SARAJEVO: Bosnia's sole aluminium smelter Aluminij Mostar said it may have to close down if it continues to make losses in a weak market beset with slumping demand and rising energy costs.
The country's top exporter, which sells most of its aluminium into the depressed European construction and auto industries, said its supervisory board will decide next month whether to cover a 2012 loss of 65.8 million Bosnian marka ($43.8 million) by dipping into the company's core capital.
"If Aluminij, with reduced core capital, posts a similar or bigger loss this year, that may be the company's end," Aluminij General Manager Ivo Bradvica said in the company's annual newsletter.
Bradvica said that a rise in the price of power purchased from Bosnian utility EPHZHB by 11 percent and Croatia's HEP by more than 9 percent made conditions for the energy-intensive manufacturing process of aluminium "unbearable" in 2012.
"The price of electricity has affected the overall aluminium processing sector," he said. "Last year was the most difficult one in our history."
Located in the southern Bosnian town of Mostar, Aluminij's 2012 losses follow a profit of just over one million marka in 2011 in spite of a two-year deal with trading and mining giant Glencore International for deliveries of alumina to Aluminij and of aluminium to Glencore from 2012 to 2014.
Aluminij Mostar produced 159,660 tonnes of metal last year, almost 3 percent down from 2011.
It was forced to close 12.5 percent of its smelting capacity last September but managed to return half of that into operation by the year's end and trim losses, it said.
The company said it had finished an upgrade of its foundry and would put it into operation in April after tests.
Bradvica said he was hopeful that if conditions allowed, the upgrade will boost the company's output by 30,000 tonnes to 190,000 tonnes a year, much of it destined for Glencore.
Aluminij is a major employer in the Mostar area and has repeatedly asked for state subsidies to cut power prices, saying the price of energy accounts for more than 60 percent of the cost of producing aluminium.
Bradvica also warned that dozens of Bosnian aluminium processing firms which rely on Aluminij's supplies and employ thousands of workers may be forced to close down after the smelter increased the price to $365 per tonne from $315.
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