SEGMENT INFORMATION

               The Company uses a portion of its bauxite, alumina and
          primary aluminum production for additional processing at its
          downstream facilities.  Transfers between business units are made
          at estimated market prices.  The accounting policies of the
          segments are the same as those described in Note 1 of Notes to
          Consolidated Financial Statements for the year ended December 31,
          1999.  Business unit results are evaluated internally by
          management before any allocation of corporate overhead and
          without any charge for income taxes or interest expense.  See
          Note 12 of Notes to Consolidated Financial Statements for the
          year ended December 31, 1999.

          Financial information by operating segment for the quarters ended
          June 30, 2000 and 1999 is as follows:

          
          
                                                           Quarter Ended                 Six Months Ended
                                                             June 30,                        June 30,
                                                  ------------------------------  ------------------------------
                                                            2000            1999            2000            1999
          ----------------------------------------------------------------------  ------------------------------
                                                                                      
          Net Sales:
               Bauxite and Alumina:
                    Net sales to unaffiliated
                         customers                $       120.2   $       110.8   $       221.0   $       200.5
                    Intersegment sales                     29.5            29.6            86.3            52.6
                                                  ------------------------------  ------------------------------
                                                          149.7           140.4           307.3           253.1
                                                  ------------------------------  ------------------------------
               Primary Aluminum:
                    Net sales to unaffiliated
                         customers                        130.6           100.5           257.7           189.6
                    Intersegment sales                     57.5            63.1           139.6           112.2
                                                  ------------------------------  ------------------------------
                                                          188.1           163.6           397.3           301.8
                                                  ------------------------------  ------------------------------
               Flat-Rolled Products                       121.4           155.3           275.1           303.6
               Engineered Products                        145.0           137.8           304.5           271.3
               Minority interests                          25.3            20.6            49.9            39.4
               Eliminations                               (87.0)          (92.7)         (225.9)         (164.8)
                                                  ------------------------------  ------------------------------
                                                  $       542.5   $       525.0   $     1,108.2   $     1,004.4
                                                  ==============================  ==============================
          Operating income (loss):
               Bauxite and Alumina                $        13.5   $        (3.5)  $        29.9   $       (11.3)
               Primary Aluminum (3)                        34.4             1.6            59.9           (20.5)
               Flat-Rolled Products                         7.2             7.5            10.3            14.9
               Engineered Products                         11.9            10.7            25.2            17.6
               Micromill (5)                                -              (3.0)            (.6)           (6.3)
               Eliminations                                 1.2             1.9            (2.9)            5.5
               Corporate and Other                        (16.7)          (14.5)          (33.4)          (32.2)
                                                  ------------------------------  ------------------------------
                                                  $        51.5   $          .7   $        88.4   $       (32.3)
                                                  ==============================  ==============================
          Depreciation and amortization:
               Bauxite and Alumina                $         6.0   $         8.9   $        12.0   $        17.8
               Primary Aluminum                             6.2             7.0            12.4            14.3
               Flat-Rolled Products                         4.1             4.1             8.2             8.2
               Engineered Products                          3.5             2.6             6.3             5.3
               Micromill (5)                               -                 .7              .2             1.4
               Corporate and Other                           .5              .8              .8             1.5
                                                  ------------------------------  ------------------------------
                                                  $        20.3   $        24.1   $        39.9   $        48.5
                                                  ==============================  ==============================


          
          (1)  Net sales for the quarter and six-month periods ended June
               30, 2000, included approximately 68,000 tons and 145,000
               tons, respectively, of alumina purchased from third parties
               and resold to certain unaffiliated customers of the Gramercy
               facility and 15,000 tons and 54,000 tons, respectively, of
               alumina purchased from third parties and transferred to the
               Company's Primary aluminum business unit.
          (2)  Operating income (loss) for the quarter and six-month
               periods ended June 30, 2000, included estimated business
               interruption insurance recoveries totaling $40.5 and $65.8,
               respectively.
          (3)  Operating income (loss) for the quarter and six-month
               periods ended June 30, 2000, included a non-recurring pre-
               tax gain of $15.8 relating to the sale of power.  Operating
               income (loss) for the quarter and six-month periods ended
               June 30, 1999, included potline restart costs of $2.5 and
               $9.6, respectively.
          (4)  Operating income (loss) for the quarter and six-month
               periods ended June 30, 2000, included $.7 of non-recurring
               pre-tax costs related to a product line exit.
          (5)  KACC's Micromill assets and technology were sold to a third
               party in February 2000.
          (6)  Operating income (loss) for the quarter and six-month
               periods ended June 30, 2000, included approximately $1.5 and
               $3.5, respectively, of non-recurring expenses related to
               Corporate staff cost reduction and efficiency initiatives.
          (7)  Depreciation was suspended for the Gramercy facility for the
               last six months of 1999 and the first six months of 2000, as
               a result of the July 5, 1999, incident.  Depreciation
               expense for the Gramercy facility for the six months ended
               June 30, 1999, was approximately $6.0.

               Excluding the capital expenditures made during the first six
          months of 2000 related to the rebuilding of the Gramercy
          facility, which affected the Bauxite and Alumina segment, and the
          purchase of the capital assets of a drawn tube aluminum
          fabricating operation, which affected the Engineering Products
          segment, there were no material changes in segment assets since
          December 31, 1999.

          ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                    -------------------------------------------------
                    CONDITION AND RESULTS OF OPERATIONS
                    -----------------------------------

               This section should be read in conjunction with the response
          to Item 1, Part I, of this Report.

               This section contains statements which constitute "forward-
          looking statements" within the meaning of the Private Securities
          Litigation Reform Act of 1995.  These statements appear in a
          number of places in this section (see, for example, "Recent
          Events and Developments," "Results of Operations," and "Liquidity
          and Capital Resources").  Such statements can be identified by
          the use of forward-looking terminology such as "believes,"
          "expects," "may," "estimates," "will," "should," "plans" or
          "anticipates" or the negative thereof or other variations thereon
          or comparable terminology, or by discussions of strategy.
          Readers are cautioned that any such forward-looking statements
          are not guarantees of future performance and involve significant
          risks and uncertainties, and that actual results may vary
          materially from those in the forward-looking statements as a
          result of various factors.  These factors include the
          effectiveness of management's strategies and decisions, general
          economic and business conditions, developments in technology, new
          or modified statutory or regulatory requirements, and changing
          prices and market conditions.  This section and Part I, Item 1.
          "Business - Factors Affecting Future Performance" in the
          Company's Annual Report on Form 10-K for the year ended December
          31, 1999, each identify other factors that could cause actual
          results to vary. No assurance can be given that these are all of
          the factors that could cause actual results to vary materially
          from the forward-looking statements.

          RECENT EVENTS AND DEVELOPMENTS

          INCIDENT AT GRAMERCY FACILITY
               In July 1999, KACC's Gramercy, Louisiana alumina refinery
          was extensively damaged by an explosion in the digestion area of
          the plant.  See Note 2 of Notes to Interim Consolidated Financial
          Statements for a full discussion regarding the incident at the
          Gramercy facility.

               Construction on the damaged part of the facility began
          during the first quarter of 2000.  Initial production at the
          plant is currently expected to commence during the third quarter
          of 2000.  Based on current estimates, full production is expected
          to be achieved during the first quarter of 2001.  KACC has
          received the regulatory permit required to operate the plant once
          the facility is ready to resume production.

               In March 2000, the U.S. Mine Safety and Health
          Administration ("MSHA") proposed that KACC be assessed a penalty
          of $.5 million in connection with the citations issued from its
          investigation of the incident.  KACC disagrees with the substance
          of the previously issued MSHA citations and has challenged them
          and the associated penalty. However, it is possible that other
          civil or criminal fines or penalties could be levied against
          KACC.

               From the date of the Gramercy incident through June 30,
          2000, KACC had expended or incurred costs or losses associated
          with the Gramercy incident totaling $131.7 million, consisting of
          clean-up, site preparation and business interruption costs.  From
          the date of the Gramercy incident through June 30, 2000, $88.1
          million of insurance recoveries related to these costs had been
          received.  In addition, during the second quarter of 2000, KACC
          spent approximately $48.0 million on Gramercy-related
          construction activities and received $24.0 million of insurance
          recoveries for capital expenditures related to the rebuilding of
          the Gramercy facility.  Gramercy-related capital spending prior
          to the second quarter of 2000 was not significant.

          WASHINGTON SMELTERS' OPERATING LEVEL
               As previously announced, as a result of unprecedented high
          market prices for power in the Pacific Northwest, the  Company
          has temporarily curtailed approximately 128,000 tons of its
          annual primary aluminum production at the Tacoma and Mead,
          Washington smelters and has sold 100 megawatts of power that it
          had under contract through June 30, 2001.  As a result of the
          curtailment, the Company will avoid the need to purchase power on
          a variable cost basis.  Additionally, the sale of power is
          expected to substantially mitigate the cash impact of the potline
          curtailment over the contract period for which the power was
          sold.  To implement the curtailment, the Company has temporarily
          curtailed the two and one-half operating potlines at its Tacoma
          smelter and two and one-half out of a total of eight potlines at
          its Mead smelter.  One-half of a potline at the Tacoma smelter
          was already curtailed.

               As a result of the sale of the power, the Company recorded a
          net pre-tax gain of approximately $15.8 million, which amount was
          composed of gross proceeds of $31.3 million offset by incremental
          excess power costs in the second quarter, employee termination
          expenses and other fixed commitments.  The net gain was recorded
          as a reduction of Cost of products sold.

          LABOR MATTERS
               Substantially all of KACC's hourly workforce at its
          Gramercy, Louisiana, alumina refinery, Mead and Tacoma,
          Washington, aluminum smelters, Trentwood, Washington, rolling
          mill, and Newark, Ohio, extrusion facility were covered by a
          master labor agreement with the United Steelworkers of America
          (the "USWA") which expired on September 30, 1998.  The parties
          did not reach an agreement prior to the expiration of the master
          agreement and the USWA chose to strike.  In January 1999, KACC
          declined an offer by the USWA to have the striking workers return
          to work at the five plants without a new agreement.  KACC imposed
          a lock-out to support its bargaining position and continues to
          operate the plants with salaried employees and other workers as
          it has since the strike began.

               As previously announced, in June 2000, KACC and USWA
          representatives agreed to a methodology to resolve the remaining
          differences between the parties.  During July 2000, the USWA
          announced that its members had voted to accept this methodology.
          Under the agreement between KACC and the USWA, the parties
          continued to negotiate certain matters until mid-August.  Since
          KACC and the USWA were unable to reach a complete agreement,
          the parties will proceed with binding arbitration.  The
          arbitration will be completed by mid-September 2000 and
          it is expected that the USWA workers will return to the
          plants during September and October 2000.

               As certain financial terms remain to be arbitrated, the
          Company cannot currently estimate the financial statement
          impact of the pending labor settlement.  While KACC
          expects that many of its labor and financial objectives will be
          achieved in the pending settlement, it is anticipated that the
          labor settlement will result in certain one time charges and re-
          integration costs.

               In connection with the USWA strike and subsequent lock-out
          by KACC, certain allegations of unfair labor practices ("ULPs")
          have been filed with the National Labor Relations Board ("NLRB")
          by the USWA.  As previously disclosed, KACC responded to all such
          allegations and believes that they were without merit.  In July
          1999, the Oakland, California, regional office of the NLRB
          dismissed all material charges filed against KACC.  In September
          1999, the union filed an appeal of this ruling with the NLRB
          general counsel's office in Washington, D.C.  In April 2000, KACC
          was notified by the general counsel of the NLRB of the dismissal
          of twenty-two of twenty-four allegations of ULPs previously
          brought against it by the USWA.  In June 2000, the general
          counsel of the NLRB directed the Oakland Regional Office to issue
          a complaint on two allegations for trial before an administrative
          law judge.  The Regional Office issued such a complaint in late
          June 2000.  A trial date has been set for November 2000.  Any
          outcome from the trial before the administrative law judge would
          be subject to an additional appeal either by the USWA or KACC.
          This process could take months or years.  If these proceedings
          eventually resulted in a definitive ruling against KACC, it could
          be obligated to provide back pay to USWA members at the five
          plants and such amount could be significant.  However, while
          uncertainties are inherent in the final outcome of such matters,
          the Company believes that the resolution of the alleged ULPs
          should not result in a material adverse effect on the Company's
          consolidated financial position, results of operations, or
          liquidity.

          STRATEGIC INITIATIVES
               KACC's strategy is to improve its financial results by:
          increasing the competitiveness of its existing plants; continuing
          its cost reduction initiatives; adding assets to businesses it
          expects to grow; pursuing divestitures of its non-core
          businesses; and strengthening its financial position.

