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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, 1999

                            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 August 6, 1999, the registrant had 79,404,553 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,
                                                                                1999            1998
                                                                      ------------------------------
                                                                                
                                     ASSETS                             (Unaudited)
          Current assets:
               Cash and cash equivalents                              $        26.2   $        98.3
               Receivables                                                    271.7           282.7
               Inventories                                                    524.7           543.5
               Prepaid expenses and other current assets                      132.8           105.5
                                                                      ------------------------------
                    Total current assets                                      955.4         1,030.0

          Investments in and advances to unconsolidated affiliates            101.2           128.3
          Property, plant, and equipment - net                              1,088.0         1,108.7
          Deferred income taxes                                               405.9           377.9
          Other assets                                                        495.7           346.0
                                                                      ------------------------------

                    Total                                             $     3,046.2   $     2,990.9
                                                                      ==============================

                       LIABILITIES & STOCKHOLDERS' EQUITY
          Current liabilities:
               Accounts payable                                       $       148.1   $       173.3
               Accrued interest                                                37.3            37.3
               Accrued salaries, wages, and related expenses                   62.4            73.8
               Accrued postretirement medical benefit obligation -
                    current portion                                            48.2            48.2
               Other accrued liabilities                                      167.3           148.3
               Payable to affiliates                                           79.7            77.1
               Long-term debt - current portion                                  .4              .4
                                                                      ------------------------------
                    Total current liabilities                                 543.4           558.4

          Long-term liabilities                                               670.0           532.9
          Accrued postretirement medical benefit obligation                   687.5           694.3
          Long-term debt                                                      962.3           962.6
          Minority interests                                                  116.4           123.5
          Commitments and contingencies
          Stockholders' equity:
               Common stock                                                      .8              .8
               Additional capital                                             536.7           535.4
               Accumulated deficit                                           (470.9)         (417.0)
                                                                      ------------------------------
                    Total stockholders' equity                                 66.6           119.2
                                                                      ------------------------------

                         Total                                        $     3,046.2   $     2,990.9
                                                                      ==============================

          


              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,
                                                            -----------------------------  -----------------------------
                                                                      1999           1998            1999           1998
                                                            -----------------------------  -----------------------------
                                                                                              
          Net sales                                         $       525.0  $       614.8   $     1,004.4  $     1,211.8
                                                            -----------------------------  -----------------------------

          Costs and expenses:
               Cost of products sold                                473.9          503.5           933.8        1,000.6
               Depreciation and amortization                         24.1           24.9            48.5           50.3
               Selling, administrative, research and
                    development, and general                         26.3           31.1            54.4           60.8
                                                            -----------------------------  -----------------------------
                         Total costs and expenses                   524.3          559.5         1,036.7        1,111.7
                                                            -----------------------------  -----------------------------

          Operating income (loss)                                      .7           55.3           (32.3)         100.1

          Other income (expense):
               Interest expense                                     (27.4)         (26.9)          (55.1)         (54.9)
               Other - net                                            1.2           (2.7)            2.5           (1.9)
                                                            -----------------------------  -----------------------------

          Income (loss) before income taxes and minority
               interests                                            (25.5)          25.7           (84.9)          43.3

          Benefit (provision) for income taxes                        8.6           (9.0)           28.8          (15.2)

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

          Net income (loss)                                 $       (15.7) $        16.7   $       (53.9) $        28.7
                                                            =============================  =============================

          Earnings (loss) per share:
               Basic                                        $        (.20) $         .21   $        (.68) $         .36
               Diluted                                      $        (.20) $         .21   $        (.68) $         .36

          Weighted average shares outstanding (000):
               Basic                                               79,377         79,145          79,266         79,077
               Diluted                                             79,377         79,234          79,266         79,160

          



              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,
                                                                      ------------------------------
                                                                                1999            1998
                                                                      ------------------------------
                                                                                
          Cash flows from operating activities:
               Net income (loss)                                      $       (53.9)  $        28.7
               Adjustments to reconcile net income (loss) to net
                    cash (used) provided by operating activities:
                    Depreciation and amortization (including
                         deferred financing costs of $2.1 and $2.0)            50.6            52.3
                    Gain on sale of interest in AKW joint venture             (50.5)          -
                    Equity in (income) loss of unconsolidated
                         affiliates, net of distributions                      (4.2)            1.5
                    Minority interests                                         (2.2)            (.6)
                    Decrease in receivables                                    11.0            45.5
                    Decrease in inventories                                    18.8            61.5
                    (Increase) decrease in prepaid expenses and
                         other current assets                                 (37.4)           11.0
                    Decrease in accounts payable and accrued
                         interest                                             (25.2)          (19.8)
                    Increase (decrease) in payable to affiliates
                         and other accrued liabilities                          4.3           (31.5)
                    (Decrease) increase in accrued and deferred
                         income taxes                                         (36.5)            5.3
                    Increase (decrease) in net long-term assets and
                         liabilities                                           11.1            (9.6)
                    Other                                                       1.3             7.4
                                                                      ------------------------------
                         Net cash (used) provided by operating               (112.8)          151.7
                              activities                              ------------------------------

          Cash flows from investing activities:
               Proceeds from sale of interest in AKW joint venture             70.4           -
               Capital expenditures                                           (30.3)          (36.7)
               Other                                                             .2            (3.1)
                                                                      ------------------------------
                         Net cash provided (used) by investing
                              activities                                       40.3           (39.8)
                                                                      ------------------------------
          Cash flows from financing activities:
               Borrowings under revolving credit facility, net                 -               -
               Repayments of long-term debt                                     (.3)           (7.0)
               Capital stock issued                                             1.3            -
               Decrease in restricted cash, net                                  .8             1.2
               Redemption of minority interests' preference stock              (1.4)           (8.5)
                                                                      ------------------------------
                         Net cash provided (used) by financing
                              activities                                         .4           (14.3)
                                                                      ------------------------------

          Net (decrease) increase in cash and cash equivalents
               during the period                                              (72.1)           97.6
          Cash and cash equivalents at beginning of period                     98.3            15.8
                                                                      ------------------------------
          Cash and cash equivalents at end of period                  $        26.2   $       113.4
                                                                      ==============================

          Supplemental disclosure of cash flow information:
               Interest paid, net of capitalized interest             $        53.0   $        53.2
               Income taxes paid                                                8.8             8.9

          

              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 with the instructions to Form 10-Q and Article
          10 of Regulation S-X as promulgated by 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, 1998.  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, 1999, are not necessarily indicative of the
          results that may be expected for the year ending December 31,
          1999.

               Certain reclassifications of prior-year information were
          made to conform to the current presentation.

          INCIDENT AT GRAMERCY FACILITY
               On July 5, 1999, KACC's Gramercy, Louisiana alumina
          refinery was extensively damaged by an explosion in the
          digestion area of the plant. Approximately 24 employees were
          injured in the incident, several of them severely.  The cause of
          the incident is under investigation by KACC and governmental
          agencies.

               As previously announced, KACC expects that production at
          the plant will be curtailed for many months.  KACC has
          declared force majeure with respect to certain of its sales
          and purchase contracts, but continues to work with customers
          to assist them in securing alternative sources of alumina.

               More than 30 lawsuits have been filed against KACC
          alleging, among other things, property damage and personal
          injury as a result of the incident.  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.

               KACC has significant amounts of property damage, business
          interruption, liability and workers compensation insurance
          coverage relating to the Gramercy incident.  Deductibles and
          self-retention provisions under  the insurance coverage for the
          Gramercy incident total $5.0.

               The incident will cause KACC to incur incremental costs
          for clean-up and other activities in the second half of 1999
          and will cause the affected operations to incur certain operating
          losses until production can be restored.  Further, depending
          on the outcome of the ongoing investigations by various
          regulatory agencies, KACC could also be subject to certain
          fines or penalties, which may not be covered by insurance.
          However, based on what is known to date, the Company currently
          believes that the financial impact of this incident (in excess
          of the deductibles and self-retention provisions) will be
          largely offset by insurance coverage.

               The accompanying consolidated financial statements as of
          and for the periods ended June 30, 1999, do not include any
          provisions for the Gramercy incident.

          LABOR RELATED COSTS
               The Company is currently 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 the Company in January 1999.  However, the Company has
          continued to accrue certain benefits 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 has based its accruals on
          the terms of the previously existing (expired) USWA contract.
          Any differences between any amounts accrued and any amounts
          ultimately agreed to during the collective bargaining process
          will be reflected in future results during the term of any new
          contract.

          RECENT ACCOUNTING PRONOUNCEMENTS
               In June 1998, the Financial Accounting Standard 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 was initially required on or
          before January 1, 2000.  However, in June 1999, the FASB
          issued SFAS No. 137 which delayed the required implementation
          date of SFAS No. 133 to no later than January 1, 2001.  The
          Company is currently evaluating how and when to implement SFAS
          No. 133.

          2.   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 loss per share for the quarter
          and six-month periods ended June 30, 1999, as its effect would
          have been antidilutive.  Diluted earnings per share for the
          quarter and six-month periods ended June 30, 1998, include the
          dilutive effect of outstanding stock options of 89,000 and
          83,000 shares, respectively.

          3.   INVENTORIES

               The classification of inventories is as follows:

          
          

                                                                               June 30,    December 31,
                                                                                   1999            1998
                                                                         ------------------------------
                                                                                   
             Finished fabricated aluminum products                       $        118.2  $        112.4
             Primary aluminum and work in process                                 171.6           205.6
             Bauxite and alumina                                                  118.9           109.5
             Operating supplies and repair and maintenance parts                  116.0           116.0
                                                                         ------------------------------
                  Total                                                  $        524.7  $        543.5
                                                                         ==============================

          

               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.

