Booming global demand for hard commodities, including aluminium, has given big mining companies and upstream processors the sort of cash piles that could rapidly concentrate a once fragmented industry. So days after Alcoa of the US launched a $28m (£14bn) takeover bid for Canadian counterpart Alcan, London/Melbourne-based mining group Rio Tinto has let it be known that it is interested in the same target, and might even turn the tables by bidding for Alcoa instead. Alcan, which regards its southern rival’s bid as hostile, has been sounding out possible counterbidders since the first bid was announced. Its motive mat simply be to force a rise in Alcoa’s bid, which sets a price per share which is lower than last week’s closing valuation. But if independence is to be lost, it may prefer to disappear into a diversified group than become part of a more aluminium-focused enterprise that would give it less autonomy.
US competition regulators have signalled that they are likely to investigate an Alcoa-Alcan link, which would create the world’s largest aluminium producer, overtaking Russia’s Rusal. The two American Als were split apart 80 years ago on anti-trust grounds, and had been discussing a merger before disagreement over price and strategy led to Alcoa’s hostile bid. However, a Rio-Alcan combination might also invite anti-monopoly probing because of its substantial hold over the world’s supply of bauxite.
Now that Alcan is in play, the lost of other rumoured bidders extends to almost all the world’s other big commodity players, including Anglo American, BHP Billiton and Brazil’s CVRD. Rusal might also be in the field, but size and closeness to the Russian state would make it an even more obvious target for foreign regulators. The rising number of industrial users of the metal, for packaging and as a weight-saving alternative to steel, will hope the world’s regulators stay resolute enough to ensure continued competitive supply.