AluNews - August 2003

Oman revives $2.5b aluminium venture

Khaleej Times - 31/07/2003

MUSCAT - Oman has revived the $2.5 billion aluminium venture with a completion of a new feasibility study and the sultanate has offered a majority stake to a foreign company to help build the plant.

A project official said: "This project has concluded a new feasibility study. Oman Oil Company (OOC) with its partner, Abu Dhabi Water and Electricity Authority (ADWEA) are assessing the finding of the study. The two partners will form a company to build the plant with a shareholding of 49 per cent. OOC and ADWEA have offered a 51 per cent stake to an international aluminium company to join them as partner."

He added that the venture will have a dedicated power station to fuel the project and the initially conceived production of 530,000 tons per year was under revision.

"Everything has gone under close scrutiny and revision. The new feasibility that has been concluded will lead the project to a new concept. We can't reveal the name of our international partner but it is a leading aluminium company with the right technology and experience."

Industry sources said that Canada's Alcan is a possible candidate to join the venture as the third partner.

"We know that Alcan had a few rounds of talks with the OOC and ADWEA in the past and the company is most likely to be the one to take the offer," one aluminium expert said.

The project suffered many delays in the last five years due to fluctuating market prices but analysts said that the major stumbling block was the competition from existing aluminium companies in the Gulf.

There was a question over its feasibility because there are two other aluminium producers in the region in Dubai and Bahrain. However, Oman and Abu Dhabi are determined to build the plant and make a success out of it. Let's hope the new feasibility finding will offer new ideas so the project can take off, a market analyst added.

Bauxite rides boom
The Australian, Australia August 04, 2003 By John McCarthy

RIO Tinto subsidiary Comalco will spend $US150 million ($230 million) on expanding its Weipa bauxite operation.

This expansion is to meet the demands of the alumina refinery being developed in Gladstone.

The massive expansion project will generate 250 jobs during construction and 130 permanent jobs on completion in the far north Queensland town.

Comalco said the majority of the funds would be spent on a 9.5 million tonne beneficiation plant for the Andoom ore body, north of Weipa, which would allow the company to access the lower grade fine ores.

The development, which will make Weipa a constant two-mine operation, is due for completion next year. It will give Comalco a 47 per cent production boost to 16.5 million tonnes a year.

But even with the extensive increase, Weipa has about 40 years worth of reserves left and a resource of 3.5 billion tonnes.

The expansion is also the biggest single project development at Weipa for many years.

Managing director of mining and refining Hubie Van Dalsen said the project was a vote of confidence for Weipa.

"It is clearly a demonstration of the importance of Weipa," he said. "We are a growing global supplier of alumina and aluminium and our Weipa bauxite reserves provide the platform for our business."

The project, known as NeWeipa, would maximise the recovery of the existing bauxite reserves and increase the supply of bauxite to Comalco's operations and customers.

Comalco's Gladstone refinery project remains on budget. Its construction is now 22 per cent and engineering 90 per cent complete.

About $1 billion has been spent on its development.

Weipa's production for the June 30 half-year was 8 per cent more than the previous six months but this was due to the timing of maintenance.

Rio's share of aluminium production, including the additional share of Boyne Island that was bought in July 2002, was 4 per cent more than the second half of 2002.

Production at Tiwai Point, in New Zealand, was constrained by higher spot prices for power forced on the company by a drought and the subsequent impact on hydro electricity production.

The Weipa announcement coincided with the major expansion of several Chinese alumina facilities to meet the strong demand for raw materials.

The Shanxi refinery is expanding its capacity by about 60 per cent and will soon produce about 1.4 million tonnes of alumina a year. Its parent company, Chalco, is expected to increase production to about 5.6 million tonnes this year and the East Hope Group has started construction of a 1 million tonne refinery.

China is undergoing a massive expansion in aluminium production.

LME Investigates Aluminum Contracts

Moscow Times, Russia Tuesday, Aug. 5, 2003. Page 6

By Martin Hayes

Reuters LONDON -- The London Metal Exchange, the world's largest nonferrous market, on Monday launched an investigation into its aluminum contract, having already ordered traders to report all market positions.

The probe will look at possible collusion among market participants, warehouse inventory levels, individual trading patterns and the price curve, the LME said in a notice.

"This is very much a shot across the bows," a senior trader said.

The exchange's actions, which include reducing the large position reporting level to just one lot from 100 lots, seem designed to defuse long-running technical tightness, traders said.

This has seen high cash premiums, or backwardations, which appear at odds with warehouse stocks at eight-year highs.

"It [the action] is long overdue, and it not surprising ... although it is a case of the stable door being closed after the horse has bolted," another LME trader said.

"I think it is the LME pre-empting possible complaints from the industry, bearing in mind that demand is not great and stocks are reasonably high," an analyst said.

Aluminum is currently gripped by long-running tightness, with the cash/three months backwardation hitting its highest since February 2001 on Friday.

The backwardation reached $70 per ton at one point before easing back. On Monday it stood around $55.

Traders said a major long holder based in Europe was believed to account for a considerable proportion of the LME's warehouse inventory, which now stands at 1.3 million metric tons, having climbed over the last six weeks from 1.11 million tons, attracted by the tightness.

Despite this, much of the metal is unavailable as significant tonnages are tied up in long-term financing deals, traders said.

