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 worlds major currencies or pricing in European currency units (Ecus) to protect against exchange rate volatility. Bues views on integration between European smelters were met by general approval from the conference audience comprising representatives from many of the worlds major mining smelting and trading companies although some of the mining representatives were somewhat sceptical in view of their own industrys 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.
MAJOR EUROPEAN ZINC SMELTER MERGER SEEN BY 1990