WCA May 2007

From the Americas

National Association for Business Economics (Washington, DC): US gross domestic product will likely expand by 2.5% in 2007, down from an expected 3.3% last year, according to a panel of 50 forecasters. The big question is, of course, whether the US economy will slow gradually while avoiding a jump in inflation – for a so- called soft landing – or slide into a recession, which could seriously stifle global growth. Latin American economies are expected to do well in 2007, with this qualification: the region is a big exporter of commodities such as copper and iron ore, so any global economic shocks – eg an unexpected slump in China – would have severe repercussions. Brazil: Growth is seen accelerating to 3.4% this year after an approximate 3% last year. President Luiz Inacio Lula da Silva has brought inflation down to 3.2%, considered an amazing accomplishment. Mexico: Growth of 3.7% is expected this year, down from 4.7% last year. But inflation has dropped to a record low, the nation’s currency is stable, and nearly 1 million jobs have been created. Argentina: The strong comeback after the economic meltdown of 2002 is expected to continue, with experts predicting growth in gross domestic product of 7% this year. Construction is booming, and unemployment – which reached a record high of 21.5% in 2003 – is below 10%. ❖ Canada’s Alcan flourishes on scarcer aluminium, higher prices Alcan Inc reported a fourth-quarter 2006 profit of US$422 million as tight supplies of the metal boosted prices 30%, more than making up for a drop in shipments. The price of aluminium sold by Alcan rose $620 in the quarter, to $2,712 a ton from $2,092 a year earlier, while ship- ments contracted from 1.096 million tons to 1.09 million. Montreal-based Alcan said its quarterly sales jumped 23%, to $6.22 billion. The world’s second-largest aluminium producer foresees rising output creating a small surplus of the metal this year. As reported by Bloomberg News (31 st January), Alcan said global production will outpace growth in demand, ending the supply deficit that sent prices in May 2006 to their highest level in at least 19 years. With copper prices having more than tripled over the past four years, Alcan is seeing ‘very strong’ demand from the cable and electric-conductor markets as industrial consumers increasingly use aluminium as a substitute for copper. Accordingly, in a 31 st January interview with Bloomberg ’s Dale Crofts, Alcan CEO Richard Evans said the company plans to spend $1.8 billion in Quebec to acquire as much as 450,000 metric tons of additional smelting capacity. Aerospace demand for aluminium is also gaining, and Alcan is seeing growth in emerging markets such as Russia. Metals

The company is closing aluminium plants in Europe to build new ones in Iceland and Oman, where electricity is cheaper. Alcan expects world aluminium demand to rise about 6.7% this year – after a 6.8% gain in 2006 – and production to accelerate, jumping 7.8% after a 6.3% increase last year. Global output will exceed demand by about 200,000 tons, erasing a deficit last year of 160,000 tons, the company said. Another Alcan executive, Carmine Nappi, head of industry analysis, told Bloomberg that China may increase demand by 19% this year after gaining 17% in 2006. The world’s biggest aluminium user, China now accounts for about a quarter of world demand, Mr Nappi said. Of related interest . . . Novelis Inc (Atlanta, Georgia), the aluminium sheet roller spun off from Alcan in 2004, said on 26 th January that it was in talks that could lead to the sale of the company. According to the Hindustan Times , India’s Aditya Vikram Birla group may be preparing a bid of as much as $6 billion for Novelis. The Times ’s Arun Kumar reported that sources in the investment banking industry say the acquisition would make the Indian conglomerate’s Hindalco Industries Ltd ‘the world’s largest player in the downstream aluminium business involving value-added products.’ If Novelis does go to the Birla group for top dollar, the sale would tend to confirm Alcan’s view that the rally in metals has made assets overpriced. Novelis’s market value is about $2.7 billion. The Brazilian steel company Companhia Siderurgica Nacional SA , or CSN, has been outbid by Mumbai- based Tata Steel in a rivalry to acquire the Anglo-Dutch steelmaker Corus . On 31 st January the Indian company – a unit of the Tata Group conglomerate – made a new offer of $11.3 billion for Corus, representing a 22% premium to an already sweetened offer it made last autumn. That offer was later trumped by CSN, setting off a bidding war that led London-based Corus to hold the January auction in which Tata prevailed after several rounds of bidding. The takeover will help extend Tata Steel’s reach into Europe and propel the company – now 56 th in the world as measured by output – into a global player, Tata said. The Tata-Corus combination could produce 25 million tons of steel a year, making it the world’s fifth-largest steel producer. ❖ ❖ GE and Hitachi will merge their nuclear businesses, seek US clients In another sign of global retrenchment in the nuclear power industry, General Electric, of the US, and Hitachi, of Japan, will merge their nuclear power businesses that provide services to owners of existing reactors and build new ones. GE, based in Fairfield, Connecticut, competes with Westinghouse Electric (owned by Toshiba, of Japan) and with the French-German consortium Areva to sell reactors in the United States. Interest in nuclear power is reviving in that market as a result of high energy prices and concern about dependence on oil imports.

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Wire & Cable ASIA – May/June 2007