               In addition to working to improve the performance of the
          Company's existing assets, the Company has devoted significant
          efforts analyzing its existing asset portfolio with the intent of
          focusing its efforts and capital in sectors of the industry that
          are considered most attractive and in which the Company believes
          it is well positioned to capture value.  This process has
          continued in 2000.  In the first quarter of 2000, KACC, in the
          ordinary course of business, sold certain non-operating
          properties and its Micromill assets and technology.  In June
          2000, KACC purchased the assets of a drawn tube aluminum
          fabricating operation.  This acquisition is part of the Company's
          continued focus on growing its Engineered products operations.

               Another area of emphasis has been a continuing focus on
          managing the Company's legacy liabilities.  The Company believes
          that KACC has insurance coverage available to recover certain
          incurred and future environmental costs and a substantial portion
          of its asbestos-related costs and is actively pursuing claims in
          this regard.  The timing and amount of future recoveries of
          asbestos-related claims from insurance carriers remain a major
          priority of the Company, but will depend on the pace of claims
          review and processing by such carriers and the resolution of any
          disputes regarding coverage under the insurance policies.

               Additional portfolio analysis and initiatives are
          continuing.

          FLAT-ROLLED PRODUCTS
               In December 1999, the Company announced that its Flat-rolled
          products business unit expects to accelerate its product mix
          shift toward higher value-added product lines such as heat-treat,
          beverage can lid and tab stock, automotive and other niche
          businesses, and away from beverage can body stock.  This process
          should be completed during the fourth quarter of 2000, at which
          point the Company will assess related issues such as employment
          levels at the Trentwood facility.  Although the shift in product
          mix is expected to have a favorable impact on the Company's
          results and financial position over the long term, it is possible
          that such a product mix shift may result in certain one-time
          charges.

          SUBSEQUENT EVENT
               During August 2000, KACC agreed to sell certain power that it
          had under contract for the third quarter of 2001.  The power being
          sold is in excess of KACC's current and expected future operating
          requirements.  The power sale, which is subject to final
          documentation, will yield net proceeds, and is expected to result
          in a net pre-tax gain, of approximately $40.0 million during the
          third quarter of 2000.

          RESULTS OF OPERATIONS

               As an integrated aluminum producer, the Company uses a
          portion of its bauxite, alumina, and primary aluminum production
          for additional processing at certain of its downstream
          facilities.  Intersegment transfers are valued at estimated
          market prices.  The following table provides selected operational
          and financial information on a consolidated basis with respect to
          the Company for the quarters and six-month periods ended June 30,
          2000 and 1999.  The following data should be read in conjunction
          with the Company's interim consolidated financial statements and
          the notes thereto, contained elsewhere herein.  See Note 12 of
          Notes to Consolidated Financial Statements for the year ended
          December 31, 1999, for further information regarding segments.

               Interim results are not necessarily indicative of those for
          a full year.


                    SELECTED OPERATIONAL AND FINANCIAL INFORMATION
                                     (Unaudited)
                (In millions of dollars, except shipments and prices)

          
          
                                                                     Quarter Ended                   Six Months Ended
                                                                        June 30,                         June 30,
                                                            -------------------------------  -------------------------------
                                                                      2000             1999            2000             1999
          ---------------------------------------------------------------------------------  -------------------------------
                                                                                                  
          Shipments: (000 tons)
               Alumina
                    Third Party                                     538.9 (1)        611.4           976.4 (1)      1,098.4
                    Intersegment                                    156.7 (1)        189.3           434.3 (1)        339.6
                                                            --------------   --------------  --------------   --------------
                         Total Alumina                              695.6            800.7         1,410.7          1,438.0
                                                            --------------   --------------  --------------   --------------
               Primary Aluminum
                    Third Party                                      86.1             69.0           165.5            131.9
                    Intersegment                                     37.5             46.3            85.4             85.8
                                                            --------------   --------------  --------------   --------------
                         Total Primary Aluminum                     123.6            115.3           250.9            217.7
                                                            --------------   --------------  --------------   --------------
               Flat-Rolled Products                                  39.0             59.0            90.8            111.5
                                                            --------------   --------------  --------------   --------------
               Engineered Products                                   44.3             43.5            91.6             84.9
                                                            --------------   --------------  --------------   --------------
          Average Realized Third Party Sales Price: (2)
               Alumina (per ton)                            $         204    $         170   $         204    $         171
               Primary Aluminum (per pound)                 $         .69    $         .66   $         .71    $         .65
          Net Sales:
               Bauxite and Alumina
                    Third Party (includes net sales of
                         bauxite)                           $       120.2 (1)$       110.8   $       221.0 (1)$       200.5
                    Intersegment                                     29.5 (1)         29.6            86.3 (1)         52.6
                                                            --------------   --------------  --------------   --------------
                         Total Bauxite & Alumina                    149.7            140.4           307.3            253.1
                                                            --------------   --------------  --------------   --------------
               Primary Aluminum
                    Third Party                                     130.6            100.5           257.7            189.6
                    Intersegment                                     57.5             63.1           139.6            112.2
                                                            --------------   --------------  --------------   --------------
                         Total Primary Aluminum                     188.1            163.6           397.3            301.8
                                                            --------------   --------------  --------------   --------------
               Flat-Rolled Products                                 121.4            155.3           275.1            303.6
               Engineered Products                                  145.0            137.8           304.5            271.3
               Minority Interests                                    25.3             20.6            49.9             39.4
               Eliminations                                         (87.0)           (92.7)         (225.9)          (164.8)
                                                            --------------   --------------  --------------   --------------
                         Total Net Sales                    $       542.5    $       525.0   $     1,108.2    $     1,004.4
                                                            ==============   ==============  ==============   ==============
          Operating Income (Loss):
               Bauxite & Alumina                            $        13.5 (3)$        (3.5)  $        29.9 (3)$       (11.3)
               Primary Aluminum (4)                                  34.4              1.6            59.9            (20.5)
               Flat-Rolled Products                                   7.2              7.5            10.3             14.9
               Engineered Products                                   11.9 (5)         10.7            25.2 (5)         17.6
               Micromill (6)                                          -               (3.0)            (.6)            (6.3)
               Eliminations                                           1.2              1.9            (2.9)             5.5
               Corporate                                            (16.7)(7)        (14.5)          (33.4)(7)        (32.2)
                                                            --------------   --------------  --------------   --------------
                         Total Operating Income (Loss)      $        51.5    $          .7   $        88.4    $       (32.3)
                                                            ==============   ==============  ==============   ==============
          Net Income (Loss)                                 $        11.0    $       (15.7)  $        22.7    $       (53.9)
                                                            ==============   ==============  ==============   ==============
          Capital Expenditures                              $        69.1    $        13.8   $        85.8    $        30.3
                                                            ==============   ==============  ==============   ==============

          

          (1)  Net sales for the quarter and six-month periods ended June
               30, 2000, included approximately 68,000 tons and 145,000
               tons of alumina purchased from third parties and resold to
               certain unaffiliated customers and 15,000 tons and 54,000
               tons, respectively, of alumina purchased from third parties
               and transferred to the Company's Primary aluminum business
               unit.
          (2)  Average realized prices for the Company's Flat-rolled
               products and Engineered products segments are not presented
               as such prices are subject to fluctuations due to changes in
               product mix.  Average realized third party sales prices for
               alumina and primary aluminum include the impact of hedging
               activities.
          (3)  Operating income (loss) for the quarter and six-month
               periods ended June 30, 2000, included estimated business
               interruption insurance recoveries totaling $40.5 and $65.8,
               respectively.  Additionally, depreciation was suspended for
               the Gramercy facility, as a result of the July 5, 1999,
               incident.  Depreciation expense for the Gramercy facility
               for the six months ended June 30, 1999, was approximately
               $6.0.
          (4)  Operating income (loss) for the quarter and six-month
               periods ended June 30, 2000, included a non-recurring pre-
               tax gain of $15.8 relating to the sale of power.  Operating
               income (loss) for the quarter and six-month periods ended
               June 30, 1999, included potline restart costs of $2.5 and
               $9.6, respectively.
          (5)  Operating income (loss) for the quarter and six-month
               periods ended June 30, 2000, included $.7 of non-recurring
               pre-tax costs related to product line exit.
          (6)  KACC's Micromill assets and technology were sold to a third
               party in February 2000.
          (7)  Operating income (loss) for the quarter and six-month
               periods ended June 30, 2000, included approximately $1.5 and
               $3.5, respectively, of non-recurring expenses related to
               Corporate staff cost reduction and efficiency initiatives.

          OVERVIEW
               The Company's operating results are sensitive to changes in
          prices of alumina, primary aluminum, and fabricated aluminum
          products, and also depend to a significant degree on the volume
          and mix of all products sold and on KACC's hedging strategies.
          Primary aluminum prices have historically been subject to
          significant cyclical price fluctuations.  See Note 6 of Notes to
          Interim Consolidated Financial Statements for a discussion of
          KACC's hedging activities.

               Changes in global, regional, or country-specific economic
          conditions can have a significant impact on overall demand for
          aluminum-intensive fabricated products in the transportation,
          distribution, and packaging markets.  Such changes in demand can
          directly affect the Company's earnings by impacting the overall
          volume and mix of such products sold.  To the extent that these
          end-use markets weaken, demand can also diminish for what the
          Company sometimes refers to as the "upstream" products: alumina
          and primary aluminum.

               During 1999, the Average Midwest United States transaction
          price ("AMT price") per pound of primary aluminum declined from
          the low $.60 range at the beginning of the year to a low of
          approximately $.57 per pound in February and then began a steady
          increase ending 1999 at $.79 per pound.  During the first quarter
          of 2000, the average AMT price was $.79 per pound.  During the
          second quarter of 2000, the average AMT price was $.72 per pound,
          however, in mid-June the price began to increase ending the
          second quarter at approximately $.77 per pound.  The average AMT
          price for primary aluminum for the week ended July 28, 2000, was
          approximately $.76 per pound.

          QUARTER AND SIX MONTHS ENDED JUNE 30, 2000, COMPARED TO QUARTER
          AND SIX MONTHS ENDED JUNE 30, 1999

          SUMMARY
               The Company reported net income of $11.0 million, or $.14 of
          basic income per common share, for the second quarter of 2000,
          compared to a net loss of $15.7 million, or $.20 of basic loss
          per common share, for the same period of 1999.  However, second
          quarter 2000 results included a non-recurring pre-tax gain of
          $15.8 million, or $.12 of basic income per share, relating to the
          sale of power discussed above offset by certain non-recurring
          pre-tax severance and relocation costs associated with Corporate
          restructuring initiatives and product line exit of $2.0 million,
          or $.02 of basic loss per common share.  Results for the quarter
          ended June 30, 2000, also included pre-tax losses of $6.0
          million, ($.05 of basic loss per common share) to reflect mark-
          to-market adjustments on certain primary aluminum hedging
          transactions.

               For the six-month period ended June 30, 2000, the Company
          reported net income of $22.7 million, or $.29 of basic income per
          common share, compared to a net loss of $53.9 million, or $.68 of
          basic loss per common share, for the six-month period ended June
          30, 1999.  In addition to the second quarter 2000 non-recurring
          items described above, results for the six months ended June 30,
          2000, included pre-tax gains of $8.4 million ($.6 of basic income
          per common share) to reflect mark-to-market adjustments on
          certain primary aluminum hedging transactions.

               Results for the quarter and six-month periods ended June 30,
          1999, included three essentially offsetting items. A favorable
          $50.5 million pre-tax gain on the sale of the Company's interests
          in AKW L.P., an aluminum wheel joint venture, was offset by a
          non-cash pre-tax charge of $38.0 million for asbestos-related
          claims and a pre-tax charge of $13.5 million to reflect a mark-
          to-market adjustment on certain primary aluminum hedging
          transactions.

               Net sales in the second quarter of 2000 totaled $542.5
          million compared to $525.0 million in the second quarter of 1999.
          Net sales for the six-month period ended June 30, 2000, totaled
          $1,108.2 million compared to $1,004.4 million for the six-month
          period ended June 30, 1999.

          BAUXITE AND ALUMINA
               Third party net sales of alumina increased 8% for the
          quarter ended June 30, 2000, as compared to the same period in
          1999 as a 20% increase in third party average realized prices was
          partially offset by a 12% decrease in third party shipments.  The
          increase in average realized prices was due to an increase in
          primary aluminum market prices related to the Company's primary
          aluminum-linked customers sales contracts, partially offset by
          allocated net losses from the Company's hedging activities.  The
          decrease in quarter-over-quarter shipments resulted primarily
          from differences in the timing of shipments and, to a lesser
          extent, the net effect of the Gramercy incident, after
          considering the 68,000 tons of alumina purchased by KACC in 2000
          from third parties to fulfill third party sales contracts.

