MAJOR EUROPEAN ZINC SMELTER MERGER SEEN BY 1990
There should be at least one merger
between major European zinc smelters before the end of the
decade, Christian Bue, Executive Vice President (commercial) of
SMM Penarroya in France, said.
    Speaking on the second day of the Metal Bulletin base
metals conference, Bue said he expected the current talks
between five smelters including Penarroya to result in
integration between at least some of the companies before 1990.
    The five companies, SMM Penarroya, Outokumpu Oy, Preussag
Ag, Ste de la Vieille Montagne and Boliden Ore and Metals AB,
have 22 pct of the world market, Bue added.
    "We have no alternative than to integrate out businesses
into large trading blocs if we are to survive the cut-throat
price competition and the trend to forward integration from the
mining companies," Bue said.
    "It is by no means certain that all the five companies
involved in the talks will integrate together. It is quite
likely, and even preferable, that the European smelters form
two or three large integrated blocs.
    "In this way we will be better able to negotiate with our
concentrate suppliers on one side, and with the metal buyers on
the other," Bue added.
    In the past, production overcapacity and the intense
competition between the European zinc smelters has meant they
have not only been in a very weak negotiating position when
buying concentrates, but in an even weaker one when selling the
metal, Bue noted.
    Although the apparently easy solution is to simply shut
down excess capacity, the burden of this on individual
companies is far too heavy and no one can be expected to
volunteer, he added.
    Another possible but very risky solution is to invest
heavily in more modern and lower cost facilities, he said.
    "My answer to this suggestion is that individual companies
who do not invest will surely die, and those that do invest
might survive, but only might, " Bue said.
    "The only real option in my mind is integration,
rationalization and stabilization. We have no alternative, " he
added.
    Bue also said that the European smelters were completely
dissatisfied with the tradition of pricing concentrates and
metals in US dollars, and suggested moving either to a basket
of the world's major currencies or pricing in European currency
units (Ecus) to protect against exchange rate volatility.
    Bue's views on integration between European smelters were
met by general approval from the conference audience comprising
representatives from many of the world's major mining, smelting
and trading companies, although some of the mining
representatives were somewhat sceptical in view of their own
industry's move towards integration with smelters.
    However, some concentrate traders did express worry about
their own position if the metals industry does make the move to
large trading blocs.
    The currency basket suggestion cropped up constantly, but
few said they thought matters would change in the near future.
 REUTER