          4.   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, 1999, the balance of such accruals, which are
          primarily included in Long-term liabilities, was $50.1.  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 $8.0
          for the years 1999 through 2003 and an aggregate of
          approximately $30.0 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.  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 it 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, 1999, the number of
          such claims pending was approximately 94,700, as compared with
          86,400 at December 31, 1998.  In 1998, approximately 22,900 of
          such claims were received and 13,900 were settled or
          dismissed.  During the quarter and six-month periods ended
          June 30, 1999, approximately 7,000 and 16,300 of such claims
          were received and 3,600 and 8,000 of such claims were settled
          or dismissed.  However, the foregoing claim and settlement
          figures as of and for the quarter and six-month periods ended
          June 30, 1999, do not reflect the fact that as of June 30,
          1999, KACC has reached agreements under which it will settle
          approximately 27,000 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 expected 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, 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, there is a reasonable possibility
          that such costs may continue beyond 2009, and that such costs
          could be substantial.  As of June 30, 1999, an estimated
          asbestos-related cost accrual of $337.5, before consideration
          of insurance recoveries, has been reflected in the accompanying
          financial statements primarily in Long-term liabilities.  The
          Company estimates that annual future cash payments for
          asbestos-related costs will be approximately $37.0 to $54.0 for
          each of the years 1999 through 2003, and an aggregate of
          approximately $123.0 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
          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
          with respect to applicable insurance coverage law relating to
          the terms and conditions of those policies. Accordingly, an
          estimated aggregate insurance recovery of $272.5, determined on
          the same basis as the asbestos-related cost accrual, is
          recorded primarily in Other assets at June 30, 1999.

               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. In the
          second quarter of 1999, this process resulted in the Company
          reflecting a $38.0 charge (included in Other income(expense))
          for asbestos-related claims, net of expected insurance
          recoveries, based on recent cost and other trends experienced
          by KACC and other companies.  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")
          were filed with the National Labor Relations Board ("NLRB") by
          the USWA.  As previously disclosed, KACC responded to all such
          allegations and believed that they were without merit.  In
          July 1999, all material charges were dismissed by the NLRB's
          Regional Director.  The USWA has announced its intention to
          appeal the dismissal.  If the allegations are sustained on
          appeal, KACC could be required to make locked-out employees
          whole for back wages from the date of the lock-out in January
          1999.  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 9 of Notes to Consolidated Financial Statements
          for the year ended December 31, 1998, for additional
          information on commitments and contingencies.

          5.   DERIVATIVE FINANCIAL INSTRUMENTS AND RELATED HEDGING
          PROGRAMS

               At June 30, 1999, 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 $15.5 (based on comparisons to 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, 1999, KACC had sold forward, at
          fixed prices, approximately 12,000 tons* of primary aluminum
          with respect to 1999. As of June 30, 1999, KACC had also
          entered into option contracts that established a price range

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

           for an additional 130,000, 353,000 and 124,000 tons of
          primary aluminum for 1999, 2000 and 2001, respectively.

               Additionally, through June 30, 1999, KACC had entered 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 4,000 tons of primary aluminum per
          month during the period July 1999 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 8,000 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 are "marked to market" each
          period.  For the quarter and six-month periods ended June 30,
          1999, the Company recorded mark-to-market charges of $13.5 and
          $14.1 in Other income (expense) associated with the above
          transactions.

               As of June 30, 1999, KACC had sold forward virtually all
          of the alumina available to it in excess of its projected
          internal smelting requirements for 1999, 2000 and 2001 at
          prices indexed to future prices of primary aluminum.

          ENERGY
               KACC is exposed to energy price risk from fluctuating
          prices for fuel oil, diesel fuel and natural gas consumed in
          the production process.  Accordingly, 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, 1999, KACC had a
          combination of fixed price purchase and option contracts for
          the purchase of approximately 27,000 MMBtu of natural gas per
          day during the remainder of 1999.  As of June 30, 1999, KACC
          also held a combination of fixed price purchase and option
          contracts for an average of 249,000 and 232,000 barrels per
          month of fuel oil and diesel fuel for 1999 and 2000,
          respectively.

          FOREIGN CURRENCY
               KACC enters into forward exchange contracts to hedge
          material cash commitments to foreign subsidiaries or
          affiliates.  At June 30, 1999, KACC had net forward foreign
          exchange contracts totaling approximately $138.9 for the
          purchase of 208.7 Australian dollars from July 1999 through
          May 2001, in respect of its Australian dollar-denominated
          commitments for the remainder of 1999 through May 2001.

               See Note 1 of the Notes to Consolidated Financial
          Statements for the year ended December 31, 1998, for
          additional information concerning the use of derivative
          financial instruments.

          6.   SIGNIFICANT ACQUISITIONS AND DISPOSITIONS

               In February 1999, KACC, through a subsidiary, completed
          the acquisition of its joint venture partner's 45% interest in
          Kaiser LaRoche Hydrate Partners ("KLHP") for a cash purchase
          price of approximately $10.0.  As KACC already owned 55% of
          KLHP, the results of KLHP were already included in the
          Company's consolidated financial statements.

               On April 1, 1999, KACC completed the previously announced
          sale of its 50% interest in AKW L.P. ("AKW"), an aluminum
          wheels joint venture, to its partner, Accuride Corporation for
          $70.4.  The sale resulted in the Company recognizing a net
          pre-tax gain of $50.5 in the second quarter of 1999.  The
          Company's equity in income of AKW for the quarter ended March
          31, 1999, was $2.5.  The Company's equity in income of AKW for
          the quarter and six-month periods ended June 30, 1998, was
          $2.3 and $3.4, respectively.

          7.   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, 1998.  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 11 of Notes to Consolidated Financial
          Statements for the year ended December 31, 1998, for
          additional information regarding the Company's segments.

          Financial information by operating segment for the quarters and
          six months ended June 30, 1999 and 1998 is as follows:

          
          

                                                                     Quarter Ended                 Six Months Ended
                                                                       June 30,                        June 30,
                                                            ------------------------------  ------------------------------
                                                                      1999            1998            1999            1998
          --------------------------------------------------------------------------------  ------------------------------
                                                                                                
          Net Sales:
               Bauxite and Alumina:
                    Net sales to unaffiliated customers     $       110.8   $       136.9   $       200.5   $       230.2
                    Intersegment sales                               29.6            36.1            52.6            78.3
                                                            ------------------------------  ------------------------------
                                                                    140.4           173.0           253.1           308.5
                                                            ------------------------------  ------------------------------
               Primary Aluminum:
                    Net sales to unaffiliated customers             100.5           105.8           189.6           232.0
                    Intersegment sales                               63.1            61.0           112.2           127.8
                                                            ------------------------------  ------------------------------
                                                                    163.6           166.8           301.8           359.8
                                                            ------------------------------  ------------------------------
               Flat-Rolled Products                                 155.3           197.0           303.6           391.3
               Engineered Products                                  137.8           156.0           271.3           318.6
               Minority interests                                    20.6            19.2            39.4            39.8
               Eliminations                                         (92.7)          (97.2)         (164.8)         (206.2)
                                                            ------------------------------  ------------------------------
                                                            $       525.0   $       614.8   $     1,004.4   $     1,211.8
                                                            ==============================  ==============================
          Operating income (loss):
               Bauxite and Alumina                          $        (3.5)  $        17.8   $       (11.3)  $        29.4
               Primary Aluminum (1)                                   1.6            22.1           (20.5)           42.2
               Flat-Rolled Products                                   7.5            23.2            14.9            39.5
               Engineered Products                                   10.7            15.2            17.6            31.5
               Micromill                                             (3.0)           (4.7)           (6.3)           (9.9)
               Eliminations                                           1.9             (.7)            5.5             2.4
               Corporate and Other                                  (14.5)          (17.6)          (32.2)          (35.0)
                                                            ------------------------------  ------------------------------
                                                            $          .7   $        55.3   $       (32.3)  $       100.1
                                                            ==============================  ==============================
          Depreciation and amortization:
               Bauxite and Alumina                          $         8.9   $         9.0   $        17.8   $        18.6
               Primary Aluminum                                       7.0             7.5            14.3            15.0
               Flat-Rolled Products                                   4.1             4.0             8.2             8.1
               Engineered Products                                    2.6             2.7             5.3             5.4
               Micromill                                               .7              .8             1.4             1.5
               Corporate and Other                                     .8              .9             1.5             1.7
                                                            ------------------------------  ------------------------------
                                                            $        24.1   $        24.9   $        48.5   $        50.3
                                                            ==============================  ==============================


          

          (1)  Includes potline preparation and restart costs of $2.5 and
          $9.6 for the quarter and six-month periods ended June 30,
          1999, respectively.

               Excluding the February 1999 purchase of the remaining
          interest in KLHP, which affected the Bauxite and Alumina
          segment, and the April 1999 sale of KACC's interest in AKW,
          which affected the Engineered Products segment, there were no
          material changes in segment assets since December 31, 1998.
          Capital expenditures made during the first half of 1999 (other
          than the acquisition of the interest in KLHP) were incurred on
          a relatively ratable basis among KACC's four primary operating
          business segments.

