Ferraro started at the law firm Arthur Robinson (now Allens) for four years and then moved into investment banking in Australia and then London.
“When the recession hit in ’87 I went back to Australia. A third of the people on my street were unemployed, so I thought about going back to a law firm for a couple of years. I joined Freehills in ’91. I was made a partner in ’94 and made a corporate director,” she says.
“I had no fucking idea. [about leadership] but I went with it.”
After a stint at BHP, Ferraro returned to Freehills and, while still at the law firm, joined the Alumina board of directors in 2014. That ultimately led to him becoming CEO in mid-2017, although his mother still asks why he doesn’t. He will not open a law office on Sydney Road like the other success stories he sees.
“Many people today plan their career, especially young people. It amazes me how focused they are on planning their career. I can honestly say I didn’t plan it. I was lucky to get into Arthur Robinson, I was lucky to get into investment banking, I was lucky to join this company. Just try to do the right thing and do the best you can,” he says.
Ferraro admits that as the son of a migrant “you are much more impulsive”. He says that his curiosity and his multitude of roles gave him ample experience. Importantly, he was never afraid to make the tough decisions.
“I didn’t shy away from the hard stuff. I see that many people, even in leadership roles, find it hard to do the hard things,” she says.
Modern metal, but great need for energy.
The business that Ferraro runs is unique in that it does not manufacture or sell the end product that dictates its fortune. Alumina Limited owns 40 percent of Alcoa World Alumina and Chemicals, which mines bauxite, mines alumina and smelts aluminum, through a joint venture with US-based Alcoa Corporation. AWAC controls about 25 percent of the world’s alumina market.
Alumina is the essential element needed to make aluminum, which has been described as the all-rounder in the metal industry, underpinning everything from iPhones to airplanes to beer cans to electric cars.
Australia is the world’s largest producer of bauxite, which is exported abroad and refined domestically to produce alumina.
Converting bauxite to metal is an energy-intensive process. That is why aluminum smelters are located where electricity is cheap and China becomes the preferred location due to its cheap coal-fired power plants. That said, China has imposed capacity limits on its smelter’s output even as global demand for the metal grows.
The $4.5 billion ASX100 company, Alumina Limited, created after Western Mining Corporation spun off its 40 per cent stake in the AWAC joint venture, also has a stake in Australia’s second largest aluminum producer, Victoria’s Portland Aluminum Smelter, with Alcoa. The smelter is a major carbon emitter due to its high electricity use — about 10 percent of the state’s power.
I have a door and a window to what is happening globally
— mike ferraro
Ferraro says that as the power grid has become greener, the Portland smelter’s emissions have dropped from 18.9 tons of carbon for every ton of alumina produced in 2015 to 13.1 tons.
“We are now using 33 percent of green electricity and we forecast that we will use up to 44 percent of green energy by the end of the decade,” he says. “We are also working on new technologies such as mechanical vapor recompression to reduce emissions.”
Ferraro says that while government subsidies for the Portland smelter have ended, the plant plays an important role in the country’s energy supply by reducing its energy use during peak periods.
The federal government announced in 2020 that it would pay the aluminum smelter nearly $80 million to assist in the Reliability and Emergency Reserve Trader (RETR) scheme.
“There are arrangements in place, so from time to time [the government] you can ask Portland to cut production, use less electricity so it’s available in peak periods for cooling and heating, so that the federal government pays a guaranteed amount annually to ensure that we participate because if we cut production, our income will fall,” he said. He says.
“It has been requested in recent months when there have been power outages.”
The joint venture with Alcoa, and Ferraro’s small team of just 16 people, means the former lawyer and investment banker’s leadership role is also unique.
“We cannot pull all the levers to drive change. We have to use a combination of influence and engagement and my job is to be constructive, not order them around. [Alcoa] or tell them how they need to improve, but work with them around ideas, opportunities, developments, market assessment and be constructive, so they see us as a valued member of the joint venture rather than a pain in the butt,” he said. He says.
”Our interests are not always aligned because [Alcoa] they are a major customer of the joint venture, they buy about 30 percent of the alumina, we are aware of that and they are aware of that and from time to time conflicts arise, but we understand them and we deal with them.”
The relationship also changed significantly in 2016 when Alcoa needed Alumina’s consent for what was once the world’s largest miner to split in two, with the high-end industrial metal fabrication businesses separated and separately listed as Arconic. .
The AWAC joint venture was renegotiated and Alumina’s veto and approval rights increased substantially so that Alcoa could no longer largely ignore its Australian partner.
Ferraro admits the Australian resource company that produces alumina is not as well known to retail investors and the general public as it should be.
“When I joined the company as CEO, people were asking where I worked and when I told them, they were like, ‘Who is that?’, compared to BHP and Freehills, where you didn’t need to explain.
“We are a major company, but we invest in the aluminum supply chain as a major investor, not as an operator. We do not sell our product. Our joint venture partner, Alcoa, sells our product and sells it to companies, so we are not a consumer-oriented company.”
“When it comes to retail investors, I think we are underrepresented. I think we need to better communicate what we do and how important we are to a wide range of sectors, but also how important we are to the decarbonization story because aluminum is part of the solution to decarbonize the world.”
The company provides an interesting indicator on China (China’s state-owned CITIC group owns 20 percent of the business), as well as on energy prices and economic activity in general.
“It’s an interesting business because I have a window into what’s going on globally and aluminum is a key global commodity, as is alumina, so you can read the ups and downs of what’s going on globally in an economic sense. “, He says.
“I knew inflation was coming. We were seeing our freight costs more than double, other inputs. Shipping went from $24 a ton to more than $60. Now it’s down to about $36 a ton, so it’s a lot more manageable.”
Alumina’s global joint venture with Alcoa posted a $438.9 million half-year profit this week and Ferraro says he hopes the inflation that pushed his company’s unit costs up 32 percent over the past year has peaked. maximum.
‘I don’t want to be a defender’ of a high-emissions business
“The alumina price is $330 a tonne, which is actually a 10-year average, so the price isn’t bad if you didn’t have all the costs going up,” he says.
“But the costs have gone up significantly, the main costs have been energy and caustic soda. Our refinery in Spain, San Ciprián, which runs on gas, has a fairly high cost base because the cost of gas has increased fivefold, so we recently announced that we are reducing production to about 50 percent, so that we can use less gasoline and reduce our losses,” says Ferraro.
Ferraro adds that despite coming under cost pressure in the short term, in the medium term demand for aluminum will only increase as the push to decarbonize intensifies.
“The move to decarbonization will require a lot more aluminum over the course of this decade to 2050,” he says. “Mainly in electric vehicles. Below, an electric car is made of aluminum, it is light because batteries are heavy, and aluminum is lighter than steel.
“More and more buses and trucks will need it. It is also infinitely recyclable. We will see a significant increase in demand for aluminum, some supported by recycled aluminum that does not require alumina, but there will still be a demand for more alumina to be produced outside of China and there are not enough projects committed to meet that demand. “
Ferraro says he wants to be remembered for being at the forefront of the challenge of tackling climate change.
“We extract in areas of the Amazon. We mine in areas of the Jarrah forest in WA so those are very sensitive areas so we need to make sure we remediate,” he says.
“I don’t want to be seen as a defender of an industry that generates a lot of emissions.”
“When I leave, I want it to be seen that you were there and helped support the industry in moving towards a decarbonization outcome where we use more clean energy, reduce our footprint, and are part of the long-term solution to reduce the impact of climate change. climate.”