IDEAS home Printed from https://ideas.repec.org/a/spr/minecn/v24y2011i1p29-44.html
   My bibliography  Save this article

Evaluating the efficiency of the global primary aluminum smelting industry: a data envelopment approach

Author

Listed:
  • Jerry Blomberg
  • Bo Jonsson

Abstract

The purpose of this paper is to evaluate the efficiency of the global primary aluminum industry. Efficiency is here taken to be evaluated relative to some benchmark, i.e., the smelter or smelters identified as the most efficient in the data set, thus forming the production frontier. The performance of individual smelters, specifically their technical, allocative, and scale efficiencies are calculated by the means of data envelopment analysis. A proprietary database containing data on inputs used, output, and cost of production for 151 primary aluminum smelters operational globally in 2003 were used in the efficiency estimations. In order to assess and contrast the performance of smelters at different locations, facing dissimilar policy and factor supply environments, smelters are grouped into geographical regions. Furthermore, the technology used will also be evaluated in terms of the above efficiency measures. For each region, measures of potential technical and cost-wise factor savings will be calculated in order to assess specifically in what way production factors improvements can be made and approximately how large these improvements are. The findings indicate that; (a) smelters are overall highly efficient given the scale of operation, (b) many smelters operate with increasing returns to scale and thus we find significant scale inefficiencies, (c) substantial allocative inefficiencies exist within the industry, and (d) there are significant variations in the level of efficiency across regions. The allocative efficiency is particularly low in regions such as China and the Commonwealth of Independent States (CIS) region. Finally, the greatest potential for factor reductions is in labor input in China, the CIS region and in Asia. Copyright Springer-Verlag 2011