          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, year 2000 technology
          issues, new or modified statutory or regulatory requirements,
          and changing prices and market conditions.  This section and
          the Company's Annual Report on Form 10-K for the year ended
          December 31, 1998, each identify other factors that could
          cause such differences.  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
               On July 5, 1999, KACC's Gramercy, Louisiana alumina
          refinery was extensively damaged by an explosion in the
          digestion area of the plant.  Approximately 24 employees were
          injured in the incident, several of them severely.

               The cause of the incident is under investigation by KACC
          and governmental agencies.  KACC's continuing investigation
          suggests that the incident was caused by a power distribution
          interruption involving the plant's on-site power house that caused
          process flow pumps to cease operating.

               KACC has also identified certain other conditions that
          were present at the time of the incident and continues to
          investigate these and other matters.

               As previously announced, KACC expects that production at
          the plant will be curtailed for many months.  KACC has
          declared force majeure with respect to certain of its sales
          and purchase contracts, but continues to work with customers
          to assist them in securing alternative sources of alumina.

               More than 30 lawsuits have been filed against KACC
          alleging, among other things, property damage and personal
          injury as a result of the incident.  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.

               KACC has significant amounts of property damage, business
          interruption, liability and workers compensation insurance
          coverage relating to the Gramercy incident.  Deductibles and
          self-retention provisions under  the insurance coverage for the
          Gramercy incident total $5.0 million.

               The incident will cause KACC to incur incremental costs
          for clean-up and other activities in the second half of 1999
          and will cause the affected operations to incur certain operating
          losses until production can be restored.  Further, depending
          on the outcome of the ongoing investigations by various
          regulatory agencies, KACC could also be subject to certain
          fines or penalties, which may not be covered by insurance.
          However, based on what is known to date, the Company currently
          believes that the financial impact of this incident (in excess
          of the deductibles and self-retention provisions) will be
          largely offset by insurance coverage.

               The accompanying consolidated financial statements as of
          and for the periods ended June 30, 1999, do not include any
          provisions for the Gramercy incident.

               KACC has announced that its intention is to rebuild the
          Gramercy facility assuming that it is able to reach acceptable
          agreements with the various stakeholders to ensure the plant's
          competitive future.  KACC hopes to have the plant operating
          at a reduced production level in mid-2000 and to have the plant
          completely operational by the end of 2000.  However, there can be
          no assurance that the Gramercy facility will be made operational
          on this schedule.

          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.  As previously
          announced, 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 a result of the USWA strike, KACC temporarily
          curtailed three out of a total of eleven potlines at its Mead
          and Tacoma, Washington, aluminum smelters at September 30, 1998
          (representing approximately 70,000 tons per year of production
          capacity out of a total combined production capacity of
          273,000 tons per year at the facilities.) The first of the two
          Mead potline restarts began in March 1999 and was completed
          during the second quarter of 1999.  Restart activities on the
          second of the two Mead potlines commenced during the second
          quarter of 1999, and the Company expects the line to be fully
          operational before the end of the third quarter of 1999.  The
          timing for any restart of the Tacoma potline has yet to be
          determined and will depend upon market conditions and other
          factors.

               While the Company initially experienced an adverse strike-
          related impact on its profitability, the Company currently
          believes that KACC's operations at the affected facilities have
          been substantially stabilized and will be able to run at, or
          near, full capacity, and that the effect of the incremental
          costs associated with operating the affected plants during the
          dispute was eliminated or substantially reduced as of January
          1999 (excluding the impacts of the restart costs discussed
          above and the effect of market factors such as the continued
          market-related curtailment at the Tacoma smelter).  However, no
          assurances can be given that KACC's efforts to run the plants
          on a sustained basis, without a significant business
          interruption or material adverse impact on the Company's
          operating results, will be successful.

               KACC and the USWA continue to communicate.  A series of
          bargaining sessions are scheduled for August 1999. The
          objective of KACC has been, and continues to be, to negotiate
          a fair labor contract that is consistent with its business
          strategy and the commercial realities of the marketplace.

          STRATEGIC INITIATIVES
               The Company has previously disclosed that it believes it
          had met, and exceeded, its goal of achieving $120.0 million of
          pre-tax cost reductions and other profit improvements,
          independent of metal price changes, measured against 1996
          results prior to the end of the third quarter of 1998, when
          the impact of such items as smelter operating levels, the USWA
          strike and changes in foreign currency exchange rates are
          excluded from the analysis.  The Company remains committed to
          sustaining the full $120.0 million improvement and to
          generating additional profit improvements in future years;
          however, no assurances can be given that the Company will be
          successful in this regard.

               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.  The initial
          steps of this process resulted in the June 1997 acquisition of
          the Bellwood extrusion facility, the May 1997 formation of AKW
          L.P. ("AKW"), the rationalization of certain of the Company's
          Engineered Products operations, the Company's investment to
          expand its production capacity for heat treat flat-rolled
          products at its Trentwood, Washington, rolling mill, and the
          Company's fourth quarter 1998 decision to seek a strategic
          partner for further development and deployment of KACC's
          Micromill(TM) technology.  This process has continued in 1999.
          In February 1999, KACC completed the acquisition of the
          remaining 45% interest in Kaiser LaRoche Hydrate Partners
          ("KLHP"), an alumina marketing venture, from its joint venture
          partner for a cash purchase price of approximately $10.0
          million.  Additionally, in April 1999, KACC completed the sale
          of its interest in AKW L.P., an aluminum wheel joint venture,
          to its partner, Accuride Corporation for $70.4 million.  The
          cash sale represents a continuation of the Company's strategy
          to focus its resources and efforts in industry segments that
          are considered most attractive and in which it believes it is
          well positioned to capture value.

               Another area of emphasis has been a continuing focus on
          managing the Company's legacy liabilities, including the
          Company's active pursuit of claims in respect of insurance
          coverage for certain incurred and future environmental costs,
          as evidenced by the Company's fourth quarter 1998, receipt of
          recoveries totaling approximately $35.0 million related to
          current and future claims against certain of its insurers.
          See Note 9 of Notes to Consolidated Financial Statements for
          the year ended December 31, 1998, for additional information
          regarding insurance recoveries.

               Additional portfolio analysis and initiatives are
          continuing.

          VALCO OPERATING LEVEL
               The Company's 90%-owned Volta Aluminium Company Limited
          ("Valco") smelter in Ghana operated only one of its five
          potlines during most of 1998.  Each of Valco's potlines is
          capable of producing approximately 40,000 tons per year of
          primary aluminum.  Valco earned compensation in 1998 (in the
          form of energy credits to be utilized over the last half of
          1998 and during 1999) from the Volta River Authority ("VRA")
          in lieu of the power necessary to run two of the potlines that
          were curtailed during 1998.  The compensation substantially
          mitigated the financial impact in 1998 of the curtailment of
          such lines.  However, Valco did not receive any compensation
          from the VRA for one additional potline which was curtailed in
          January 1998.  Valco currently expects to operate an average
          of three lines during 1999, an operating rate that it reached
          during the second quarter of 1999.

               Valco has notified the VRA that it believes it had the
          contractual rights at the beginning of 1998 and 1999 to
          sufficient energy to run four and one-half potlines for the
          balance of both years.  Valco continues to seek compensation
          from the VRA with respect to the 1998 and 1999 reductions in
          its power allocation.  Valco and the VRA also are in
          continuing discussions concerning other matters, including
          steps that might be taken to reduce the likelihood of power
          curtailments in the future.  No assurances can be given as to
          the success of these discussions.

          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 ended June 30,
          1999 and 1998.  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 11 of Notes to Consolidated Financial Statements for
          the year ended December 31, 1998, 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,
                                                            -----------------------------  -----------------------------
                                                                      1999           1998            1999           1998
          -------------------------------------------------------------------------------  -----------------------------
                                                                                              
          Shipments: (000 tons)
               Alumina
                    Third Party                                     611.4          652.5         1,098.4        1,077.1
                    Intersegment                                    189.3          196.6           339.6          412.4
                                                            -----------------------------  -----------------------------
                         Total Alumina                              800.7          849.1         1,438.0        1,489.5
                                                            -----------------------------  -----------------------------
               Primary Aluminum
                    Third Party                                      69.0           68.3           131.9          148.8
                    Intersegment                                     46.3           42.5            85.8           86.1
                                                            -----------------------------  -----------------------------
                         Total Primary Aluminum                     115.3          110.8           217.7          234.9
                                                            -----------------------------  -----------------------------
               Flat-Rolled Products                                  59.0           63.6           111.5          123.3
                                                            -----------------------------  -----------------------------
               Engineered Products                                   43.5           44.2            84.9           90.0
                                                            -----------------------------  -----------------------------
          Average Realized Third Party Sales Price: (1)
               Alumina (per ton)                            $         170  $         197   $         171  $         198
               Primary Aluminum (per pound)                 $         .66  $         .70   $         .65  $         .71
          Net Sales:
               Bauxite and Alumina
                    Third Party (includes net sales of      $       110.8  $       136.9   $       200.5  $       230.2
                         bauxite)
                    Intersegment                                     29.6           36.1            52.6           78.3
                                                            -----------------------------  -----------------------------
                         Total Bauxite & Alumina                    140.4          173.0           253.1          308.5
                                                            -----------------------------  -----------------------------
               Primary Aluminum
                    Third Party                                     100.5          105.8           189.6          232.0
                    Intersegment                                     63.1           61.0           112.2          127.8
                                                            -----------------------------  -----------------------------
                         Total Primary Aluminum                     163.6          166.8           301.8          359.8
                                                            -----------------------------  -----------------------------
               Flat-Rolled Products                                 155.3          197.0           303.6          391.3
               Engineered Products                                  137.8          156.0           271.3          318.6
               Minority Interests                                    20.6           19.2            39.4           39.8
               Eliminations                                         (92.7)         (97.2)         (164.8)        (206.2)
                                                            -----------------------------  -----------------------------
                         Total Net Sales                    $       525.0  $       614.8   $     1,004.4  $     1,211.8
                                                            =============================  =============================
          Operating Income (Loss):
               Bauxite & Alumina                            $        (3.5) $        17.8   $       (11.3) $        29.4
               Primary Aluminum (2)                                   1.6           22.1           (20.5)          42.2
               Flat-Rolled Products                                   7.5           23.2            14.9           39.5
               Engineered Products                                   10.7           15.2            17.6           31.5
               Micromill(TM)                                         (3.0)          (4.7)           (6.3)          (9.9)
               Eliminations                                           1.9            (.7)            5.5            2.4
               Corporate                                            (14.5)         (17.6)          (32.2)         (35.0)
                                                            -----------------------------  -----------------------------
                         Total Operating Income (Loss)      $          .7  $        55.3   $       (32.3) $       100.1
                                                            =============================  =============================
          Net Income (Loss)                                 $       (15.7) $        16.7   $       (53.9) $        28.7
                                                            =============================  =============================
          Capital Expenditures                              $        13.8  $        23.0   $        30.3  $        36.7
                                                            =============================  =============================

