Metals & Mining

While the European iron and steel industry has yet to restore capacity usage rates to pre crisis levels, market conditions are liable to be challenging in the coming years:

• Continuous tension in commodities, dominated by global momentum
• Risk of excess capacities in China if demand slows

In order to sustainably create value, new strategies must be developed:

• Client value: innovation, short supply chain, local services...to improve the specializations/commodities mix
• Asset reconfiguration: new technologies, energy efficiency, organizational efficiency
• Upstream integration
• Allocation of investments: effectiveness of maintenance investments in mature regions, growth in emerging areas

The sector has changed enormously in the last ten years:

• Capacities doubled, driven by China, placing traditional Western manufacturers in the minority
• Ongoing divestment of major downstream transformation companies
• Exhaustion of competitive energy resources
• Challenge of composite materials in the aerospace industry, i.e. the traditional high value-added aluminum sector

There will be many value creation opportunities in the coming years for companies that know how to grab them:

• In emerging countries: new generations of low-cost electrolysis, paving the way for targeted growth investments in new energy-rich geographic regions
• In mature countries:
  - Continued cost-cutting efforts, increasingly difficult to achieve
  - Innovation and development of new aluminum solutions: transport, construction, packaging, etc...

The last five years spanned a structural super-cycle in prices, with major tension between supply and demand (predominantly Chinese), and a large-scale crisis in 2009 recalling the growing capital-intensity of activities.

In mature countries, recycling businesses need to get organized to extract the fair value of these resources in segments that are traditionally very fragmented.

Ultimately, the leaders of these industries have to focus their efforts on:

• Organic growth opportunities and acquisitions
• Technological innovation (or how to increase the value in use of extracted minerals)
• Operational performance: capex management, purchases, SG&A, supply chain, pricing policy, sales efficiency