WCA January 2017

From the Americas

new ownership would be seamless and that the “new strategic shareholder” would give the company “greater financial flexibility.” Analysts said the deal could provide the USA company with new sources of raw aluminium and a foothold in the fast-growing Chinese market.  For its part, the Illinois-based Aluminum Extruders Council has said Zhongwang’s takeover of Aleris “raises very serious concerns for the entire aluminium industry,” and is trying to mobilise support to block further Chinese penetration. To Mr Burns of MetalMiner , a multimedia resource for metal-buying organisations, signs are strong that the Western producers currently doing very well out of the sector fear “major disruption only just over the horizon.”  The deal for Aleris, expected to close early this year, could attract attention from the federal inter-agency Committee on Foreign Investment in the USA, which could recommend blocking or modifying the acquisition on national security grounds. Worldsteel, with input from 85 per cent of steel producers, sees the crisis in steel fading, demand growing On 11 th October, at its conference in Dubai, the World Steel Association (Worldsteel) declared its belief that the global steel sector crisis is easing, with demand for steel showing growth last year and again this year. In April 2016 it had forecast demand would fall 0.8 per cent for the year. But Brussels-based Worldsteel, with a membership of over 150 steel producers, now sees global steel demand for 2016 up 0.2 per cent to 1.501 billion metric tons (bmt), while for 2017 it expects demand to grow 0.5 per cent year-on-year to 1.51 bmt. “Global steel demand is through the bottom of this cycle” is the Worldsteel view, on grounds of a brighter outlook for Russia and strong growth in emerging Asian economies excluding China. The question then arises how much benefit producers will realise from the envisioned pickup in demand, since it is unknown how much of the additional steel would be secured by Chinese buyers. To Alistair Ramsay, research director at Metal Bulletin Research , the Worldsteel forecast for higher output does suggest higher steel prices ahead. But, he told Reuters , “If China takes all of it, prices will remain under pressure.” China produces and consumes about half the world’s steel, and has an estimated overcapacity of 300 million metric tons (mmt). Confronting global criticism over cheap Chinese steel exports, Beijing pledged to cut steel capacity by 45mmt last year, and had met almost 50 per cent of its target by the end of July. Even so, China’s crude steel output rose for a sixth straight month in August and at the time of the Worldsteel projection Chinese exports were on track to exceed the 2015 record of 112mmt. Worldsteel had forecast that Chinese steel demand would fall four per cent in 2016. But the association said it now Steel

Aluminium Awakening late to Chinese competition, Western aluminium makers learn that Zhongwang USA is to acquire Cleveland-based Aleris In an article on the impact of Chinese aluminium on global markets, Stuart Burns of MetalMiner took note of a projection by Goldman Sachs analysts that the use of aluminium alloy in a car’s main structure will rise by 17.5 per cent each year between 2015 and 2025. Perceiving a major source of growth for a decade to come, in a sector in which they had relatively little competition beyond the USA and Europe, Western firms like Aleris and Alcoa, both of the USA, increased their capacities and enhanced their product lines. While Chinese aluminium mills – and to a lesser extent mills in Malaysia and Turkey – gradually increased their presence in commodity products, the Western mills moved upstream, investing heavily to meet demand for automotive sheet and castings and aerospace sheet, plate and extrusions. But now, Mr Burns wrote, “Chinese manufacturers are beginning to enter these markets, with a number of Chinese mills gaining Boeing and Airbus approval, underlining their intentions to take a slice of this lucrative market.” (“China: A Growing Presence in Automotive and Aerospace Aluminium,” 20 th September) The announcement on 29 th August that the USA affiliate of one of China’s largest aluminium makers would buy Aleris Corp (Cleveland) sounded an alarm. In addition to the cash price of $1.1 billion, Zhongwang USA will assume $1.2 billion in Aleris debt. Suddenly it became plain that Chinese firms, no longer content to export aluminium automotive and aerospace products from a cautiously expanding home base, were looking at taking over what Mr Burns termed “the crown jewels of Western aluminium producers.” To judge from Wall Street Journal coverage of the $1.1 billion deal – the biggest yet by a Chinese firm for an American metals producer – Aleris does seem a jewel. The company has annual revenue of around $3 billion, a 5,000-strong workforce, and 14 plants around the world. It makes rolled aluminium for the construction, automotive and aerospace industries, and has supplied aluminium plate to the USA military for use in armoured vehicles. It is building a $400 million expansion in Lewisport, Kentucky, to ramp up production of aluminium sheet for car and truck makers. Thus parent company China Zhongwang stands to gain better access to USA auto makers, whose increased consumption of aluminium to meet fuel efficiency standards is, notes MetalMiner’s Mr Burns “one of the brightest spots in the global aluminium industry.”  China Zhongwang, based in eastern China, is among the world’s biggest makers of aluminium extrusions. The deal by Zhongwang USA to buy Aleris offers a “complementary business foothold,” said Liu Zhongtian, who controls the USA affiliate and is also the founder and chairman of China Zhongwang Holdings Ltd. Aleris CEO Sean Stack told the WSJ that the transition to

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Wire & Cable ASIA – January/February 2017