               Intersegment net sales of alumina were essentially flat for
          the quarter ended June 30, 2000, as compared to the same period
          in 1999.  A 23% increase in the intersegment average realized
          price was offset by a 17% decrease in intersegment shipments.
          The increase in the intersegment average realized price is the
          result of increases in primary aluminum prices from period to
          period as intersegment transfers are made on the basis of market
          prices on a lagged basis of one month.  The decrease in shipments
          was due to the timing of shipments as well as the unfavorable
          impact of the curtailments of the potlines at the Company's
          Washington smelters in mid-June 2000 as discussed above.
          Intersegment net sales for the second quarter 2000 included
          approximately 15,000 tons of alumina purchased from third-parties
          and transferred to the Primary aluminum business unit.

               For the six-month period ended June 30, 2000, third party
          net sales of alumina were 10% higher than the comparable period
          in 1999 as a 19% increase in third party average realized prices
          was partially offset by an 11% decrease in third party shipments.
          The increase in average realized prices and decrease in third
          party shipments during the first six months of 2000 as compared
          to 1999 was attributable to the same price and volume factors
          discussed above.  Third party net sales included approximately
          145,000 tons of alumina purchased by KACC from third parties to
          fulfill third party sales contracts.

               Intersegment net sales for the six-month period ended June
          30, 2000, increased 64% as compared to the same period in 1999.
          The increase was due to a 28% increase in the intersegment
          average realized price and a 28% increase in intersegment
          shipments.  The increase in the intersegment average realized
          price is the result of increases in primary aluminum prices from
          period to period as intersegment transfers are made on the basis
          of market prices on a lagged basis of one month.  The increase in
          shipments was due to the favorable impact of operating more
          potlines at the Company's smelters during the first four months
          of 2000 as compared to the same months in 1999.  Intersegment net
          sales for the year to date 2000 period included approximately
          54,000 tons of alumina purchased from third-parties and
          transferred to the Primary aluminum business unit.

               Segment operating income for the quarter and six-month
          periods ended June 30, 2000, increased from the comparable
          periods in 1999 primarily as the result of the increases in the
          average realized prices offset in part by the net decrease in
          shipments as discussed above.

               See Note 2 of Notes to Interim Consolidated Financial
          Statements for a discussion of the effect of the Gramercy
          incident on the Bauxite and Alumina business unit's operations.

          PRIMARY ALUMINUM
               Third party net sales of primary aluminum were up 30% for
          the second quarter of 2000, as compared to the same period in
          1999 as a result of a 25% increase in third party shipments and a
          5% increase in third party averaged realized prices.  The
          increase in shipments was primarily due to the favorable impact
          of the increased operating rate at the Company's 90%-owned Volta
          Aluminium Company Limited ("Valco") and Washington smelters
          offset, in part, by the mid-June 2000 curtailment of the potlines
          at the Washington smelters discussed above.  The increase in the
          average realized prices reflects the 13% increase in primary
          aluminum market prices, partially offset by allocated net losses
          from the Company's hedging activities. Intersegment net sales
          were down approximately 9% between the second quarter of 2000 and
          the second quarter of 1999.  This decrease was the result of a
          19% decrease in intersegment shipments offset, in part, by a 13%
          increase in intersegment average realized prices.  The increase
          in the intersegment average realized price was due to higher
          market prices for primary aluminum.

               For the six-month period ended June 30, 2000, third party
          sales of primary aluminum increased approximately 36% from the
          comparable period in 1999, reflecting a 25% increase in third
          party shipments and a 9% increase in third party average realized
          prices.  The increases in year-to-date 2000 shipments and prices
          compared to 1999 were attributable to the same factors described
          above.  Intersegment net sales for the first half of 2000 were up
          24% as compared to the same period in 1999.  This increase
          primarily resulted from a 25% increase in average realized prices
          reflecting higher market prices for primary aluminum.
          Intersegment shipments were essentially flat.

               Segment operating income for the quarter and six-month
          periods ended June 30, 2000, was up from the comparable periods
          1999.  The primary reason for the increases was the improvements
          in average realized prices and net shipments discussed above.
          However, both years' operating results included several non-
          recurring transactions.  The quarter and six-month periods ended
          June 30, 2000, results included a net gain of $15.8 million
          associated with the sale of power described above; while the
          quarter and six-month periods ended June 30, 1999, results
          included costs of approximately $2.5 million and $9.6 million,
          respectively, associated with preparing and restarting potlines
          at Valco and the Washington smelters.  In addition, segment
          operating income for the quarter and six-month periods ended June
          30, 2000, have been adversely affected by increases in alumina
          and electric power costs.  Even after excluding the excess power
          costs experienced by the Company in the second quarter in the
          Pacific Northwest, power costs have increased.  As previously
          reported, new agreements entered into in both Ghana and Wales
          will provide for increased power stability but at increased
          costs.

          FLAT-ROLLED PRODUCTS
               Net sales of flat-rolled products decreased by 22% during
          the second quarter 2000 as compared to 1999 as a 34% decrease in
          shipments was offset by an 18% increase in average realized
          prices.  The decrease in shipments was primarily due to reduced
          shipments of can body stock as a part of the Company's planned
          stock shipments was a modest quarter over quarter improvement in
          heat-treat products.  The increase in average realized prices
          primarily reflects the change in product mix (resulting from the
          can stock body exit) as well as the pass through to customers of
          increased market prices for primary aluminum.

               For the six-month period ended June 30, 2000, net sales of
          flat-rolled products decreased by 9% as compared to the same
          period in 1999 as a 19% decrease in shipments was offset by a 11%
          increase in average realized prices.  The decline in year-to-date
          2000 shipments is primarily attributable to the aforementioned
          decline in can body stock offset, in part, by increased shipments
          of general engineering heat-treat products.  The increase in the
          average realized price reflects the pass-through to customers of
          increased market prices for primary aluminum offset, in part, by
          the substantial decline in the demand for aerospace heat-treat
          products subsequent to the first quarter of 1999.

               The decrease in segment operating income in the quarter and
          the six-month periods ended June 30, 2000, were attributable to
          the same factors described above.  Segment operating income also
          reflects the benefit of lower plant overhead and reduced major
          maintenance spending.

          ENGINEERED PRODUCTS
               Net sales of engineered products increased approximately 5%
          during the second quarter 2000 as compared to 1999, reflecting a
          2% increase in product shipments and a 3% increase in average
          realized prices.  Increased product shipments are the result of
          increased demand in the distribution market offset by reduced
          engineered component deliveries resulting from a product line
          exit.  The increase in average realized prices reflects increased
          prices for soft alloy extrusions offset, in part, by a shift in
          product mix.  For the six-month period ended June 30, 2000, net
          sales of engineered products increased approximately 12% as
          compared to the same period in 1999 as the result of an 8%
          increase in product shipments and a 4% increase in average
          realized prices.  In addition to the factors described above for
          the quarter ended June 30, 2000, the price and value factors for
          the six-month period ended June 30, 2000, also reflect a short-
          term market related spike in certain hard alloy extrusion
          products.  The changes in average realized prices for the quarter
          and six-month periods ended June 30, 2000, also reflect the pass
          through to customers of increased market prices for primary
          aluminum.

               Segment operating income increased in the quarter and six-
          month period ended June 30, 2000, as compared to the comparable
          periods in 1999.  These increases primarily reflect the impact of
          the demand in the distribution and redraw rod markets.  Segment
          operating income for the quarter and six month periods ended June
          30, 2000, included non-recurring severance charges of $.7 million
          related to a product line exit.  Segment operating income for the
          six months ended June 30, 1999, included equity in earnings of
          $2.5 million from the Company's 50% interest in AKW L.P., which
          was sold in April 1999.

          ELIMINATIONS
               Eliminations of intersegment profit vary from period to
          period depending on fluctuations in market prices as well as the
          amount and timing of the affected segments' production and sales.

          CORPORATE AND OTHER
               Corporate operating expenses represent corporate general and
          administrative expenses which are not allocated to the Company's
          business segments.  Corporate operating expenses for the quarter
          and six-month period ended June 30, 2000, included approximately
          $1.5 million and $3.5 million, respectively, of non-recurring
          expenses related to ongoing Corporate staff cost reduction and
          efficiency initiatives.

          LIQUIDITY AND CAPITAL RESOURCES

               See Note 5 of Notes to Consolidated Financial Statements for
          the year ended December 31, 1999, for a listing of the Company's
          indebtedness and information concerning certain restrictive debt
          covenants.

          OPERATING ACTIVITIES
               At June 30, 2000, the Company had working capital of $332.4
          million, compared with working capital of $336.0 million at
          December 31, 1999.  The decrease in working capital primarily
          resulted from an increase in trade and other receivables offset
          by decreases in inventories, prepaid expenses and other current
          assets and an increase in accounts payable.  The increase in
          trade receivables reflects the increased market prices for
          primary aluminum.  The increase in other receivables was
          primarily due to the sale of power (see Note 3 of Notes to
          Interim Consolidated Financial Statements) and an increase in the
          estimated business interruption insurance recoveries related to
          the Gramercy facility incident (see Note 2 of Notes to Interim
          Consolidated Financial Statements).  The decrease in inventories
          reflects a planned focus on inventory reduction and efficiency
          initiatives and the previously announced exit from production of
          can body stock at the Flat-rolled products business unit.
          Changes in trade receivables and inventories also reflect the
          factors described in "Results of Operations."  The decrease in
          prepaid expenses and other current assets resulted primarily from
          receipts by KACC of margin deposits resulting from reduced margin
          requirements due to lower end of period primary aluminum market
          prices.  The increase in accounts payable was primarily due to
          the timing of payments for third party alumina purchases as well
          as increased capital spending related to the Gramercy incident.

          INVESTING ACTIVITIES
               Capital expenditures during the six-month period ended June
          30, 2000, were $85.8 million, consisting primarily of $54.9
          million for the rebuilding of the Gramercy facility and $13.3
          million for the purchase of the non-working capital assets of a
          drawn tube aluminum fabricating operation (see Note 7 of Notes to
          Interim Consolidated Financial Statements).  The remainder of the
          2000 capital expenditures were used to improve production
          efficiency and reduce operating costs at the Company's other
          facilities.  Total consolidated capital expenditures, excluding
          the expenditures for the rebuilding of the Gramercy facility (see
          Note 2 of Notes to Interim Consolidated Financial Statements),
          are expected to be between $80.0 and $115.0 million per annum in
          each of 2000 through 2002 (of which approximately 10% is expected
          to be funded by the Company's minority partners in certain
          foreign joint ventures).  See "- Financing Activities and
          Liquidity" below for a discussion of Gramercy-related capital
          spending.  Management continues to evaluate numerous projects all
          of which would require substantial capital, both in the United
          States and overseas.  The level of capital expenditures may be
          adjusted from time to time depending on the Company's price
          outlook for primary aluminum and other products, KACC's ability
          to assure future cash flows through hedging or other means, the
          Company's financial position and other factors.

          FINANCING ACTIVITIES AND LIQUIDITY

               As of June 30, 2000, the Company's total consolidated
          indebtedness was $997.3 million, including $37.6 million of
          borrowings under KACC's credit agreement, as amended (the "Credit
          Agreement"), compared with $972.8 million at December 31, 1999.
          As of July 31, 2000, $25.3 million of borrowings were outstanding
          under the Credit Agreement.

               At June 30, 2000, $207.8 million (of which $59.7 million
          could have been used for letters of credit) was available to KACC
          under the Credit Agreement.  Loans under the Credit Agreement
          bear interest at a spread (which varies based on the results of a
          financial test) over either a base rate or LIBOR at the Company's
          option.  During the six-month period ended June 30, 2000, the
          average per annum interest rate on loans outstanding under the
          Credit Agreement was approximately 9.78%.

               The Company's and KACC's near-term liquidity will be, as
          more fully discussed below, affected by the Gramercy incident and
          the amount of net payments for asbestos liabilities.

               From the date of the Gramercy incident through June 30,
          2000, KACC had expended or incurred costs or losses associated
          with the Gramercy incident totaling $131.7 million, consisting of
          clean-up, site preparation and business interruption costs.  From
          the date of the Gramercy incident through June 30, 2000, $88.1
          million of insurance recoveries related to these costs had been
          received.  In addition, during the second quarter of 2000, KACC
          spent approximately $48.0 million on Gramercy-related
          construction activities and received $24.0 million of insurance
          recoveries for capital expenditures related to the rebuilding of
          the Gramercy facility, which amount reduced the minimum property
          damage receivable recorded in the fourth quarter of 1999.  Until
          all construction activity at the Gramercy facility is completed
          and full production is restored, KACC will continue to incur
          substantial business interruption costs and capital spending.
          Business interruption costs are expected to be substantially
          offset by insurance recoveries. A minimum of an additional $76.0
          million of capital spending is expected to be funded by insurance
          recoveries.  The remainder of the Gramercy-related capital
          expenditures will be funded by KACC using existing cash
          resources, funds from operations and/or borrowings under KACC's
          Credit Agreement.  The amount of capital expenditures to be
          funded by KACC will depend on, among other things, the ultimate
          cost and timing of the rebuild and negotiations with the
          insurance carriers.  KACC continues to work with the insurance
          carriers to maximize the amount of recoveries and to minimize, to
          the extent possible, the period of time between when KACC expends
          funds and when it is reimbursed. KACC will likely have to
          continue to fund an average of 30 - 60 days of property damage
          and business interruption activity, unless some other arrangement
          is agreed with the insurance carriers, and such amounts will be
          significant.  The Company believes it has sufficient financial
          resources to fund the construction and business interruption
          costs on an interim basis.  However, no assurances can be given
          in this regard.

