A prominent international analyst in the field of aluminum industry, author of a series of analyses and expert reviews in the world's aluminum magazines, Montenegrin Goran Đukanović, wrote for the online edition of Radio Free Europe a comprehensive analysis of the situation in the Aluminij d.d. Mostar, published under the title Mostar Aluminij can be saved and can survive. Fully translated into English language:
Aluminij, owned in 44 percent by the Government of the Federation of Bosnia and Herzegovina and small shareholders, while Croatia owns the remaining 12 percent, employs 900 employees and, according to estimates, it has debts of about 350 million BAM. Aluminij, which has survived from day to day in the last few months, occasionally shutting down the plants and pausing the production, sought assistance from the Government of FBiH, that said that the fate of the company depends on the audit to determine the overall condition.
Undoubtedly, this year's market situation was such that the so-called marginal aluminum manufacturers in the world, including Aluminij d.d. Mostar, those who do not have their own energy sources and those who have high production costs due to a variety of other circumstances, and therefore relatively small production in comparison to large Chinese producers and large integrated manufacturers such as Norsk Hydro and Alcoa, mean all those small European producers, this year have difficulties with profitability and survival in the market.
The price of alumina this year has grown extremely sharply on several occasions, the price of aluminum is very low, now it is lower than $ 2,000 per tonne, so manufacturers, Aluminij d.d. Mostar or CAP Podgorica, cannot earn money and cannot be competitive on the market. They import alumina from abroad, through large suppliers and at high prices, and Aluminij d.d. Mostar also has a very high cost of electricity so, of course, at least this year it is not a matter of management but of pure state of the world market.
I'm not as well acquainted with management details over the last few years, I've been monitoring changes in management, how several management sets have changed over the last few years, but I would not put situation there and the crisis in the same context of recent events, but more with, for a long period of time, unresolved status and lack of a strategy for Aluminij dd Mostar by, first and foremost, the owners and those most responsible for its destiny and for its maintenance. These are the Government of the Federation of Bosnia and Herzegovina and small shareholders, and partly the Croatian government that should be involved in assisting the survival of Aluminij d.d. Mostar because it has 12 percent ownership in the factory.
My impression is that there is no long-term strategy for Aluminij d.d. Mostar.
Hence, what is important at this moment, what are the options for Aluminij d.d. Mostar? Either it will get help by the Government, because there is no one at this time, or it is threatened with bankruptcy and shutdown. What are the consequences of such a state and possible shutdown and bankruptcy? It would be a shame at this point rather than short-term or medium-term help from the state.
Furthermore, if the Government is planning to sell Aluminij to another owner, it will be difficult for someone to buy it at this time without a long-term contract for electricity for a favourable supply of electricity. If the foreign owner or the new owner will get Aluminij d.d. Mostar under such favourable conditions, it raises the question why the Government would not now support it and enable management to save this company in order to survive on the market?
I have the impression that, at these moments, the process is slow, and that the Government should react faster for something to happen concerning Aluminij d.d. Mostar, as this condition is unsustainable.
They literally pay electricity day by day, and each day is uncertain. No one in the world except Aluminij d.d. Mostar, does not buy electricity at an enormously high price of 70 euros per MW. These are unsustainable conditions for survival of a company.
The message is that things must be resolved faster or, after all, if they cannot be solved, then a solution in terms of a programmed bankruptcy or something that would simply, in any way, stop this agony in Aluminij d.d. Mostar must be found.
The lack of a strategy and such distribution of power on the world market leaves a small, so called marginal manufacturers, either aluminum or steel, without the opportunity for a longer-term perspective or survival in the market. These are companies that, under these market conditions, in this state, without a variety of aluminum product programs, without customers from various parts of the world and without a large market, simply cannot make a profit and, at this point, cannot be successful
It all comes down to the fact that these big players play a major role and if they want to buy shares in a company then it will survive, and if not, the company is left to the mercy and of the world market.
The regional countries’ governments have a lot of problems with other things and lack information and will and resources to deal with such companies, such as Željezera Smederevo, Podgorica KAP or Aluminij. I'm afraid that everything comes down to the lack of a long-term strategy, what and how.
Surely this, call it a plan, could be implemented better along with searching for a solution for all of those companies in the region, but just as if it was not enough, not only the will but there was no enough information, clever decisions at the right moment to prevent damage and loss and to allow these companies to stand up and have some prospects.
These are the companies that, under these market conditions, in this state of affairs, without a variety of aluminum products programs, without customers from various parts of the world and without a large market, simply cannot make a profit and, at this point, they cannot be successful.
In this particular case of Aluminij d.d. Mostar, I think the prospects for the aluminum industry are positive, and the trends are such that soon, maybe after a few months, Aluminij d.d. Mostar can stand on its feet and can survive on its own, without the help of the state and the Government with, again, the more favourable conditions of electricity supply. This must be solved.
It is only a matter of overcoming this period of several months, caused by this trade war between China and the United States and the aluminum prices in the United States. However, this is not a permanent state of the market, there is a huge demand for aluminum, demand is rising, and the market situation will stabilize, so Aluminij d.d. Mostar may, by the end of next year, be able to generate income and earnings without the help of the state.
It is important to emphasize that now, these couple of months, Aluminij must overcome this state and somehow stand on its own feet in order to function independently. I do not think it is for a longer period of time that the state will have to assist that company, but simply because it is a relatively short time in which a company has to go through this period and has to rely on some help from the owner.
Obviously, there is no majority ownership in Aluminij d.d. Mostar, which should, in some ways, be resolved to make someone accountable, to have someone 50 + 1% of ownership and to be responsible for the company. If a company is waiting for a solution, it is literally gained the impression that no one is responsible for this situation, and there is no time, so immediate response is needed, if anyone has ever thought about helping.
If the government said they would save the factory, and that the factory would not be closed, there are still no concrete decisions and moves. If a decision has already been made on helping a company, it should be done immediately, not when the damage arises and when the losses are even greater. Now it is necessary, and now they need to react.