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Wire & Cable ASIA – January/February 2017
From the Americas
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,” 20th September)
The announcement on 29th 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
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.
Steel
Worldsteel, with input from 85 per cent of
steel producers, sees the crisis in steel
fading, demand growing
On 11th 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
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