Tag Archives: MimboloveBHPB
BHP Billiton has announced that it intends to package its aluminium, nickel and some other assets into a new company.
In a move that has been anticipated for more than a year, BHPB said that its Chief Financial Officer Graham Kerr would be CEO of the new company, which analysts say will have a net value of about US$12 billion. But the company stopped short of naming the new entity.
This is a good move for shareholders. Aluminium assets are set to become more valuable as the metal price rises over the coming years, and the plants such as Mozal and the alumina assets in Western Australia are well run.
It may even be good news for those of you who sell to BHPB’s aluminium smelters in South Africa. You will have a new city to visit on your global business travels. The new company’s head office is slated to be located in Perth, Australia. One of the prettiest cities in the world, Perth is also one of the remotest. i am picturing folk who maybe live in New York or New Orleans, who would just love to add a stop in Perth on the run between South Africa, Brisbane and Singapore…
South Africa’s Bayside Aluminium smelter looks set to close later this year, after BHP Billiton announced that it is conducting talks with employees on mitigating job losses.
The plan would be to retain the casting operations using liquid metal from Hillside smelter.
Bayside is the baby of the smelters in that corner of the world, with Mozambique’s Mozal smelter being the third. Bayside produces only 97,000 tonnes, so it will not make a huge dent in the total supply equation, though any loss of supply is like to help keep a floor under the price.
BHP Billiton has announced that it will merge its aluminium division with its stainless steel materials division, to form a new larger entity within the group.
According to the BHPB website, “… individually, Aluminium and Nickel are small divisions relative to the other businesses in BHP Billiton. The combination of these into a single business unit will provide appropriate scale within the BHP Billiton portfolio, as well as simplifying the functional structure of the business to assist in our efforts to make it a more efficient and competitive organisation.”
In some senses this is a backward move for the aluminium assets. Smelters in Mozambique and South Africa now have to compete with nickel projects for capital, even before the RFA gets past the division heads and on to the corporate board of directors. And two small divisions being merged still don’t make for a big enough voice, compared to the heavy weights in the BHPB portfolio.
It’s part of a general long-term shift in the aluminium industry. We will be talking more about this in our upcoming “Cash Cost Curve” Report (due out very soon), but if you look at who were the big players in aluminium at the turn of this century, you would find (surprise, surprise) aluminium companies. Alcoa, Rusal, Pechiney, Comalco, Chalco – all these companies were focused only on aluminium. So when the boards of directors were planning capital strategies, it was about how to maximise shareholder returns in aluminium.
Now we have Resources companies like Rio Tinto and BHPB controlling portions of the industry, and aluminium companies like Chalco now branching away from the light metal. Chalco is now active in coal, copper, and rare earths. Rio Tinto assesses its aluminium interests in the light of its iron ore and coal and other materials, as does BHPB, and with the poor returns on aluminium in the 12 years since the turn of the century, it’s no surprise that these boards relegate aluminium into a second tier of assets.
Of the heavyweights, only Alcoa and to a lesser extent Hindalco/Novelis have made diversification decisions within the industry, and stayed true to their original purpose.
Watch for more on our CCC report very soon.
BHP Billiton has recently advised clients in Japan that shipments of aluminium may be affected by some operational problems with their anodes at the Hillside smelter.
According to the note that went to customers, metal purity is suffering, and BHP is likely not to be able to supply sufficient 99.7% purity metal to meet all orders. Japanese buyers are now looking for supplies from other sources, though apparently the Hillside ingots and T-Bars are slightly different in shape and weight.
Although I am no technical expert, a problem with anodes that affects metal purity sounds like a problem with coke. Either the coke has the wrong levels of impurity – perhaps too much iron or calcium, or they are allowing too much burn, causing iron from the pins to be exposed. Perhaps there was a problem in the baking ovens, and anodes were not fully baked before being presented to the rodding shop and potlines.
All these potential problems are controlled in the coke specification, and are tested at the source and at most plants around the world (I don’t know about Hillside specifically) before the coke is introduced into the stream. Anodes are closely identified and controlled at production, and presented to pots not all at once, so that if a problem is detected, the offending batch can be segregated, spare inventory brought in to cover.
So it begs the question why and how the problem got to the point of affecting customer deliveries. We have written to BHPB asking for more information, and as soon as we receive some publishable answers, we will post them here.
BHPB buys an occasional parcel of coke from China, but the majority comes from Western suppliers.
But one thing is for sure – no anode plant manager, and nobody associated with selecting cokes that later prove to have a problem, ever want to have it come to a point where it affects metal output. Let’s hope none of our friends in BHPB were involved in the problem, though probably they are involved in finding the solution!