ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     This section contains forward-looking statements that involve risk and
uncertainties. Actual results could differ materially from those projected in
these forward-looking statements.

     The following sets forth updated information regarding the impact on future
earnings of adverse market changes related to KACC's alumina and primary
aluminum hedging positions resulting from the downward shift in the forward
market prices for primary aluminum experienced during the first quarter of 2000,
as well as additional hedging positions put in place during the quarter. See
"Quantitative and Qualitative Disclosures About Market Risk" in the Company's
Annual Report on Form 10-K for additional information regarding KACC's hedging
activities.

     On average, before consideration of hedging activities, any fixed price
contracts with fabricated aluminum products customers, variations in production
and shipment levels, and timing issues related to price changes the Company
estimates that each $.01 increase (decrease) in the market price per
price-equivalent pound of primary aluminum increases (decreases) the Company's
annual pre-tax earnings by approximately $15.0 million.

     As of March 31, 2000, approximately 65%, 45% and 15% of KACC's net
hedgeable volume with respect to the remainder of 2000, 2001 and 2002,
respectively, is subject to a minimum and maximum contract price. If the March
31, 2000 London Metal Exchange ("LME") cash price for primary aluminum of
approximately $.69 per pound were to be the prevailing price during the period
of these hedging contracts, the Company estimates that it would realize a net
aggregate pre-tax reduction of operating income of approximately $40.0 million
from its hedging positions and fixed price customer contracts during the
remainder of 2000, 2001 and 2002. The Company estimates that a hypothetical $.10
increase from the March 31, 2000, LME price would result in an additional net
aggregate pre-tax reduction of operating income of approximately $100.0 million
being realized during the remainder of 2000, 2001 and 2002 related to KACC's
hedging positions and fixed price customer contracts. Approximately 25% of any
reductions in operating income would occur in the second quarter of 2000 as the
maximum contract prices in that period are lower than in the other periods. Both
amounts above are versus what the Company's results would have been without the
derivative commodity contracts and fixed price customer contracts discussed
above. Conversely, the Company estimates that a hypothetical $.10 decrease from
the March 31, 2000, LME price would result in an aggregate pre-tax increase in
operating income of approximately $65.0 million being realized during 2000 and
2001 related to KACC's hedging positions and fixed price customer contracts. It
should be noted, however, that, since the hedging positions and fixed price
customer contracts lock-in a specified price or range of prices, any increase or
decrease in earnings attributable to KACC's hedging positions or fixed price
customer contracts would be significantly offset by a decrease or increase in
the value of the hedged transactions.

     As stated in Note 5 of Notes to Interim Consolidated Financial Statements,
KACC has certain hedging positions which do not qualify for treatment as a
"hedge" under current accounting guidelines and thus must be marked-to-market
each period. Fluctuations in forward market prices for primary aluminum would
likely result in additional earnings volatility as a result of these positions.
The Company estimates that a hypothetical $.10 increase in spot market prices
from the March 31, 2000, LME cash price would, if the forward market were in a
"contango" position (i.e., where future prices exceed spot prices), result in
additional aggregate mark-to-market charges of between $20.0 - $30.0 million
during the balance of 2000 and 2001. Conversely, the Company estimates that a
hypothetical $.10 decrease in quarter-end 2000 spot market prices would result
in aggregate mark-to-market income of up to $19.0 million during the balance of
2000 and 2001 (which is the amount of cumulative net mark-to-market losses
reflected

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   22

              KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

through March 31, 2000). For purposes of this computation, the Company assumed
that the forward market would be essentially "flat" (i.e., future prices would
approximate the current forward market price).

     The foregoing estimated earnings impact on 2001 excludes the possible
effect on pre-tax income of Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which must be
adopted by the Company as of January 1, 2001.

     In addition to having an impact on the Company's earnings, a hypothetical
$.10-per-pound change in primary aluminum prices would also impact the Company's
cash flows and liquidity through changes in possible margin advance
requirements. At March 31, 2000, KACC had made margin advances of approximately
$10.0 million and had posted letters of credit totaling $20.0 million in lieu of
paying margin advances. Increases in primary aluminum prices subsequent to March
31, 2000, could result in KACC having to make additional margin advances or post
additional letters of credit and such amounts could be significant. If primary
aluminum prices increased by $.10 per pound (from the March 31, 2000 LME price)
by June 30, 2000 and the forward curve were as described above, it is estimated
that KACC could be required to make additional margin advances in the range of
$60.0 to $90.0 million. On the other hand, a hypothetical $.10 decrease in
primary aluminum prices by June 30, 2000, using the same forward curve
assumptions stated above, would be expected to result in KACC receiving all of
its March 31, 2000, margin advances. KACC's exposure to margin advances is
expected to improve throughout 2000 as its year 2000 positions, which have a
lower average maximum contract price than KACC's 2001 positions, expire. KACC is
also considering various financing and hedging strategies to limit its exposure
to further margin advances in the event of aluminum price increases. However, no
assurance can be given that KACC will be successful in this regard.