Aluworks threatened by unfair Chinese competition

Ghana’s aluminum industry is under intense pressure due to unfair competition from China, threatening its very survival, says the Managing Director of Aluworks Limited, Mr. Kwasi Okoh.

Okoh disclosed that heavily subsidized aluminum products from China have led to excessive importation of such cheap and inferior products from that country, by a few large scale companies for sale to downstream operators who are traditional Aluworks customers, thus encroaching on its market.

Aluworks, until recently sourced all its alumina raw material input from the Volta Aluminum Company(VALCO) but has had to resort to importing alumina ingots due to VALCO’s closure over the past 18 months.

The other importers, allegedly, pretend to be manufacturers thereby qualifying them for concessionary import tariff of five percent and thus managing to avoid the higher 20 percent import tariff on such imported alumina products for direct sale in the country.

Large manufacturers who previously sourced their raw materials from Aluworks now either import more quantities than they require and sell the rest or take their production requirements from the importers, Okoh claimed, adding that despite the quality being inferior, they are attracted by the huge price differential, running to as much as $800 per tonne.

Okoh appealed for government intervention through the restructuring of import tariffs to ensure that manufacturers who import excess for sale are be made to pay the right duty, and also to check illegal importation, so as to save the industry from virtual collapse.

Aluworks produced between 18,000 and 20,000 metric tonnes of aluminum sheets and coils last year, but is currently struggling to repeat the feat this year. The company’s exports to Europe have seen a dip in recent months due to the economic recession.

“Having struggled to overcome the costs and difficulties occasioned by the closure of VALCO, and by the recession and credit crunch, it is a pity that the industry should succumb to unfair competition from China which is slow but surely strangling the life out of the industry through stealing its sales and revenue,” Okoh said.

The nation’s only alumina smelter, VALCO, with total annual production capacity of 200,000 tonnes was forced to shut down early 2009, due to inadequate power supply and other challenges, which now is adversely affecting Aluworks’ operations leading to huge losses.

Aluworks is incurring extra smelting costs, since the company previously obtained alumina in molten form VALCO, delivered directly to its casting furnaces.

Other costs associated with the importation of ingots include freight charges from the supplying country, duty charges, shipping and clearing charges and inland transportation costs.

“Additionally a lot of energy in diesel fuel for the furnace is required just to smelt the solid ingots before processing,” Okoh said.

He disclosed that the challenges have added about 33 percent to the cost of metal compared to that purchased from VALCO. This cost, he claimed, has now been assimilated by the company mainly by cost cutting, and by reducing staff.

“The need for working capital to save the company from imminent collapse was one of the reasons for the company’s recent right issue, which was about 67 percent successful but the company still requires a considerable amount of working capital,” Okoh disclosed.