CELEX: 31995M0675
Language: en
Date: 1995-12-21 00:00:00
Title: COMMISSION DECISION of 21/12/1995 declaring a concentration to be compatible with the common market (Case No IV/M.675 - Alumix / Alcoa) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31995M0675

COMMISSION DECISION of 21/12/1995 declaring a concentration to be compatible with the common market (Case No IV/M.675 - Alumix / Alcoa) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 121 , 25/04/1996 P. 0014

 COMMISSION  DECISION of 21/12/1995 declaring a concentration to be compatible with the common market (Case No IV/M.675  - Alumix  /  Alcoa) according to Council Regulation  (EEC)  No 4064/89  (Only the English text is authentic).  The  paper version of the decision is available through  the sales offices of the Office of Official Publications of  the European Communities. PUBLIC VERSION MERGER PROCEDURE ARTICLE 6(1) (b) DECISION To the notifying parties Dear Sirs, Subject:  Case No. IV/M.675  ALUMIX/ALCOA <ind>  <ind> Notification of  21.11.1995 pursuant to Article 4 of Council Regulation No 4064/89 1.<ind>  On  21  November  1995 the  U.S.  company  Aluminum Company of America ("Alcoa") notified the Commission of  its intention  to  acquire certain assets and   subsidiaries  of the Italian company Alumix  S.p.A. ("Alumix"). The operation is part of the privatisation programme for EFIM. 2.<ind> After examination of the notification the Commission has  concluded that the notified operation falls within  the scope  of  application of Council Regulation N  4064/89  and does  not raise serious doubts as to its compatibility  with the  common  market  or  with the  functioning  of  the  EEA Agreement. I.<ind> THE PARTIES 3.<ind>  Alcoa   is a vertically  integrated   company  with worldwide  activities  including  the  mining  of   bauxite, alumina  refining, smelting alumina into primary  aluminium, fabricating flat rolled aluminium and extruded aluminium. In addition, Alcoa is active in the collection and recycling of used  aluminium beverage cans. Alcoa is the worldwide leader on the aluminium market.  4.<ind>  Alumix   is  a  wholly  owned  subsidiary  of  Ente Partecipazioni   e  Finanziamento  Industria  Manifatturiera (EFIM).   EFIM  is a corporation wholly owned by the Italian government   and  currently   in  compulsory  administrative liquidation.  Alumix  is  a vertically  integrated  producer having  essentially  the  same  activities  as  Alcoa.   Its activities  are  focused  on the  European  market,  and  in particular in the Italian market. II.<ind> THE OPERATION 5.<ind>  The operation consists of the acquisition by  Alcoa of  Alumix's  interests in the aluminium  sector,  with  the exclusion  of  a  minor  part of its  flat  rolled  products business,  (the  manufacture of slugs). In  addition,  Alcoa acquires Alumix's 6% participation in Halco Mining, Company, a  Delaware  company  engaged in bauxite  mining  in  Guinea through  Compagnie des Bauxites de Guinée  (CBG),  which  is owned 51 % by Halco and 49 % by the Guinea Government. II.<ind> CONCENTRATION 6.<ind>  The  transaction,  involving  acquisition  of  sole control  by  Alcoa  of  parts  of  Alumix's  assets,  is   a concentration with in the meaning of article 3(1) (b) of the Merger  Regulation. The assets to be transferred  relate  to Alumix's primary aluminium, flatrolled products and extruded products  activities. None of the assets to be  retained  by Alumix relate to Alumix's activities in those markets, other than the production of aluminium slugs. III.<ind> COMMUNITY DIMENSION 7.<ind>  The  combined aggregate worldwide turnover  of  the undertakings  concerned  exceeds  5.000  million  ECU.   The aggregate  Community wide turnover of Alcoa and of  Alumix's transferred assets each exceed 250 million ECU. They do  not achieve more than twothirds of their turnover in one and the same  Member State. The operation has therefore a  Community dimension. IV.<ind> THE RELEVANT MARKETS A.<ind> Relevant Product Markets 8.<ind> Alcoa and Alumix are active in the aluminium sector. Both are present in the markets for <ind> primary aluminium, flat rolled aluminium and extruded aluminium.