Consumers react to potential new powerhouse in Alcoa/Alcan

As the aluminum market absorbed the news of the possible takeover by US aluminum producer Alcoa of rival Canadian producer Alcan, the main areas of overlap seen likely to cause concern with consumers were aerospace plate, heat exchangers, rolling slab and possibly billet, though most consumers contacted by Platts did not seem greatly concerned.

Antitrust implications in the US from a merger of aluminum heavyweights Alcoa and Alcan are seen as possible in the aerospace sector on both sides of the Atlantic, although smelting and raw materials could be an issue, according to analysts.

While overall there were very few overlaps seen, as Alcan had largely focused on upstream markets, Alcoa CEO Alain Belda said last week Alcoa recognized it might have to sell of some aerospace, automotive and sheet or heat exchanger assets to appease regulators and allow the deal to go through.Consumers noted the fact that Alcoa and Alcan would end up owning two of only three US rolling mills capable of producing heat-treated plate for the aerospace industry.

Alcan's Ravenswood, West Virginia plant, and Alcoa's Davenport, Iowa, mill are both seen as critical to aerospace and defense.

In January, a Boeing official speaking at the Platts Aluminum Symposium urged the aluminum industry to increase heat-treated plate capacity so the company could meet its expected aircraft demand, implying that the aluminum industry's average lead in times of 26 weeks was too long. He said more capacity was needed because Boeing had moved more toward monolithic design, rather than sheet metal build-up to plate, because of its higher quality, longevity and lighter weight characteristics.

The other producer of heat-treated plate is Kasier Aluminum's Trentwood Works facility in Spokane, Washington.

"Aerospace will be the biggest challenge, with minor overlaps in rolled
products," said a remelter official.

Some consumers also pointed to the concentration the combined company would have in rolling slab (sheet ingot). At the time of the Novelis spinoff, the cansheet producer expressed concern about getting access to rolling slab. While there is no overlap in cansheet in North America, in Europe there would be, as Alcoa would gain the Alcan's huge Neuf-Brisach cansheet mill in France in addition to its own numerous rolling plants. Alcan recently announced it planned to upgrade that mill.