               KACC's estimated annual cash payments, prior to insurance
          recoveries, for asbestos-related costs will be approximately
          $75.0 million to $100.0 million for each of the years 2000
          through 2002.  The Company believes that KACC will recover a
          substantial portion of these payments from insurance.  However,
          delays in receiving these or future insurance repayments would
          have an adverse impact on KACC's liquidity.

               While no assurance can be given that existing cash sources
          will be sufficient to meet the Company's short-term liquidity
          requirements, management believes that the Company's existing
          cash resources, together with cash flows from operations and
          borrowings under the Credit Agreement, will be sufficient to
          satisfy its working capital and capital expenditure requirements
          for the next year.

               KACC's ability to make payments on and to refinance its debt
          on a long-term basis depends on its ability to generate cash in
          the future.  This, to a certain extent, is subject to general
          economic, financial, competitive, legislative, regulatory and
          other factors beyond KACC's control.  KACC will need to refinance
          all or a substantial portion of its debt on or before its
          maturity.  No assurance can be given that KACC will be able to
          refinance its debt on acceptable terms.  However, with respect to
          long-term liquidity, management believes that operating cash
          flow, together with the ability to obtain both short and long-
          term financing, should provide sufficient funds to meet KACC's
          and the Company's working capital and capital expenditure
          requirements.

          CAPITAL STRUCTURE
               MAXXAM Inc. ("MAXXAM") and one of its wholly owned
          subsidiaries collectively own approximately 63% of the Company's
          Common Stock, with the remaining approximately 37% of the
          Company's Common Stock being publicly held.  Certain of the
          shares of the Company's Common Stock beneficially owned by MAXXAM
          are subject to a pledge agreement by MAXXAM and its subsidiary.

               The Company has an effective "shelf" registration statement
          covering the offering from time to time of up to $150.0 million
          of equity securities.  Any such offering will only be made by
          means of a prospectus.  The Company also has an effective "shelf"
          registration statement covering the offering of up to 10,000,000
          shares of the Company's Common Stock that are owned by MAXXAM.
          The Company will not receive any of the net proceeds from any
          transaction initiated by MAXXAM pursuant to this registration
          statement.

               The Credit Agreement does not permit the Company, and
          significantly restricts KACC's ability, to pay any dividends on
          their common stock.

          ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
                    -----------------------------------------------------
                    RISK
                    ----

               The information included under Item 3. "QUANTITATIVE AND
          QUALITATIVE DISCLOSURES ABOUT MARKET RISK" in the Company's Form
          10-Q for the quarterly period ended March 31, 2000, is
          incorporated by reference.

                             PART II - OTHER INFORMATION

          ITEM 1.   LEGAL PROCEEDINGS
                    -----------------

          Gramercy Litigation

               On July 5, 1999, KACC's Gramercy, Louisiana, alumina
          refinery was extensively damaged by an explosion in the digestion
          area of the plant.  The cause of the accident is under
          investigation by KACC and various governmental agencies.  In
          January 2000, the U.S. Mine Safety and Health Administration
          issued 21 citations and in March 2000 proposed KACC be assessed a
          penalty of $.5 million in connection with its investigation of
          the Gramercy incident.  The citations allege, among other things,
          that certain aspects of the plant's operations were unsafe and
          that such mode of operation contributed to the explosion.  KACC
          has previously announced that it disagrees with the substance of
          the citations and has challenged them and the associated penalty.
          It is possible that other civil or criminal fines or penalties
          could be levied against KACC.

               A number of employees were injured in the incident, several
          of them severely.  KACC may be liable for claims relating to the
          injured employees.  The incident has resulted in more than sixty
          lawsuits, many of which were styled as class action suits, being
          filed against KACC and others on behalf of more than 16,000
          claimants.  Such lawsuits allege, among other things, property
          damage, business interruption loss and personal injury.  Such
          lawsuits were filed, on dates ranging from July 5, 1999, through
          July 9, 2000, principally in the Fortieth Judicial District Court
          for the Parish of St. John the Baptist, State of Louisiana or in
          the Twenty-Third Judicial District Court for the Parish of St.
          James or the Parish of Ascension, State of Louisiana.  Two of
          such lawsuits were filed in the United States District Court,
          Eastern District of Louisiana.  Discovery has begun in such
          cases.  The aggregate amount of damages sought in the lawsuits
          cannot be determined at this time.

               See Part I, Item 3.  "LEGAL PROCEEDINGS - Gramercy
          Litigation" in the Company's Form 10-K for the year ended
          December 31, 1999, and Part II, Item 1. "LEGAL PROCEEDINGS -
          Gramercy Litigation" in the Company's From 10-Q for the quarter
          ended March 31, 2000.

          Asbestos-related Litigation

               KACC is a defendant in a number of lawsuits, some of which
          involve claims of multiple persons, in which the plaintiffs
          allege that certain of their injuries were caused by, among other
          things, exposure to asbestos during, and as a result of, their
          employment or association with KACC or exposure to products
          containing asbestos produced or sold by KACC.  The portion of
          Note 5 of Notes to Interim Consolidated Financial Statements
          contained in this report under the heading "Asbestos
          Contingencies" is incorporated herein by reference.  See Part I,
          Item 3. "LEGAL PROCEEDINGS - Asbestos-related Litigation" in the
          Company's Form 10-K for the year ended December 31, 1999.

          ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
                    ---------------------------------------------------

               The annual meeting of stockholders of the Company was held
          on May 24, 2000, at which meeting the stockholders voted to elect
          management's slate of nominees as directors of the Company.  The
          nominees for election as directors of the Company are listed
          below, together with the number of votes cast for, against, and
          withheld with respect to each such nominees, as well as the
          number of abstentions and broker nonvotes with respect to each
          such nominee:

          Robert J. Cruikshank
               Votes For:       76,406,961
               Votes Against:
               Votes Withheld:     263,986
               Abstentions:
               Broker Nonvotes:

          James T. Hackett
               Votes For:       76,405,833
               Votes Against:
               Votes Withheld:     265,114
               Abstentions:
               Broker Nonvotes:

          George T. Haymaker, Jr.
               Votes For:       76,409,092
               Votes Against:
               Votes Withheld:     261,855
               Abstentions:
               Broker Nonvotes:

          Charles E. Hurwitz
               Votes For:       76,384,487
               Votes Against:
               Votes Withheld:     286,460
               Abstentions:
               Broker Nonvotes:

          Ezra G. Levin
               Votes For:         74,676,890
               Votes Against:
               Votes Withheld:     1,994,057
               Abstentions:
               Broker Nonvotes:

          Raymond J. Milchovich
               Votes For:       76,407,239
               Votes Against:
               Votes Withheld:     263,708
               Abstentions:
               Broker Nonvotes:

          James D. Woods
               Votes For:       76,412,312
               Votes Against:
               Votes Withheld:     258,635
               Abstentions:
               Broker Nonvotes:

          ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K
                    --------------------------------

               (a)  Exhibits.

               Exhibit No.    Exhibit
               -----------    -------

               *10.1     Time-Based Stock Option Grant pursuant to the
                         Kaiser 1997 Omnibus Stock Incentive Plan to Joseph
                         A. Bonn, effective September 9, 1999.

               *10.2     Time-Based Stock Option Grant pursuant to the
                         Kaiser 1997 Omnibus Stock Incentive Plan to J.
                         Kent Friedman, effective December 1, 1999.

               *10.3     Form of Non-Employee Director Stock Option
                         Agreement pursuant to the Kaiser 1997 Omnibus
                         Stock Incentive Plan.

               *27       Financial Data Schedule.

               (b)  Reports on Form 8-K.

               No Report on Form 8-K was filed by the Company during the
          quarter ended June 30, 2000.




          ---------------
          *    Filed herewith





                                      SIGNATURE

               Pursuant to the requirements of the Securities Exchange Act
          of 1934, the registrant has duly caused this report to be signed
          on its behalf by the undersigned thereunto duly authorized, who
          have signed this report on behalf of the registrant as the
          principal financial officer and principal accounting officer of
          the registrant, respectively.

                                             KAISER ALUMINUM CORPORATION


                                                  /s/   John T. La Duc
                                             By:---------------------------
                                                        John T. La Duc
                                              Executive Vice President and
                                                 Chief Financial Officer
                                              (Principal Financial Officer)


                                                  /s/  Daniel D. Maddox
                                             By:---------------------------
                                                       Daniel D. Maddox
                                              Vice President and Controller
                                             (Principal Accounting Officer)



          Dated:    August 11, 2000







                                                            Exhibit 10.1


                            TIME-BASED STOCK OPTION GRANT
                                PURSUANT TO THE KAISER
                          1997 OMNIBUS STOCK INCENTIVE PLAN

               1.   GRANT OF STOCK OPTION.  Kaiser Aluminum Corporation
                    ---------------------
          ("KAC") and Kaiser Aluminium & Chemical Corporation ("KACC"),
          both Delaware corporations (collectively, the "Company"), hereby
          evidence that the Company has granted to JOSEPH A. BONN
          ("Optionee") the right, privilege and option as herein set forth
          (the "Stock Option") to purchase 163,190 shares of common stock,
          $.01 par value per share, of KAC (as more fully defined in
          Attachment I -- "Definitions Applicable to Certain Terms", which
          ------------
          is incorporated herein and made a part hereof, the "Option
          Shares") in accordance with the terms of this document (this
          "Stock Option Grant").

               The Stock Option is granted pursuant to the Kaiser 1997
          Omnibus Stock Incentive Plan (the "Plan") and is subject to the
          provisions of the Plan, a copy of which has been furnished to
          Optionee and which is hereby incorporated in and made a part of
          this Stock Option Grant, as well as to the provisions of this
          Stock Option Grant.  By acceptance of the Stock Option, Optionee
          agrees to be bound by all of the terms, provisions, conditions
          and limitations of the Plan and this Stock Option Grant.

               All capitalized terms used herein shall have the meanings
          provided in the Plan document unless otherwise specifically
          provided in this Stock Option Grant, including Attachment I.  The
                                                         ------------
          Stock Option is a Nonqualified Stock Option under the Plan and is
          not intended to qualify as an "incentive stock option" within the
          meaning of Section 422 of the Code.

               All Option Shares, when issued to Optionee upon the exercise
          of this Stock Option, shall be fully paid and nonassessable.

               2.   OPTION TERM.  Subject to earlier termination as
                    -----------
          provided herein, or in the Plan, the Stock Option shall expire on
          September 09, 2009.  The period during which the Stock Option is
          in effect shall be referred to as the "Option Period".

               3.   OPTION EXERCISE PRICE.  The exercise price per Option
                    ---------------------
          Share (including any Attributable Securities, as defined in
          Attachment I) (the "Option Price") at which Optionee may purchase
          ------------
          such Option Shares subject to the Stock Option shall be equal to
          the remainder of (i) $8.8438 per Option Share minus (ii) the
          amount per Option Share of Distributed Cash Value (as defined in
          Attachment I) determined as of the date of exercise.  Such Option
          ------------






          Price shall also be subject to adjustment as provided in the Plan
          and this Stock Option Grant.  The Company shall notify Optionee
          within thirty (30) days of each change in the Option Price.

               4.   VESTING.  The Stock Option may be exercised during the
                    -------
          Option Period only to the extent it has become a "Vested Option".
          Provided Optionee's Qualified Service Period (as defined in
          Attachment I) has not previously terminated, the Stock Option
          ------------
          shall become a "Vested Option" as to one-third of the Option
          Shares as of 12:01 a.m. Houston time on December 31, 1999, as to
          an additional one-third of the Option Shares as of 12:01 a.m.
          Houston time on December 31, 2000 and as to the final one-third
          of the Option Shares as of 12:01 a.m. Houston time on December
          31, 2001.  Notwithstanding the preceding sentence, if KAC
          experiences a Change in Control (as defined in Attachment I)
                                                         ------------
          prior to January 1, 2002 and prior to the end of Optionee's
          Qualified Service Period, then the Stock Option shall become a
          Vested Option, exercisable as to all Option Shares from and
          including the date of the Change in Control until and including
          the first anniversary of the Change
          in Control, upon which anniversary the Option Period shall
          terminate and this Stock Option shall expire.

