Zoo news - Xiao returns to aluminium - sort of

Long time China aluminium watchers will know the name of Xiao Yaqing. Mr Xiao was the man at the head of Chalco in the formative years that saw China’s aluminium industry accelerate from nowhere to now 55% of all global production.

Mr Xiao has been appointed head of SASAC - the State Assets Supervision and Administration Commission. This is the body that manages all of China’s State Owned Enterprises. In a sense, Mr Xiao is coming back into aluminium, but at a much more elevated level than when he was president of Chalco.

This is clearly a stepping stone for Mr Xiao, and shows that he has well earned his reputation as a Mr Fixit. The amalgamation and improvement of China’s SOEs is a major project for the Communist Party. With more than 120 companies in the portfolio, Beijing wants to streamline the assets but avoid creating companies that are even more cumbersome than some are now. The fact that the mantle has been passed to Mr Xiao is a sign that his star is still rising in the Communist Party ranks.

Mr Xiao’s previous role was as Secretary to the State Council, and it was he who was despatched to sort out various problems and emergencies around China the last couple of years, such as the 2013 oil pipeline explosion in Qing Dao.

Mr Xiao started making his presence felt in 1999, when he was appointed plant manager of Southwest Aluminium. In 2004, he moved to join Chalco, where he rose to be Chairman, Party Secretary and General Manager of the group through to 2009. During the time Mr. Xiao worked for Chalco, the company expanded from 7 branches to at that time the world’s 3^rd largest aluminium group, with more than 50 subsidiaries, mainly through acquisition. It was Mr. Xiao who took Chalco overseas to Mongolia, India, Vietnam, Singapore, Indonesia, Guinea, Peru, Cayman Island, Australia, and Hongkong.

His most famous play was in 2008, when the struggle was going on between Alcoa and Rio Tinto and then with BHP and Rio, that saw Chalco at first working with Alcoa, then finally bidding for a slice of Rio Tinto. Chalco ended up spending about US$14 billion, and still own 9.8% of the mining company today. Although the deal was not finalised until he had departed Chalco, it was Mr Xiao who engineered the initial proceedings. At the time, the deal making and breaking that was going on attracted close scrutiny from governments and from shareholders, with many observers criticising the proposal.

What will his appointment mean for China’s aluminium industry? Of course it is impossible to say what his agenda will be precisely, but it seems to me there are two points can be made. First, as said earlier, Mr Xiao has a long history in aluminium, so it is an industry he will waste no time in learning. On the other hand, it is safe to say that the woes of SOEs such as Chalco are probably well down the list compared to say the petrochemical, shipbuilding or steel industries.

AZ China will be watching developments with SASAC and with the amalgamation of SOEs and reporting to our clients.

The feature image shows Mr Xiao, second from left, with Paul Skinner and Tom Albanese of Rio Tinto.