5th World Congress ALUMINIUM 2000 Rome, 18-22 March, 2003 B. Ruettimann, Alcan Automotive...

5th World Congress ALUMINIUM 2000 Rome, 18-22 March, 2003 B. Ruettimann, Alcan Automotive

Globalisation and the Effects of the Opening of the East on the Western European Aluminium Semis Industry

Globalisation and the Effects of the Opening of the East on the Western European Aluminium Semis Industry

Bruno G. Rüttimann, Alcan Singen GmbHBruno G. Rüttimann, Alcan Singen GmbH

5th World Congress ALUMINIUM 2000

Rome, 18-22 March 2003

5th World Congress ALUMINIUM 2000

Rome, 18-22 March 2003


Mergers & Acquisitions

Mergers & Acquisitions


Trade Deregulation

Trade Deregulation


Increasing Competition

Increasing Competition


Price PressurePrice Pressure


Flow of Information

Flow of Information


Interlinked MarketsInterlinked Markets


World-wide StrategiesWorld-wide Strategies


Reduced Growth RatesReduced Growth Rates


OvercapacityOvercapacity


Un-employmentUn-employment


The Drivers for Globalisation

The Globalising Competitive System

The Opening of the East

The Resulting Effects

Changes in Demand Characteristics

Possible Strategies

The Ten Postulates of Globalisation

The Drivers for Globalisation

The Globalising Competitive System

The Opening of the East

The Resulting Effects

Changes in Demand Characteristics

Possible Strategies

The Ten Postulates of Globalisation

CONTENTCONTENT


Saturation in existing

end markets

Saturation in existing

end markets

World-wide communication

network

World-wide communication

network

Searching for optimization potential

Searching for optimization potential

Searching for geographical expansion

Searching for geographical expansion

Searching for diversification opportunities

Searching for diversification opportunities

M&AM&A

Opening of a global market

with new competitive environment

and new world market

price

Opening of a global market

with new competitive environment

and new world market

price

+PricePrice//margin pressure margin pressure PricePrice//margin pressure margin pressure

Change of competitive system

Change of competitive system

Shake-outShake-out

Concentration processConcentration processConcentration process

The Drivers for GlobalisationThe Drivers for GlobalisationSymptoms, causes, and effects Symptoms, causes, and effects


Type 1 Globalisation of business itself

products with world price

and world-wide sourcing

or need to follow globally active customers

Type 2 Globalisation of managing business

mainly in fragmented market structures

for „franchise-like“ business model

Type 1 Globalisation of business itself

products with world price

and world-wide sourcing

or need to follow globally active customers

Type 2 Globalisation of managing business

mainly in fragmented market structures

for „franchise-like“ business model

The Globalising Competitive SystemThe Globalising Competitive SystemThe types of globalisation The types of globalisation


Bauxit mining,

alumina production

,

Primary smelter, casting,

Rolling, extruding,

die casting, forging ,...

, ,

,

Components, ,

finished products

Usa

ge

Recycling

Usa

ge

Scrap,

waste

Remelters, foundries

, Scrap,

waste

The Globalising Competitive SystemThe Globalising Competitive SystemAluminium industry structure and type of globalisationAluminium industry structure and type of globalisation

Type 1 globalisation predominant

Type 1 globalisation predominant

Type 2 globalisation predominant, if ever

Type 2 globalisation predominant, if ever


+-

Aluminium Aluminium priceprice

Eastern privat and industry demandEastern privat and industry demand

+

Eastern economy policy

Western govern.

help

Loans

+

++

+

Eastern economy policy

Western govern.

help

Loans

+

++

+

++

Substitution or cooling downSubstitution or cooling down++

Export possibilitiesto western countries Export possibilitiesto western countries

+

++

Al- demand western countries Al- demand western countries

Al- demand eastern countries Al- demand eastern countries

++++

Al-capacityCIS-offer

Al-capacityWestern-offer

+ +Al-capacityCIS-offer

Al-capacityWestern-offer

+ +TOTAL Al-offer

TOTAL Al-demand

+

-

TOTAL Al-offer

TOTAL Al-demand

+

-

Al- consumption Western countries Al- consumption Western countries

--

- -

+

-

The Opening of the EastThe Opening of the EastSystem dynamics and driving forces on Alu demand System dynamics and driving forces on Alu demand

Al- consumption eastern countries

Al- consumption eastern countries

-


Primary:

Capacity 2586

Consumption 5353

Production 2571

Rolling4:

Capacity 17003

Consumption 250

Production 330

Extrusion:

Capacity 2600

Consumption 2440

Production 2400

Extrusion4:

Capacity 600

Consumption 80

Production 150

Rolling:

Capacity 3500

Consumption 3350

Production 3300

1 EU 15 includes EU 11 plus Denmark, Greece, Sweden and UK2 Differences between Production and Consuption/Export are explainable with stocked material or even higher (not registered) Exports