               5.   METHOD OF EXERCISE.  To exercise the Stock Option,
                    ------------------
          Optionee shall deliver written notice to the Company stating the
          number of Option Shares with respect to which the Stock Option is
          being exercised together with payment for such Option Shares.
          Payment shall be made (i) in cash or its equivalent, (ii) by
          tendering previously acquired Shares having an aggregate Fair
          Market Value (as defined in the Plan) at the time of exercise
          equal to the total Option Price (provided that the Shares which
          are tendered must have been held by Optionee for at least six
          months prior to their tender to satisfy the Option Price) or
          (iii) by a combination of (i) and (ii).

               6.   TERMINATION OF OPTIONEE'S EMPLOYMENT.  Termination of
                    ------------------------------------
          Optionee's employment as a regular full-time salaried employee of
          KAC, a Subsidiary (as defined in Attachment I), or any branch,
                                           ------------
          unit or division of KAC or any Subsidiary ("Employment") shall
          affect Optionee's rights under the Stock Option as follows:

                    (a)  Termination by the Company for Cause.  If
          Optionee's Employment is terminated by the Company at any
          time for Cause, then (i) the Option Period shall terminate
          and (ii) Optionee's right to exercise the Stock Option shall
          terminate, in each case immediately upon Optionee's becoming
          subject to termination of Employment for Cause. Optionee
          shall be terminated for "Cause" if terminated as a result of
          Optionee's breach of Optionee's written employment or other

                                          -2-






          engagement agreement (if any), or if the Board of Directors
          determines that Optionee is being terminated as a result of
          misconduct, dishonesty, disloyalty, disobedience or action
          that might reasonably be expected to injure KAC or any
          Subsidiary or their business interests or reputation.

                    (b)  Termination by the Company Other than for Cause.
          If Optionee's Employment is terminated by the Company prior
          to January 1, 2002 other than as a result of termination of
          Optionee's Employment for Cause, then (i) the Stock Option
          and the Option Period shall not terminate and (ii) the Stock
          Option shall thereafter be exercisable as to all Option
          Shares from and including the date of such termination
          through and including the end of the Option Period.

                    (c)  Other Termination.  If Optionee's Qualified
          Service Period terminates prior to January 1, 2002 other
          than as a result of termination of Optionee's Employment by
          the Company, then (i) the Stock Option and the Option Period
          shall not terminate but the Stock Option shall thereafter be
          exercisable only to the extent it has become a Vested Option
          as of the date of termination of Optionee's Qualified
          Service Period and otherwise is exercisable in accordance
          with the provisions of this Stock Option Grant and the Plan.

          The Stock Option may be exercised by Optionee or, in the case of
          death, by the executor or administrator of Optionee's estate, or
          the person or persons to whom Optionee's rights under the Stock
          Option shall pass by will or by the applicable laws of descent
          and distribution, or in the case of Disability, by Optionee's
          personal representative.

               7.   REORGANIZATIONS; REPURCHASE OF STOCK OPTION.
                    -------------------------------------------
                    (a)  Freedom to Reorganize the Company and
          Subsidiaries.  The existence of the Stock Option shall not
          affect in any way the right or power of the Company and its
          Subsidiaries or the issuers of Attributable Securities or
          its or their stockholders to make or authorize any and all
          Distribution Events (as defined in Attachment I) and any and
                                                  ------------
          all other adjustments, recapitalizations, reorganizations
          or other changes in the capital structure or business of the
          Company or its Subsidiaries or the issuers of Attributable
          Securities, any and all issuances of bonds, debentures,
          common stock, preferred or prior preference stock, warrants,
          rights or other securities, whether or not affecting the
          Option Shares or the rights thereof, any dissolution or
          liquidation of the Company or any Subsidiary, any sale or
          other divestiture or transfer of all or any part of the
          assets or business of the Company or any Subsidiary or any
          issuer of Attributable Securities and any and all other
          corporate acts or proceedings, whether of a similar
          character or otherwise (collectively, including any
          Distribution Events, collectively, "Reorganizations").

                                          -3-






                    (b)  Spin-Offs.  If the Board of Directors authorizes
          any Distribution Event or other Reorganization as a result
          of which holders of Shares (as defined in Attachment I)
                                                    ------------
          become entitled, in their capacities as holders, to receive
          Marketable Securities, the Board of Directors shall, to the
          extent reasonably practicable, cause the Company to provide
          for or require: (i) that the issuer(s) of such Marketable
          Securities shall undertake to issue and deliver to Optionee,
          upon any subsequent exercise of the Stock Option, such
          Marketable Securities as Optionee would have received if
          Optionee had so exercised the Stock Option prior to such
          Distribution Event or other Reorganization and had
          participated therein (and in any and all subsequent
          Distribution Events or other Reorganizations) to the maximum
          extent allowed to holders of Shares (including any
          Attributable Securities) outstanding at the time of such
          Distribution Event or other Reorganization; (ii) that such
          Marketable Securities shall be so issued and delivered to
          Optionee pursuant to an effective registration statement
          under the Securities Act of 1933, as amended, or otherwise
          free of any restriction on resale thereof by Optionee, other
          than any restriction on resale arising from Optionee's being
          an Affiliate or Insider (as such terms are defined in the
          Plan) of such issuer; (iii) that such Marketable Securities
          shall be so issued and delivered without any agreement,
          condition, payment or other consideration being required of
          Optionee or the Company; (iv) that such issuer(s) shall at
          all times reserve for issuance a sufficient amount of such
          Marketable Securities to fulfill all obligations
          contemplated hereunder; and (v) that upon each such
          issuance, such Marketable Securities shall be duly
          authorized, validly issued, fully paid and nonassessable.
          The Company shall also provide for or require that: (x) in
          the event any such issuer shall fail or be unable to issue
          and deliver to Optionee any Marketable Securities as
          provided in the preceding sentence, such issuer shall be
          obligated, in lieu of issuing and delivering such Marketable
          Securities, to pay to Optionee in cash, immediately upon
          exercise of the Stock Option, the Market Value of such
          Marketable Securities determined as of the date of exercise
          of the Stock Option; and (y) in the event the Company is
          obligated to make a cash payment to Optionee pursuant to
          Paragraph 8(b), such issuer shall be obligated to reimburse
          the Company for a part of such payment proportionate to the
          Distributed Cash Value attributable to Attributable
          Securities of such issuer compared to the total amount of
          Distributed Cash Value.

                    (c)  Right to Repurchase Stock Option.  Upon receipt of
          a notice of exercise, the Company shall have the right but
          not the obligation to repurchase, and thereby to satisfy all
          of the Company's obligations under, the Stock Option as to
          the number of Option Shares as to which the Stock Option is
          exercised by paying Optionee in cash an amount, net of any

                                          -4-






          taxes required to be withheld, equal to the sum of (A) the
          product of (i) the number of Option Shares as to which the
          Stock Option is exercised multiplied by (ii) the amount,
          determined as of such date of exercise, equal to the
          remainder of (x) the Market Value of one Option Share minus
          (y) the Option Price plus (B) the amount of cash, if any,
          payable to Optionee pursuant to Paragraph 8(b).

               8.   ADJUSTMENTS.
                    -----------

                    (a)  In the event of any one or more Distribution
          Events or other Reorganizations affecting the Stock Option
          and not already adjusted for under Paragraph 7, the Option
          Price and the number of Option Shares subject to the Stock
          Option shall be appropriately adjusted by the Board of
          Directors.  In addition, the Board of Directors shall, as
          permitted by Section 3.2, Section 16.2 and other provisions
          of the Plan, construe and interpret the Plan and this Stock
          Option Grant and make all appropriate adjustments in order
          to prevent dilution or enlargement of the benefits or
          potential benefits intended to be made available to Optionee
          under this Stock Option Grant and the Plan.

                    (b)  Without limitation to the foregoing, in the event
          that the amount of Distributed Cash Value as of any date of
          exercise of the Stock Option is equal to or greater than
          $8.8438 per Option Share, the Option Price shall be deemed
          to be $.01 per Option Share and the Company, in addition to
          issuing Option Shares to Optionee, shall pay to Optionee in
          respect of each Option Share as to which the Stock Option is
          exercised an amount of cash equal to the remainder of (i)
          such amount of Distributed Cash Value per Option Share minus
          (ii) $8.8438.

               9.   NO RIGHTS IN OPTION SHARES.  Optionee shall have no
                    --------------------------
          rights as a stockholder in respect of Option Shares until such
          Optionee becomes the holder of record of such Option Shares.

               10.  OPTION SHARES RESERVED.  The Company shall at all times
                    ----------------------
          during the Option Period reserve and keep available such number
          of Shares as will be sufficient to satisfy the requirements of
          this Stock Option.











                                          -5-






               11.  NONTRANSFERABILITV OF STOCK OPTION.  The Stock Option
                    ----------------------------------
          granted pursuant to this Stock Option Grant is not transferable
          other than by will, the laws of descent and distribution or by
          qualified domestic relations order.  The Stock Option will be
          exercisable during Optionee's lifetime only by Optionee or by
          Optionee's guardian or legal representative.  No right or benefit
          hereunder shall in any manner be liable for or subject to any
          debts, contracts, liabilities, or torts of Optionee.

               12.  AMENDMENT AND TERMINATION.  No amendment or termination
                    -------------------------
          of the Stock Option shall be made by the Board of Directors or
          the Committee (as defined in the Plan) at any time without the
          written consent of Optionee.  No amendment of the Plan will
          adversely affect the rights, privileges and options of Optionee
          under the Stock Option without the written consent of Optionee.

               13.  NO GUARANTEE OF EMPLOYMENT.  The Stock Option shall not
                    --------------------------
          confer upon Optionee any right with respect to continuance of
          Employment or other service with the Company or any Subsidiary or
          Affiliate, nor shall it interfere in any way with any right the
          Company or any Subsidiary or Affiliate would otherwise have to
          terminate such Optionee's Employment or other service at any
          time.

               14.  WITHHOLDING OF TAXES.  The Company shall have the right
                    --------------------
          to deduct or withhold, or require Optionee to remit to the
          Company, an amount sufficient to satisfy all federal, state and
          local taxes, domestic or foreign, required by law or regulation
          to be withheld with respect to any taxable event arising under
          this Stock Option Grant or any exercise or other action or event
          hereunder.

               15.  NO GUARANTEE OF TAX CONSEQUENCES.  Neither the Company
                    --------------------------------
          nor any Subsidiary or Affiliate, nor the Board of Directors or
          any Committee, makes any commitment or guarantee that any federal
          or state tax treatment will apply or be available to any person
          eligible for benefits under the Stock Option.

               16.  SEVERABILITY.  In the event that any provision of the
                    ------------
          Stock Option shall be held illegal, invalid, or unenforceable for
          any reason, such provision shall be fully severable, but shall
          not affect the remaining provisions of the Stock Option, and the
          Stock Option shall be construed and enforced as if the illegal,
          invalid, or unenforceable provision had never been included
          herein.

               17.  GOVERNING LAW.  The Stock Option shall be construed in
                    -------------
          accordance with the laws of the State of Texas to the extent

                                          -6-






          federal law does not supersede and preempt Texas law.

          Executed effective as of the 9th day of September, 1999.

                                     "COMPANY"

                                     KAISER ALUMINUM CORPORATION

                                     By:   /s/ Raymond J. Milchovich
                                     Printed Name:  Raymond J. Milchovich
                                     Title:  President and COO

                                     KAISER ALUMINUM & CHEMICAL CORPORATION

                                     By:   /s/ Raymond J. Milchovich
                                     Printed Name:  Raymond J. Milchovich
                                     Title:  President and COO


          Accepted effective as of the 9th day of September, 1999.

                                             "OPTIONEE"

                                             /s/  Joseph A. Bonn
                                             Printed Name:  Joseph A. Bonn
                                             Title:  Vice President






























                                          -7-






                                                               ATTACHMENT I

                            TIME-BASED STOCK OPTION GRANT

                       DEFINITIONS APPLICABLE TO CERTAIN TERMS

          "AFFILIATE" -- see Section 2.1 of the Plan.

          "ATTRIBUTABLE SECURITIES" -- see the definition of "Option
          Share".

          "CAUSE" -- see Paragraph 6(a) of this Stock Option Grant.

          "CHANGE IN CONTROL" means a change in control of KAC that would
          be required to be reported in response to item 6(e) of Schedule
          14A of Regulation 14A under the Securities Exchange Act of 1934,
          as amended, assuming such Schedule, Regulation and Act were
          applicable to KAC as in effect on April 15, 1998.

          "DISABILITY" -- See Section 2.12 of the Plan.

