The last two years have been good for metals: Steel industry output exceeded the billion-tonne mark in 2004 and though the expansion rate is expected to slow down, analysts believe that global crude steel production will easily exceed 1.1 billion tones in 2005, primarily due to Chinese output. But the future outlook for steel prices remains mixed. Clearly, steel companies will have to operate in a different cost environment: significant increases in raw materials prices and energy supplies will result in substantial cost increases. Aluminum and alumina prices were also on the rise in line with the upturn in the construction industry, commercial vehicles, and aerospace.
Despite the recent successes, metals is a cyclical industry and much of the current boom has been driven by Asian demand. Sooner or later the industry will experience a down cycle and then, once again, there will be renewed focus on traditional issues, such as cost management and "anti-dumping" concerns.
Volatile and often falling commodity prices, depleted mineral reserves, stringent environmental regulations and restriction, rising operating costs, and ever intensifying competition have seen the mining industry reassess its strategies and become ever more global in its focus.
Mining companies around the world have responded to these challenges by consolidating and restructuring their companies, seeking new capital resources, and adopting innovative technologies. Investment incentive opportunities, deregulation, low-cost labor and the opportunities for large, high quality ore reserves have enticed companies to overcome previous entry barriers and explore emerging markets in developing mining markets. This ever-increasing move towards globalisation is driving a record number of mergers, acquisitions strategic alliances and joint ventures around the world.
How PwC can help you
PwC provides assurance, tax and advisory services to many of the world's largest metals and mining companies. Our strength in serving this industry comes from our skills and experience, industry thought leadership, and global network of fully dedicated partners and managers.