Manufacturers face fight for raw materials in 2012

14 March 2012

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15 March 2012 | Angeline Albert

The battle to secure access to raw materials will continue in 2012 with manufacturers joining forces to invest in securing supplies.

To tackle concerns about supply chain robustness, manufacturers are forming alliances with each other to collectively invest in owning raw materials, such as iron ore used in steel and rare earth minerals used in technology, according to the PwC report Metals Deals Forging Ahead 2012 Outlook & 2011 Review.

A desire to secure supply and reduce dependence on the pricing strategies of large mining companies remains a driving force that will continue into 2012, said the analysis published by the professional services firm.

It said consolidation among manufacturers in Europe and the Chinese metals sector, which is currently fragmented, is set to continue this year. The report highlighted the case of four Chinese steelmakers who formed a consortium to secure a stake in a South American rare metal supplier.

PwC said with China producing the majority of rare earth minerals “concerns have been raised over how these and other raw materials, are sourced, exported and controlled”. As SM reported in February, China was told to lift export restrictions on a selection of rare earths by the World Trade Organization.

“Vertical integration through minority stakes in miners continues to be a major theme,” the report said.

In January, it was announced the steel manufacturers Georgsmarienhütte Holding, ThyssenKrupp and copper producer Aurubis had joined a commodities alliance of German manufacturers, coordinated by the Bundesverband der Deutschen Industrie (BDI). The alliance’s objective is to take shareholdings in commodity projects to secure an improvement in the long-term supply of raw materials, including rare earth minerals.




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