          "DISTRIBUTED CASH VALUE" means, as of any determination date, the
          aggregate amount of cash (other than regular quarterly cash
          dividends, if any) plus the aggregate value, as determined by the
          Board of Directors as of the date of distribution, of all
          property (other than cash and Attributable Securities)
          distributed or set aside for distribution to the holder of one
          Original Share and all Attributable Securities, if any, during
          the period commencing January 1, 1999 and ending on the
          determination date.

          "DISTRIBUTION EVENTS" means any and all distributions, dividends,
          recapitalizations, forward or reverse splits, reorganizations,
          mergers, consolidations, spin-offs, combinations, repurchases,
          share exchanges, or other similar or substantially equivalent
          corporate transactions or events in which the holder of a
          security becomes, as such, entitled to receive cash, securities
          or other property in addition to or in exchange for or upon
          conversion of such security.

          "EMPLOYMENT" -- see Paragraph 6 of this Stock Option Grant.

          "INSIDER" -- see Section 2.19 of the Plan.

          "KAC" -- see Paragraph 1 of this Stock Option Grant.

          "KACC" -- see Paragraph 1 of this Stock Option Grant.

          "MARKET VALUE" means, as of any Trading Day, the average of the
          highest and lowest sales prices as reported by the consolidated
          tape (or, if such prices are not quoted, the average of the
          quoted closing bid and asked prices) on such Trading Day for one
          Option Share (including, as applicable, the Market Values of any
          Attributable Securities).  In the event that sales prices or
          closing bid and asked prices are not quoted on a particular

                                          B-1






          Trading Day, the Market Value for that Trading Day shall be
          deemed to be the Market Value for the immediately preceding
          Trading Day.  In the event that any Attributable Security shall
          cease to be a Marketable Security, it shall thereupon be deemed
          to have no further Market Value and shall be deemed instead to
          have, as of the date it ceases to be a Marketable Security, such
          Distributed Cash Value as shall be determined by the Board of
          Directors.

          "MARKETABLE SECURITIES" means securities (a) of a class that is
          registered under the Securities Exchange Act of 1934, as amended,
          (b) for which sales prices or bid and asked prices are regularly
          quoted and (c) that, if issued and delivered to Optionee upon
          exercise of the Stock Option, would not be subject to any
          restriction on resale, other than any restriction arising from
          Optionee's being an Affiliate or Insider (as such terms are
          defined in the Plan) of the issuer of such Marketable Securities.

          "OPTION PERIOD" -- see Paragraph 2 of this Stock Option Grant.

          "OPTION PRICE" -- see Paragraph 3 of this Stock Option Grant.

          "OPTION SHARE" means (a) one Share as constituted on January 1,
          1999 (an "Original Share") and (b) in the event of any one or
          more successive Distribution Events, all Marketable Securities
          ("Attributable Securities") into which or for which an Original
          Share or any Attributable Securities may be converted or
          exchanged or that a Stockholder may have the right to receive in
          respect of such Original Share or Attributable Securities.

          "OPTIONEE" -- see Paragraph 1 of this Stock Option Grant.

          "ORIGINAL SHARE" -- see the definition of "Option Share"

          "PLAN" -- see Paragraph 1 of this Stock Option Grant.

          "QUALIFIED SERVICE PERIOD" means the period from and including
          January 1, 1999 through and including the earlier of (a) December
          31, 2001 or (b) the date immediately preceding the date of
          termination of Optionee's Employment; provided, however, that if
          Optionee's Employment has not terminated prior to the date that a
          proposed transaction is announced by KAC that would cause KAC to
          experience a Change in Control  and such transaction is
          subsequently consummated so that KAC experiences a Change in
          Control, then Optionee's Qualified Service Period shall be deemed
          to continue through the date of consummation of such transaction
          and Change in Control unless Optionee's Employment is terminated
          by the Company for Cause or by Optionee.

          "REORGANIZATION" -- see Section 7(a) of this Stock Option Grant.

          "SHARE" means one share of common stock, par value $.01 per
          share, of KAC.

          "STOCK OPTION" -- see Paragraph 1 of this Stock Option Grant.

                                          B-2






          "SUBSIDIARY" -- see Section 2.32 of the Plan.  For avoidance of
          doubt, KACC shall be considered a Subsidiary of KAC so long as
          KAC has a majority voting interest in KACC, and KAC shall be
          considered to have a majority voting interest whether it holds
          such interest directly or indirectly through one or more
          Subsidiaries.

          "TRADING DAY" means as to an Option Share (including any
          Attributable Securities) a day when the New York Stock Exchange
          (or other principal securities exchange, including Nasdaq, on
          which such securities are traded) is open.













































                                          B-3

                          TIME-BASED STOCK OPTION GRANT
                             PURSUANT TO THE KAISER
                        1997 OMNIBUS STOCK INCENTIVE PLAN

         1.     GRANT OF STOCK OPTION. Kaiser Aluminum Corporation ("KAC") and
Kaiser Aluminium & Chemical Corporation ("KACC"), both Delaware corporations
(collectively, the "Company"), hereby evidence that the Company has granted to
J. KENT FRIEDMAN ("Optionee") the right, privilege and option as herein set
forth (the "Stock Option") to purchase 167,000 shares of common stock, $.01 par
value per share, of KAC (as more fully defined in Attachment I -- "Definitions
Applicable to Certain Terms", which is incorporated herein and made a part
hereof, the "Option Shares") in accordance with the terms of this document (this
"Stock Option Grant").

         The Stock Option is granted pursuant to the Kaiser 1997 Omnibus Stock
Incentive Plan (the "Plan") and is subject to the provisions of the Plan, a copy
of which has been furnished to Optionee and which is hereby incorporated in and
made a part of this Stock Option Grant, as well as to the provisions of this
Stock Option Grant. By acceptance of the Stock Option, Optionee agrees to be
bound by all of the terms, provisions, conditions and limitations of the Plan
and this Stock Option Grant.

         All capitalized terms used herein shall have the meanings provided in
the Plan document unless otherwise specifically provided in this Stock Option
Grant, including Attachment I. The Stock Option is a Nonqualified Stock Option
under the Plan and is not intended to qualify as an "incentive stock option"
within the meaning of Section 422 of the Code.

         All Option Shares, when issued to Optionee upon the exercise of this
Stock Option, shall be fully paid and nonassessable.

         2.     OPTION TERM. Subject to earlier termination as provided herein,
or in the Plan, the Stock Option shall expire on December 1, 2009. The period
during which the Stock Option is in effect shall be referred to as the "Option
Period".

         3.     OPTION EXERCISE PRICE. The exercise price per Option Share
(including any Attributable Securities, as defined in Attachment I) (the "Option
Price") at which Optionee may purchase such Option Shares subject to the Stock
Option shall be equal to the remainder of (i) $9.00 per Option Share minus (ii)
the amount per Option Share of Distributed Cash Value (as defined in Attachment
I) determined as of the date of exercise. Such Option Price shall also be
subject to adjustment as provided in the Plan and this Stock Option Grant. The
Company shall notify Optionee within thirty (30) days of each change in the
Option Price.

         4.     VESTING. The Stock Option may be exercised during the Option
Period only to the extent it has become a "Vested Option". Provided Optionee's
Qualified Service Period (as defined in Attachment I) has not previously
terminated, the Stock Option shall become a "Vested Option" as to 20% of the
Option Shares on the first anniversary of the date of this Agreement, and with
respect to an additional 20% of the Option Shares on each of the second, third,
fourth, and fifth anniversaries of the date of this Agreement, so that the Stock
Option shall be fully exercisable with respect to all of the Option Shares on
such fifth anniversary. Notwithstanding the preceding sentence, if KAC
experiences a Change in Control (as defined in Attachment I) prior to December
1, 2004 and prior to the end of Optionee's Qualified Service Period, then the
Stock Option shall become a fully Vested Option, exercisable as to all Option
Shares from and including the date of the Change in Control until and including
the first anniversary of the Change in Control, upon which anniversary the
Option Period shall terminate and this Stock Option shall expire.

         5.     PARACHUTE PAYMENT GROSS-UP. To the extent that the acceleration
of the vesting of Optionee's Stock Option as a result of a Change of Control of
KAC subjects Optionee to federal income, excise, or other tax at a rate above
the rate ordinarily applicable upon the exercise of the Stock Option ("Penalty
Tax"), whether as a result of the provisions of sections 280G and 4999 of the
Code, any similar or analogous provisions of any statute adopted subsequent to
the date hereof, or otherwise, then KAC shall pay to Optionee an amount (the
"Gross-up Amount") such that the net amount realized by Employee upon exercise
of the Stock Option, after paying any applicable Penalty Tax and any federal or
state income tax on such Gross-up Amount, shall be equal to the amount that
Employee would have realized if such Penalty Tax were not applicable to the
Stock Option.

         6.     METHOD OF EXERCISE. To exercise the Stock Option, Optionee shall
deliver written notice to the Company stating the number of Option Shares with
respect to which the Stock Option is being exercised together with payment for
such Option Shares. Payment shall be made (i) in cash or its equivalent, (ii) by
tendering previously acquired Shares having an aggregate Fair Market Value (as
defined in the Plan) at the time of exercise equal to the total Option Price
(provided that the Shares which are tendered must have been held by Optionee for
at least six months prior to their tender to satisfy the Option Price) or (iii)
by a combination of (i) and (ii).

         7.     TERMINATION OF OPTIONEE'S EMPLOYMENT. Termination of Optionee's
employment as a regular full-time salaried employee of KAC, an Affiliate, a
Subsidiary (as defined in Attachment I), or any branch, unit or division of KAC
or any Subsidiary ("Employment") shall affect Optionee's rights under the Stock
Option as follows:

                (a) Termination by the Company for Cause. If Optionee's
         Employment is terminated by the Company at any time for Cause, then (i)
         the Option Period shall terminate and (ii) Optionee's right to exercise
         the Stock Option shall terminate, in each case immediately upon
         Optionee's becoming subject to termination of Employment for Cause.
         Optionee shall be terminated for "Cause" if terminated as a result of
         (A) Optionee's gross negligence or willful misconduct in the
         performance of the duties and services required of Optionee pursuant to
         the Employment Agreement, (B) Optionee's conviction of a felony, (C)
         Optionee's commission of an act of fraud against KAC, an Affiliate, or
         a Subsidiary, (D) Optionee's breach of any material provision of the
         Employment Agreement which remains uncorrected for 30 days following
         written notice to Optionee by his employer of such breach, (E)
         Optionee's failure to substantially perform his duties under the
         Employment Agreement, other than as a result of illness or injury,
         which failure remains uncorrected for 30 days following written notice
         to Optionee by his employer of such failure, or (F) Optionee's material
         failure to comply with his employer's code of business conduct, which
         failure remains uncorrected for 30 days following written notice to
         Optionee by his employer of such failure.

                (b) Involuntary Termination Other than for Cause. If
         Optionee's Employment is terminated prior to December 1, 2009 other
         than as a result of termination of Optionee's Employment for Cause, and
         other than by reason of Voluntary Termination (as defined in Attachment
         I) then (i) the Stock Option and the Option Period shall not terminate
         and (ii) the Stock Option shall thereafter be exercisable as to all
         Option Shares from and including the date of such termination through
         and including the end of the Option Period.

                (c) Voluntary Termination. If Optionee's Qualified Service
         Period terminates prior to December 1, 2009 by reason of a Voluntary
         Termination, then the Stock Option and the Option Period shall not
         terminate but the Stock Option shall thereafter be exercisable only to
         the extent it has become a Vested Option as of the date of termination
         of Optionee's Qualified Service Period and otherwise is exercisable in
         accordance with the provisions of this Stock Option Grant and the Plan.

The Stock Option may be exercised by Optionee or, in the case of death, by the
executor or administrator of Optionee's estate, or the person or persons to whom
Optionee's rights under the Stock Option shall pass by will or by the applicable
laws of descent and distribution, or in the case of Disability, by Optionee's
personal representative.

         8.     REORGANIZATIONS; REPURCHASE OF STOCK OPTION.

                (a) Freedom to Reorganize the Company and Subsidiaries. The
         existence of the Stock Option shall not affect in any way the right or
         power of the Company and its Subsidiaries or the issuers of
         Attributable Securities or its or their stockholders to make or
         authorize any and all Distribution Events (as defined in Attachment I)
         and any and all other adjustments, recapitalizations, reorganizations
         or other changes in the capital structure or business of the Company or
         its Subsidiaries or the issuers of Attributable Securities, any and all
         issuances of bonds, debentures, common stock, preferred or prior
         preference stock, warrants, rights or other securities, whether or not
         affecting the Option Shares or the rights thereof, any dissolution or
         liquidation of the Company or any Subsidiary, any sale or other
         divestiture or transfer of all or any part of the assets or business of
         the Company or any Subsidiary or any issuer of Attributable Securities
         and any and all other corporate acts or proceedings, whether of a
         similar character or otherwise (collectively, including any
         Distribution Events, collectively, "Reorganizations").

