In an article titled "World aluminum industry saved by disaggregation: Alcoa CEO," MarketWatch quotes the CEO of Alcoa as saying that the aluminum industry would have gone the way of the steel industry (i.e., downhill to bankruptcy) if it weren't for the aluminum industry's disaggregation of its commodity business from the business of fabrication:
Belda said as companies separated primary aluminum from flat rolled products, transparency and price clarity followed.
"This allowed Alcoa to properly measure the profitability of each of its business sectors," Belda said. "It instilled a pricing discipline and made the aluminum industry an even more profitable business."What's also interesting is that the aluminum industry fought for a dozen years against disaggregation — against commodity trading of aluminum:
"It was rumored, though never anything official, that in the early days of the aluminum contract, anyone who entered into a LME [London Metals Exchange]-based contract would be summarily dismissed," Belda joked. He said the aluminum industry in general took about 12 years to accept the LME contract as its official pricing method.
"By the 1990s, the aluminum industry had completely embraced the contract and had even started looking at new products, such as automotive alloys and high purity alloys," Belda said.
"It gave liquidity, price transparency, the capacity for management of inventory, and financing," he added.The steel industry attempted to resist progress and paid the price.
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