International Today 1989-2019 Aluminium International Today 1989-2019

government has long played a role in the de- practices in the sector but one which also gen- By way of contrast, when the struggling Brit- velopment of the aluminium industry for good erated innovation through the collective sharing ish Aluminium Company Ltd (BACo), the UK’s and sometimes for ill. From the outset the state of research and development. Military demand dominant aluminium producer, was eyed for The Light Metal Age played a critical role in the survival of aluminium. for the metal reached its peak during World War takeover by Reynolds Metals and UK fabrication In the 1850s, French emperor Louis Napoleon III II, especially given the importance of air power, fi rm Tube Investments in the winter of 1958-9, Aluminiumville both acted as a fi nancial backer of, and an advo- driving a massive expansion in the productive the UK government chose not to intervene, By Andrew Perchard* cover cate for, the French industry. Above all, it was the capacity of the industry and protection over despite the Cabinet being split over the matter. military applications for the metal starting with strategic reserves, which would inform policy A further disastrous fl irtation with the government Transformation in the global aluminium industry aluminium production (Stuckey, 1983; Lesclous, Franco-Prussian (1870-1) and second Anglo-Boer on stockpiling in the Cold War amongst the sponsored attempts to build the new generation since Aluminium International Today launched 1999). For most of that century then, the industry (1899-1902) wars that opened up opportunities key powers (Grinberg and Hachez-Leroy, 1997; nuclear power stations, Advanced Gas-cooled 30 years ago has been dramatic by any stand- was characterised by rapid backward vertical for an industry struggling for markets. Expan- Frøland and Ingulstad, 2012; Perchard, 2012). Reactors, and reduce imports of aluminium ingot, ards. That same year saw the start of a series of integration, oligopolies and powerful cartels, as sion in the demand for aluminium was aided almost saw go to the wall and ultimately led to revolutions across Eastern European and Baltic well as by a pronounced incidence of state in- by the birth of the modern industry in 1886 with In the United States, longstanding concerns their merger with ’s UK subsidiary in 1982. satellite states of the Soviet Union culminating volvement. In respect of concentration and state the Hall-Héroult process replacing far more over monopolies saw – also the parent In BACo’s case, whilst proximity to government in 1991 with the fall of the Berlin Wall. This was intervention, especially of the primary industry, expensive and smaller scale processes (those of the Aluminium Company of Canada (Alcan) and the narrow selection of directors from the preceded by political and economic reforms that remains true to a signifi cant degree even if leaders and educators, as it has been of politics, discovered by Henri Sainte-Claire Deville in 1854 – become the target of successive antitrust ranks of the military and civil service served the that had signifi cant implications for the Soviet the geographical locus has shifted. intent on rea! rming comforting myths and rhet- and by Alfred Cowles in 1887). However, it was actions and enquiries by the US Department company well initially, it led to disastrous conse- domestic, and ultimately the global, aluminium oric. The history of aluminium is peppered with especially the watershed of , and of Justice (1911-1912, 1924-1930, and 1937-1945), quences with the board increasingly unable to industry; with the collapse of military orders, At the dawn of the 20th century, aluminium failures as well as successes. There are lessons the expansion of aluminium’s use from soldiers’ the Federal Trade Commission (1920s), and the distinguish between the priorities of the business including strategic stockpiling (which accounted enthusiasts proselytised about the coming of a to be learnt both from events, as well as industry canteen and explosive powders to aeroengines Temporary National Eco- and those of government (Per- for around 80 per cent of Soviet output), the “Light Metal Age” (Perchard, 2012). As Alumini- and organisational behaviours. and military vehicles, that led to a revolution in nomic Committee (1930s) chard, 2012; MacKenzie, 2012). increasingly liberalised industry looked further um International Today enters its third decade, aluminium. It also marked a watershed in the under both Democrat and While in France, major national afi eld with large quantities of primary metal be- the “lightest and brightest of metals” remains This chapter focuses on a number of recurrent evolving relationship with the state. In most of Republican administrations. producer -Ugine-Ku- ing dumped on global markets. In 1990, the So- ubiquitous. Beyond its material presence, some themes in the history of the industry; those of the the major combatant nations, leading company In 1945, Alcoa was found hlmann, close to bankruptcy, viet Union exported 250,000mts of aluminium. economists have postulated on aluminium as a industry’s relationship with government, the man- o! cials served in government ministries, the guilty of monopolization. was nationalised between 1981 By 1994, three years after the USSR’s collapse, reliable barometer of global economic growth. In agement of political risk, and cartelisation and state regulated sales and prices for the metal. Prior to this, and under the and 1995 (Barjot, 2016). It was Russian exports had reached 2.293 million mts the Metals Forum’s (2015) Strategic Vision 2030, accusations of anti-competitive practices. For In Britain and France, national producers served auspices of national defence taken over by Alcan in 2002. (with signifi cant amounts being purchased by the while emphasising recognising the metals indus- despite profound changes