          

          (1)  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.
          (2)  Results for the Primary aluminum segment include potline
          restart costs of $2.5 and $9.6 for the quarter and six-month
          periods ended June 30, 1999, respectively.

          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
          5 of Notes to Interim Consolidated Financial Statements for a
          discussion of KACC's hedging activities.

               During 1998, the Average Midwest United States transaction
          price ("AMT Price") per pound of primary aluminum experienced
          a steady decline during the year, beginning the year in the
          $.70 to $.75 range and ending the year in the low $.60 range.
          During the first quarter of 1999, the AMT Price for primary
          aluminum was in the $.57 to $.59 per pound range most of the
          quarter, but increased in March 1999 and ended the second
          quarter at approximately $.67. The AMT Price for primary
          aluminum for the week ended July 30, 1999, was approximately
          $.68 per pound.

          QUARTER AND SIX MONTHS ENDED JUNE 30, 1999, COMPARED TO
          QUARTER AND SIX MONTHS ENDED JUNE 30, 1998

          SUMMARY
               The Company reported a net loss of $15.7 million or $.20
          of basic loss per share, for the second quarter of 1999,
          compared to a net income of $16.7 million, or $.21 of basic
          earnings per share, for the same period of 1998.  Results for
          the quarter ended June 30, 1999, included a pre-tax gain of
          $50.5 million, or $.42 per share, on the sale of the Company's
          interests in AKW.  The gain was offset by a non-cash pre-tax
          charge of $38.0 million, or $.32 per share, for asbestos-related
          claims and a pre-tax charge of $13.5 million, or $.11
          per share, to reflect a mark-to-market adjustment on certain
          primary aluminum hedging transactions.  Results for the quarter
          ended June 30, 1998, included charges related to additional
          litigation reserves of $3.9 million.

               For the six-month period ended June 30, 1999, the Company
          reported a net loss of $53.9 million, or basic loss per share
          of $.68 compared to net income of $28.7 million, or basic
          earnings per share of $.36 for the six-month period ended June
          30, 1998.

               Net sales for the second quarter of 1999 totaled $525.0
          million compared to $614.8 million in the second quarter of
          1998.  Net sales for the six-month period ended June 30, 1999,
          were $1,004.4 million compared to $1,211.8 for the first six
          months of 1998.

          BAUXITE AND ALUMINA
               Third party net sales of alumina declined 19% for the
          quarter ended June 30, 1999, as compared to the same period in
          1998 as a result of a 14% decline in third party average
          realized price and a 6% decline in third party alumina
          shipments.  The decline in 1999 third party average realized
          prices resulted from lower first quarter 1999 market prices
          for primary aluminum on the Company's alumina sales contracts,
          substantially all of which are linked (on a lagged basis of up
          to three months) to changes in primary aluminum market prices.
          Although market prices for primary aluminum recovered somewhat
          during the second quarter of 1999, the beneficial impacts of
          these price increases on the segment's operating income will
          not be fully realized until the third quarter of 1999.  The
          impact of lower prices for primary aluminum in 1999 on the
          Company's third party average realized prices was partially
          offset by allocated net gains from the KACC hedging
          activities.  The decline in third party shipments of alumina
          between the second quarter of 1999 and 1998 resulted primarily
          from differences in the timing of shipments rather than any
          specific operating trend.

               Intersegment net sales for the second quarter of 1999
          declined by 22% as compared to the same period in 1998.  The
          decline in net sales was primarily due to a 14% decline in
          intersegment average realized price due to lower primary
          aluminum prices as well as a decline in intersegment
          shipments, resulting from potline curtailments at the Company's
          Washington smelters and Valco.

               For the six-month period ended June 30, 1999, third party
          net sales of alumina were 12% lower than the comparable period
          in 1998 as a 14% decline in average realized prices was only
          partially offset by a 2% increase in third party shipments.
          The decline in average realized prices during the first six
          months of 1999 as compared to 1998 was attributable to the
          linkage of third party sales contracts to primary aluminum
          prices as more fully described above, offset by allocated net
          gains from KACC's hedging activities.  The increase in year-over-
          year shipments was the result of the timing of individual
          shipments, rather than a specific operating trend.

               Intersegment net sales for the six-month period ended June
          30, 1999, declined by 33% as compared to the same period in
          1998.  The decline in net sales was primarily due to the 14%
          decline in intersegment average realized price due to lower
          primary aluminum prices as well as reduced intersegment
          shipments, resulting from potline curtailments at the Company's
          Washington smelters and Valco.

               Segment operating income for the quarter and six-month
          periods ended June 30, 1999, were down significantly from the
          comparable periods of 1998 primarily as a result of the price
          and, to a lesser extent, the volume factors discussed above.

          PRIMARY ALUMINUM
               Third party net sales of primary aluminum for the second
          quarter of 1999 were down 5% as compared to the same period in
          1998 primarily as a result of a 6% decrease in average
          realized third party sales prices, reflecting lower market
          prices offset, in part, by allocated net gains from KACC's
          hedging activities.  Partially offsetting the decline in
          average realized price was a 1% increase in third party
          shipments.  Intersegment net sales in the second quarter of
          1999 were up approximately 4% over 1998.  Intersegment
          shipments increased 9% from the comparable prior year period
          while average realized price dropped by 5%.  The decline in
          average realized price resulted from lower market prices for
          primary aluminum in 1999.  The increase in intersegment
          shipments between 1999 and 1998 was due to the timing of
          shipments to the Company's fabricated business units, as on a
          year-to-date basis intersegment shipments were essentially
          flat.

               For the six-month period ended June 30, 1999, third party
          net sales of primary aluminum declined approximately 16% from
          the comparable period in 1998, reflecting a 8% decline in
          third party average realized prices and an 11% reduction in
          third party shipments.  The decline in third party average
          realized price reflects lower 1999 market prices for primary
          aluminum offset, in part, by allocated net gains from KACC's
          hedging activities.  The reduction in third party shipments
          reflects the impact of the potline curtailments at KACC's
          Washington smelters.  Intersegment net sales for the first
          half of 1999 were down 12% as compared to the same period in
          1998.  Intersegment average realized prices were down 12%
          reflecting lower market prices for aluminum.  Intersegment
          shipments were essentially flat.

               Segment operating income for the quarter and six-month
          periods ended June 30, 1999, was down significantly from the
          comparable periods of 1998.  The most significant component of
          this decline was the reduction in average realized prices
          discussed above.  However, also included in 1999 results were
          the adverse impact of the Valco and Washington smelter potline
          curtailments (including the fact that there is no mitigating
          compensation being earned in 1999 for the Valco potline
          curtailments) and costs of approximately $2.5 and $9.6 for the
          quarter and six-month periods ended June 30, 1999,
          respectively, associated with preparing and restarting potlines
          at Valco and the Washington smelters.

          FLAT-ROLLED PRODUCTS
               Net sales of flat-rolled products for the second quarter
          of 1999 declined by 21% compared to the second quarter of 1998
          as a result of a 14% decline in average realized prices and a
          7% decline in shipments.  The reduction in shipments was due
          to reduced demand in 1999 for aerospace heat treat products
          offset, in small part, by increased shipments of general
          engineering products.  The decline in 1999 average realized
          prices resulted from a shift of product mix (from aerospace
          products, which have a higher price and operating margin, to
          other products) as well as the impact of lower market prices
          for primary aluminum.

               For the six-month period ended June 30, 1999, net sales
          of flat rolled products declined by 22% from the comparable
          period in 1998 as a result of a 14% decline in average realize
          price and a 10% decline in product shipments.  The declines in
          year-to-date 1999 prices and shipments as compared to 1998
          were attributable to the same factors described above for the
          second quarter of 1999 and were also responsible for the
          significant decline in segment operating income both for the
          second quarter and year-to-date periods.

