I have been trying to get competitive picture for AIA and following are some notes ->
To read up, I chose one competitor which supplies Steel Grinding Balls (Molycop) & other from High Chrome Grinding balls (Magotteaux).
MOLYCOP
Molycop is probably largest producer of Steel/Forged grinding media balls in the world. The have installed capacity of 1.7MT and sales of about 1MT. If AIA is trying to convert forged media mills into high chrome media, they would be going after some of the customers of Molycop. Molycop has manufacturing facilities located in Chile, Peru, Mexico, USA, Canada, Indonesia and Australia. it also fully owns two steel mills - one in Canada named AltaSteel and another one in Australia named Waratah.
Molycop also has grinding rods as products which are used in rod mill. I need to check whether AIA makes such an product and whether high chrome rods would provide similar efficiency. Also about 15% of world’s mineral extraction (for gold, copper, iron) happens in Russia (no surprise). Also Latin America, especially Chile also seems to be big mining center along with other geographies in America, Africa.
In 2016, Molycop developed new grinding media balls by the name Moly Cop NG aimed for SAG (Semi Autogenous) grinding mills. The company claims that these balls have higher impact & spalling resistance resulting in overall lower consumption. In some experiments, it seems like consumption reduced by 13% in low/mid impact environments and 20% in high impact environments.
Molycop was actually a subsidiary of Arrium group and it was sold for $1.2bn to American Industrial Group as a part of restructuring plant.
AIA is currently valued 1.5bn$+ and close to ~2bn$. The capacities and business of AIA is at much lower scale compared to Molycop.
MAGOTTEAUX
Magotteaux is an 100 year old company founded in Belgium. The company was acquired by Chilean company named Sigdo Koppers listed in Santiago, Chile in 2011. The company has following capacities in tonnes - High Chrome GM (300,000), Low Chrome GM (55,000), Forged Steel GM (55,000), Castings (66,000). Apart from this, the company has JV with South African company named Scaw which has capacity of High Chrome GM of 100,000T. The company has 15 production units located in USA, Canada, China, Brazil, Thailand & Belgium.
The company had reported full year sales of ~629mn$ in CY16 (692mn$ in CY15). The EBITDA of company went down from 80mn$ to 63mn$ in same period. This was mainly due to product mix being skewed towards low margin products.
If feels like company has reasonably strong R&D department and company spends on average about ~6mn$ on R&D. One can read about various technical innovations done by the company on their website & reports. One interesting thing I found is something called as Metal Matrix Composite (MMC). In this it seems that, some high waer resistant alloy is mixed with other material like Ceramic. The resultant product seems to have wear resistance higher by 3-4 times. This technology seems to have been developed around 1990s and it feels like game changer. I would love to know more from technical experts in this area.
The company formed a JV with chinese steel Supplier named Xingcheng to supply forged grinding media balls.
http://www.magotteaux.com/group-news/strategic-alliance-production-commercialization-forged-grinding-balls/
The products and mill overview pages of Magotteaux are simply beautiful. I learned a few things from them ->
Wiki -> http://www.magotteaux.com/wiki-mag/
Mills -> http://www.magotteaux.com/customers/
Now some questions in my mind -
- Both Molycop and Magotteaux seems to have decent institutionalized R&D. I haven’t found something similar for AIA. Would be great if someone with metallurgy background can comment on this (quality of research, impact, risk etc.)
- The forged grinding players are also not static while AIA attacks their customers. As shown by Moycop NG, even forged media products can be innovated to reduce end consumption. This along with RM price cycles and difference between chrome vs. steel means it is not so straight forward for AIA to win and keep customers. They migt have to sacrifice margins.
- One reason for competitiveness of AIA vis-a-vis Magotteaux seems to be the fact that all the plants of latter are in high cost geographies barring Thailand (50,000 capacity). I have not done research on cost competitiveness of Thailand. Although I could not find financial breakdown for Magotteaux, but AIAs cost advantage might be primarily in employee cost (around 5% of sales). If Magotteaux opened plant in India or other low cost geographies, wouldn’t that change the game?
- Both Molycop and Magotteaux are not simply grinding media/mill parts players. They provide more products along the milling/cement pipeline. Would such ability to provide complete solutions has any advantage?
- Ferro Chrome prices and Currency Fluctuations remain two most important risks for AIA as demonstrated in last 2 quarters.
A lot of information about other competitors is publicly available. Those invested and interested can go through those and share any interesting findings. (Competitors - ME Long Teng Grinding Media, Gerdau, Donhad, Scaw, Arcelor Mittal, Metso and many more)
Disc - No investments.