<ind>  <ind>  Aluminum  is used in a wide range of applications  in sectors including transportation, building and construction, containers  and packaging, and the electrical  industry.  In the  transportation  sectoraluminium has traditionally  been used  in  the aerospace industry but is also being  used  in other areas, including automobiles, ships and rail cars.  In the  construction sector, aluminium is used in  applications including  cladding,  roofing, window and  door  frames.  In containers  and packaging, aluminium is used in a  range  of applications  including  beverage cans,  barrels  and  kegs, tubes  and  bottles,  aluminium foil  containers,  caps  and closures, and aerosol cans.  <ind>  Primary aluminium is produced by refining bauxite  to alumina  and  then  converting alumina to  aluminium  metal. Primary  aluminium  is  then  processed  into  flat   rolled products and/or extruded products. <ind> Primary aluminium 9.<ind>  Primary aluminium is produced by smelting  alumina, which  is obtained by refining bauxite. The smelting process converts   alumina   into  its  two  elemental   components, aluminium  and  oxygen.  The separation  of  aluminium  from oxygen  is  accomplished  by  hightemperature  electrolysis. Aluminum  can  be  shipped in its molten form  in  insulated ladles  directly to a user's plant, or it can be  cast  into ingots (rectangular), rolling slab (rectangular), or billets (circular) of varying sizes and shapes, either in pure  form or  alloyed  with  other  metals (eg  manganese,  magnesium, copper, zinc or iron). <ind> Flat rolled products (FRP) 10.<ind>  FRP  include a variety of flat aluminium  products ranging  from foil stock to industrial aluminium plate,  and account for 62% of the demand for primary aluminium. FRP are produced in a number of steps in hot and cold rolling mills, which  can  begin  with  aluminium ingot,  scrap  or  molten aluminium,  which  may be mixed with alloying  materials  to achieve particular characteristics eg strength, formability, machinability, weight, corrosion resistance,  hardness.  The finishing   process  used  will  depend  on  the  customer's criteria for appearance and performance. The amount of waste generated in the manufacturing process can account for 2540% of  primary aluminium used. This waste is normally  remelted in a cast house and run through the rolling process again. 11.<ind>   Three  main  categories  of  FRP   are   commonly distinguished:  plates,  sheets  and  strips;  circles   and blanks; slugs. Plates, sheets and strips are the bulk of the market  (about 80% of the EEA production of FRP). Slugs  are excluded  from the present operation, as Alumix's activities in  this  field  are  not transferred to Alcoa.  Plates  and sheets  are  distinguished from one  another  by  thickness: plates are typically defined as 6.00 mm. and thicker,  while sheet is 5.99 mm. and thinner. Strips, also known as "coils" is  sheet  that is rolled before being unrolled and  cut  to length and width.  <ind>  Sheets and strips are the most important FRP  in  the EEA  in  terms  of  volume. Sheets and  strips  are  general purpose  products used in a wide range of applications  such as packaging, construction industry, automotive industry and electrical  industry. The same type of rolling equipment  is needed   for  the  production  of  both  kinds  of  product. Consequently  sheets  and strips  form   part  of  the  same product market. <ind>  On the other hand, plates is a thicker material which has  in  its  standard  form specific  applications  in  the construction  (for  example,  shipbuilding)   and   in   the transport   industry.   Specific   equipment   which   needs substantial  investment to be acquired is needed  for  their processing. <ind>  It  is  however here not necessary to decide  whether sheets and strips on the one hand and standard plates on the other  hand constitute separate product markets, as also  on the  narrowest product market definition the operation  does not create or strengthen a dominant position.  <ind> Finally, special plates for the aeronautic and defence industry are not considered in the competitive assessment of this  decision,  as  Alumix does  not  produce  them.  