in the global structure in government and were subject to controls. requirements (but informed The same year, VAW was taken Metals Exchange, which had launched try as forming the backbone of UK construction, of the industry, these remain salient issues for However, they also used their position of infl u- by antitrust sentiments), over by Norsk Hydro. aluminium in 1978 (Godzmirski, 2018). manufacturing and infrastructure, Metals Strategy industry, evident in contemporaneous discus- ence to undermine their German-owned Swiss key fi gures in the wartime Steering Group Chair, Jon Bolton, underlined sions of the role of state owned or controlled competitor (AIAG subsequently Alusuisse) and administration of President Australian wartime poster for scrap aluminium, Thus, the aluminium industry c.1939-1945 Many of the global leaders in 1989 either do the importance of history both to understanding enterprises in the global industry, trade tari" s secure some political support and protection for Franklin Delano Roosevelt (as with most non-ferrous and not exist or have been absorbed into larger strategic decision-making in the industry and and controversies over LME warehousing (WTO, the industry. In Germany, where there was no supported a number of new ferrous metals producers) then, metals conglomerates. The scale of production investment and changes in the policy environ- 2010; World Bank, 2011; Chatham House, 2014; national producer of aluminium and it was even entrants, the largest being, the Reynolds Met- as now, has long had to navigate a cautious has grown exponentially, and the epicentres of ment. It is commonplace to repeat the Spanish European Aluminium, 2018). Political interven- less endowed with access to key raw materials, als Company and Kaiser Aluminium, to secure path in its complex relationship with the politi- , alumina and primary aluminium pro- philosopher George Santayana’s maxim that tion in the industry has typically been justifi ed a national aluminium producer was established government fi nance and contracts, take control cal environment. The astute conduct of public duction have shifted geographically, as have those who do not read history are forced to primarily on two grounds: national defence and (Vereinigte Aluminium-Werke AG (VAW) to cir- of Alcoa’s upstream and downstream plants a" airs – and appreciation of the potential pitfalls markets for the metal. Meanwhile a combination repeat it. Over a century before the French reconstruction; and competitiveness. In addition, cumvent the blockade to Germany, which would and . So that by the end of WWII, Alcoa’s of historical precedent in this as in the impact of of market mechanisms and new entrants to the enlightenment philosopher and historian Voltaire aluminium’s energy requirements, supply chains, go on to become a major global player. Ger- dominance of US markets was broken. These other external forces – remains an imperative as industry (many of them state owned or subject to remarked that: “History never repeats itself. Man land ownership, and more latterly environmental many’s lack of access to the vital raw materials interventions also propelled both Reynolds tensions between the , Europe and the US state control) have profoundly altered the global always does.” Whilst a grasp of history is vital, as impact have also piqued the interest of legisla- necessary to produce aluminium, as well as an and Kaiser to emerge as major global players continue to demonstrate. market. Contrast this with the global industry’s with any knowledge, it is how we choose to read tors. A further related issue considered is that of e" ective military blockade, became the mother by the 1950s (Smith, 1988; Perchard, 2019). To structure throughout much of the 20th century and evaluate the past. As is abundantly clear sustainability – that of the fi rm and the industry’s of invention and innovation. a signifi cant degree, Richard Reynolds Senior COLLECTIVE RESPONSES: and we see how profound that change was. In from the world around us, there are many who ecological footprint – both of which, alongside (Reynolds Metals’ founder) and Henry J. Kaiser The early twentieth century aluminium industry 1913 seven companies controlled 94 per cent choose to read history but do so selectively, dis- the others will be determinant factors in alumini- Aluminium’s military uses led to spin-o" opportu- (Kaiser Permanente’s founder) were responsible responded to some of the global challenges of of aluminium production. Over sixty-fi ve years regarding lessons from the past, and conscious- um’s future. nities after 1919, notably a signifi cant expansion for their fi rms’ successes as adept “government market uncertainty, the state dumping of scrap later, in 1979, six fi rms controlled respectively: ly and recklessly appropriating the rhetoric and in its transport applications. However, govern- entrepreneurs” with a deftness for selecting their and trade wars with periods of cooperation be- 54 per cent of bauxite mining; 74 per cent of vestments of the past for their own ends. This ALUMINIUM: A STRATEGIC METAL ment dumping of stockpiles also created a crisis managers and an astuteness for public a" airs. tween the fi rst movers in the industry through a alumina production; and 62 per cent of primary has been as true of business and management Given its strategic importance and footprint, for the industry, which further informed cartel series of cartels. The fi rst aluminium cartel (1901-

