DUBAI: The aluminium industry has experienced an abundance of severe challenges in recent years, resulting in a sharp decline in company valuations and profits. To reignite the value creation engine and restore investor confidence, CEOs and their management teams can pursue aggressive action plans that will turn around the industry, according to The Aluminium Industry CEO Agenda, 2013-2015: Understanding the Challenges and Taking Action, a new report by The Boston Consulting Group (BCG).
The Middle East’s aluminium industry is in an advantageous position, and can play a key role in industry consolidation and the development of new globally active players, shows a new report by The Boston Consulting Group (BCG). The Middle East’s strategic position is supported by the recent $15 billion merger of Dubai Aluminium (Dubal) and Emirates Aluminium (Emal) to create Emirates Global Aluminium, the world’s fifth-largest aluminum producer.
“The GCC aluminium market’s cost advantage is supported by its proximity to Europe, Asia and Africa and growing aluminum demand from the construction, packaging, transportation and industrial sectors,” said added Bradtke. “We are seeing local players make strategic movements both upstream and downstream as they build viable value chains and further aluminium-driven manufacturing.”
The report examines the challenges and outlook for demand and supply of primary aluminium and for the value chain’s upstream and downstream segments. To help the overall industry and individual companies address the challenges, the report presents a comprehensive CEO agenda with ten actions items. This agenda provides a basis for setting the priorities of industry executives as well as government policymakers, whose national or regional economies are influenced by the industry’s performance.
“Our analyses show that the industry’s crisis can’t be traced back to an unexpected drop in demand caused by the global economic downturn or sudden changes in the value chain’s upstream or downstream segments,” said Thomas Bradtke, a BCG partner and coauthor of the report. “The crisis arose from the supply side, driven by China’s strategy to increase its capacity for producing primary aluminum. Producers in the rest of the world misinterpreted China’s moves and didn’t adjust their own strategies fast enough in response.”
“Global aluminium consumption has been driven almost entirely by China since 2000, and we expect this trend to continue,” added Kai Gruner, a BCG senior partner and coauthor of the report. “China’s capacity for producing primary aluminium has also grown dramatically, and its imports have declined significantly. Western aluminum companies weren’t expecting this, and they expanded their capacity in anticipation of increased Chinese imports. The resulting overcapacity and high inventory have caused the aluminium price to remain at low levels.”