"Low cost production areas will be the growth areas in the near term: The Simonsen Brothers"

“We do not think there will be any dramatic change in the LME situation in the near term…But I must say that the low cost production areas will be the growth areas…”

Mr. Morten Simonsen, Managing Director,
Mr. Klaus Simonsen, Technical Director,
Simonsen, Denmark.

AlCircle Team had the opportunity to meet and interview Mr. Morten Simonsen & Mr. Klaus Simonsen, the Managing Director and the Technical Director of Simonsen, Denmark; during their recent visit to India. They are a globally recognized supplier of Refractory linings and Carbon Materials for the primary aluminium industry. Since 1984, the Simonsen family has been active in the industry on a worldwide scale and is one of the largest suppliers of insulation, barrier bricks and silicon carbide blocks for electrolytic furnaces.

Excerpts from the Interview:

AlCircle Team: Please briefly introduce your company and your products and service.

Morten: Our Company was established in 1984 by our late father Jorgen Simonsen and my brother Klaus. I joined the company two years later in 1986.

We are specializing in supplying insulation and refractory material for the primary aluminium industry only. We do not produce materials, but, we are the exclusive representative/sales office for a wide range of high quality producers. We are the only company in this industry that has the capacity to supply the whole path lining that includes everything from insulation to cathode blocks. We have been constantly adding more materials to our portfolio like the Fully Graphitized Carbon Blocks we have introduced recently.

AlCircle Team: In today’s recessionary scenario, what steps are you taking to mitigate the negative impact on your business?

Morten: Yes, globally, the aluminium industry is suffering with high level of warehouse stock and low LME price as a consequence. And as a supplier only to this industry, we can see that the prices in general are under lots of pressure. However, aluminium is still the key material in a number of sectors today. So, there will still be a vast opportunity to supply as long as there is production of aluminium. Above this, we have to find ways to reduce cost and come up with material that are energy efficient. Unfortunately, the aluminium industry is beginning to see casualties from the lower prices in terms of production cuts.

But, we are a small company… lean in size, we are easy to manage and we carry no warehouse cost and so on. But surely, we are keeping check on our own cost and the cost of the manufacturers and what we supply. What we mean to say is that we are being prudent in our business. No matter what, you have to be close to your business and operations and especially to your suppliers. Always remember one thing: you cannot make all the money by yourself. To sustain longevity in business, you will have to make sure that the whole supplier base and for that matter, everyone within your business circle is taken care of.

AlCircle Team: You have mentioned about LME, what in your view is the reason for current low LME price and what is your forecast for the short and medium term?

Morten: The LME is a direct link, in my view, to the warehouse situation which is again linked to investment banking and of course becomes a similar scenario that led to banking scandals and so on which is not a healthy sign for the market and also for the aluminium industry. And we think, before something is done to realize the unused stock of aluminium, the LME would not move despite the rise in demand. Of course the world as well as the aluminium industry is moving in a better direction and there is bullish forecast for the bigger nations and the aluminium industry. Still, the aluminium price is unrealistically low, being one of the metals that do not really move.

There is something fundamentally wrong in terms of the LME price which is hurting the equation in the aluminium industry and we do not think there will be any dramatic change in the LME situation in the near term. Growth possibilities can be seen in terms of the low cost aluminium producers, however, high cost production units would be struggling tremendously. The smelters that are closing due to high cost of production and low price are actually having an impact on the society where they are situated, in terms of job and living. That is the reason the government is stepping in to save the smelters in a number of countries.

AlCircle Team: Any special measures your company is taking to cope with the present situation?

Morten: Yes, we try and change our strategy with the time; to work even closer with strong partners in the market, to find alternatives and other sources for business. Another important strategy is to align with the partner and see if our company can grow by adding more materials to our portfolio to sustain in the smelter scene worldwide. To offset the lower LME, we are aggressively working in the market. It might be the tough time, but, we have to be here for good as well as the bad time.

AlCircle Team: Coming back to good time, when do you think will it come back?

Morten: looking at the present condition, going back to an ideal situation where LME aluminium settles at $3000 is still long way away. But I must say that the low cost production areas will be the growth areas in the near term. I won’t say that it will never change as that is not the sustainable future for aluminium as we see it. But, in my view, it is tough to commit a time when the market will rebound.

AlCircle Team: There is a segment of market for new lining materials for smelters? How do you hope to cater to this new market?

Morten: It is too general to expect that all the new smelters will only use the new lining material. There will still be a segment of smelters that will not shift to Graphitized blocks and will not see the benefit of it. But, clearly, there is a change in design, to increase production and to cut energy consumption. Everyone in the industry knows how difficult for a smelter to change dramatically in the smelter design. There are smelters in the Middle East that are using new design and we are keen on partnering with them. As material suppliers of the industry for last thirty years it becomes imperative to add new materials and to follow the tendency and demands of the industry.


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