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Global Metals Outlook 2015
© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 2
Executive summary
The past few years have been challenging for many metals organizations. Overcapacity and sagging iron ore prices have led to heightened pressure and intense competition. Everyone is looking for new growth opportunities while – at the same time – remaining keenly focused on reducing costs.
KPMG International’s Global Metals Outlook provides a comprehensive overview of current trends, issues and opportunities in the global metals sector. It includes valuable benchmarks as well as forward-thinking advice and practical insights from KPMG partners, industry experts and metals leaders.
An era of intense competition emerges
© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 3
© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 4
Metals organizations are focused on sales growth, but are challenged by stiff competition and pressure on prices.
49%of all metals respondents cited sales growth as their top strategic priority
47%say they will focus on reducing the cost structure as a top priority
49%cite intense competition and pressure on prices as a top challenge over the next 2 years.
© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 5
Many expect growth to come from the adoption of new technologies and expansion into new markets.
60% say that the adoption of new technology will drive future growth
43% say they will grow through expansion into new markets
40% say increased R&D spend will drive growth in the future.
Note: Respondents selected top three options.Source: Forbes survey, January 2015.
© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 6
The competitive environment is pushing metals organizations to increase their focus on the development of new products – such as ultra-light alloys – and to adopt new manufacturing technologies that could help respond to emerging needs in the market and stricter environmental regulations.
Eric DamotteKPMG Global Head of Metals
Innovating for growth
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© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 8
70% will funnel investments towards projects that deliver incremental innovation
32% percent will spend more than 6 percent of revenues on R&D over the next 2 years, almost three times the number that report spending that much over the past 2 years
Investment into R&D is set to increase, but will largely be focused on enhancing existing product lines rather than discovering new breakthrough innovations.
© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 9
81% are already adopting more collaborative business models with suppliers and customers
85% believe that partnerships, not in-house efforts, will form the future of innovation for their organization
Metals organizations are focusing on partnerships to drive innovation, largely motivated by cost considerations.
36% say that their primary reason for collaborating on innovation is to lower their R&D costs
© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 10
Metals organizations want to spend more on R&D and firmly believe that innovation will be a key growth lever in the future. Indeed, going forward, the best opportunities for revenue growth and profitability will likely be found in technologically-advanced products as opposed to commodity products.
Eric DamotteKPMG Global Head of Metals
Rethinking the supply chain
© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 11
© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 12
30% say that the flexibility and responsiveness of their supply chain is creating challenges
32% believe they lack a competitive supply chain cost structure
Concerned about the competitiveness of their supply chain, metals organizations are sharpening their focus on costs and restructuring to support growth.
49% say that lowering costs and working capital levels is a top supply chain priority over the coming 2 years
26% say they will focus on restructuring their supply chain to support growth
© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 13
Supplier performance and supplier capacity rank as top challenges for metals supply chain organizations, yet supplier visibility remains low.
38%are concerned about supplier performance in terms of risk, reliability and quality
36% are not confident that their suppliers have enough capacity to meet demand
17% report having ‘complete visibility’ into their Tier 1
and Tier 2 suppliers.
But just
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Metals organizations are increasingly focused on becoming more competitive through new product launches and better demand-planning. But be warned: the reality is that growth and new product launches tend to turn supply chains into increasingly complex operations and that can often become a drag on agility and competitiveness.
Erich L. GampenriederHead of KPMG’s Global Supply Chain Center of Excellence
Key take-aways for the metals sector
© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 15
© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 16
Metals organizations will need to focus on product and process innovation to manage cost and profitability in order to resist competition as traditional trade flows are challenged by China’s slowdown and global overcapacity.
© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 17
New products, business models and disruptors will drive metals organizations to develop more agile, transparent and demand-driven supply chains and integrated business planning models. But supply
chain visibility remains low and significant opportunity exists for greater collaboration.
© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 18
Metals organizations must be focused on making bigger bets on R&D initiatives, attracting talent and creating broader, more inclusive innovation models and collaborating with tech-savvy partners to capitalize on new opportunities.
© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 19
Stoked by difficult market conditions and continued capacity increases in some markets, metals organizations will need to focus on uncovering new opportunities for growth in order to absorb some of their growing stock; the imbalance between capacity and demand will continue to create challenges for the short to medium-term.
© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 20
Facing a challenging M&A environment, metals organizations will need to increasingly focus on building partnerships with customers, suppliers and even competitors in order to achieve innovation, improve supply chain efficiency and maximize growth and profitability.
About the survey
© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 21
© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 22
The Global MetalsOutlook 2015 is based on a survey of nearly 50 senior metals executives (director level or above).
The survey included metals organizations around the world.
43% report being based in Europe, the Middle East or Africa
34% report being based in Asia
23%are located in the Americas
The survey was conducted by Forbes on behalf of KPMG International and was completed in early 2015.
© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 23
All respondents in this year’s Metals Outlook survey represented organizations with global annual revenues of more than US$1 billion
38% represent organizations with revenues of between US$5 billion and US$10 billion
26% represent organizations with revenues of between US$10 billion and US$25 billion
© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 24
CONTACTS
Eric DamotteGlobal Head of Metals+34 914 [email protected]
Jeff DobbsGlobal Sector Chair Industrial Manufacturing+1 313 230 [email protected]
© 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 25
Hong Gi BaeMetals Sector LeaderKPMG in Korea+82 22 112 [email protected]
Anthony BerrangePartner, AuditAfrica Head of MetalsKPMG in South Africa+27 11 647 [email protected]
Biswanath BhattacharyaDirector, Metals SectorKPMG in India+91 223 090 [email protected]
Robert BrownePartner, StrategyKPMG in the UK+44 20 [email protected]
Arne FrognerPartnerKPMG in Norway+47 4063 [email protected]
Don MatthewPartnerKPMG in Canada+1 604 455 [email protected]
Tom MayorPrincipal, Strategy practiceIndustrial ManufacturingKPMG in the US+1 216 875 [email protected]
Herve MicheletPartner, AuditFrance Head of MetalsKPMG in France+33 15 568 [email protected]
Hakan ÖlekliPartner, AuditIndustrial Manufacturing LeaderKPMG inTurkey+90 216 681 9000 (ext: 9087)[email protected]
Mark RaddanPartnerKPMG in the UK+44 20 7694 [email protected]
Eduardo SalgadoNational Industry LeaderMining & MetalsKPMG in Mexico+52 55 5246 [email protected]
S.V. SukumarPartner, Management ConsultingHead of Strategy and OperationsKPMG in India+91 223 090 [email protected]
Michele HendricksGlobal Executive for IndustrialManufacturingKPMG in the US+1 203 406 [email protected]
Leona MickelsonSenior Marketing ManagerKPMG in Canada+1 416 777 [email protected]
Michael GewehrMetals & Steel LeaderKPMG in Germany+49 211 475 [email protected]
Anders HahnssonDirectorKPMG in Finland+358 20 760 39 [email protected]
K JayaramanPartner, Advisory ServicesKPMG in [email protected]
Charles KrieckIndustrial Manufacturing Country LeaderKPMG in Brazil+55 11 218 [email protected]
Denise LingMetals LeaderKPMG in China+86 212 212 [email protected]
Gavin MaileAfrica Head of Industrial ManufacturingKPMG in South Africa+27 11 647 [email protected]
CONTRIBUTORS
Download the full report at kpmg.com/metals
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2015 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International.
KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.
Publication date: September 2015
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