Summit Notebook
Exclusive outtakes from industry leaders
Would the last person to leave the smelter please turn out the lights?
For UC RUSAL, one simple act is crucial to reducing costs. Bonuses for managers at the world’s largest aluminium company depend on the company’s 75,000 workers heeding the message. “We have to introduce a new culture: if you leave the office, turn off the lights,” Artyom Volynets, UC RUSAL’s deputy chief executive for strategy, said at Reuters Global Mining and Steel Summit on Monday. “We have 16 smelters, each with their own headquarters and offices. We employ 75,000 people. If each one of them is switching off the lights at the end of their shift, that would help tremendously.” UC RUSAL embarked on a major drive to slash production costs last year as part of an ultimately successful attempt to secure Russia’s largest ever private sector debt restructuring. Easy access to Siberian hydroelectric power, compared with relatively high-cost coal used to power smelters in other parts of the world, affords UC RUSAL a distinct cost advantage when making aluminium used in transport, construction and packaging. In the first half of 2009, it cost UC RUSAL an average $1,400 to produce a tonne of aluminium. The metal is now selling at above $2,200 a tonne. UC RUSAL has cut costs by sourcing cheaper raw materials of better quality and improving throughput rates at its smelters in Siberia, which account for about 80 percent of its total output. But cheap power in Siberia had also led to complacency. “Our smelters are located in probably the only remaining major energy-long region in the world. Therefore, if you buy power at 2 cents per kilowatt, you don’t really care how much you spend,” Volynets said. “For my colleagues on the operational side of the business, their key performance indicators are 100 percent tied to cost improvements,” he said. “They will not be compensated if these improvements are not implemented.” (Writing by Robin Paxton in Moscow)
2010 Global Mining and Steel Outlook
This time last year, steel mills and base metal miners were in an unprecedented slump, with metal prices bouncing off multi-year lows amid steep economic downturn. Since then, the world economy has turned upwards and demand for metal is resurging. While many analysts have cited economic recovery for the price gains, they add that demand signals show only slow, choppy growth. Whether metal prices have gained as investors search for a place to put excess liquidity or are based in solid supply/demand fundamentals remains a question. Get exclusive insight into the sector from the Reuters Global Mining and Steel Summit taking place in New York, London and Sydney on Mar 8-11.
Audio – The family jewels
This week’s annual Reuters Global Mining and Steel Summit has been a pretty rich event.
Oh, the guests have been stellar, for sure, but there’s also been a lot of talk about gold and jewelry and the prospect that maybe someday this lousy economy will turn around.
For Peter Marrone, chief executive of Yamana Gold, customers’ willingness to buy jewelry is an important consideration in providing outlook for his company.
But even with times so tough, jewelry sales are an inexact science, he warned. And overall gold demand is less a matter of whether someone is willing to shell out a couple hundred dollars on a new necklace and more based on investors looking for safe-haven investments in times when other investments are far shakier.
Marrone was one of the featured speakers at the summit, which continues through Thursday in New York, London and Sydney. The Summit program is in its fifth year, and in 2009 will include top-level executives from industries and sectors including everything from Infrastructure; to Global technology; to Investing in India, China, Japan and Russia; to Islamic Banking.
The Summits continue next week at the annual Global Food and Agriculture Summit with guests in the U.S. and Asia from March 16-19; and the Funds Summit in Luxembourg on March 17-18.
Audio – For best M&A results? Don’t forget the fish and the booze!
There is an entire industry out there about what to do to make a merger a success. Many of us know bankers or lawyers who work for weeks and hours on end just to make sure their deals are perfectly done with all the t’s crossed and the i’s dotted.
Millions of dollars are spent on just teaching people the best way to get a transaction from idea to completion.
In fact, we found out this week that sometimes the key to a good deal is a plate full of small, pickled fish.
Well, at least if you’re negotiating with Alcoa’s Chief Executive Klaus Kleinfeld.
Kleinfeld, speaking at the annual Reuters Global Mining and Steel Summit described how he and his counterpart recently structured a deal and decided that it was the best thing for both companies. His thoughts were instructive to dealmakers who right now might have a little more time on their hands and might be looking for new ways to seal a deal.
Anyway, even if the deal doesn’t get done, it sounds like it was a pretty fun night.
Kleinfeld was one of the featured speakers at the summit, which continues through Thursday in New York, London and Sydney. The Summit program is in its fifth year, and in 2009 will include top-level executives from industries and sectors including everything from Infrastructure; to Global technology; to Investing in India, China, Japan and Russia; to Islamic Banking.
Audio – Kinross in the ‘Sweet Spot’
In the M&A world, this is where you want to be.
Kinross Gold’s CEO Tye Burt said at the Reuters Global Mining and Steel Summit on Wednesday that as far as mergers and acquisitions go, his company is in a pretty good place — there are more deals hitting his desk, sellers are getting more motivated and Kinross, the third-largest of the Canadian gold miners, has the cash to do a little shopping.
While Burt did not expect to be party to one of those huge mega-deals, he did indicate the company was keeping its options open — and was listening for bargains.
Burt was one of the featured speakers at the summit, which continues through Thursday in New York, London and Sydney. The Summit program is in its fifth year, and in 2009 will include top-level executives from industries and sectors including everything from Infrastructure; to Global technology; to Investing in India, China, Japan and Russia; to Food and Beverages.