          ENGINEERED PRODUCTS
               Second quarter 1999 net sales of engineered products
          declined by approximately 12% compared to the second quarter
          of 1998, reflecting a 10% decline in average realized prices
          and a 2% decline in product shipments.  The decline in
          quarterly shipments was due to reduced demand in 1999 for
          aerospace products offset almost entirely by a strong increase
          in 1999 demand for ground transportation products.  The
          reduction in average realized price between periods was
          attributable to the change in product mix (lower aerospace
          shipments offset by higher ground transportation shipments) as
          well as lower 1999 market prices for primary aluminum.  For
          the six-month period ended June 30, 1999, net sales of
          engineered products declined by approximately 15% from the
          comparable period in 1998, as a result of a 10% decline in
          average realized prices and a 6% declined in product
          shipments.  The reasons for the year-to-date price and volume
          declines were the same as the factors that affected the second
          quarter of 1999.

               Segment operating income for the 1999 quarter and year-to-
          date periods declined from the comparable periods in 1998 as a
          result of the reduced equity in earnings from AKW as well as
          the product mix shift discussed above.

          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 included corporate general
          and administrative expenses which were not allocated to the
          Company's business segments.

          LIQUIDITY AND CAPITAL RESOURCES

          OPERATING ACTIVITIES
               At June 30, 1999, the Company had working capital of
          $412.0 million, compared with working capital of $471.6 million
          at December 31, 1998.  The decrease in working capital
          primarily resulted from a decrease in Cash and cash
          equivalents.  Increases in Prepaid expenses and other current
          assets, primarily resulting from increased insurance deposits,
          were generally offset by an increase in Other accrued
          liabilities resulting primarily from an increase in expected
          payments for asbestos-related costs.  Changes in Receivables,
          Inventories and Accounts payable reflect reduced metal prices
          in 1999 as well as other factors described in "Results of
          Operations."

          INVESTING ACTIVITIES
               Capital expenditures during the six months ended June 30,
          1999, were $30.3 million. The only significant expenditure was
          the purchase of the remaining 45% interest in KLHP for
          approximately $10.0 million.  The remainder of the year-to-date
          1999 capital expenditures were primarily used to improve
          production efficiency and reduce operating costs.

               Total consolidated capital expenditures (of which
          approximately 8% is expected to be funded by the Company's
          minority partners in certain foreign joint ventures) are
          expected to be between $70 and $90 million per annum in each
          of 1999 through 2001, prior to any consideration of plans to
          rebuild the Gramercy facility.  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

               At June 30, 1999, the Company had long-term debt of
          $962.7 million, compared with $963.0 million at December 31,
          1998.

               At June 30, 1999, $273.7 million (of which $73.7 million
          could have been used for letters of credit) was available to
          KACC under the Credit Agreement and no amounts were
          outstanding under the revolving credit facility. 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.

               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
          meet its working capital and capital expenditure requirements
          for the next year.  Additionally, 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 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 certain pledge agreements 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 or KACC
          to pay any dividends on their common stock.

          OTHER MATTERS

          YEAR 2000 READINESS DISCLOSURE
               The Company utilizes software and related technologies
          throughout its business that will be affected by the date
          change to the year 2000.  There may also be technology
          embedded in certain of the equipment owned or used by the
          Company that is susceptible to the year 2000 date change as
          well.  The Company has implemented a company-wide program to
          coordinate the year 2000 efforts of its individual business
          units and to track their progress.  The intent of the program
          is to make sure that critical items are identified on a
          sufficiently timely basis to assure that the necessary
          resources can be committed to address any material risk areas
          that could prevent the Company's systems and assets from being
          able to meet the Company's business needs and objectives.
          Year 2000 progress and readiness has also been the subject of
          the Company's normal, recurring internal audit function.

               Each of the Company's business units has developed year
          2000 plans specifically tailored to its individual situations.
          A wide range of solutions is being implemented, including
          modifying existing systems and, in limited cases where it is
          cost effective, purchasing new systems.  Total spending related
          to these projects, which began in 1997 and is expected to
          continue through 1999, is currently estimated to be in the
          $10-15 million range. As of June 30, 1999, the Company
          estimates that approximately $3 million of year 2000
          expenditures are yet to be incurred.  Such remaining amounts
          are expected to be incurred over the balance of 1999,
          primarily in the third quarter of the year. System
          modification costs are being expensed as incurred.  Costs
          associated with new systems are being capitalized and will be
          amortized over the life of the system.  In total, the Company
          believes that its remediation and testing efforts are
          approximately 85% complete at July 31, 1999.  The balance is
          expected to be substantially completed by the end of the third
          quarter of the year.  The Company plans to commit the
          necessary resources for these efforts.

               In addition to addressing the Company's internal systems,
          the company-wide program involves identification of key
          suppliers, customers, and other third-party relationships that
          could be impacted by year 2000 issues.  A general survey has
          been conducted of the Company's supplier and customer base.
          Direct contact has been made, or is in progress, with parties
          which are deemed to be particularly critical including
          financial institutions, power suppliers, and customers, with
          which the Company has a material relationship.

               Each business unit, including the corporate group, is
          developing a contingency plan covering the steps that would be
          taken if a year 2000 problem were to occur despite the
          Company's best efforts to identify and remediate all critical
          at-risk items.  Formal contingency plans have been completed
          for approximately 75% of the Company's facilities and their
          individual systems as of July 31, 1999.  Contingency plans for
          the remaining facilities and systems are expected to be
          completed by October 31, 1999.  When complete, each
          contingency plan will address, among other things, matters such
          as alternative suppliers for critical inputs, incremental
          standby labor requirements at the millennium to address any
          problems as they occur, and backup processing capabilities for
          critical equipment or processes.  The goal of the contingency
          plans will be to minimize any business interruptions and the
          associated financial implications.

               While the Company believes that its program is sufficient
          to identify the critical issues and associated costs necessary
          to address possible year 2000 problems in a timely manner,
          there can be no assurances that the program or underlying
          steps implemented will be successful in resolving all such
          issues prior to the year 2000.  If the steps taken by the
          Company (or critical third parties) are not made in a timely
          manner, or are not successful in identifying and remediating
          all significant year 2000 issues, business interruptions or
          delays could occur and could have a material adverse impact on
          the Company's results and financial condition.  However, based
          on the information the Company has gathered to date and the
          Company's expectations of its ability to remediate problems
          encountered, the Company currently believes that significant
          business interruptions that would have a material impact on
          the Company's results or financial condition will not be
          encountered.

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

               See Part I, Item 7A. "QUANTITATIVE AND QUALITATIVE
          DISCLOSURE ABOUT MARKET RISK" in the Company's Form 10-K for
          the year ended December 31, 1998.

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

               The annual meeting of stockholders of the Company was
          held on May 19, 1999, 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 with held 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:          75,504,199
               Votes Against:
               Votes Withheld:     145,483
               Abstentions:
               Broker Nonvotes:

          George T. Haymaker, Jr.
               Votes For:          75,503,674
               Votes Against:
               Votes Withheld:     146,008
               Abstentions:
               Broker Nonvotes:

          Charles E. Hurwitz
               Votes For:          75,453,477
               Votes Against:
               Votes Withheld:     196,205
               Abstentions:
               Broker Nonvotes:

          Ezra G. Levin
               Votes For:          75,499,799
               Votes Against:
               Votes Withheld:     149,883
               Abstentions:
               Broker Nonvotes:

          Raymond J. Milchovich
               Votes For:          75,505,799
               Votes Against:
               Votes Withheld:     143,883
               Abstentions:
               Broker Nonvotes:

          James D. Woods
               Votes For:          75,498,899
               Votes Against:
               Votes Withheld:     150,783
               Abstentions:
               Broker Nonvotes:


                             PART II - OTHER INFORMATION

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

          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 4 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, 1998.

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

               (a)  Exhibits.

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

                 3.1     Restated Certificate of Incorporation of Kaiser
                         Aluminum Corporation (the "Company" or "KAC"),
                         dated February 21, 1991 (incorporated by
                         reference to Exhibit 3.1 to Amendment No. 2 to
                         the Registration Statement on Form S-1, dated
                         June 11, 1991, filed by KAC, Registration No.
                         33-37895).

                 3.2     Certificate of Retirement of KAC, dated October
                         24, 1995 (incorporated by reference to Exhibit
                         3.2 to the Report on Form 10-K for the period
                         ended December 31, 1995, filed by KAC, File No.
                         1-9447).

                 3.3     Certificate of Retirement of KAC, dated February
                         12, 1998 (incorporated by reference to Exhibit
                         3.3 to the Report on Form 10-K for the period
                         ended December 31, 1997, filed by KAC, File No.
                         1-9447).


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

                *3.4     Certificate of Elimination of KAC, dated July 1,
                         1998.

                 3.5     Amended and Restated Bylaws of KAC, dated
                         October 1, 1997 (incorporated by reference to
                         Exhibit 3.3 to the Report on Form 10-Q for the
                         quarterly period ended September 30, 1997, filed
                         by KAC, File No. 1-9447).

               *10.1     Employment Agreement, dated as of June 1, 1999,
                         between Kaiser Aluminum & Chemical Corporation
                         and Raymond J. Milchovich.

               *10.2     Restated Promissory Note, dated June 14, 1999,
                         from Raymond J. Milchovich to Kaiser Aluminum &
                         Chemical Corporation.

               *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, 1999.  However, subsequent to June
          30, 1999, two Form 8-K's were filed.

               A Report on Form 8-K was filed by the Company on July 2,
          1999, announcing the expected impact of certain non-operating
          adjustments on second quarter 1999 results.

               A Report on Form 8-K was filed by the Company on July 9,
          1999, announcing that on July 5, 1999, KACC's Gramercy,
          Louisiana alumina refinery had been extensively damaged by
          an explosion and that production at the plant would be
          curtailed for several months.



