Eramet

Tour Maine-Montparnasse, 33 av du Maine
Paris F-75755 Cedex 15
France
Telephone: +33145384242
Fax: +33145387425
Web site: http://www.eramet.fr

Public Company
Incorporated: 1880 as Société Le Nickel
Employees: 12,806
Sales: EUR 2.52 billion ($3.44 billion) (2004)
Stock Exchanges: Euronext Paris
Ticker Symbol: ERA
NAIC: 331419 Primary Smelting and Refining of Nonferrous Metals (Except Copper and Aluminum); 325131 Inorganic Dye and Pigment Manufacturing; 331491 Nonferrous Metal (Except Copper and Aluminum) Rolling, Drawing, and Extruding; 331492 Secondary Smelting, Refining, and Alloying of Nonferrous Metals (Except Copper and Aluminum)

France's Eramet is a world-leading producer of nickel, manganese, high-performance alloys, and speedsteel. The company has its roots in the nickel mines in New Caledonia, where it continues to operate four mines as well as nickel production facilities. Since the early 1990s, Eramet has successfully diversified, capturing a world-leading share in the high-performance speedsteel market, notably through subsidiaries Erasteel Commentry and Aubert & Duval. The company also has acquired stakes in manganese mining, through its controlling stake in New Caledonia's Comilog, among other businesses. As such, Eramet has become the world's top producer of manganese alloys and chemical derivatives, and the world's number two producer of manganese ore. The company's alloys division is the world's largest producer of nickel alloys and so-called super alloys. Formerly controlled by the French government, which viewed nickel product to be of vital national interest, Eramet has been progressively privatized, with an offering since 1994 on the Paris Stock Exchange. In 1999, the French government further reduced its stake in Eramet. The company posted revenues of EUR 2.5 billion in 2004.

Discovering Nickel in the 1880s

Eramet stemmed from the discovery of nickel deposits in French colonial possession New Caledonia in the late 19th century. French geologist Jules Garnier was the first to discover nickel deposits along the Dumbéa river in the 1860s; for a time, the mineral was even named as "garniérite" by France's Académie des Sciences. By 1873, the first exploitable nickel veins had been discovered by Pierre Coste on his property on the Mont-Dore slopes. Soon after, new deposits of the ore, which contained as much as 14 percent of nickel, were located in Bourail, Canala, Thio, and Houailou. Coste's discovery led to a rush of small-scale miners and mining concessions. Among the larger concessionaires were John Higginson, Jean-Louis Hanckar, and Jules Garnier. Higginson became the first to obtain a contract from the colony's prison administration for the use of prison labor to work his deposits in 1878. This practice became widespread throughout the colony's nickel mines, and spread to other industries as well.

The nickel market proved highly unstable—by 1877, the nickel industry had entered its first crisis, ruining many of the small-scale miners. The situation enabled the larger mining companies, in particular those of Hanckar, Higginson, and Garnier, to buy up the smaller concessions for low prices. In 1880, Hanckar, Higginson, and Garnier decided to pool their concessions into a common company, called Société Le Nickel (SLN). The company received financial backing from the Baron de Rothschild, and SLN remained under control of the Rothschild family until the early 1970s. SLN's operations began with 40 mines under its direct control, and shares in another 20.

SLN remained the dominant nickel producer in New Caledonia. By the outbreak of World War I, however, the company had lost ground amid the entry of a number of competitors, including Canada's International Nickel Company, or INCO, which set up operations in 1902. By 1913, SLN's market share had dropped to 33 percent, compared with INCO's 55 percent.

In the meantime, the local industry also had expanded to include foundries; the first of these had been constructed in 1879, but had gone bankrupt in 1885 amid a new crisis in the nickel market. A more lasting facility was built in 1910 by André Ballande, who founded the Société des Hauts Fourneaux in Nouméa. When the nickel market collapsed again amid the Global Depression of 1929, Ballande's company collapsed and was merged into SLN. Later, during World War II, as France fell under Nazi occupation, SLN turned to INCO for help in refining its nickel production for export to the United States.

The 1960s marked a new boom period for the New Caledonian nickel industry. SLN in particular profited during the period between 1967 and 1971, as nickel prices skyrocketed. The booming Western economies and high demand, as well as the U.S. involvement in the Vietnam War, helped drive up nickel prices. Another important factor in SLN's growth during this period, however, was an extended strike at INCO, which more or less shut down the company's chief rival's production.

SLN grew quickly during the late 1970s, expanding its production facilities and opening new mines. A large part of the population now moved toward the metropolitan region to find employment in the nickel industry. The company's growth was further stimulated by the French government's declaration of nickel as a strategic resource—resulting in the government taking control of research and exploration operations in the former colony. While New Caledonia (now considered a French overseas possession) benefited from the strong nickel market, its reliance on the mineral left it dangerously exposed to vagaries in the market.