These products  constitute a separate product market, as  specific equipment  requiring very high investment is  necessary  for their production, as well as a special technology. Only very few companies are active on this market. <ind>  Circles  and  blanks have a  round  shape  and  their applications are basically in the domestic field  (pots  and pans).  Special equipment is required for their  production. These products are however not considered in the competitive assessment as Alumix has no production in this field. <ind> Extruded products 12.<ind>  An  extrusion  is  a  product  formed  by  pushing materialthrough  a  die.  About 25 %  of  primary  aluminium production   is  used  to  manufacture  extruded   products. Extruded  products are used in a wide range of applications, including   aerospace,   building  and   construction,   and industrial  uses. The products also come  in  a  variety  of shapes, including rods, bars, profiles and forging stock. 13.<ind> Extruded products can be distinguished on the basis of  the technology used for their processing. In particular, extruded  products can be divided into soft alloy extrusions and  hard  alloy extrusions. Soft alloy extrusions and  hard alloy extrusions constitute separate product markets for the following reasons. <ind>  Soft  alloy  extrusions require  a  relatively  small capital  investment and are generally simple to manufacture. They  are produced by extruding aluminum relatively  quickly and  require an extrusion press capable of exerting pressure of 60 Kilograms per square millimetre.  <ind> By contrast, hard alloy extrusions are manufactured in a  more capital and labour intensive process involving  heat treatment  and  continuous  metallurgic  tests.   They   are excluded  slowly and require an extrusion press  capable  of exerting pressure of 90 kilograms per square millimetre.  <ind> In addition, soft alloy products are generally used in less  demanding applications than hard alloy  products.  For example,  soft alloy products are used in windows and  doors and in consumer products, while hard alloy products are used in   bridges   and   for  military,  aerospace   and   other applications demanding high strength and durability. <ind> Bauxite mining 14.<ind> The notified operation includes the acquisition  by Alcoa  of  Alumix's 6% participation in Halco mining,  which operates the bauxite mine at Boké in Guinea. Bauxite is  the principal  raw  material  used  in  refining  alumina.  This acquisition  is  included in the overall assessment  of  the case. B. <tab> Geographic Reference Market <ind> Primary aluminium 15.<ind>  The  geographical market for primary aluminium  is Western   worldwide  (which  excludes  China  and   Russia): aluminium  ingot  is traded and transported  throughout  the world  (excluding  Russia  and China),  the  EEA  is  a  net importer of primary aluminium, pricing of aluminium ingot is substantially  uniform because of the  link  to  the  London Metal Exchange (LME). <ind> Flat rolled products (FRP) 16.<ind> The relevant geographic market for all FRP  (sheets and  strips/standard plates, circles and blanks) is at least the  EEA.  There  are  no barriers to trade  between  Member States.  There  are significant trade flows  between  Member States. This area cannot for the moment be enlarged since: <ind>  a)<ind>  for imports from countries outside  the  EEA there  is a duty of 9% (to be reduced to 7.5% over the  next five  years)  (except for Poland and the  Czech  and  Slovak Republics), <ind>  b)<ind>  Actual  imports of FRP  from  countries  not belonging to the EEA do not exceed 10%. <ind>  Extruded  products (hard alloy  extrusions  and  soft alloy extrusions) 17.<ind>  The  relevant geographic market for  all  extruded products  (soft and hard alloys) is the EEA.  There  are  no barriers to trade between Member States. Trade flows between Member States, although less extensive when compared to FRP, have significantly increased over the last years. <ind> Bauxite  18.