Source: EAA/Eurostat,various souces, own estimations

Primary:

Capacity 3745

Consumption 845

Production 37072

31

680

21

2

7

26

EUR (15)EUR (15)11 CISCIS

1338

0

69

2

64

13

Russia,Azerbaijan,

Tadjikistan,Ucraine

Russia,Ucraine

Russia,Tajikistan,

Ucraine

1960

150

464

420

181

166

3 theoretical, not fully operational4 estimated, figures not available

Russia 330

Primary:

Capacity 2586

Consumption 5353

Production 2571

Rolling4:

Capacity 17003

Consumption 250

Production 330

Extrusion:

Capacity 2600

Consumption 2440

Production 2400

Extrusion4:

Capacity 600

Consumption 80

Production 150

Rolling:

Capacity 3500

Consumption 3350

Production 3300

1 EU 15 includes EU 11 plus Denmark, Greece, Sweden and UK2 Differences between Production and Consuption/Export are explainable with stocked material or even higher (not registered) Exports

Source: EAA/Eurostat,various souces, own estimations

Primary:

Capacity 3745

Consumption 845

Production 37072

31

680

21

2

7

26

EUR (15)EUR (15)11 CISCIS

1338

0

69

2

64

13

Russia,Azerbaijan,

Tadjikistan,Ucraine

Russia,Ucraine

Russia,Tajikistan,

Ucraine

1960

150

464

420

181

166

3 theoretical, not fully operational4 estimated, figures not available

Russia 330

The Opening of the EastThe Opening of the EastThe EU/CIS intertrade in 2001 (ktons) The EU/CIS intertrade in 2001 (ktons)


0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

1980 1984 1988 1992 1996 2000

LM

E D

M/T

on

0

1

2

3

4

5

6

7

8

9

10

DM

/kg

LME

rolling

extrusion

The Effect on PricesThe Effect on PricesPrice evolution of rolled and extruded products Price evolution of rolled and extruded products


The Immediate EffectsThe Immediate EffectsPrice discontinuity due to apparent supply increasePrice discontinuity due to apparent supply increase

Demand curve D

Supply curve S

S‘ after opening

Price

Volume

pº

p‘

V‘Vº

overcapacity

cost differential


0,0

10,0

20,0

30,0

40,0

50,0

60,0

70,0

80,0

1 5 9 13 17 21 25 29 33 37 41 45

Year

DE

M/h

Western salary withconstant growth rate

Eastern salary withshrinking growth rate

The Persistance of EffectThe Persistance of EffectEvolution of East-West salary differential Evolution of East-West salary differential


Demand curve D

Supply curve S

S‘

Price

Volume

pº

p‘

V‘Vº

long-term D‘‘

V‘‘

p‘‘

Changes in Demand CharacteristicsChanges in Demand CharacteristicsNew possible equilibrium in the long term New possible equilibrium in the long term


Larger marketLarger marketLarger marketLarger market

Increased competitionIncreased competitionIncreased competitionIncreased competition

Margin squeezeMargin squeezeMargin squeezeMargin squeeze

Increased opportunityIncreased opportunityIncreased opportunityIncreased opportunity Foreward integrationForeward integrationForeward integration

Foreward integration

Resulting StrategiesResulting StrategiesThe response to the opportunities and challenges The response to the opportunities and challenges

FocussingFocussing

Best-in-classBest-in-class

Cost reductionCustomer dedication

Innovation

Cost reductionCustomer dedication

Innovation

Opening/Globalization/OpeningGlobalization


1. The price spiral has not yet reached its equilibrium.

2. The Eastern semis exports will increase.

3. The East‘s labour cost advantage will persist.

4. The semis margin will hardly improve.

5. Lower semis prices will create new applications.

6. Customers will increasingly take advantage from low-price sources.

7. Economies of scale will play a decisive part.

8. Specialised plants will take advantage over multi-purpose plants.

9. Technology-push allows differentiation.

10. Mergers and networking within an integrated value chain will dominate the future.

1. The price spiral has not yet reached its equilibrium.

2. The Eastern semis exports will increase.

3. The East‘s labour cost advantage will persist.

4. The semis margin will hardly improve.

5. Lower semis prices will create new applications.

6. Customers will increasingly take advantage from low-price sources.

7. Economies of scale will play a decisive part.

8. Specialised plants will take advantage over multi-purpose plants.

9. Technology-push allows differentiation.

10. Mergers and networking within an integrated value chain will dominate the future.

The 10 Postulates of GlobalisationThe 10 Postulates of Globalisation


ALCANALCAN


Aimmagination materialized

Aimmagination materialized

5th World Congress ALUMINIUM 2000 Rome, 18-22 March, 2003 B. Ruettimann, Alcan Automotive...

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