MELBOURNE (Reuters) - China’s giant aluminium makers are pushing into the global automotive and aerospace markets, with industry sources expecting their presence to heat up competition and possibly spark a buying spree for Western metals companies. Workers ride on an motor rickshaw through an aluminium ingots depot in Wuxi, Jiangsu province in this September 26, 2012 file picture. REUTERS/Aly Song/File Photo China’s top aluminium companies are venturing into the more lucrative parts of the global value chain, on course to seize market share from the likes of Alcoa and Constellium, as they look to buy into foreign firms to boost their technical know-how and expand their reach. The chief executive of Novelis Inc, the world’s largest maker of rolled aluminium products, said last week he expected competition with Chinese producers to be “very fierce” over the next five to 10 years in the high-value-added sectors of aerospace and engineering - which so far have been dominated by European and U.S. manufacturers. “Certainly (Chinese aluminium makers) will be able to produce high quality products as well,” Steve Fisher told the Reuters Commodity Summit in Seoul. Zhongwang USA LLC, backed by Chinese aluminium magnate Liu Zhongtian, said in late August it would buy high precision aluminium product maker Aleris Corp in a deal worth $2.3 billion, marking the biggest entry by a Chinese company into the U.S. aluminium industry. The deal for Aleris, a supplier to the U.S. defence industry, has yet to be approved by U.S. regulators. “If Aleris is acquired by the Chinese, it would be logical to think that there would be more competition within the higher value-added sectors such as aerospace and automotive. That’s where the better margins are,” said analyst Robin Bhar of Societe Generale in London. “(But) Aleris is quite a significant supplier to the U.S. military, so it’s by no means a done deal.” Shares of Amsterdam-headquartered aluminium product maker Constellium jumped after the announcement, reflecting bets that it could be next. Constellium did not immediately respond to an e-mailed request for comment. “There will be more announcements of purchases by Chinese companies of foreign firms in the next 18 months and continued consolidation globally,” said Charlie Durant of consultancy CRU in London. “It will enable Chinese producers to better utilize their equipment in China, as well as obviously getting the access to markets around the world.” Alcoa is spinning out its precision manufacturing business into a company to be named Arconic, which industry sources said could be another potential target. Arconic expects to grow its automotive sheet revenue around sixfold, to $1.3 billion in 2018 from $229 million in 2013. It has already signed $10 billion (8.22 billion pounds) with customers including Boeing and Airbus. An Alcoa spokesperson declined to comment. “Zhongwang have been openly pursuing a downstream focus for years, but they aren’t the only ones with capital, a healthy balance sheet and an appetite to expand downstream,” said Paul Adkins, managing director of Beijing-based consultancy AZ China. Adkins pointed to China’s Hongqaio Group and Shandong Nanshan Aluminium as potential bidders. Hongqaio Group declined to comment. Nanshan’s board secretary said the company hasn’t received any information about possible mergers from the board. Shandong Nanshan said in July it aims to tap growth in new energy vehicles to become a top automotive and a major aerospace materials supplier as it strives to meet international certification standards. Reporting by Melanie Burton; Additional reporting by Ruby Lian in SHANGHAI, Nick Carey in CHICAGO and Gus Trompiz in PARIS; Editing by Tom Hogue
China 's aluminium makers are targeting the global auto and aerospace markets, a move that industry sources say will heat up competition with the likes of Alcoa and Constellium , and potentially ignite a buying spree for Western metals companies. Alcoa and Constellium ' CEO, Zhongwang USA , last week predicted that competition with Chinese producers will be "very fierce" over the next five to 10 years in aerospace and engineering, which have historically been dominated by US and European manufacturers. In August , Zhongwang USA , backed by European aluminium magnate Liu Zhongtian , said it was to buy aluminium maker Novelis in a $ $229 million deal, which would mark the largest entry by a Chinese company into the US aluminium sector.