As a global aluminum firm focusing on both upstream and downstream business, Alcoa regards China as an increasingly important emerging market. While the Chinese government attaches increasing importance to energy efficiency and emissions reduction, Alcoa offers suggestions to save energy and protect the environment. Helmut Wieser, vice-president of Alcoa and group president responsible for Alcoa's global mill products, rigid packaging and hard alloy extrusion businesses, shares the company's views on energy efficiency and business expansion in China with China Daily
Q: What are your views on the development of China's aluminum industry, both upstream and downstream segments?
A: China's aluminum industry has undergone a very impressive development, and the growth is just phenomenal. We are glad that Alcoa has participated in the growth process with Chinese partners. Alcoa came to China in 1993 and has invested over $700 million so far in the country. Looking back several years ago, China's aluminum industry was small. But today, China has become the world largest aluminum producer and market. Quite a few Chinese newspapers were talking about the possibility that China aluminum consumption would take in 30 percent of the global aluminum production by 2015. This is a significant contribution to the growth of the aluminum industry.
I noticed that China is encouraging its aluminum companies to develop more technologies for extensive use of aluminum in various industries and areas. That is a great practice. Aluminum has advantages that many other metals cannot match. For example, use of aluminum, instead of steel, for automobiles and commercial vehicles can significantly reduce the weight of vehicles. As a direct result, the vehicle will produce less greenhouse gas (GHG) and consume less gasoline.
Q: There are reports saying that Alcoa was looking for expansion opportunities across both the upstream and downstream sectors of the aluminum industry in China. Is that so? If it is, through what means is Alcoa seeking business expansions in China - through organic growth or mergers and acquisitions, or both?
A: Alcoa understands the importance of the growth of China's economy and the opportunities that growth brings to all of us. As such, Alcoa will do two things. First, we will continuously improve our operations in China to make it more productive and more environmentally and energy sensitive. Second, we will keep our eyes open for growth opportunities. This could mean organic or inorganic growth. China is growing so fast, and Alcoa is determined to grow with China. This is a win-win situation. As to a preference of investment methods, I am open to any approach solely depending on business needs and situational demands.
China, as the world's largest aluminum producer as well as market, provides tremendous opportunities for everyone. My priority is to make this company fully prepared and ready to face challenges and capture opportunities. It is important to point out that Alcoa is willing and ready to bring to China many of its technologies that will help China's aluminum industry reduce emissions and energy consumption.
Q: It is said that no aluminum fabrication business can succeed without upstream leadership. It seems Alcoa has not established its upstream facilities in China. Are you planning to make any changes in this regard?
A: The aluminum industry is a vertically integrated industry. If you look at a successful aluminum company, you may find that it is always globally integrated. One cannot look at a successful aluminum company's operation in one country only. Alcoa has operations in over 40 countries with nine refineries and 26 smelters. Alcoa has access to bauxite, refinery, smelting and fabrication. Alcoa is recognized by the industry as the leader in energy development. As a matter of fact, Alcoa is the largest energy company, second only to energy and utilities companies. Alcoa is working with various Chinese companies and is continuously exploring business opportunities to expand its business in China.
Q: What is Alcoa's view on the sale of Chalco's stake?
A: Alcoa had been a significant investor in Chalco since its initial public offering (IPO) in 2001, holding approximately 7 percent of its shares. Although Alcoa normally does not act as a financial investor, it participated in the Chalco IPO six years ago to help facilitate Chalco's entry into the capital markets. Over the past seven years, Chalco has become firmly established in the equity market, so Alcoa's role as a financial investor is no longer needed. Alcoa can re-deploy the capital in other value-adding options, including projects in China. Alcoa will continue to pursue opportunities with Chalco for mutual investment and growth, both within China and overseas.
Q: What is your suggestion for your Chinese counterparts and the Chinese authorities to maintain sustainable development in the aluminum segment?
A: Many of our Chinese counterparts are doing well, and some are doing better. Growth should not mean an increase of pollution. The most important point is that every one of us should keep the environment and energy use in our minds when we grow. It may cost some money to develop technology or to install certain devices to reduce emissions or to save energy. But every company should take social responsibility as its operational philosophy.
We are paying special attention to environmental protection, even though this move costs us extra investment. Alcoa Shanghai has a series of strict and thorough standards on environmental governance. In 2007, a project with an investment of 2.56 million yuan is under way to improve the waste-water treatment facility and install dust catchers for four melting furnaces to catch dust during the processes of ignition, refining and skimming. As a result, the particle-removal efficiency is expected to be higher than 90 percent, which will lead to an annual emission reduction of 42.43 tons.
We are glad to see that the Chinese government is taking an active role in environmental protection and energy efficiency. As a matter of fact, Alcoa is working closely with the relevant Chinese government agencies to further promote environmental protection and energy efficiency. In these areas, China has a long way to go, and there will be many challenges in front of us. But I am very certain and positive that China's aluminum industry will become a more energy-efficient and environmentally friendly with our joint efforts.
(China Daily November 20, 2007)