Nationalization in the 1970s

Indeed, nickel's boom years proved short-lived. By 1972, the global nickel market had once again collapsed. To make matters worse, the Arab Oil Embargo in 1973 only exacerbated New Caledonia's dependence on its nickel industry. A consequence of the crisis years was the steady increase in ethnic and political tensions, and the growth of a nationalistic movement seeking New Caledonia's independence from France.

SLN's strong growth had led the Rothschilds to restructure its various mining interests, including Pennaroya and Mokta, which were then placed under SLN. Amid the economic crisis of the early 1970s, however, the French government moved to nationalize a number of industries. SLN's nickel interests were reformed into a subsidiary, Société Metallurgique Le Nickel SLN, in 1974. The French government, through Elf Acquitaine, then took a 50 percent stake in the new company. SociétéLe Nickel—that is, the company representing the combined Rothschild mining holdings—then changed its name to Imetal, retaining a 50 percent stake in SLN.

As the global nickel market emerged from the extended economic crisis of the 1970s, the French government sought to rebuild SLN's tattered operations. In 1983, the French state-owned oil and gas policy instrument, ERAP, which by then had become majority shareholder in Elf Acquitaine, took over a 70 percent stake in SLN. At that time, both Imetal's and Elf's interests in SLN were reduced to 15 percent. Under ERAP, a new structure was put into place, with the creation of the holding company Eramet-SLN, which in turn took over the operations of Société Metallurgique Le Nickel SLN. ERAP remained the company's principal shareholder into the late 1990s, boosting its stake to 85 percent through the acquisition of Imetal's share in 1990.

SLN enjoyed the benefits of a new boom in the international nickel market. Under ERAP, however, the company not only restructured its operations, it also adopted a new policy of diversification. In this way, SLN sought to reduce its reliance on a single, highly cyclical market.

SLN's first diversification move came in 1989, when the company acquired France-based La Commentryenne, then the world's third largest producer of high-performance speedsteel. This type of steel was used in the production of components requiring high resistance to heat and abrasion, such as the fabrication of tool bits, among many other applications.

In 1991, SLN boosted its new division through a still larger acquisition, that of Sweden's Kloster Speedsteel. The addition of Kloster, then the world's top producer of speedsteel, transformed SLN into the clear global market leader. In that year, as well, SLN formed a cooperation agreement with Japan's Nisshin Steel, one of that country's leading stainless steel producers. Under that agreement, Nisshin agreed to purchase SLN's steels, in exchange for a growing shareholding in SLN. By 1994, Nisshin's stake in SLN had reached its maximum 10 percent.

In 1992, SLN grouped its speedsteel operation under a single holding company, Erasteel. Also that year, SLN made a new diversification move, buying a stake in Eurotunstene Poudres, a producer of cobalt powder and tungsten steel. That shareholding topped 51 percent in 1994. By then, the company had restructured again, with Société Metallurgique Le Nickel SLN renamed as Société Le Nickel, and the Eramet-SLN becoming simply Eramet.

Eramet was then taken public in 1994 in a partial privatization that saw the listing of 30 percent of its shares on the Paris Bourse's Secondary Market. Soon after, Eramet boosted its nickel mining operation, acquiring from the government-run Bureau de Recherches Geologiques et Minieres its subsidiary Cofremmi, which held concessions to a number of mining deposits in New Caledonia.

Company Perspectives:

Eramet's strategy is to continue growing in each of its businesses by drawing on the substantial complementarity and synergy between its activities.

The Group's ambition is to be a long-term partner for its customers, with a reputation for quality and reliability of its products and services.

For its shareholders, the Group's objective is to provide comparable profitability to its major international competitors.

Eramet is also determined to develop the skills and motivation of its teams and to constantly strive to improve working and safety conditions while contributing to the protection of the environment.

Diversified Leader in the 2000s

Eramet shifted its listing to the Paris exchange's main Reglement Mensuel in 1995 ahead of its next diversification move. That came that same year when the company acquired a 46 percent stake in Gabon's Comilog. That company was then the world's second largest producer of manganese, as well as a leading producer of ferromanganese for the steel industry. In 1997, the company acquired an additional 15 percent of Comilog, thereby gaining majority control.

Growing pressure from New Caledonia's nationalist movement led the French government to agree to cede a stake in the company to local control. The French government also agreed to exchange its concession in Koniambo for a lower-yielding concession in Poum in 1998.

Eramet's privatization was completed in 1999, when ERAP ceded a 30 percent stake in Eramet to the locally controlled Société Territoriale Caledonienne de Participation Industrielle. Consequently, the French government's stake in Eramet fell below 50 percent. At that time, as well, the French government announced its intention to exit ERAP's holding in Eramet entirely.

