Intense competition plaguing global metals industry: KPMG survey

Intense competition plaguing global metals industry

Global metals organizations embarking on multiple paths to secure growth.

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Forty-nine percent of global metals executives say intense competition and pressure on pricing will be their biggest challenges over the next two years the latest KPMG International Global Metals Outlook survey reveals. 

According to the survey, to win in this new competitive environment, metals organizations are keenly focused on driving cost-efficient sales growth. Almost half of all metals respondents cite sales growth as their top strategic priority while an almost equal number say they will focus on reducing the cost structure. 

“Market dynamics have completely changed,” says Eric Damotte, KPMG’s Global Head of Metals. “This ultra-competitive metals environment is creating significant challenges for the sector. In China, pressure on margins and overcapacity has already translated into record-high export levels that, eventually, will lead to significant domestic consolidation. Outside of China, however, much of the competition will revolve around metals organizations’ ability to understand and meet customer demand.”  

Accordingly, the KPMG Global Metals Outlook shows that metals organizations are embarking on multiple paths to secure growth: 

  • 60 percent say that the adoption of new technology will drive future growth
  • 43 percent say they will grow through expansion into new markets
  • 40 percent expect to increase R&D spend to drive  future growth
  • 85 percent believe that partnerships, not in-house efforts, will form the future of innovation for their organization
  • 81 percent are already adopting more collaborative business models with suppliers and customers.

And, as the KPMG Global Metals Outlook reports, more than a third of respondents say that their primary reason for collaborating on innovation is to lower their R&D costs, while almost a quarter say they are creating partnerships in order to reduce risk.

“We are seeing new partnerships being formed, often between producers and their customers that focus on very specific needs and customer demands” notes Damotte. “While sharing costs are certainly part of the motivation, partnering with customers also helps ensure that there is an existing market for the new innovations once they have been developed which, ultimately, reduces the risk.”

To further wring in cost savings and gain a competitive advantage, metals organizations are honing in on their supply chains. Almost half of all metals respondents say that lowering costs and working capital levels is a top supply chain priority over the coming 2 years while more than a quarter say they would focus on restructuring their supply chain to support growth.

“Our respondents are worrying that their current supply chain structure is not fit-for-purpose in this new competitive environment,” notes Damotte. “Almost a third say that one of their biggest concerns relates to the competitiveness of their supply chain and 30 percent say that the flexibility and responsiveness of their supply chain is creating challenges.” 

Five key take-aways for metals manufacturers

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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 KPMG Global Metals Outlook

This Global Metals Outlook is part of KPMG’s 2015 Global Manufacturing Survey. Data was collected by Forbes on behalf of KPMG in early 2015 and accompanying analysis was provided by senior KPMG metals leaders from across the organization’s global network of metals practices. 

A total of 386 senior manufacturing executives (director level or above) participated in the survey, of which 12 percent – close to 50 unique organizations – come from the metals sector. More than a quarter of the metals respondents represent organizations with revenues of between USD10 billion and USD25 billion, and more than a third represent organizations with revenues of between USD5 billion and USD10 billion. 

A copy of the survey can be found at

For more information, please contact:

Carolyn Forest

KPMG International

+ 1 416 777 3857

KPMG is a global network of professional services firms providing Audit, Tax and Advisory services. We operate in 155 countries and have 174,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

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