          ---------------
          *    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 13, 1999

                                                                Exhibit 3.4

                         CERTIFICATE OF ELIMINATION
                                     OF
                        KAISER ALUMINUM CORPORATION
                                   UNDER
           SECTION 151 OF THE GENERAL CORPORATION LAW OF DELAWARE

     In accordance with Section 151 of the General Corporation Law of the
State of Delaware, Kaiser Aluminum Corporation (the "Corporation"), a
Delaware corporation, DOES HEREBY CERTIFY:

     FIRST:    That the following resolution has been adopted by the Board
of Directors of the Corporation:

     "RESOLVED, that none of the authorized shares of the 8.255% PRIDES,
     Convertible Preferred Stock, par value $.05 per share, (the "8.255%
     PRIDES") of Kaiser Aluminum Corporation (the "Corporation"), are
     outstanding; and that none will be issued subject to the Certificate
     of Designations of 8.255% PRIDES, Convertible Preferred Stock of
     Kaiser Aluminum Corporation previously filed with respect to the
     8.255% PRIDES."

     SECOND:   That when this Certificate of Elimination becomes effective
in accordance with Section 103 of the General Corporation Law of the State
of Delaware, it shall have the effect of eliminating from the Restated
Certificate of Incorporation of the Corporation all matters set forth in
the Certificate of Designations of 8.255% PRIDES, Convertible Preferred
Stock of Kaiser Aluminum Corporation with respect to the 8.255% PRIDES.

     IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Elimination to be signed by E. Bruce Butler, a Vice President, and attested
by John Wm. Niemand II, its Secretary, this 1st day of July, 1998.

                                        KAISER ALUMINUM CORPORATION


                                        By:     /S/ E. BRUCE BUTLER
                                          E. Bruce Butler, Vice President

ATTEST:

      /S/ JOHN WM. NIEMAND II
   John Wm. Niemand II, Secretary
   [Corporate Seal]

                      EMPLOYMENT AGREEMENT

This Agreement (the "Agreement") is made effective for the
period from June 1, 1999 to December 31, 2004, (such term being
hereinafter referred to as the "Employment Period") between
Kaiser Aluminum & Chemical Corporation, a Delaware corporation
("Company"), and Raymond J. Milchovich ("Executive").

WHEREAS, Executive is currently employed by the Company as a
senior executive and Chief Operating Officer; and

WHEREAS, the Company desires to secure the services of
Executive as Chief Executive Officer effective as of January 1,
2000, and Executive desires to perform such services for the
Company, on the terms and conditions as set forth herein;

     NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements set forth below, it is mutually agreed
as follows:

     1.   Effective Date, Term and Duties.  The term of
          -------------------------------
employment of Executive by the Company hereunder shall commence
effective as of January 1, 2000 and end on December 31, 2004,
(the "Employment Period") unless earlier terminated pursuant to
Section 4.

Executive shall have such duties as the Company may from
time to time prescribe consistent with his position as Chief
Executive Officer of the Company (the "Services").  Executive
shall report directly to the Board of Directors.  Executive shall
devote his full time, attention, energies and best efforts to the
business of the Company.  The Executive shall relocate his office
to Houston, Texas.

     2.   Compensation.  The Company shall pay and Executive
          ------------
shall accept as full consideration for the Services compensation
consisting of the following:

          2.1  Base Salary.  Effective upon announcement of the
               -----------
promotion, $550,000 per year base salary, payable in installments
in accordance with the Company's normal payroll practices, less
such deductions or withholdings required by law.  On January 1,
2000, an increase to no less than $630,000 per year will be
effective which will subsequently increase to no less than
$692,000 on January 1, 2001 and no less than $750,000 on January
1, 2002.  Base Salary shall be reviewed annually by the
Compensation Committee of the Company to evaluate the performance
of Executive and his duties hereunder, and in any event on and
after January 1, 2003 will be adjusted for inflation consistent
with the general program of increases for other executives and
management employees.

          2.2  Annual Bonus.  A target bonus equal to 80% of base
               ------------
salary per year ("Target Annual Bonus") shall be payable based on
the attainment by the Company of the Short-Term Bonus Plan
Objectives under the Company's Executive Bonus Plan for each such
year, which such Short-Term Bonus Plan Objectives shall be agreed
upon by the Executive and the Company annually and shall be
consistent with the Company's business plan for the relevant
year.

          2.3  Long-Term Compensation.  Upon execution hereof
               ----------------------
Executive shall receive a stock option grant of 750,000 shares
under the Company's Stock Option Plan.  Twenty percent (20%) or
150,000 of the stock options will be granted at $9.50, 40% or
300,000 of the options will be granted with an exercise price of
$12.35, and the remaining 40% or 300,000 of the options will have
an exercise price of $14.25. The schedule in Exhibit A
illustrates the value of the new stock option grant and 60% of
the 1998 stock option grant at various strike prices.  The new
(750,000) options will have an exercise period of ten years from
date of grant.  Such options shall be in lieu of any payment of
long-term incentive compensation under the Company's Executive
Bonus Plan ("Plan") for the five year period beginning January 1,
2000, although Executive shall be eligible for additional option
grants at the discretion of the Company's Compensation Committee.
The existing grant will continue to vest as scheduled and the new
grant shall vest at the rate of 20% per year, beginning on
January 1, 2001, unless: (i) Executive becomes employed by an
affiliate or "spin-out" of Kaiser Aluminum, in which case a pro
rata amount of the options will vest equal to the percentage of
days during the Employment Period which the Executive has been
employed; or (ii) Executive's service is terminated by the
Company for any reason other than for "Cause", or Executive's
employment terminates by the expiration of the Employment Period
without an offer for continued employment by the Company for a
position of responsibility comparable to that held by Executive
at the beginning of the Employment Period and on substantially
the same or improved terms and conditions, or Executive
terminates his employment for "Good Reason" or in event of a
Change in Control in which cases vesting of all outstanding
options is accelerated as provided in Section 4.

     Such option grant shall provide that upon exercise of any
option, Executive will be entitled to receive shares pursuant to
the Company's Stock Option Plan but also any securities that have
been distributed in respect to such shares.  For example, if the
Company were to spin off part of its business as a new company
and distribute to its stockholders one share of stock of the new
company for each one share of stock under the Company's Stock
Option Plan, then, upon a subsequent exercise by Executive of the
stock under the Company's Stock Option Plan, Executive would also
receive one new company share along with one share under the
Company's Stock Option Plan.  All such grants shall be governed
by the Company's Stock Option Plan and by the agreement executed
by the Company and Executive at the time of the option grant.

          2.4  Indemnification.  In the event Executive is made,
               ---------------
or threatened to be made, a party to any legal action or
proceeding, whether civil or criminal, by reason of the fact that
Executive is or was a director or officer of the Company or
serves or served any other corporation fifty percent (50%) or
more owned or controlled by the Company in any capacity at the
Company's request, Executive shall be indemnified by the Company,
and the Company shall pay Executive related expenses when and as
incurred, all to the fullest extent permitted by law, provided,
however, that the Company shall have the right of defense to any
action or proceeding.

     3.   Benefits during Employment Period.  Employee will be
          ---------------------------------
eligible to participate in the Company's employee benefit plans
of general application, including, without limitation, those
plans covering medical disability and life insurance in
accordance with the rules established for individual
participation in any such plan and under applicable law.
Employee will be eligible for vacation and sick leave in
accordance with the policies in effect during the term of this
Agreement and will receive such other benefits as the Company
generally provides to its other employees of comparable position
and experience.

     4.   Benefits Upon Termination.  Notwithstanding anything in
          -------------------------
the Agreement to the contrary, if (i) Executive's employment is
terminated during the Employment Period for any reason other than
(a) termination by the Company for "Cause" (as defined in
Subsection 4.1), (b) acceptance by Executive of an offer of
employment with an affiliate of the Company, or (c) a voluntary
termination by Executive for other than "Good Reason", then
Executive will be entitled to receive the following benefits:

          (A)  An Early Retirement Lump Sum Payment by the
Company as described below:

               The Early Retirement Lump Sum Payment by the
Company shall be equal to the excess, if any, of the sum of (i)
plus (ii) less the amount computed in accordance with (iii).

               (i)  The lump sum benefit from the Kaiser Aluminum
Salaried Employees Retirement Plan (KRP) that the Executive would
have been entitled to as of the date of his actual termination
calculated, for this purpose, as if the terms of KRP in effect on
such date were identical to the terms of KRP in effect on the
effective date of this Agreement (except for such changes
required to maintain the qualified status of KRP), and as if the
Executive qualified for a KRP Full Early Retirement Pension:
provided, however, in calculating such amount, his actual age,
credited service, social security benefits and final average
monthly compensation in effect on the date of his actual
termination shall be used as well as the daily yields on longer
term treasury issues and the PBGC applicable interest rates in
effect on such date.

               (ii) The lump sum benefit from the Kaiser Aluminum
Supplemental Benefits Plan (KASBP) based on KRP limitations, that
the Executive would have been entitled to as of the date of his
actual termination calculated, for this purpose, as if (i) the
terms of KASBP in effect on such date were identical to the terms
of KASBP in effect on the effective date of this Agreement, (ii)
the Executive qualified for a KRP Full Early Retirement Pension,
and (iii) the other assumptions set forth in "(i)" above
including interest rates were in effect in calculating the
benefits under Section C-2(a) and (b) of KASBP.

               (iii) An amount equal to the lump sum actuarial
equivalent of (a) the Executive's actual benefit payable from KRP
on account of his actual termination, plus (b) the Executive's
actual benefit payable from KASBP based on KRP limitations on
account of his actual termination.