In the meantime, Eramet continued looking for expansion opportunities. In 1999, the company boosted its position in the worldwide manganese market, taking the leadership with the acquisition of the Norwegian Elkem's manganese mining operations. In this way Eramet also emerged as a leader in the production of superalloys and other manganese-based alloys. Eramet confirmed this leadership that same year when it acquired the Société Industrielle de Materiaux Avancés, or SIMA. The purchase made Eramet the global leader in the production of nickel-based alloys as well.

Eramet opened a new industrial complex in Moanda, in Gabon, in 2000, boosting Comilog's production capacity. The following year, the company also began building up capacity at its nickel operations in New Caledonia, ramping up to a 25 percent increase in production.

Into the mid-2000s, Eramet began seeking to expand its international base as well. In 2000, the company acquired Mexico's Sulfamex, which produced agrochemicals based on manganese. The company then entered China, acquiring the Guilin manganese alloy facility in 2002. The company launched an expansion of its China presence in 2003, investing in a new speedsteel production facility in a joint venture with Tiangong.

After completing its production expansion in New Caledonia, Eramet turned to its manganese operations in Gabon, launching an expansion to boost capacity by 50 percent in 2004. In that year, as well, the company added to its China presence with its announcement of the creation of a new factory producing manganese for use in alkaline batteries.

By 2005, the booming manganese market led Eramet to announce its plans to boost its manganese production again, adding another one million tons by 2006. Eramet had successfully transformed itself into a diversified mining and metals group, capable of resisting downturns in its core nickel market, while claiming leadership in the global manganese, speedsteel, and specialty alloys markets.

Principal Subsidiaries

Aubert & Duval Holding; Bear Metallurgical Corporation (U.S.A.); Brown Europe; Comilog Asia Ltd. (China); Comilog Far East Development Ltd. (China); Comilog International; Comilog US; Erachem Comilog Inc. (USA); Erachem Comilog S.A. (Belgium); Erachem Marietta Inc. (U.S.A.); Eramet Alliages; Eramet Canada Inc. (Canada); Eramet Comilog North America Inc. (U.S.A.); Eramet Holding Manganése; Eramet Holding Nickel; Eramet Manganèse Alliages; Erasteel Champagnole; Erasteel Commentry; Erasteel GmbH (Germany); Erasteel Inc. (U.S.A.); Erasteel Korea Ltd.; Erasteel Latin America (Brazil); Forges M. Dembiermont; Guangxi Comilog Ferro Alloys Ltd. (China); Stahlschmidt GmbH (Germany).

Principal Competitors

Fushun Aluminium Plant; Mittal Steel Temirtau; Lonmin Platinum Div; Jilin Ferroalloy Works; Kadamzhay Antimony Combine JSC; Norsk Hydro ASA; Degussa AG; Tata Sons Ltd.; Hengyang Xinhua Chemical Metallurgical Company General; Umicore; Solnechniy Mining and Ore-Processing Plant Joint Stock Co.; W.C. Heraeus GmbH; Johnson Matthey PLC.

Key Dates:

1864:

Jules Garnier discovers the presence of nickel ore in New Caledonia.

1880:

Garnier joins with John Higginson and Jean-Louis Hanckar to form Société Le Nickel (SLN) with the financial backing of Baron de Rothschild.

1929:

SLN absorbs Société des Hauts Fourneaux in Nouméa.

1969:

The French government declares nickel mineral a strategic market, leading to the company's nationalization in 1974.

1983:

ERAP takes 70 percent control of SLN.

1985:

SLN is renamed as Eramet.

1989:

Diversification begins, with the purchase of La Commentryenne, a leading producer of speedsteel.

1991:

The acquisition of Sweden's Kloster Speedsteel gives Eramet the lead in the global market.

1994:

Eramet is partially privatized, with a listing on the Paris Stock Exchange.

1996:

Eramet diversifies into manganese production with the acquisition of control of Comilog of Gabon.

1999:

Eramet acquires Elkem's manganese operations; the company acquires control of alloy producer SIMA.

2000:

Eramet builds a new industrial complex in Gabon; a capacity increase in nickel production begins in New Caledonia.

2002:

Eramet acquires its first production facility in China.

2005:

Eramet begins an investment in a one million-ton manganese production increase.

Further Reading

Carroll, Rory, "Force Majeure at Eramet Fails to Boost Nickel," American Metal Market, June 7, 2005, p. 1.

"Eramet Decision Due on SLN Expansion," American Metal Market, June 26, 2001, p. 5.

"Eramet Mum on Terms of China Ferroalloy Plant Buy," American Metal Market, September 27, 2002, p. 6.

"Eramet to Hike Manganese Output," American Metal Market, May 13, 2005, p. 2.

"Expansion in New Caledonia," Mining Journal, June 29, 2001, p. 485.

"France's Eramet Acquires Medium-Sized Ferroalloy Plant in Guangxi's Guilin," China Business News, October 9, 2002.

"Historique du groupe Eramet," Eramet Document de Référence, 2003.

—M.L. Cohen