China’s influence in the global metals markets just stepped up a gear after the owner of its top supplier of aluminum products agreed to buy Aleris Corp of the US for US$2.3 billion, marking the nation’s biggest-ever overseas purchase of a metals processor.
The purchase of the Cleveland, Ohio-based company by Zhongwang USA LLC, owned by Liu Zhongtian (劉忠田), founder and chairman of China Zhongwang Holdings Ltd (中國忠旺控股), will open up new markets for the Chinese company among aerospace and automotive companies.
Monday’s deal underscores China’s shift to higher value-added products and will give Zhongwang access to technological know-how and more demanding customers, said Paul Adkins, managing director of Beijing-based aluminum consultancy AZ China Ltd.
“Aleris supplies the Boeings and the big carmakers of this world — very advanced consumers,” Adkins said by phone. “Buying it has to provide some sort of opportunity for Zhongwang to bring that know-how back to China. When you’ve got more than half of the world’s primary aluminum supply in China, there is a natural momentum for China to pull other parts of the supply chain into its orbit.”
China Zhongwang is Asia’s biggest producer of extruded aluminum and already has ambitions to sell aluminum sheet to China’s emerging auto and aerospace industries. It is due this year to start up a flat-rolled aluminum plant in Tianjin, which will supply products that China still has to import.
The acquisition will leave Zhongwang founder Liu overseeing “companies that have complementary geographic footprints and capabilities,” Zhongwang USA said in a statement.
Aleris has its own mill in China’s Zhenjiang Province, producing aerospace plate, “which Zhongwang lacks the know-how to produce,” according to a note from Bloomberg Intelligence analyst Yi Zhu.
China Zhongwang is being probed by the US Department of Commerce for possible circumvention of US anti-dumping duties. The inquiry was launched in response to a complaint from the US Aluminum Extruders Council. The company has denied any wrongdoing.
The purchase of Aleris is unlikely to face any regulatory hurdles from US authorities, chief executive officer Sean Stack said.
Liu offered China Zhongwang the opportunity to buy Aleris directly, but it declined because of concerns the deal would adversely affect its cash flow and financial planning, the Hong Kong-listed firm said in a statement.
China Zhongwang said it would consider buying Aleris “as and when appropriate” after Liu’s US holding has completed the deal.
Aleris’ clients include Airbus Group, Siemens, Bombardier, Boeing and ABB., Bloomberg Supply Chain data showed.
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