Being a crucially important raw material for high-tech industries, aluminum encourages globalization plans of its large manufacturers and consumers. As some experts predict, world aluminum production in the 21st century will see further internationalizati
METAL FOR THE NEW MILLENNIUM
Being a crucially important raw material for high-tech industries, aluminum encourages globalization plans of its large manufacturers and consumers. As some experts predict, world aluminum production in the 21st century will see further internationalization and mergers in the aluminum business, including involvement of power-generating facilities. Aluminum consumption will grow in such industries as automotive and transport engineering, construction business, and household appliances. The aluminum market will expand on account of joint research & development, creation of technologies, and establishment of joint ventures by producers and consumers of aluminum.
There is plenty of evidences of the upcoming integration. In July 2000, the first deputy Prime Minister of Ukraine Yuriy Yekhanurov, management of France’s aluminum manufacturer Pechiney, and the European Bank for Reconstruction and Development met in Ukraine to discuss upgrade of Nikolayev Alumina Works (Mykolayivsky glynozemny zavod). As a matter of fact, it is not by a sheer chance that Poux Guyom, the first vice-president of Pechiney-Bauxite-Alumina directors board with Pechiney World Trade, and Andrew Seaton, chief operating officer with the EBRD, paid a visit to Ukraine. It was this France-based aluminum company that partook in construction of Nikolayev Alumina Plant in due time. On the other hand, it is obvious that the French company seeks new partners being inspired by the global alliance trend in aluminum manufacturing around the world. For instance, within the framework of the antimonopoly law, the European Union suspended a merger of Canada’s Alcan, France’s Pechiney, and Switzerland’s Alusuisse in spring 2000. Should these companies merge, the new aluminum giant would beat the current leader, Alcoa of the USA. Responding to these projects, Alcoa declared its intention to purchase Reynolds Metals, the USA.
The expectations are plain obvious. If Alcoa succeeds to purchase Reynolds, then the company will have a chance to retain the title of the top aluminum producer in the world. Nevertheless, American officials have a negative attitude towards the merger. Besides, certain aluminum manufacturers are ready to file a suite to court. Hence, the issue is yet undecided. The efforts, however, speak for themselves. Russia, being a large player on the global market, pays close attention to these moves. Unless all the aforementioned mergers are performed, Russian Aluminum holding (Russkiy aluminiy) is officially ranked the second global producer after Alcoa, thus being a more than suitable partner for the French aluminum makers. We should remind that Nikolayev Aluminum Works is under control of Ukrainian Aluminum (Ukrayinskiy aluminiy), a subsidiary company of Siberian Aluminum (Sibirskiy aluminiy). The latter, in turn, is a co-founder of Russian Aluminum. By the way, the head of Ukrainian Aluminum Herman Tkachenko, who is concurrently the vice president of Siberian Aluminum, participated in the July meeting with French businessmen. The mutual interest of French, Ukrainian, and Russian aluminum manufacturers is distinct.
Let’s say a few words about another significant event. On July 24-28, 2000, Russian cities of Krasnoyarsk and Irkutsk hosted the International Conference on Aluminum Industry in Russia and Worldwide in the 21st Century. Representatives of more than 50 largest Russian and foreign companies and leading scientific institutions, as well as up to 50 aluminum smelters, cartels, and financial-and-industrial alliances from England, Switzerland, Germany, the USA, South Korea, France, Greece, and Italy took part in the Conference. In official terms, these people met to discuss the progress of modern technologies for production of aluminum and alumina, as well as to consider the prospects for aluminum recycling. Off the record, aluminum giants like Kaiser and Hydro Aluminum tried to reconnoiter the financial health of the recently-founded Russian Aluminum holding, as well as to develop future expectations of the company’s performance on the world market.
Western metal-makers also raised the issue of establishing large national companies and power-and-metal alliances in Russia. The foreigners actively discussed this issue as distinct to the Russian participants. Though field trips of the conference participants came along major aluminum-making links of the holding, namely, Bratsk and Krasnoyarsk Smelters, the Russian Aluminum representatives lacked visible desire to discuss any issues with metal-makers from abroad. It looks as if Russian Aluminum controlling some 80% of the total aluminum output in Russia is not eager to show its cards to global competitors.
And yet, most of the conference time was devoted to problems of the aluminum industry development in the new century. Questions under review embraced development of mineral resource exploitation in Russia and worldwide, as well as competitiveness of aluminum on the metals market. Participants paid close attention to new technologies and alternative ways of making aluminum.
The industry’s development should not be so impacted by price fluctuations, the first vice president of Norway’s Hydro Aluminum Aynwid Haghen mentioned.
It was him who made a forecast about the entire aluminum production being concentrated at some 5 to 6 leading multinational corporations in the future. Hydro Aluminium hopes to enter the list of such leading aluminum manufacturers.
At the conference, the emphasis was put on the fact that greater industrial application of aluminum will not appear from nowhere. Close business contacts among producers themselves, and clients are a must. Excellent example of cooperation between enterprises within the industry is the joint work initiated by the Association of Electrical Appliance Producers and the leading European aluminum makers. They work under the shared slogan of Aluminum for Future Generations.