          (B)  Full health benefits as if the Executive had qualified
for an Early Retirement Pension.

          (C)  A lump sum amount equal to Executive's base salary as
of the date of Executive's termination for a period equal to the
greater of (i) the number of months remaining in the Employment
Period or (ii) two years.  In addition, Executive shall be
entitled to receive Executive's Target Annual Bonus for the year
of termination in one lump sum payment.  Such salary and Target
Annual Bonus payments shall be referred to as "Termination Pay".
Such Termination Pay shall be in lieu of any claims Executive may
have had with respect to termination benefits.

          (D)  All of the unvested stock options held by Executive
on the date of such termination that would have vested during the
Employment Period shall immediately vest and become exercisable
in full for the remaining portion of the applicable period.

          4.1  Circumstances Under Which Termination Benefits
               ----------------------------------------------
Would Not Be Paid.  The Company shall not be obligated to pay
- -----------------
Executive the termination benefits pursuant to Section 4 if the
Executive's employment is terminated for Cause.  For purposes of
this Agreement, "Cause" shall be limited to (1) Executive's gross
misconduct or fraud, in the performance of his employment; (2)
Executive's conviction or guilty plea with respect to any felony
(except for motor vehicle violations); or (3) Executive's
material breach of this Agreement after written notice delivered
to Executive of such breach and a reasonable opportunity to cure
such breach.

          4.2  Constructive Termination.  Notwithstanding
               ------------------------
anything in this Section 4 or Section 5 to the contrary, the
Employment Period will be deemed to have been terminated (a
"Constructive Termination") and Executive will be deemed to have
Good Reason for voluntary termination of the Employment Period
("Good Reason"), if there should occur:

          (A) a material adverse change in Executive's position
causing it to be of materially less stature or responsibility
without Executive's written consent, and such a materially
adverse change shall in all events be deemed to occur if on and
after January 1, 2000 Executive no longer serves as Chief
Executive Officer reporting to the Board of Directors, unless
Executive consents in writing to such change;

          (B)      a reduction, without Executive's written consent,
in his level of base compensation (including base salary and
fringe benefits) by more than ten percent (10%) or a reduction
by more than ten percent (10%) in his Target Annual Bonus under
the CEO Bonus Plan; or

          (C)      a relocation of his principal place of employment
by more than 50 miles without Executive's consent, after
Executive's relocation to Houston, Texas.

          4.3  Termination by Reason of Death or Disability.  In
               --------------------------------------------
the event of Employee's death during the Employment Period, the
Company shall pay to Employee or Employee's estate Employee's
Target Annual Bonus for the Company's fiscal year in which death
occurred or, if no such Target Annual Bonus has been scheduled,
an amount equal to the Target Annual Bonus paid to Employee for
the Company's fiscal year immediately preceding the year in which
death occurred.  In addition, Employee's estate will receive
payment for all salary, bonuses and unpaid Vacation accrued as of
the date of Employee's death and any other benefits payable under
the Company's then existing benefit plans and policies in
accordance with such plans and policies in effect on the date of
death and in accordance with applicable law.  In the event that
during the term of this Agreement, Employee is unable to perform
his job due to disability (as determined under the Company's
long-term disability insurance program) for six (6) months in any
twelve (12) month period, the Company may, at its election,
terminate Employee's employment with the Company and such
termination shall be deemed to be termination by the Company
other than for Cause and Employee shall be entitled to receive
the benefits set forth in Section 4 hereof.

     5.     Change in Control
            -----------------

     Should there occur a Change in Control (as defined below),
then the following provisions shall become applicable:

     (A)  During the period (if any) following a Change in
Control that Executive shall continue to provide the Services,
then the terms and provisions of this Agreement shall continue in
full force and effect, and Executive shall continue to vest in
all of his unvested stock options; or

     (B)  In the event of (x) a termination of the employment by
the Company other than for Cause or (y) a termination of
employment by Executive for any reason within twelve (12) months
following such Change in Control the benefits listed in Section 4
shall become due and payable:

     For purposes of this Section 5, a Change of Control shall be
deemed to occur upon:

     (I)  the sale, lease, conveyance or other disposition of all
or substantially all of the Company'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;

     (II) 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, of more than 50%
of the aggregate voting power of all classes of common equity of
the Company, except if such Person is (A) a subsidiary of the
Company, (B) an employee stock ownership plan for employees of
the Company or (C) a company formed to hold the Company's common
equity securities and whose shareholders constituted, at the time
such company became such holding company, substantially all the
shareholders of the Company; or

     (III)     a change in the composition of the Company'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 (a) have been
Board members continuously since the beginning of such period, or
(b) 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 (a) who were still in office at the time such
election or nomination was approved by the Board.

     In the event that the severance and other benefits provided
to Executive constitute "parachute payments" within the meanings
of Section 28OG of the Internal Revenue Code of 1986, as amended
(the "Code"), either alone or in conjunction with other payments,
Executive has the right to receive either directly or indirectly
from the Company (the "Total Payments"), that would constitute an
excess parachute payment under Section 28OG of the Code.  Company
agrees to pay Executive an amount (the "Gross-up Payment"), such
that after payment by Executive of all taxes, including interest
and penalties imposed with respect to such taxes, including any
excise tax imposed by Section 4999 of the Code, (the "Excise
Tax") Executive retains an amount of the Gross-up Payment equal
to the Excise Tax imposed upon the Total Payments.

Unless the Company and Executive otherwise agree in writing, any
determination required under this Section 5 shall be made in
writing by independent public accountants agreed to by the
Company and Executive (the "Accountants"), whose determination
shall be conclusive and binding upon Executive and the Company
for all purposes.  For purposes of making the calculations
required by this Section 5, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and
may rely on reasonable, good faith interpretations concerning the
application of Sections 28OG and 4999 of the Code.  The Company
and Executive shall fumish to the Accountants such information
and documents as the Accountants may reasonably request in order
to make a determination under this Section 5. The Company shall
bear all costs the Accountants may reasonably incur in connection
contemplated by this Section 5.

     6.   Dispute Resolution.  The Company and Executive agree
          ------------------
that any dispute regarding the interpretation or enforcement of
this Agreement shall be decided by confidential, final and
binding arbitration conducted by Judicial Arbitration and
Mediation Services ("JAMS") under the then-existing JAMS rules,
rather than by litigation in court, trial by jury, administrative
proceeding, or in any other forum.  Executive and Company agree
that in any dispute resolution proceedings arising out of this
Agreement, the Company shall be responsible for all reasonable
attorney's fees and costs incurred by Executive, not to exceed
$10,000 in connection with the resolution of the dispute in
addition to any other relief granted.

     7.   Cooperation with the Company After Termination of the
          -----------------------------------------------------
Employment Period.  Following termination of the Employment
- -----------------
Period by Executive, Executive shall fully cooperate with the
Company in all matters relating to the winding up of his pending
work on behalf of the Company and the orderly transfer of any
such pending work to other employees of the Company as may be
designated by the Company.

     8.   Confidentiality; Return of Property.  Executive
          -----------------------------------
acknowledges that an Employee Invention and Confidential
Information Agreement executed by Executive on October 28, 1996
will continue in effect.

     9.   Non-Competition.  Executive agrees that a
          ---------------
Noncompetition Agreement shall be executed by Executive and
attached hereto as Exhibit B shall continue in effect.

     10.  General.
          -------

          10.1  Waiver.  Neither party shall, by mere lapse of
                ------
time, without giving notice or taking other action hereunder, be
deemed to have waived any breach by the other party of any of the
provisions of this Agreement.  Further, the waiver by either
party of a particular breach of this Agreement by the other shall
neither be construed as, nor constitute a, continuing waiver of
such breach or of other breaches by the same or any other
provision of this Agreement.

          10.2 Severability.  If for any reason a court of
               ------------
competent jurisdiction or arbitrator finds any provision of this
Agreement to be unenforceable, the provision shall be deemed
amended as necessary to conform to applicable laws or
regulations, or if it cannot be so amended without materially
altering the intention of the parties, the remainder of the
Agreement shall continue in full force and effect as if the
offending provision were not contained herein.

         10.3  No Mitigation.  Executive shall have no duty to
               -------------
mitigate the Company's obligation with respect to the termination
payments set forth in Sections 4 or 5 by seeking other employment
following termination of his employment, nor shall such
termination payments be subject to offset or reductions by reason
of any compensation received by Executive from such other
employment.  The Company's obligations to make payments under
Sections 4 or 5 shall not terminate in the event Executive
accepts other full time employment.

         10.4  Notices.  All notices and other communications
               -------
required or permitted to be given under this Agreement shall be
in writing and shall be considered effective upon personal
service or upon depositing such notice in the U.S. Mail postage
prepaid, return receipt requested and addressed to the Chairman
of the Board of the Company at its principal corporate address,
and to Executive at his most recent address shown on the
Company's corporate records, or at any other address which he may
specify in any appropriate notice to the Company.

         10.5  Counterparts.  This Agreement may be executed in
               ------------
any number of counterparts, each of which shall be deemed an
original and all of which taken together constitutes one and the
same instrument and in making proof hereof it shall not be
necessary to produce or account for more than one such
counterpart.

