Summary of Commission Decision of 4 May 2023 declaring a concentration compatible with the internal market and the functioning of the EEA Agreement (Case M.10658 — Norsk Hydro / Alumetal) (notified under document number C(2023) 2821)
Date: 2023-05-04
Institutions: Directorate-General for Competition, European Commission
Subjects: aluminium, bauxite, economic concentration, merger control, metallurgical industry, waste recycling








C_202407525EN.000101.fmx.xml












Official Journal of the European Union


EN
C series













C/2024/7525


23.12.2024







            SUMMARY OF COMMISSION DECISION
         
of 4 May 2023
         
declaring a concentration compatible with the internal market and the functioning of the EEA Agreement
(Case M.10658 — Norsk Hydro / Alumetal)


(notified under document number C(2023) 2821)


(Only the English version is authentic)
(C/2024/7525)




On 4 May 2023 the Commission adopted a Decision in a merger case under Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings

             (1)

, and in particular Article 8(1) of that Regulation. A non-confidential version of the full Decision, can be found in English on the website of the Directorate-General for Competition, at the following address:
https://competition-cases.ec.europa.eu/search.


1.   THE PARTIES









(1)


Norsk Hydro ASA (Norway) (‘Hydro’ or the ‘Notifying Party’) and Alumetal S.A. (Poland) (‘Alumetal’ or the ‘Target’ and, together with Hydro, the ‘Parties’) are both producers of aluminium foundry alloys (‘AFAs’ or ‘foundry alloys’). AFAs are semi-finished aluminium products in liquid form or ingot form, which customers (mainly automotive players, for example wheels manufacturers) use to cast parts. Alumetal is also a producer of aluminium master alloys (‘AMAs’), which are used as an input in the production of semi-finished aluminium products such as AFAs, sheet ingots and extrusion ingots.












(2)


Hydro is a fully integrated aluminium company and has activities throughout the aluminium value chain from bauxite, alumina and energy generation to the production of aluminium from bauxite/alumina, aluminium extruded products and aluminium recycling.












(3)


Alumetal is a producer of AFAs and AMAs with plants located in Poland (Kety, Gorzyce and Nowa Sol) and Hungary (Komarom). In 2020 and 2021, the majority of AFAs sold by Alumetal were made from recycled aluminium.




2.   THE OPERATION









(4)


On 1 September 2022, the Commission received the notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 by which Hydro would acquire through its subsidiary Hydro Aluminium sole control of Alumetal. Hydro therefore acquired within the meaning of Article 3(1), point (b), of the Merger Regulation sole control of the whole of Alumetal (the ‘Transaction’). The Transaction is to be accomplished by way of a public bid.




3.   EXPLANATORY MEMORANDUM

3.1.   THE RELEVANT PRODUCT MARKETS









(5)


The Parties’ activities overlap for the production of advanced solid AFAs, with a plausible overlap in low-carbon AFAs. The Parties’ activities are also vertically linked, upstream by Alumetal’s AMA production, and downstream, by the Parties’ production of AFAs and other products.




3.1.1.   The relevant product markets









(6)



AFAs. The Commission found, based on the evidence gathered during its investigation, and contrary to the arguments of the Notifying Party, that advanced AFAs (defined as AFAs with an iron content of up to 0,55 % and a copper content of up to 0,7 %) constitute a separate product market from standard AFAs. Customers, competitors and the Parties’ internal documents state that the chemical composition is key to specify and differentiate AFAs, rather than the production process, i.e., whether the AFAs are made by a smelter (such as Hydro) or a recycler (such as Alumetal). The Commission also found that solid AFAs constitute a separate product market from liquid AFAs. The Commission also found that low-carbon AFAs could constitute a separate product market. Nevertheless, given that the Transaction does not give rise to competition concerns irrespective of the split between low-carbon AFAs and other AFAs, the Commission left open this possible further segmentation of the market. The Commission considered that a distinction of AFA alloys by end-industry or more specific end-uses into separate product markets is not relevant and should rather be considered in the competitive assessment.












(7)



AMAs. The Commission found, based on the evidence gathered during its investigation, and consistent with the arguments of the Notifying Party, that AMAs constitute their own product market segment, distinct from other aluminium products. The Commission did not find that AMAs should be further sub-segmented by alloying element.




3.1.2.   The relevant geographic markets









(8)


Following its market investigation, the Commission observed strong indications that competition takes place on an EEA level as regards the manufacturing and supply of solid advanced AFAs, AMAs, and any plausible sub-distinctions thereof. The Commission also observed a degree of geographic differentiation, which it considered in the competitive assessment.












(9)


The results of the investigation indicated that there are significant obstacles for EEA-based customers to source from outside the EEA, including customs duties and longer transport times, rendering an EEA-based supplier highly preferable. Considering all evidence available to it, the Commission concluded that the markets for the production and supply of solid advanced AFAs, of AMAs, and any plausible sub-distinctions thereof are all EEA-wide in scope, with a degree of geographic differentiation.




3.2.   COMPETITIVE ASSESSMENT

3.2.1.   AFAs









(10)


The in-depth investigation confirmed that the Transaction would not significantly impede effective competition in the internal market or in a substantial part of it, in particular as a result of horizontal non-coordinated effects in the market for the production and supply of solid advanced AFAs in the EEA, for the reasons outlined below.












(11)


The Parties’ activities overlap for the production of AFAs in the EEA, including for solid advanced AFAs, and also taking into account a plausible further segmentation into low-carbon solid advanced AFAs. This horizontal overlap in solid advanced AFAs results in an affected market.