<ind>   Most  bauxite  is  used  by  integrated  aluminum producers which have direct access to bauxite mines, by  way of participations and long term contracts. Both the European and the USA aluminum markets currently depend on imports  of bauxite   from  other  areas  of  the  world.  The  relevant geographic market is therefore worldwide. V.<ind> ASSESSMENT <ind> Primary aluminium 19.<ind>  Alcoa  is  the world's largest  primary  aluminium producer.  However its share of the 1994 production  in  the Western  world  market  is approximately  [Deleted  business secrets.  Between  5% and 15%.]. Alumix's  market  share  is approximately [ Between 0% and 5%.]. <ind>  The competitors on this market include the integrated aluminum  producers Alcan [ Between 5% and  15%.],  Reynolds [Between  5%  and  15%.], Pechiney [Between  5%  and  15%.], Alumax  [Between 0% and 5%.],Hydro Aluminum [Between 0%  and 5%.],  Kaiser [Between 0% and 5%.], and VAW [Between 0%  and 5%.] . <ind> The operation will not create or strengthen a dominant position on this market. <ind> FRP <ind> Plates/SheetsStrips 20.<ind>  The parties' combined market shares  even  on  the narrowest  possible market definition discussed in paragraph 11 do not exceed 15%. <ind>  Competitors  in  these markets  include  Alcan  about [Between  15%  and 25%.], Pechiney (about [Between  10%  and 20%.]),  Alusuisse,  VAW  (about  [Between  5%  and  15%.]), Reynolds,  Hydro  and Hoogovens (less than [Between  5%  and 15%.]). <ind> The operation will not create or strengthen a dominant position on this(these) market(s). <ind> Extruded products <ind> Hard Alloys 21.<ind>  The parties' combined market shares do not  exceed 15%. <ind>  Competitors in these markets include Pechiney  (about [Between 10% and 20%.]), Hoogovens, Alcan, Alusuisse  (about [Between 5% and 15%.]). <ind> The operation will not create or strengthen a dominant position on this market. <ind> Soft Alloys 22.<ind>  The parties' combined market shares do not  exceed 15%. <ind>  Competitors in these markets include  Hydro  Aluminum (about  [Between 5% and 15%.]), Graenges (about [Between  0% and  10%.]), Reynolds, Alcan, Alusuisse, Pechiney ( [Between 0% and 5%.]). <ind> The operation will not create or strengthen a dominant position on this market. <ind> Bauxite mining <ind>  There are large quantities of bauxite available.  The majority of bauxite mined today is refined into alumina. All major  integrated  aluminium  producers  have  interests  in companies exploiting bauxite mines and have further  sources by  way  of  long  term  contracts.  On  the  basis  of  the information  provided  by  the  parties,  Alcoa's  share  of worldwide  bauxite  production  in  1994  was  approximately [Deleted  business  secrets. ].  Alumix's  participation  in Halco Mining Company in Guinea (referred to in paragraph  5) has  represented  (in 1994) approximately [Deleted  business secrets.]   of   the   worldwide   production.   In    these circumstances,  it  appears that  the  acquisition  of  this participation  will  not substantially  restrict  access  to bauxite for the other purchasers on this market. VI.<ind> ANCILLARY RESTRICTIONS <ind>  The  parties  intend to conclude  an  Alumina  Supply Agreement by which Alcoa undertakes to purchase the  alumina requirements of the two smelters acquired from Alumix from a third  company  called Eurallumina S.p.A.  (52.1%  owned  by Alumix)  for  three years following the closing  date.  This agreement  can be considered necessary to ensure a continued supply of alumina to the Portovesme and Fusina smelters in a market which is characterised by the existence of long  term contracts  between  buyer and supplier.  Its  duration  must nevertheless not exceed three years. VII.<ind> CONCLUSION 23.<ind>  For the above reasons, the Commission has  decided not  to  oppose  the notified operation and  to  declare  it compatible  with the common market and with the  functioning of   the   EEA  Agreement.  This  decision  is  adopted   in application  of  Article 6(1)(b) of  Council  Regulation  No 4064/89. 24.<ind>  This decision is without prejudice to any decision which  the  Commission will adopt under State aid procedures regarding Alumix. For the Commission,