Suggested Citation

  • Jerry Blomberg & Bo Jonsson, 2011. "Evaluating the efficiency of the global primary aluminum smelting industry: a data envelopment approach," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 24(1), pages 29-44, July.
    • Handle: RePEc:spr:minecn:v:24:y:2011:i:1:p:29-44
    DOI: 10.1007/s13563-011-0004-7
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s13563-011-0004-7
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s13563-011-0004-7?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Tsekouras, K. D. & Zagouras, N. G., 1998. "A cost function of Greek non-ferrous metal industry," International Journal of Production Economics, Elsevier, vol. 56(1), pages 621-640, September.
    2. Lindquist, Kjersti-Gro, 1995. "The Existence of Factor Substitution in the Primary Aluminum Industry: A Multivariate Error-Correction Approach Using Norwegian Panel Data," Empirical Economics, Springer, vol. 20(3), pages 361-383.
    3. Jan Larsson, 2003. "Testing the Multiproduct Hypothesis on Norwegian Aluminium Industry Plants," Discussion Papers 350, Statistics Norway, Research Department.
    4. Boyd, Roy G. & Jung, Chulho & Seldon, Barry J., 1995. "The market structure of the US aluminum industry," Journal of Economics and Business, Elsevier, vol. 47(3), pages 293-301, August.
    5. George W. Wilson & Joseph M. Jadlow, 1982. "Competition, Profit Incentives, and Technical Efficiency in the Provision of Nuclear Medicine Services," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 472-482, Autumn.
    6. Blomberg, Jerry & Söderholm, Patrik, 2011. "Factor demand flexibility in the primary aluminium industry: Evidence from stagnating and expanding regions," Resources Policy, Elsevier, vol. 36(3), pages 238-248, September.
    7. Isabel Figuerola-Ferretti, 2005. "Prices and production cost in aluminium smelting in the short and the long run," Applied Economics, Taylor & Francis Journals, vol. 37(8), pages 917-928.
    8. Luis R. Murillo‐Zamorano, 2004. "Economic Efficiency and Frontier Techniques," Journal of Economic Surveys, Wiley Blackwell, vol. 18(1), pages 33-77, February.
    9. R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, vol. 30(9), pages 1078-1092, September.
    10. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
    11. Ma, Jinlong & Evans, David G. & Fuller, Robert J. & Stewart, Donald F., 2002. "Technical efficiency and productivity change of China's iron and steel industry," International Journal of Production Economics, Elsevier, vol. 76(3), pages 293-312, April.
    12. Ray, Subhash C. & Kim, Hiung Joon, 1995. "Cost efficiency in the US steel industry: A nonparametric analysis using data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 80(3), pages 654-671, February.
    13. Robert Gagne & Carmine Nappi, 2000. "The cost and technological structure of aluminium smelters worldwide," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(4), pages 417-432.
    14. Murillo-Zamorano, Luis R. & Vega-Cervera, Juan A., 2001. "The use of parametric and non-parametric frontier methods to measure the productive efficiency in the industrial sector: A comparative study," International Journal of Production Economics, Elsevier, vol. 69(3), pages 265-275, February.
    15. Wu, Yanrui, 1995. "The productive efficiency of Chinese iron and steel firms A stochastic frontier analysis," Resources Policy, Elsevier, vol. 21(3), pages 215-222, September.
    16. Dixit, M. R. & Venugopal R, 1995. "Indian Aluminium Industry: A Perspective," IIMA Working Papers WP1995-05-01_01331, Indian Institute of Management Ahmedabad, Research and Publication Department.
    17. F Pedraja-Chaparro & J Salinas-Jiménez & P Smith, 1999. "On the quality of the data envelopment analysis model," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 50(6), pages 636-644, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Blomberg, Jerry & Söderholm, Patrik, 2011. "Factor demand flexibility in the primary aluminium industry: Evidence from stagnating and expanding regions," Resources Policy, Elsevier, vol. 36(3), pages 238-248, September.
    2. Blomberg, Jerry & Henriksson, Eva & Lundmark, Robert, 2012. "Energy efficiency and policy in Swedish pulp and paper mills: A data envelopment analysis approach," Energy Policy, Elsevier, vol. 42(C), pages 569-579.
    3. Cordero, José Manuel & Santín, Daniel & Sicilia, Gabriela, 2015. "Testing the accuracy of DEA estimates under endogeneity through a Monte Carlo simulation," European Journal of Operational Research, Elsevier, vol. 244(2), pages 511-518.
    4. Fakarudin Kamarudin & Bany Ariffin Amin Nordin & Junaina Muhammad & Mohamad Ali Abdul Hamid, 2014. "Cost, Revenue and Profit Efficiency of Islamic and Conventional Banking Sector: Empirical Evidence from Gulf Cooperative Council Countries," Global Business Review, International Management Institute, vol. 15(1), pages 1-24, March.
    5. Takashi Hiraide & Shinya Hanaoka & Takuma Matsuda, 2022. "The Efficiency of Document and Border Procedures for International Trade," Sustainability, MDPI, vol. 14(14), pages 1-21, July.
    6. Roslah Arsad & Zaidi Isa, 2024. "Evaluating Company Efficiency in Malaysian Stock Markets: Insights from DEA and Super Efficiency Models," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(8), pages 4707-4718, August.
    7. Feng, Chao & Huang, Jian-Bai & Wang, Miao, 2019. "The sustainability of China’s metal industries: features, challenges and future focuses," Resources Policy, Elsevier, vol. 60(C), pages 215-224.
    8. Chien-Ming Chen & Magali A. Delmas & Marvin B. Lieberman, 2015. "Production frontier methodologies and efficiency as a performance measure in strategic management research," Strategic Management Journal, Wiley Blackwell, vol. 36(1), pages 19-36, January.
    9. Chang, Hsihui & Cheng, Mei-Ai & Das, Somnath, 2004. "Hospital ownership and operating efficiency: Evidence from Taiwan," European Journal of Operational Research, Elsevier, vol. 159(2), pages 513-527, December.
    10. Liu, John S. & Lu, Louis Y.Y. & Lu, Wen-Min & Lin, Bruce J.Y., 2013. "A survey of DEA applications," Omega, Elsevier, vol. 41(5), pages 893-902.
    11. Fujii, Hidemichi & Kaneko, Shinji & Managi, Shunsuke, 2010. "Changes in environmentally sensitive productivity and technological modernization in China's iron and steel industry in the 1990s," Environment and Development Economics, Cambridge University Press, vol. 15(4), pages 485-504, August.
    12. Wu, Zai Bin & Yeung, Godfrey & Mok, Vincent & Han, Zhaozhou, 2007. "Firm-specific knowledge and technical efficiency of watch and clock manufacturing firms in China," International Journal of Production Economics, Elsevier, vol. 107(2), pages 317-332, June.
    13. Richard D. Smart & Amer Ait Sidhoum & Johannes Sauer, 2022. "Decomposition of efficiency in the global seed industry: A nonparametric approach," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 2133-2147, September.
    14. Fadzlan Sufian & Fakarudin Kamarudin, 2013. "Efficiency of the Bangladesh Banking Sector: Evidence from the Profit Function," Jindal Journal of Business Research, , vol. 2(1), pages 43-57, June.
    15. Isabel Narbón-Perpiñá & Maria Balaguer-Coll & Emili Tortosa-Ausina, 2019. "Evaluating local government performance in times of crisis," Local Government Studies, Taylor & Francis Journals, vol. 45(1), pages 64-100, January.
    16. Gianluca Bortoletto & Donata Favaro, 2019. "Healthcare efficiency across European countries during the recent economic crisis," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2019(2), pages 9-38.
    17. He, Feng & Zhang, Qingzhi & Lei, Jiasu & Fu, Weihui & Xu, Xiaoning, 2013. "Energy efficiency and productivity change of China’s iron and steel industry: Accounting for undesirable outputs," Energy Policy, Elsevier, vol. 54(C), pages 204-213.
    18. Nikolaos Oikonomou & Yannis Tountas & Argiris Mariolis & Kyriakos Souliotis & Kostas Athanasakis & John Kyriopoulos, 2016. "Measuring the efficiency of the Greek rural primary health care using a restricted DEA model; the case of southern and western Greece," Health Care Management Science, Springer, vol. 19(4), pages 313-325, December.
    19. Maria Francesca Cracolici & Peter Nijkamp & Piet Rietveld, 2008. "Assessment of Tourism Competitiveness by Analysing Destination Efficiency," Tourism Economics, , vol. 14(2), pages 325-342, June.
    20. Zamora Sanz, Mª Del Mar & Pena Trapero, J. Bernardo, 2007. "Dinámica regional en los sectores productivos de la economía española: crecimiento de la productividad y su descomposición/Regional Dynamic in the Spanish Productive Sectors: Total Factor Productivity," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 25, pages 655-690, Diciembre.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:minecn:v:24:y:2011:i:1:p:29-44. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.