3.2.1.1.   The market structure post-Transaction is fragmented, with several remaining competitors








(12)


The Commission collected data on purchases from 25 customers and on sales from 23 suppliers. This market reconstruction covered the main competitors identified by the Parties and most of the suppliers from the customers’ data. For solid advanced AFAs in the EEA in 2021, Hydro is the largest player with a market share of [20-30 %] followed by primary producers, of which three have market shares superior to 10 %. Alumetal has one of the highest market share ([0-5 %]) among the recyclers active in the supply of solid advanced AFAs, the next largest having a share of [0-5 %], with a fringe of other recyclers. The market is quite fragmented, and the post-merger Herfindahl-Hirschman Index (HHI) is 1 380. The combined market share is [20-30 %] in 2021.




3.2.1.2.   The Parties are not close competitors








(13)


The Commission assessed the overlap between the Parties at customer level, at alloy level, for specific end-uses, and with regards to their positioning with respect to low-carbon AFAs.












(14)



Customer level. The Commission found some level of overlap between the Parties at customer level. However, this overlap is limited, and the Parties’ largest common customers also purchase from several other suppliers.












(15)



Alloy level. The Parties have different alloy focuses. There are limited overlaps in the type of alloy families produced by Hydro and by Alumetal.












(16)



End-use. The Parties only partly and in an asymmetrical way focus on the same automotive end use segments ([…]), where in any event other players continue to be active. Both Hydro and Alumetal appear to supply important volumes of solid advanced AFAs for […]. However, the evidence gathered shows that Hydro is much more focused on the […] segment where Alumetal has a much more limited presence, and that several other players are equally active in the supply of AFAs for both […] segments.












(17)



Low-carbon AFAs. The Commission found that Alumetal and Hydro are not close competitors for low-carbon AFAs.




3.2.1.3.   Alumetal is not an important competitive force








(18)


The Commission found that Alumetal is the leading recycler producing solid advanced AFAs in the EEA – in terms of sales volume, technical capabilities, know-how and commercial aspects. However, the in-depth investigation revealed that there are a significant number of recyclers producing solid advanced AFAs in the EEA. The capabilities of at least one of these recyclers, Raffmetal, seem to be comparable to those of Alumetal, while the other suppliers appear somewhat less relevant but are still considered viable alternatives by some customers.




3.2.1.4.   The impact of the Transaction is limited








(19)



The results of the market investigation. The results of the market investigation with regard to the Transaction’s impact on the market for advanced solid AFAs have been more negative than positive. A majority of customers and competitors having expressed their opinion considered that the Transaction would have a negative impact on their business, with a majority of customers considering that the Transaction would lead to higher prices.












(20)



The market structure post-Transaction. While the Parties would be the largest actor post-Transaction for solid advanced AFAs in the EEA, there would remain many suppliers, both smelters and recyclers, left in the market. Furthermore, market participants have confirmed that there exist alternative suppliers post-Transaction, with the majority of customers having expressed their opinion citing at least 3 alternatives. This confirms the fragmented nature of this market.












(21)



Limited impact for low-carbon advanced AFAs. The Commission found that, on this segment, the Parties would, post-Transaction, continue to face strong competition, not only from primary aluminum producers using low-carbon electricity, but also from recyclers producing advanced AFAs. Furthermore, other recyclers have recently increased their sales of advanced low-carbon AFAs. Therefore, it is unlikely that the removal of Alumetal’s advanced AFA offering would result in a significant reduction of competition and increase in prices for low-carbon advanced AFAs.




3.2.1.5.   Conclusion on AFAs








(22)


Given (i) the Parties’ moderate combined market shares and low post-merger concentration levels, as well as the sufficient number of alternative suppliers – both primary and secondary, as well as low-carbon – remaining post-Transaction, (ii) lack of closeness between the Parties, (iii) the fact that Alumetal does not appear to be an important competitive force, and (iv) the limited impact likely resulting from the Transaction, the Commission considers that the Transaction would not significantly impede effective competition in the internal market or in a substantial part of it as a result of horizontal non-coordinated effects in the market for the production and supply of solid advanced AFAs in the EEA.




3.2.2.   AMAs









(23)


The Commission also finds that the Transaction would not significantly impede effective competition in the internal market or in a substantial part of it as a result of vertical non-coordinated effects in the upstream market for the production of AMAs and the downstream market for the production of solid advanced AFAs in the EEA.












(24)


The Commission considers that, post-Transaction, the Parties will not have the ability or incentive to pursue any plausible input foreclosure strategy in the AMAs overall segment in the EEA for the following main reasons: (i) based on market shares, there are no affected markets; (ii) as mentioned by Alumetal’s customers, there are a number of viable alternatives to Alumetal in the EEA; (iii) the Parties would not have the ability to engage in an input foreclosure strategy, given Hydro’s limited shares downstream; (iv) the majority of customers do not expect any impact of the transaction on their businesses.












(25)


The Commission considers that, post-Transaction, the Parties will not have the ability or incentive to pursue any plausible customer foreclosure strategy in the AMA market in the EEA for the following main reasons: (i) as mentioned above, there are no affected markets based on market shares; (ii) considering Hydro’s moderate market shares for the supply of solid advanced AFAs in the EEA and CEE, there will remain a sufficiently large customer base in the downstream market for Alumetal’s AMA competitors to provide their products post-Transaction; (iii) the majority of competitors expect no impact of the transaction on their businesses.




4.   CONCLUSION









(26)


For the reasons mentioned above, the decision concludes that the proposed concentration will not significantly impede effective competition in the Internal Market or in a substantial part of it.












(27)


Consequently the concentration should be declared compatible with the Internal Market and the functioning of the EEA Agreement, in accordance with Article 2(2) and Article 8(1) of the Merger Regulation and Article 57 of the EEA Agreement.






(1)  
            OJ L 24, 29.1.2004, p. 1.


ELI: http://data.europa.eu/eli/C/2024/7525/oj
ISSN 1977-091X (electronic edition)