         10.6  Entire Agreement.  The parties hereto acknowledge
               ----------------
that each has read this Agreement, understands it, and agrees to
be bound by its terms.  The parties further agree that this
Agreement and the referenced stock option agreement constitute
the complete and exclusive statement of the agreement between the
parties and supersedes all proposals (oral or written),
understandings, representations, conditions, covenants, and all
other communications between the parties relating to the subject
matter hereof.  The parties further agree that this Agreement
supersedes the employment agreement between the Company and
Executive effective June 1, 1998.  Notwithstanding anything to
the contrary, Sections 4 and 5 of this Agreement shall govern all
options issued to Executive by the Company prior to and after the
effective date of this Agreement.

         10.7  Governing Law.  This Agreement shall be governed
               -------------
by the law of the State of Texas.

         10.8  Assignment and Successors.  The Company shall have
               -------------------------
the right to assign its rights and obligations under this
Agreement to an entity which acquires substantially all of the
assets of the Company.  The rights and obligation of the Company
under this Agreement shall inure to the benefit and shall be
binding upon the successors and assigns of the Company.

     IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.

KAISER ALUMINUM & CHEMICAL             EXECUTIVE
CORPORATION

By:   /s/ George T. Haymaker, Jr.      /s/ Raymond J. Milchovich
    ------------------------------     -----------------------
                                       Raymond J. Milchovich
Name: George T. Haymaker, Jr.
    ------------------------------

Title: Chairman and Chief
       Executive Officer
    ------------------------------

EXHIBIT B
AGREEMENT REGARDING NON-COMPETITION



This Agreement is by and between the employer, Kaiser Aluminum &
Chemical Corporation ("Company") and Raymond J. Milchovich
("Executive").  In consideration of the Company's employment of
Executive, the compensation paid for Executive's services in the
course of such employment, and the training (internal and
external, formal and informal) received by Executive in the
course of such employment, Executive agrees as follows:

1.   NON-COMPETITION.  During the term of employment and for a
period of two (2) years after the termination of employment,
Executive agrees that he will not knowingly, for any person or
entity other than the Company or its affiliates, directly or
indirectly, own, manage, operate, join, control or participate
in, be compensated by or be connected with as an officer,
employee, agent, consultant, partner, stockholder, or otherwise,
any Competitive Business anywhere within which the Company
conducts business.

2.   SOLICITATION.  As part of the consideration for the
compensation and benefits to be paid to Executive thereunder, in
keeping with Executive's duties as a fiduciary, and in order to
protect Company's interest in the trade secrets of Company, and
as an additional incentive for Company to enter into this
Agreement, Executive agrees that Executive will not, directly or
indirectly, for Executive or for others, knowingly induce any
employee of Company or any of its affiliates to terminate his or
her employment with Company or its affifiates, or knowingly hire
or assist in the hiring of any such employee by any person,
association, or entity not affiliated with Company.  The
obligations in this Section shall extend throughout the Term of
this Agreement and for a period of two (2) years after the
termination of the employment relationship between Company and
Executive.

3.   ENFORCEABILITY.  Executive acknowledges that money damages
would not be sufficient remedy for any breach of this Agreement
by Executive, and Company shall be entitled to specific
performance and injunctive relief as remedies for such breach or
any threatened breach.  Such remedies shall not be deemed the
exclusive remedies for a breach, but shall be in addition to all
remedies available at law or in equity to Company, including,
without limitation, the recovery of damages from Executive and
his agents involved in such breach.  If any provision of this
Agreement is invalid or unenforceable, the remaining provisions
shall continue in effect.

4.   CONSTRUCTION.  The terms of this Agreement may not be
modified orally and may only be modified by a written instrument
executed by the parties hereto.  This Agreement shall be governed
by and construed in accordance with the laws of the state of
Texas.

5.   SURVIVAL.  The provisions of Sections 1 through 4
hereinabove shall give the termination of Executive's employment
with the Company.

6.   DUPLICATE ORIGINALS.  This Agreement has been executed in
duplicate originals.

KAISER ALUMINUM & CHEMICAL             EXECUTIVE
CORPORATION

By:   /s/ George T. Haymaker, Jr.      /s/ Raymond J. Milchovich
    ------------------------------     -----------------------
                                       Raymond J. Milchovich
Name: George T. Haymaker, Jr.
    ------------------------------

Title: Chairman and Chief
       Executive Officer
    ------------------------------


Kaiser Aluminum & Chemical Corporation
Recommended Stock Option Grant

Assume that fair market value is considered to be $9.50

Five Year LTI Target                            $5,308,000
B-S Value of Previous Award                     $3,149,600
60% of Previous Grant as Offset to Target       $1,889,760

Target New Grant Expected Value                 $3,418,240

Assume Option Awards Have a 10 Year Term(1)

                  Option
        Number of Strike                                              Option Gains at Various Share Prices
  (2)    Options  Price      $12        $15      $16.20       $17        $19        $21         $23         $25         $30
         -------  -----      ---        ---      ------       ---        ---        ---         ---         ---         ---

                                                                                  
Options  150,000 $ 9.50 $  375,000 $  825,000 $1,005,000 $1,125,000 $1,425,000 $ 1,725,000 $ 2,025,000 $ 2,325,000 $ 3,075,000
Issued
at FMV

Options  300,000 $12.35 $    -     $  795,000 $1,155,000 $1,395,000 $1,995,000 $ 2,595,000 $ 3,195,000 $ 3,795,000 $ 5,295,000
Issued
at 130%
of FMV

Options  300,000 $14.25 $    -     $  225,000 $  585,000 $  825,000 $1,425,000 $ 2,025,000 $ 2,625,000 $ 3,225,000 $ 4,725,000
Issued
at 150%
of FMV

Total    750,000        $  375,000 $1,845,000 $2,745,000 $3,345,000 $4,845,000 $ 6,345,000 $ 7,845,000 $ 9,345,000 $13,095,000
Value
of New
Award

Value    381,000 $ 9.41 $  986,790 $2,129,790 $2,586,990 $2,891,790 $3,653,790 $ 4,415,790 $ 5,177,790 $ 5,939,790 $ 7,844,790
of 60%
of Previous
Award

GRAND                   $1,361,790 $3,974,790 $5,331,990 $6,236,790 $8,498,790 $10,760,790 $13,022,790 $15,284,790 $20,939,790
TOTAL

(1)  The term of the new grant is ten years, but the options vest 20% per year beginning on January 1, 2001.

(2)  The columns indicating the Black-Scholes values were eliminated because the approach is based on a targeted
     gain at the achievement of a stock price goal, rather than a Black-Scholes valuation methodology.



                                                               Exhibit 10.2

                          RESTATED PROMISSORY NOTE


$350,000.00
                                                             Houston, Texas
                                                              June 14, 1999


     For value received, the undersigned hereby promises to pay to Kaiser
Aluminum & Chemical Corporation, a Delaware corporation, or order, at 5847
San Felipe, Suite 2600, Houston, Texas, on or before the Maturity Date (as
defined below) the lesser of (a) the principal amount of Three Hundred
Fifty Thousand Dollars ($350,000.00), and (b) the aggregate unpaid
principal amount outstanding under this Restated Promissory Note (this
"Note").  No interest will be due and payable with respect to such amounts
paid on or before the Maturity Date.

     Amounts borrowed by the undersigned and evidenced by this Note may be
used only to purchase (including remodel) the undersigned's new principal
residence in Houston, Texas.  The undersigned may borrow under this Note
from time to time between the date hereof and the Maturity Date.  Any
amount borrowed under this Note may be repaid, in whole or in part and from
time to time before the Maturity Date, without premium or penalty.  Amounts
borrowed and repaid may not be reborrowed.  If not repaid sooner, the
aggregate unpaid principal amount outstanding under this Note shall be paid
in full, without presentment, grace, demand, or notice upon the earliest to
occur of (a) fifteen (15) days after the closing of the sale of the
residence of the undersigned located at 5431 Blackhawk Drive, Danville,
California, and (b) December 31, 1999 (the "Maturity Date").

     Should default be made in the payment of any amount due under this
Note, the entire outstanding principal amount outstanding under this Note
shall be immediately due and payable, without presentment, grace, demand,
or notice.  After default, interest shall accrue on all unpaid amounts
under this Note at the highest rate then lawful in the State of Texas;
provided, in no event shall interest on the debt evidenced by this Note
exceed the maximum amount of nonusurious interest that may be contracted
for, taken, charged or received under any applicable law.

     Principal, and interest if any, shall be payable in lawful money of
the United States of America.  The undersigned agrees that the records of
Kaiser Aluminum & Chemical Corporation as to the amount of principal
outstanding and unpaid under this Note from time to time shall be deemed
presumptively correct in the absence of manifest error.

     If action is instituted on this Note, the undersigned shall pay to
Kaiser Aluminum & Chemical Corporation such sums as a court of competent
jurisdiction may fix as reasonable attorneys' fees and as costs.  The loans
evidenced by this Note were negotiated and consummated in the State of
Texas, and it is agreed and understood that the legality, enforceability,
and construction of this Note shall be governed by the laws of the State of
Texas.

     This Note restates in its entirety the Promissory Note, dated June 14,
1999, from the undersigned to Kaiser Aluminum & Chemical Corporation.


                                   /s/  Raymond J. Milchovich
                                   ____________________________________
                                        Raymond J. Milchovich
  

5 This schedule contains summary financial information extracted from the consolidated financial statements of the Company for the six months ended June 30, 1999, and is qualified in its entirety by reference to such financial statements. 0000811596 KAISER ALUMINUM CORPORATION 1,000,000 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 26 0 278 6 525 955 2,007 918 3,046 543 963 0 0 1 66 3,046 1,004 1,004 934 934 49 0 55 (83) (29) (54) 0 0 0 (54) (.68) (.68)