Aluminium industry takes strain

The global financial crisis has had a severe impact on both local and global aluminium production, which has decreased by between 20% and 30% says Aluminium Federation of South Africa (Afsa) executive director Mark Krieg. He explains that the aluminium industry has seen a decrease in demand, as banks have become stricter about lending money for capital investments and projects. The construction and automotive sectors have seen a significant decrease and these are some of the primary sectors that the aluminium industry services. He adds that, while fiscal packages from governments could provide an immediate respite, it would not be a prudent decision in the long term. “Governments are borrowing from future generations to try to prop things up now,” says Krieg. Aluminium is supplied to the automotive industry for a variety of specialised component manufacturing and, Krieg says, it is specialist manufacturers that have been hardest hit by the crisis. He adds that component manufacturers did not have the option of diversifying their products in time to survive the economic downturn. He cites the closing down of South Africa’s sole piston manufacturer, Kolbenco, as evidence of the impact on local automotive component manufacturing. Krieg says that the decision by diversified giant BHP Billiton to cease supply of certain products from its Bayside aluminium casthouse, in KwaZulu-Natal, has also affected the local aluminium industry, as certain aluminium products and alloys will now have to be sourced from international markets. International products will be more expensive and this will add to production chal- lenges for local manufacturers. Krieg adds that a number of construction projects have been stopped, and new construction of residential and commercial buildings has been significantly reduced. This has also resulted in reduced demand for the supply of aluminium to these projects. Many major construction projects have used aluminium, such as the 2010 FIFA World Cup stadiums and some station construction for the Gautrain. He says that these projects have largely been completed and that other national projects have not been structured to allow opportunities for the growth of the local aluminium industry. Aluminium can be used extensively in electrical energy transmission lines, but Krieg says that it is a concern for Afsa that State-owned power utility Eskom has chosen to place 50% of its order for transmission line expansion and repair projects with China. “When trying to develop the local industry, decisions such as this are not helpful,” he says. Afsa aluminium specialist Dr Tony Paterson says that the food and beverage industry, which is also a significant market for aluminium, has fared well during the econo- mic downturn and has not seen a significant decrease in demand for aluminium. Aluminium is used primarily in packaging in the food and beverage industry. Paterson says that aluminium is a preferred product for packaging as it easily retains decorative colouring, is nontoxic, keeps foodstuffs fresh as it does not allow oxygen through and has a deadfold effect in packaging, such as tubes. Aluminium manufacturers are also affected by the availability of scrap metal. Krieg says that Afsa has maintained a high degree of interest in the dis- cussions around the proposed introduction of a scrap metal export tariff. He explains that Afsa supports the proposal to introduce this tariff, as this would be beneficial for the development of the local alumi-nium industry. A number of reports have been submitted to the Department of Trade and Industry from various affected parties with regard to the proposed tariff. The aluminium base price has recently recovered and there is an indication of strong base demand for the metal, which indicates a positive global view of the metal, concludes Paterson.