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1908) operated a monopoly to carve up aluminium industry, in particular, su"ered during REFERENCES markets, eliminating competitors after the expiry the inter-war period as a result of higher imports, Barjot, D. (2016) ‘Pechiney 1981-1995: l’expérience de la of the original Hall-Héroult patents by reserving resulting from the UK’s lower tari"s than many of nationalisation Réalités et limites d’un redressement’. national markets for territorial producers and its competitor nations. Certainly, contemporary Revue Française d’histoire économique 45: 108-130. apportioning the remaining competitive markets economists considered the non-ferrous metal in- Bertilorenzi, M. (2014) The International Aluminium car- to members. Between 1926 and 1931, European dustries in general – and aluminium, in particular tel, 1886-1978. The Business and Politics of a Coopera- producers organised a price-fixing cartel with a – to have been far more successful in regulating tive Industrial Institution. New York: Routledge. formal sales mechanism, the Aluminium Associ- their own industry and making the organisational Godzimirski, J. M. (2018) The Political Economy of Rus- ation. This, however, operated multiple functions changes prudent under the economic circum- sian Aluminium: Between the Dual State and Global many of which helped the industry through a stances of the period (Perchard, 2012; Storli, Markets. Cham: Palgrave Macmillan. volatile period and encouraged trade diplomacy. 2014; Bertilorenzi, 2014). Grinberg, I. (2003) L’aluminium: Un si léger metal. The Aluminium Association was charged with Gallimard: Paris. regulating sales and quality, expanding market Modern observers may be want to recoil at the Grinberg, I. and Hachez-Leroy, F. (eds.) (1997) Industrial- opportunities, centralising key functions (such as mention of cartels (cartels operated with wide- isation et sociétés en Europe occidentale de la fin du research and development), and co-ordinating spread statutory acceptance in many industrial- XIXe siècle à nos jours. Armand Colin: Paris. transport. Its major shortcoming was that only ised nations until the 1950s). However, despite Kooroshy, J., Preston, F. with Bradley, S. (2014) Cartels half of the global players participated. This was the imperfections and shortcomings of such a and Competition in Minerals Markets: Challenges for superseded in 1931 by the Alliance Aluminium system, the latter two cartels (especially the AAC) Global Governance. London: Chatham House. Company (AAC). The move to a more compre- pro"ered real advantages in terms of coordinat- Lesclous, R. (1999) Histoire des sites producteurs hensive cartel in the aluminium industry (as in the ing R&D and transport. They also acted as fora d’aluminium. Les choix stratégiques de Pechiney 1892- other non-ferrous metal and chemicals indus- for trade diplomacy. In some of these respects, 1992. École des Mines: Paris. tries) was given added impetus by the rejection the best of these functions then passed on to MacKenzie, N. (2012) ‘Be careful what you wish for: of proposals submitted to the World Economic the industry’s trade associations. comparative advantage and the Wilson Smelters Conference of 1927 for transnational mecha- Project, 1967-82’ in H. O. Frøland and M. Ingulstad nisms for controlling global raw material supplies SUSTAINABILITY AND THE FUTURE OF ALUMINIUM: (eds.), From Warfare to Welfare: Business-Government by fifty of the national representatives present. Aluminium’s leading role in recycling is an anal- Relations in the Aluminium Industry. Akademika Forlag: This involved the majority of the European and ogy above all else for the innovative adaptability Trondheim. North American producers. The Alliance had of the industry as a response to necessity; im- Metals Forum (2015) Strategic Vision 2030: The UK three main constitutional aims: (1) the regulation peratives born of warfare, the economics of the Metals Industry’s New Strategic Approach. West Brom- of the output and reserves of its’ members; (2) industry and energy costs, and the threat posed wich: Metals Forum. the division of and control of the markets; and by competition from alternative materials, par- Perchard, A. (2012) Aluminiumville: Government, Global (3) to coordinate marketing and research in ticularly from the 1960s plastics (ironically, with Business and the Scottish Highlands. Carnegie: the industry. The organisation did not howev- growing consciousness of the environmental Lancaster. er centrally devise prices. Price controls were impact of plastics, aluminium is in the ascendant). Perchard, A. (2019) ‘This Thing Called GOODWILL: The reliant on member companies faithfully adhering Reynolds Metals Company and Political Networking in to their pledge not to undercut the prices of the As Aluminium International Today celebrates its Wartime America’. Enterprise & Society, in press. main plants. This system operated fairly e"ec- 30th birthday (and UK aluminium its 160th), the Storli, E. (2014) ‘Cartel Theory and Cartel Practice: The tively, with most quotas adhered to, until 1935 environment in which aluminium operates is no Case of the International Aluminum Cartels, 1901 – when VAW – to meet Germany’s re-armament less volatile. The chief challenges now will lie in 1940.’ Business History Review 88: 445-467. programme – started to buy more concessions building sustainable organisations and strategy Stuckey, J. A. (1983) Vertical Integration and Joint to increase her output beyond her quota. The to meet the economic, ecological and social Ventures in the Aluminum Industry. Harvard University cartel also encouraged a more prudent distri- challenges ahead. Learning valuable lessons Press: Cambridge. bution of fixed capital investment to demand, by from the past rather than comforting ourselves The World Bank (2011) Overview of State Ownership coordinating e"orts on marketing, and research with myths is vital. in the Global Minerals Industry. New York: The World and development. Nevertheless, the British Bank.

*Andrew Perchard is Professor and Head of the Management Research Centre, University of Wolverhampton Business School. He is the author of Aluminiumville: Government, Global Business and the Scottish Highlands (Carnegie, 2012).

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