                (b) Spin-Offs. If the Board of Directors authorizes any
         Distribution Event or other Reorganization as a result of which holders
         of Shares (as defined in Attachment I) become entitled, in their
         capacities as holders, to receive Marketable Securities, the Board of
         Directors shall, to the extent reasonably practicable, cause the
         Company to provide for or require: (1) that the issuer(s) of such
         Marketable Securities shall undertake to issue and deliver to Optionee,
         upon any subsequent exercise of the Stock Option, such Marketable
         Securities as Optionee would have received if Optionee had so exercised
         the Stock Option prior to such Distribution Event or other
         Reorganization and had participated therein (and in any and all
         subsequent Distribution Events or other Reorganizations) to the maximum
         extent allowed to holders of Shares (including any Attributable
         Securities) outstanding at the time of such Distribution Event or other
         Reorganization; (ii) that such Marketable Securities shall be so issued
         and delivered to Optionee pursuant to an effective registration
         statement under the Securities Act of 1933, as amended, or otherwise
         free of any restriction on resale thereof by Optionee, other than any
         restriction on resale arising from Optionee's being an Affiliate or
         Insider (as such terms are defined in the Plan) of such issuer; (iii)
         that such Marketable Securities shall be so issued and delivered
         without any agreement, condition, payment or other consideration being
         required of Optionee or the Company; (iv) that such issuer(s) shall at
         all times reserve for issuance a sufficient amount of such Marketable
         Securities to fulfill all obligations contemplated hereunder; and (v)
         that upon each such issuance, such Marketable Securities shall be duly
         authorized, validly issued, fully paid and nonassessable. The Company
         shall also provide for or require that: (x) in the event any such
         issuer shall fail or be unable to issue and deliver to Optionee any
         Marketable Securities as provided in the preceding sentence, such
         issuer shall be obligated, in lieu of issuing and delivering such
         Marketable Securities, to pay to Optionee in cash, immediately upon
         exercise of the Stock Option, the Market Value of such Marketable
         Securities determined as of the date of exercise of the Stock Option;
         and (y) in the event the Company is obligated to make a cash payment to
         Optionee pursuant to Paragraph 8(b), such issuer shall be obligated to
         reimburse the Company for a part of such payment proportionate to the
         Distributed Cash Value attributable to Attributable Securities of such
         issuer compared to the total amount of Distributed Cash Value.

                (c) Right to Repurchase Stock Option. Upon receipt of a notice
         of exercise, the Company shall have the right but not the obligation to
         repurchase, and thereby to satisfy all of the Company's obligations
         under, the Stock Option as to the number of Option Shares as to which
         the Stock Option is exercised by paying Optionee in cash an amount, net
         of any taxes required to be withheld, equal to the sum of (A) the
         product of (i) the number of Option Shares as to which the Stock Option
         is exercised multiplied by (ii) the amount, determined as of such date
         of exercise, equal to the remainder of (x) the Market Value of one
         Option Share minus (y) the Option Price plus (B) the amount of cash, if
         any, payable to Optionee pursuant to Paragraph 8(b).

         9.     ADJUSTMENTS.

                (a) In the event of any one or more Distribution Events or
         other Reorganizations affecting the Stock Option and not already
         adjusted for under Paragraph 7, the Option Price and the number of
         Option Shares subject to the Stock Option shall be appropriately
         adjusted by the Board of Directors. In addition, the Board of Directors
         shall, as permitted by Section 3.2, Section 16.2 and other provisions
         of the Plan, construe and interpret the Plan and this Stock Option
         Grant and make all appropriate adjustments in order to prevent dilution
         or enlargement of the benefits or potential benefits intended to be
         made available to Optionee under this Stock Option Grant and the Plan.

                (b) Without limitation to the foregoing, in the event that the
         amount of Distributed Cash Value as of any date of exercise of the
         Stock Option is equal to or greater than $9.00 per Option Share, the
         Option Price shall be deemed to be $.01 per Option Share and the
         Company, in addition to issuing Option Shares to Optionee, shall pay to
         Optionee in respect of each Option Share as to which the Stock Option
         is exercised an amount of cash equal to the remainder of (i) such
         amount of Distributed Cash Value per Option Share minus (ii) $9.00.

         10.    NO RIGHTS IN OPTION SHARES.  Optionee shall have no rights as
a stockholder in respect of Option Shares until such Optionee becomes the holder
of record of such Option Shares.

         11.    OPTION SHARES RESERVED.  The Company shall at all times during
the Option Period reserve and keep available such number of Shares as will be
sufficient to satisfy the requirements of this Stock Option.

         12.    NONTRANSFERABILILY OF STOCK OPTION. The Stock Option granted
pursuant to this Stock Option Grant is not transferable other than by will, the
laws of descent and distribution or by qualified domestic relations order. The
Stock Option will be exercisable during Optionee's lifetime only by Optionee or
by Optionee's guardian or legal representative. No right or benefit hereunder
shall in any manner be liable for or subject to any debts, contracts,
liabilities, or torts of Optionee.

         13.    AMENDMENT AND TERMINATION. No amendment or termination of the
Stock Option shall be made by the Board of Directors or the Committee (as
defined in the Plan) at any time without the written consent of Optionee. No
amendment of the Plan will adversely affect the rights, privileges and options
of Optionee under the Stock Option without the written consent of Optionee.

         14.    NO GUARANTEE OF EMPLOYMENT. The Stock Option shall not confer
upon Optionee any right with respect to continuance of Employment or other
service with the Company or any Subsidiary or Affiliate, nor shall it interfere
in any way with any right the Company or any Subsidiary or Affiliate would
otherwise have to terminate such Optionee's Employment or other service at
any time.

         15.    WITHHOLDING OF TAXES. The Company shall have the right to deduct
or withhold, or require Optionee to remit to the Company, an amount sufficient
to satisfy all federal, state and local taxes, domestic or foreign, required by
law or regulation to be withheld with respect to any taxable event arising under
this Stock Option Grant or any exercise or other action or event hereunder.

         16.    NO GUARANTEE OF TAX CONSEQUENCES.  Neither the Company nor any
Subsidiary or Affiliate, nor the Board of Directors or any Committee, makes any
commitment or guarantee that any federal or state tax treatment will apply or be
available to any person eligible for benefits under the Stock Option.

         17.    SEVERABILITY. In the event that any provision of the Stock
Option shall be held illegal, invalid, or unenforceable for any reason, such
provision shall be fully severable, but shall not affect the remaining
provisions of the Stock Option, and the Stock Option shall be construed and
enforced as if the illegal, invalid, or unenforceable provision had never been
included herein.

         18.    GOVERNING LAW.  The Stock Option shall be construed in
accordance with the laws of the State of Texas to the extent federal law does
not supersede and preempt Texas law.

Executed effective as of the 1st day of December, 1999.


"COMPANY"

KAISER ALUMINUM CORPORATION

By:   /s/  Raymond J. Milchovich
Printed Name:  Raymond J. Milchovich
Title:  President and COO

KAISER ALUMINUM & CHEMICAL
CORPORATION

By:   /s/  Raymond J. Milchovich
Printed Name:  Raymond J. Milchovich
Title:  President and COO
KAISER ALUMINUM & CHEMICAL
CORPORATION

Accepted effective as of the 1st day of December, 1999.


"OPTIONEE"

/s/  J. Kent Friedman
Printed Name:  J. Kent Friedman
Title:


                                                                    ATTACHMENT I

                          TIME-BASED STOCK OPTION GRANT

                     DEFINITIONS APPLICABLE TO CERTAIN TERMS

"AFFILIATE" -- see Section 2.1 of the Plan.

"ATTRIBUTABLE SECURITIES" -- see the definition of "Option Share".

"CAUSE" -- see Paragraph 6(a) of this Stock Option Grant.

"CHANGE IN CONTROL" means (a) the sale, lease, conveyance, or other disposition
of all or substantially all of KAC's assets as an entirety or substantially as
an entirety to any person, entity, or group of persons acting in concert other
than in the ordinary course of business; (b) any transaction or series of
related transactions (as a result of a tender offer, merger, consolidation or
otherwise) that results in any person (as defined in Section 13(h)(8)(E) under
the Securities Exchange Act of 1934) becoming the beneficial owner (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, or more than 50% of the aggregate voting power of all classes of
common equity of KAC, except if such Person is (i) a Subsidiary, (ii) an
employee stock ownership plan for employees of KAC or (iii) a company formed to
hold KAC's common equity securities and whose shareholders constituted, at the
time such company became such holding company, substantially all the
shareholders of KAC; or (c) a change in the composition of KAC's Board of
Directors over a period of thirty-six (36) consecutive months or less such that
a majority of the then current Board members ceases to be comprised of
individuals who either (x) have been Board members continuously since the
beginning of such period, or (y) have been elected or nominated for election as
Board members during such period by at least a majority of the Board members
described in clause (x) who were still in office at the time such election or
nomination was approved by the Board.

"DISABILITY" -- See Section 2.12 of the Plan.

"DISTRIBUTED CASH VALUE" means, as of any determination date, the aggregate
amount of cash (other than regular quarterly cash dividends, if any) plus the
aggregate value, as determined by the Board of Directors as of the date of
distribution, of all property (other than cash and Attributable Securities)
distributed or set aside for distribution to the holder of one Original Share
and all Attributable Securities, if any, during the period commencing December
1, 1999 and ending on the determination date.

"DISTRIBUTION EVENTS" means any and all distributions, dividends,
recapitalizations, forward or reverse splits, reorganizations, mergers,
consolidations, spin-offs, combinations, repurchases, share exchanges, or other
similar or substantially equivalent corporate transactions or events in which
the holder of a security becomes, as such, entitled to receive cash, securities
or other property in addition to or in exchange for or upon conversion of such
security.

"EMPLOYMENT" -- see Paragraph 6 of this Stock Option Grant.

"EMPLOYMENT AGREEMENT" means the Executive Employment Agreement, dated December
1, 1999 between MAXXAM, Inc. and Optionee.

"INSIDER" -- see Section 2.19 of the Plan.

"KAC" -- see Paragraph 1 of this Stock Option Grant.

"KACC" -- see Paragraph 1 of this Stock Option Grant.

"MARKET VALUE" means, as of any Trading Day, the average of the highest and
lowest sales prices as reported by the consolidated tape (or, if such prices are
not quoted, the average of the quoted closing bid and asked prices) on such
Trading Day for one Option Share (including, as applicable, the Market Values of
any Attributable Securities). In the event that sales prices or closing bid and
asked prices are not quoted on a particular Trading Day, the Market Value for
that Trading Day shall be deemed to be the Market Value for the immediately
preceding Trading Day. In the event that any Attributable Security shall cease
to be a Marketable Security, it shall thereupon be deemed to have no further
Market Value and shall be deemed instead to have, as of the date it ceases to be
a Marketable Security, such Distributed Cash Value as shall be determined by the
Board of Directors.

"MARKETABLE SECURITIES" means securities (a) of a class that is registered under
the Securities Exchange Act of 1934, as amended, (b) for which sales prices or
bid and asked prices are regularly quoted and (c) that, if issued and delivered
to Optionee upon exercise of the Stock Option, would not be subject to any
restriction on resale, other than any restriction arising from Optionee's being
an Affiliate or Insider (as such terms are defined in the Plan) of the issuer of
such Marketable Securities.

"OPTION PERIOD" -- see Paragraph 2 of this Stock Option Grant.

"OPTION PRICE" -- see Paragraph 3 of this Stock Option Grant.

"OPTION SHARE" means (a) one Share as constituted on December 1, 1999 (an
"Original Share") and (b) in the event of any one or more successive
Distribution Events, all Marketable Securities ("Attributable Securities") into
which or for which an Original Share or any Attributable Securities may be
converted or exchanged or that a Stockholder may have the right to receive in
respect of such Original Share or Attributable Securities.

"OPTIONEE" -- see Paragraph 1 of this Stock Option Grant.

"ORIGINAL SHARE" -- see the definition of "Option Share".

"PLAN" -- see Paragraph 1 of this Stock Option Grant.

"QUALIFIED SERVICE PERIOD" means the period from and including December 1, 1999
through and including the earlier of (a) November 30, 2004 or (b) the date
immediately preceding the date of termination of Optionee's Employment by reason
of Voluntary Termination.

"REORGANIZATION" -- see Section 7(a) of this Stock Option Grant.

"SHARE" means one share of common stock, par value $.01 per share, of KAC.

"STOCK OPTION" - see Paragraph 1 of this Stock Option Grant.

"SUBSIDIARY" - see Section 2.32 of the Plan. For avoidance of doubt, KACC shall
be considered a Subsidiary of KAC so long as KAC has a majority voting interest
in KACC, and KAC shall be considered to have a majority voting interest whether
it holds such interest directly or indirectly through one or more Subsidiaries.

