WCA March 2007

From the Americas

Arcelor Mittal CFO Aditya Mittal said his company saw significant potential for improving the profitability of Sicartsa. The decision to expand into Mexico was prompted by expectation of annual growth in the Mexican market of up to 6% over the next 10 years. Elsewhere in metals . . . Alcoa , the world’s largest producer of primary aluminium, on 4 th January announced the formal opening of its aluminum brazing sheet plant in Kunshan City, China. Established in April 2006 as a joint venture of Alcoa and Yencheng Engraving, Kunshan Aluminium Products Co Ltd produces heat exchanger materials for automotive and other industrial HVAC applications and complementary alloy aluminium products. It is Alcoa’s third flat-rolled products facility in China. At full capacity Kunshan Aluminium would produce 50,000 mtpy of aluminum brazing sheet, primarily for the Asian automotive market. Kunshan Aluminum has two other brazing sheet operations: in Lancaster, Pennsylvania, near Alcoa world headquarters in Pittsburgh; and at Kofem, in Hungary. Alcoa also produces aluminium rolled products at Alcoa Bohai Aluminum Industries Co Ltd , a joint venture with China International Trust & Investment (CITIC), based in Qinghuangdao, China; and at the Alcoa Aluminum Products Ltd facility in Shanghai. The American company said that the Bohai plant is the largest foil producer and exporter in China. The Canadian aluminium producer Alcan said it would invest $1.8 billion over 10 years to expand its smelter operations in the Saguenay-Lac-St-Jean region of Quebec, Canada. The expansion is expected to create 740 high skill jobs over the period, and 1,200 to 1,500 construction jobs. ❖ ❖ Even as the US hails China’s expression of intent to curb steel exports (‘Fewer Steel Exports from China,’ above), another Chinese initiative will be far less welcome to American companies doing business in China. Beijing has begun implementing a plan to do away with the low tax rates available to ‘foreign-invested’ firms that had been a major factor in attracting overseas direct investment. As of the New Year, foreign companies active in China are required to pay land-use tax, formerly imposed solely on Chinese firms. And the standing committee of the National People’s Congress is expected to approve a new corporate income tax structure that will have foreign and domestic firms paying taxes at the same rate. The Chinese legislature will likely dictate a single tax rate of 25% by the end of 2007. Beijing clearly wants to discourage investment in several sectors as a means of cooling down its economy. According to Saibal Dasgupta, writing from Beijing in the Times of India , the withdrawal of foreigners’ ‘privileges’ will effect a major transition that brings China closer to the Indian model: “If the absence of direct elections and parliamentary democracy made it possible for China to implement China pulls back on preferential treatment for overseas firms

the differential tax system, economic reasons are now prompting” the withdrawal of accommodations extended to overseas interests over 20 years. (‘China Ends Tax Benefits for Foreign Companies,’ 3 rd January).

Aero notes . . . The Mesa Air Group has said it will become the first American passenger airline to operate flights out of mainland China. The Phoenix, Arizona-based company said in December last year that it plans to sign a joint operating agreement with Shenzhen Airlines , whose fleet of 45 planes flies 100 routes within China and Southeast Asia. According to Mesa’s filing with the US Securities and Exchange Commission, the as-yet- unnamed new airline expects to begin service within 12 months, in time for the Beijing Olympic Games in 2008. An initial operation of 20 regional jets will serve Shenzhen, Beijing, Nanjing, and Zhengzhou. On 21 st November last year Korean Air Lines ordered 25 planes from Boeing Co (Chicago) in its largest- ever deal as it seeks to benefit from rising demand for passenger and cargo flights. Bloomberg News reported that South Korea’s biggest carrier ordered 15 short-and- long-range passenger aircraft and 10 freighters, which it expects to begin receiving in 2009. The airline said the order was valued at as much as $5.5 billion at list prices. ❖ ❖ The global economy will remain strong this year as Europe and Asia compensate for a slowdown in the US, according to International Monetary Fund Managing Director Rodrigo de Rato. “We are moving into another year of strong growth,” Mr de Rato told reporters in Basel, Switzerland, on 8 th January. “We certainly see strong growth in Europe, a continuation of growth in Japan, and we see very strong growth in many emerging economies.” While a housing slowdown is cooling growth in the US, unemployment in Germany in December dropped the most since 1990 and business confidence in Japan rose to a two- year high. The IMF head said a US slowdown would not be severe enough to derail the global economy. The IMF in September 2006 forecast that the global economy would expand 4.9% this year, down from 5.1% in 2006. Mr de Rato in January declined to say whether he would revise those projections. He did say that ‘complacency’ should nonetheless be avoided as ‘ample liquidity’ in the global economy helps boost asset prices and reduces the price of risk. Mr de Rato also said the price of oil, which has gained almost 25% in the last two years, posed an inflationary threat. The IMF, essentially a Washington-based lender, describes itself as ‘an organisation of 184 countries working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty.’ IMF director sees strength in ’07 despite slowdown in the US

Dorothy Fabian – Features Editor

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Wire & Cable ASIA – March/April 2007