The Summits continue next week at the annual Global Food and Agriculture Summit with guests in the U.S. and Asia from March 16-19; and the Funds Summit in Luxembourg on March 17-18.
Audio – A little less joy down the road for Joy Global
Mining and construction equipment maker Joy Global actually had a pretty good week for itself.
The company released its first-quarter results last Wednesday, which topped Wall Street’s expectations and sent the shares up more than 15 percent.
Company Chief Executive Michael Sutherlin, speaking as the kick-off guest to the Reuters Global Mining and Steel Summit, said it seems that Joy Global should be able to hit its numbers in 2009.
However, Sutherlin said 2010 provides a less clear picture, which will likely cause the company to rethink its size and staffing levels for the short term. Sutherlin said the company was reviewing its structure now and expects to have more to say about jobs and plants by the middle of the year.
Joy Global, which makes giant shovels, drills and draglines to extract coal, copper, iron ore, oil sands and other minerals, said new aftermarket orders received and booked for the surface and underground businesses rose 13 percent in the quarter.
Sutherlin was one of the featured speakers at the summit, which continues through Thursday in New York, London and Sydney. The Summit program is in its fifth year, and in 2009 will include top-level executives from industries and sectors including everything from Infrastructure; to Global technology; to Investing in India, China, Japan and Russia; to Food and Beverages.
Welcome to the 2009 Reuters Global Mining Summit
Prices for copper, zinc and aluminum have plummeted in the last four months as the global economic downturn cut demand from China and other developing countries who needed metals and steel to build up their infrastructure.
Mining companies who were hot last year and earning unprecedented profits until last September, have had to scramble to deal with the lower outlook by cutting costs, laying off workers, idling plants and reducing production.
In addition to the price fall, there are commodity supply shortages and dwindling reserves, while steel producers have idled blast furnaces as demand for their products, especially from the automobile industry, has dwindled.
The investor interest during the years of higher prices spurred a wave of consolidation, with some of the world’s biggest mining companies looking to acquire each other. But now those are on hold until signs the econony will turn.
The only positive has been for gold miners, who have seen the precious metal burst through the $1,000-per-ounce barrier as investors look for a safe haven in the economic turmoil.
Reuters has invited key players to talk at the Reuters Global Mining Summit March 9-11. The Summit will generate a series of exclusive interviews and articles from our team of expert reporters, as well as regular blog postings and online video.
Video – Steelmakers forge survival plan
As a global recession hits just about every industry, steelmakers too have felt the brunt, logging dramatic declines in demand.
Output for steel globally sank nearly 25 percent in January alone, with North America posting a more than 50 percent decline. Still analysts say the steel industry may be positioned to survive a recession.
Diane King reports.
For a banker, no panic in China
“Well insulated” China, though suffering from sharp drops in its own equities markets, doesn’t have the sense of crisis that exists in the U.S., says Philip Partnow, managing director of UBS Securities Ltd in Beijing. UBS, the first Western bank to assume management control of a domestic mainland brokerage, points out the fact that what’s hitting companies is not subprime-related securities gone bad.
“I think there’s nothing here we feel is toxid,” he told Reuters on Wednesday at the Reuters China Summit in Beijing. He goes on:
“The Chinese capital market has responded quite differently than global capital markets and that is because the Chinese capital markets are still pretty well insulated by the way China controls the RMB and by the other financial controls that China has.
“It is true that both the Shanghai A-share market and the Heng Seng market have fallen quite steeply, but that is more in response to a correction from what many people believe was an over-inflated stock bubble, rather than a direct response from some financial crisis or concern. That’s been then followed on by some concerns that people have about a weakening economic sentiment in the U.S. and Europe and Japan, which are China’s key export markets, and what the knock-in impact will be in China. So there is also a fundamental concern.”
“But there is not a sense of distress or of crisis, or that things that people thought were valuable suddenly vanishing into thin air, along the same lines of what we’ve seen with some of the things that were happening with Subprime and the complex structures that were set up around the subprime, back in the United States. So I think there’s nothing really that we feel that is toxic, out here in China, so we are broadly comfortable with the businesses that we’re in. “
By Lucy Hornby
I think people are confusing Lucy Hornby, the writer, for the fellow she quotes. As far as I can see, Hornby is a Princeton graduate who is in the journalism industry and has no vested interest in Chinese banks. She talks to Chinese bankers, yes, and therein lies the bias, so perhaps the argument that the tone of the article is skewed is still valid. But don’t blame it on Hornby.
Don’t forget the trouncing the “Made in China” brand is getting, along with rising protectionism on the part of the American consumer. I have no data on how strong those trends are, but this poster is responding to the crisis by buying American, so there you go, sample of 1.
Peru miner eyes record gold and silver production
Peruvian miner Buenaventura said 2008 will be a record-setting year for its main silver and gold mines.
Silver output at its Uchucchacua mine should increase to 12 million ounces in 2008 from 9.9 million ounces in 2007, said Buenaventura Chief Executive Roque Benavides.
He said gold output at its Orcopampa mine will rise to 300,000 ounces in 2008 from 267,935 ounces in 2007.
“Both will have record productions this year,” said Benavides, speaking at the Reuters Latin America Investment Summit in Lima, Peru.