"TRADING DAY" means as to an Option Share (including any Attributable
Securities) a day when the New York Stock Exchange (or other principal
securities exchange, including Nasdaq, on which such securities are traded) is
open.

"VOLUNTARY TERMINATION" means termination of Optionee's employment by Optionee,
other than (a) a termination because of a material breach by Optionee's employer
of any material provision of the Employment Agreement which remains uncorrected
for 30 days following written notice of such breach by Optionee to his employer,
(b) a termination within six months of a material reduction in Optionee's rank
or responsibility with his employer which remains uncorrected for 30 days
following written notice of such reduction by Optionee to his employer, or (c) a
termination within 12 months of a "Change of Control" of his employer as such
term is defined in the Employment Agreement.








                                                            Exhibit 10.3



                                NON-EMPLOYEE DIRECTOR
                                  STOCK OPTION GRANT
                                PURSUANT TO THE KAISER
                          1997 OMNIBUS STOCK INCENTIVE PLAN


               1)   GRANT OF STOCK OPTION.  Kaiser Aluminum Corporation
                    ---------------------
          ("KAC") and Kaiser Aluminum & Chemical Corporation ("KACC"), both
          Delaware corporations (collectively, the "Company"), hereby
          evidence that the Company has granted to __________("Optionee")
          the right, privilege and option as herein set forth (the "Stock
          Option") to purchase ______ shares of common stock, $.01 par
          value per share, of KAC (as more fully defined in Attachment I -
                                                            ------------
          "Definitions Applicable to Certain Terms", which is incorporated
          herein and made a part hereof, the "Option Shares") in accordance
          with the terms of this document (this "Stock Option Grant").

               The Stock Option is granted pursuant to the Kaiser 1997
          Omnibus Stock Incentive Plan (the "Plan") and is subject to the
          provisions of the Plan, a copy of which has been furnished to
          Optionee and which is hereby incorporated in and made a part of
          this Stock Option Grant, as well as to the provisions of this
          Stock Option Grant.  By acceptance of the Stock Option, Optionee
          agrees to be bound by all of the terms, provisions, conditions
          and limitations of the Plan and this Stock Option Grant.

               All capitalized terms used herein shall have the meanings
          provided in the Plan document unless otherwise specifically
          provided in this Stock Option Grant, including Attachment I.  The
                                                         -------------
          Stock Option is a Nonqualified Stock Option under the Plan and is
          not intended to qualify as an "incentive stock option" within the
          meaning of Section 422 of the Code.

               All Option Shares, when issued to Optionee upon the exercise
          of this Stock Option, shall be fully paid and nonassessable.

               2)   OPTION TERM.  Subject to earlier termination as
                    -----------
          provided herein, or in the Plan, the Stock Option shall expire on
          __________ ("Expiration Date").  The period during which the
          Stock Option is in effect shall be referred to as the "Option
          Period".

               3)   OPTION EXERCISE PRICE.  The exercise price per Option
                    ---------------------
          Share (the "Option Price") at which Optionee may purchase such
          Option Shares subject to the Stock Option shall be $_____per
          Option Share.  Such Option Price shall be subject to adjustment
          as provided in the Plan and this Stock Option Grant.  The Company
          shall notify Optionee within thirty (30) days of any change in






          the Option Price.

               4)   VESTING.  The Stock Option may be exercised during the
                    -------
          Option Period only to the extent it has become a "Vested Option."
          The Stock Option shall become a Vested Option as to all of the
          Option Shares as of 12:01 a.m. Houston time on _________.

               5)   METHOD OF EXERCISE.  To exercise the Stock Option,
                    ------------------
          Optionee shall deliver written notice to the Company stating the
          number of Option Shares with respect to which the Stock Option is
          being exercised together with payment for such Option Shares.
          Payment shall be made (i) in cash or its equivalent, (ii) by
          tendering previously acquired Shares (as defined in Attachment I)
                                                              ------------
          having an aggregate Fair Market Value (as defined in the Plan) at
          the time of exercise equal to the total Option Price (provided
          that the Shares which are tendered must have been held by
          Optionee for at least six months prior to their tender to satisfy
          the Option Price) or (iii) by a combination of (i) and (ii).

               The Stock Option may be exercised by Optionee or, in the
          case of death, by the executor or administrator of Optionee's
          estate, or the person or persons to whom Optionee's rights under
          the Stock Option shall pass by will or by the applicable laws of
          descent and distribution, or in the case of Disability (as
          defined in the Plan), by Optionee's personal representative.

               6)   TERMINATION OF DIRECTORSHIP.  If Optionee's membership
                    ---------------------------
          on the Board (as defined in the Plan) terminates for any reason,
          the Stock Option shall continue to vest and shall continue to be
          exercisable in accordance with the terms hereof.

               7)   REORGANIZATIONS.   The existence of the Stock Option
                    ---------------
          shall not affect in any way the right or power of the Company and
          its Subsidiaries (as defined in Attachment I) or the issuers of
                                          ------------
          Attributable Securities or its or their stockholders to make or
          authorize any and all Distribution Events (as defined in
          Attachment I) and any and all other adjustments or other changes
          ------------
          in the capital structure or business of the Company or its
          Subsidiaries or the issuers of Attributable Securities (as
          defined in Attachment I), any and all issuances of bonds,
                     ------------
          debentures, common stock, preferred or prior preference stock,
          warrants, rights or other securities, whether or not affecting
          the Option Shares or the rights thereof, any dissolution or
          liquidation of the Company or any Subsidiary, any sale or other
          divestiture or transfer of all or any part of the assets or
          business of the Company or any Subsidiary or any issuer of
          Attributable Securities and any and all other corporate acts or

                                          2






          proceedings, whether of a similar character or otherwise.

               8)   ADJUSTMENTS.  If any one or more Distribution Events
                    -----------
          affects the Shares such that an adjustment in the Stock Option is
          appropriate in order to prevent dilution or enlargement of the
          rights of Optionee, the Board shall make appropriate adjustment
          to the number and kind of Shares or securities issuable in
          respect of the Stock Option and to the Option Price, or if deemed
          appropriate, make provision for the payment of cash or other
          property in respect of the Stock Option.  In addition, the Board
          may make adjustments in the terms and conditions of the Stock
          Option in recognition of unusual or nonrecurring events affecting
          the Company or its financial statements or of changes in
          applicable laws, regulations or accounting principles in order to
          prevent dilution or enlargement of the benefits or potential
          benefits intended to be made available to Optionee under this
          Stock Option Grant and the Plan.

               9)   NO RIGHTS IN OPTION SHARES.  Optionee shall have no
                    --------------------------
          rights as a stockholder in respect of Option Shares until
          Optionee becomes the holder of record of such Option Shares.

               10)  OPTION SHARES RESERVED.  The Company shall at all times
                    ----------------------
          during the Option Period reserve and keep available such number
          of Shares as will be sufficient to satisfy the requirements of
          the Stock Option.

               11)  NONTRANSFERABILITY OF STOCK OPTION.  The Stock Option
                    ----------------------------------
          granted pursuant to this Stock Option Grant is not transferable
          other than by will, the laws of descent and distribution or by
          qualified domestic relations order.  The Stock Option will be
          exercisable during Optionee's lifetime only by Optionee or by
          Optionee's guardian or legal representative.  No right or benefit
          hereunder shall in any manner be liable for or subject to any
          debts, contracts, liabilities, or torts of Optionee.

               12)  AMENDMENT AND TERMINATION.  Except as permitted herein
                    -------------------------
          or by the Plan, no amendment or termination of the Stock Option
          shall be made by the Board at any time without the written
          consent of Optionee.  No amendment of the Plan will adversely
          affect the rights, privileges and options of Optionee under the
          Stock Option without the written consent of Optionee.

               13)  NO GUARANTEE OF DIRECTORSHIP.  The Stock Option shall
                    ----------------------------
          not confer upon Optionee any right with respect to continuance as
          a member of the Board, nor shall it interfere in any way with any
          right the Company would otherwise have to terminate Optionee's
          membership on the Board or other service at any time.


                                          3






               14)  WITHHOLDING OF TAXES.  The Company shall have the right
                    --------------------
          to deduct or withhold, or require Optionee to remit to the
          Company, an amount sufficient to satisfy all federal, state and
          local taxes, domestic or foreign, required by law or regulation
          to be withheld with respect to any taxable event arising under
          this Stock Option Grant or any exercise or other action or event
          hereunder.

               15)  NO GUARANTEE OF TAX CONSEQUENCES.  Neither the Company
                    --------------------------------
          nor the Board makes any commitment or guarantee that any federal
          or state tax treatment will apply or be available to any person
          eligible for benefits under the Stock Option.

               16)  SEVERABILITY.  In the event that any provision of the
                    ------------
          Stock Option shall be held illegal, invalid, or unenforceable for
          any reason, such provision shall be fully severable, but shall
          not affect the remaining provisions of the Stock Option, and the
          Stock Option shall be construed and enforced as if the illegal,
          invalid, or unenforceable provision had never been included
          herein.

               17)  GOVERNING LAW.  The Stock Option shall be construed in
                    -------------
          accordance with the laws of the State of Texas to the extent
          federal law does not supersede and preempt Texas law.




























                                          4






          Executed effective as of the [x day of mo, yr].
                                        ----------------

                                      "COMPANY"

                                      KAISER ALUMINUM CORPORATION


                                      By:
                                         ----------------------------------
                                      Printed Name:
                                                   ------------------------
                                      Title:
                                            -------------------------------

                                      KAISER ALUMINUM & CHEMICAL
                                      CORPORATION

                                      By:
                                         ----------------------------------
                                      Printed Name:
                                                   ------------------------
                                      Title:
                                            -------------------------------


               Accepted effective as of the [x day of mo, yr].
                                             ---------------

                                      "OPTIONEE"


                                      -------------------------------------
                                      Printed Name:
                                                   ------------------------
                                      Title:
                                            -------------------------------










          ---------------
               1 Stock Options granted in May 2000 vest upon the earlier of
          (a) the time when a Share trades at $10.00 or more for 20
          consecutive trading days and at least one year has elapsed since
          the date of grant, and (b) nine years after the date of grant.

               2 Stock Options granted in May 2000 will vest immediately
          upon the death of Optionee and will be exercisable as to all

                                          5






          Option Shares from the date of death through the end of the
          Option Period.  If Optionee ceases to be a member of the Board
          for any other reason, the Stock Option will continue to vest in
          accordance with Paragraph 4 and all Vested Options will be
          exercisable through the end of the Option Period.



















































                                          6






                                                               ATTACHMENT I

                       NON-EMPLOYEE DIRECTOR STOCK OPTION GRANT

                       DEFINITIONS APPLICABLE TO CERTAIN TERMS


          "ATTRIBUTABLE SECURITIES" - see the definition of "Option Share".

          "DISTRIBUTION EVENTS" means any and all distributions, dividends,
          recapitalizations, forward or reverse splits, reorganizations,
          mergers, consolidations, spin-offs, combinations, repurchases,
          share exchanges or other similar corporate transactions or
          events.

          "MARKETABLE SECURITIES" means securities (a) of a class that is
          registered under the Securities Exchange Act of 1934, as amended,
          (b) for which sales prices or bid and asked prices are regularly
          quoted and (c) that, if issued and delivered to Optionee upon
          exercise of the Stock Option, would not be subject to any
          restriction on resale, other than any restriction arising from
          Optionee's being an Affiliate or Insider (as defined in the Plan)
          of the issuer of such Marketable Securities.

          "OPTION SHARE" means (a) one Share as constituted on
          _____________ (an "Original Share") and (b) in the event of any
          one or more successive Distribution Events, all Marketable
          Securities ("Attributable Securities") into which or for which an
          Original Share or any Attributable Securities may be converted or
          exchanged or that a stockholder may have the right to receive in
          respect of such Original Share or Attributable Securities.

          "ORIGINAL SHARE" - see the definition of "Option Share".

          "SHARE" means one share of common stock, par value $.01 per
          share, of KAC.

          "SUBSIDIARY" - see Section 2.32 of the Plan.  For avoidance of
          doubt, KACC shall be considered a Subsidiary of KAC so long as
          KAC has a majority voting interest in KACC, and KAC shall be
          considered to have a majority voting interest whether it holds
          such interest directly or indirectly through one or more
          Subsidiaries.













                                          7

  

5 This schedule contains summary financial information extracted from the consolidated financial statements of the Company for the six months ended June 30, 2000, and is qualified in its entirety by reference to such financial statements. 0000811596 KAISER ALUMINUM CORPORATION 1,000,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 20 0 371 6 480 971 2,024 946 3,199 639 996 0 0 1 88 3,199 1,108 1,108 924 924 40 0 57 35 14 23 0 0 0 23 .29 .29