In a word, it has become more important recently to establish and cultivate long-term cooperation among aluminum producers and consumers. Producers with their weighty experience could render assistance to clients helping them optimize manufacturing processes, develop new products, and strengthen their positions on new markets. Such a specific assistance could be provided in the sphere of material science, research & development, technical and trade services, logistics, ecology, global planning systems, and scrap recycling.
At present, concentration of capital and agglomeration of manufacturing facilities are reported to take place in the aluminum industry. The trend is very typical for Russia. As regards the Western economy, the 6 largest shareholders of aluminum smelters gained control over 52% of the market following a number of mergers among aluminum producers. The aluminum industry is distinguished for a trend to deeper privatization, e.g., in Russia, Western Europe, and South America. On the West, the state-owned interest in aluminum companies has diminished from some 25-30% to 15% over the recent years.
Experts believe that global consumption of primary aluminum will add 10 million tonnes during the upcoming decade. According to forecasts of the British consulting agency CRU International Ltd that specializes in analysis of global markets for raw materials, consumption of primary aluminum will amount to some 34.2 million tonnes in the year 2010. The truth is somewhere in-between. Global aluminum output has seen a 3.8% annual growth recently. Simultaneously, over the last 20 years, a number of aluminum-producing enterprises with total output equaling to 10 million tpy were shut down because of inability to withstand price fluctuations on the world market for aluminum.
Production of primary aluminum at Ukraine’s closest neighbor, i.e. Russia, may reach 7.3 million tpy. The bulk of Russian raw materials comes from Severo-Uralsky bauxite mine, Kiya-Shaltyrskiy nepheline mine, and Apatit Works (producer of nepheline concentrate). Should alumina works make efficient use of their productive facilities, Russia’s total production of alumina of domestic raw materials may amount to some 3,000,000-3,100,000 tpy, including 1,800,000-1,850,000 made of bauxite (e.g., at BAZ, UAZ, and BGZ) and 1,200,000-1,250,000 tpy of nepheline (AGK, PGK).
Since Ural Aluminum Smelter (Uralsky aluminiyevy zavod) switched to processing of bauxite coming from the first stage of Sredne-Timansky bauxite mine (STBM), a portion of bauxite from Severo-Uralsky bauxite mine (SUBM) may be sold for the needs of the 2nd alumina workshop at Bogoslovsk Alumina Works (Bogoslovskiy glinozyemny zavod). Construction of the latter commenced back in the times of the administrative planning economy. The total capacity of this works will come to some 1.4-1.5 million tpy. Bogoslovsk Works will use solely the bauxite from SUBM located nearby. Because the mining costs incurred by this mine are rather high and railway tariffs are strongly expected to rise, the mentioned decision sounds like the most beneficial one.
Commissioning of the second stage of STBM and construction of a new 1.2-1.3-million-tpy alumina factory in the Republic of Komi will allow to raise Russia’s alumina output to some 4.6-4.8 million tpy, including 4.2-4.4 million tpy of metal-grade alumina.
Finally, large alumina facilities with production capacity ranging between 0.8-1.2 and 2.0-2.5 million tpy can be built on the grounds of bauxite from Severo-Onezhskiy deposit.
Thus, output of primary aluminum of domestic raw materials may sum to the following figures in Russia. The functioning alumina factories and mining enterprises may contribute 3.0-3.1 million (up to 50% of the present demand). Full-capacity launch of Sredne-Timanskiy bauxite mine and construction of BAZ-2 and alumina factory in Komi may raise total production of primary aluminum to 5.1-5.3 million tpy meeting about 85% of the present demand. Should Severo-Onezhskiy bauxite mine be put into operation and serve as a construction site for a new large alumina factory, aluminum output may see the high of 6.0-7.3 million tpy.
Russian Aluminum is going to replenish its current assets on account of Sberbank (Saving Bank) money. These two have signed a general agreement of cooperation, which stipulates for US$200-million loans to be issued to Russian Aluminum. The funds will be disbursed as several tranches repayable in 12 months. As a matter of fact, the loans will be issued for implementation of commercial and manufacturing programs, and investment projects of the compаny itself and firms comprising the holding. The agreement also provides money transfer services to be rendered to Russian Aluminum, as well as for issuance and floatation of securities. Sberbank will not secure the loans against shares of the borrowing enterprises. Productive facilities of the borrowers, export contracts, and any other assets may be used as security on the loans.
There are enough evidences that most of the money will be allotted to Bratsk Aluminum Smelter (Bratsky aluminiyevy zavod). Credit contracts with other enterprises of the holding, namely, Krasnoyarsk Aluminum Smelter (Krasnoyarsky aluminiyevy zavod) and Sayansk Aluminum Smelters (Sayansky aluminiyevy zavod), are in the technical revision stage. Russian Aluminum’s plans for the coming future embrace entering of the debentures market. Firstly, the securities will appear on the Russian market, to move on to the West later on.
Besides, Russian Aluminum has applied to participate in the tender for trust management of Azeralyuminiy company that controls the aluminum factories and facilities of Azerbaijan; namely, Sumgayitsvetmetall, Gyadzhinsk Production Association Glinozyem, Dashkesan Mining Works, and Zeilik Alunite Mining Administration.
So, Russian Aluminum strives to expand its influence beyond Ukraine-based Nikolayev Alumina Works to as many foreign companies as possible, hence willing to turn into a multination corporation.
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