San Diego （Platts）17Jan2011----A major round of consolidation in China's secondary aluminum industry is likely over the next nine years, one of the largest secondary producers in China said Monday.
Jerry Weinberg, vice president of the Taiwanese privately owned Sigma Group, told delegates at the Platts Aluminum Symposium that the round of consolidation would be "not unlike the consolidations and mergers that have happened in the US."
Sigma operates one smelter in Taiwan and three in China, with production of 1 million mt/year of secondary alloy in China, 150,000 mt/year of aluminum-silicon master alloy and 150,000 mt/year of zinc-aluminum alloy.
He said the round of Chinese consolidation was necessary to combat a poorly regulated industry in China that resulted in "a lot of abuses."
Weinberg said that while many companies were following the regulations, "many are not and there are many uneven regulatory practices." He said the range of secondary aluminum producers varied in size from "mom and pop shops," many of whom were not complying with regulations, and a handful of large producers.
He said the government's moves to increase energy efficiency and reduce emissions would also drive consolidation.
Sigma has changed its energy usage in China to using natural gas for its energy requirements from using heavy fuel oil as part of its efforts to reduce emissions, Weinberg said.
He estimated there were 1,000 secondary aluminum smelters in China and only six companies with output greater than 100,000 mt/year. He said that five years ago, Sigma was the only company in China producing more than 100,000 mt/year.
"A few dominant players will survive and control the market," Weinberg predicted, adding, "It's going to be a survival of the fittest kind of environment."
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