"Most of the people in the market know this -- the metal is on consignment financing deals -- so they trade accordingly," the first trader said.

Tightness has been rolled forward consistently this year and as yet shows no sign of easing.

The latest LME figures show one holder of 40 percent to 50 percent of warrants and cash positions.

Futures banding data for the August prompt date shows one long in the 20 percent to 29 percent band, one August short between 5 percent and 9 percent and one between 30 percent and 39 percent.

Traders said that ultimately a backwardation would break naturally by reaching levels where the deals that tied up metal would be financially less attractive and it would become more profitable to make metal freely available.

Also, there have been backwardations throughout 2003.

"Most customers know what the situation is. I can only think that it is either the regulators getting tough or someone has complained," the first trader said.

"The complaint is possibly to do with the backwardation flaring out ... and the cash price up around $1,550," the analyst added.

Since the Sumitomo copper crisis of 1996, the LME has instituted new measures to prevent high price premiums and discourage attempts at manipulation. When tight dates become traded as cash, certain mandated limits kick in, restricting the premiums.

Under its market aberrations policy, the LME says dominant market participants should be prepared to lend to the market at a maximum premium of half a percent on the cash price for one day. After five days this premium drops to a quarter of a percent.

If a participant controls more than 90 percent of the market, they must lend at the cash price only.

The coming probe will be carried out by the LME's regulation and compliance division.

Ormet Warns Of Possible 400 Layoffs

Wheeling Intelligencer, WV 8/4/03

As many as 400 workers at the Ormet Corp.'s Reduction Plant in Hannibal could be laid off within 60 days, according to company officials.

Ormet Primary Aluminum Corp. today announced that market conditions through the remainder of the year will determine whether it will be forced to curtail up to three of the six potlines at its Hannibal Reduction Plant. The curtailments may be necessary due to prolonged weak metal prices, volatility of alumina and energy prices, as well as other rising costs.

As a result and as required by the Worker Adjustment and Retraining Notification Act, Ormet sent notices to employees Friday advising them that curtailment of up to three potlines is possible after 60 days. The WARN notice gives the company the flexibility to curtail three potlines, if necessary.

However, company officials cautioned that changing market conditions could force Ormet to curtail up to two potlines before the 60-day notification period is over as such a move would not require the notification process of the WARN Act.

Ormet officials today said the number of workers to be laid off will depend upon the number, if any, of potlines that may be curtailed. The maximum number of layoffs for a three potline curtailment would be 400 employees, both hourly and salaried.

Ormet Chairman and CEO R. Emmett Boyle said the layoffs are the result of prolonged depressed metal prices, an anemic economy, rising health care costs, and the volatility of alumina and energy prices. Alumina is refined from bauxite and is necessary to make aluminum. In the past two year, alumina prices have more than doubled on the spot market. Ormet will be subject to inflated alumina costs beginning in January when its contractual agreement with a third-party provider ends.

"The U.S. aluminum industry has been in a serious economic downturn for approximately three years," Boyle said. "The hurdles facing Ormet's reduction plant are many and great, and they are the same hurdles facing all U.S. primary aluminum facilities.

"In 1978, there were 34 aluminum reduction plants operating in the United States. Today, there are just 13, including the Ormet Hannibal Reduction Plant, and these are all not operating at full capacity." Boyle said.

Last week, Alcoa, the world's largest aluminum producer, issued WARN notices to temporarily curtail all production at its Intalco reduction plant in Ferndale, Wash.

When that plant is curtailed, the number of operating reduction plants in the U.S. will fall to 12.

Boyle said Ormet officials are hoping market conditions improve and the company will not be forced to curtail any potlines.

"We sincerely hope that recent increases in metal prices continue and then hold at reasonable levels. Ormet will continue to evaluate our plans and make appropriate decisions given all the changing variables," he said.

Boyle assured that the curtailment would not cause disruptions for Ormet customers. He said Ormet operations will continue to provide the majority of metal necessary to support the company's downstream operations, however, the company will supplement primary metal requirements with outside purchases as necessary. "We currently plan to continue operating billet and flat rolled product facilities at their current levels," he said.

Indal shuts down smelter unit

The Hindu Business Line, India Kochi , Aug. 4 G.K. Nair

INDIAN Aluminium Industries Ltd (Indal) of the Aditya Birla group has shut down its smelter unit at nearby Eloor (Alupuram) in the absence of a positive response from the Kerala State Electricity Board (KSEB) on supply of power at concessional rates or granting permission to draw power from the Power Trading Corporation.

Company sources told Business Line on Monday that the management had asked 326 workers not to come for work as the operation of the smelter unit at the current power cost had rendered it unviable. Electricity is the major raw material of the unit and hence there is no alternative to closure of the unit, they said.

The management, they said, had already surrendered the power supply allocation of the unit to the State electricity board. The company had about four years back closed down a smelter plant, which was old and could not be run viably. This had resulted in sending around 300 workers on voluntary retirement.

Now it operates its extrusion and casting plants, both of which employ around 100 people each. If the State Government failed to take a positive decision, these two plants might also face the same fate, they apprehend.

The sources said the company was a major consumer of power at 20 million units per month. Prior to August 2001, the company was paying Rs 4.5 crore towards power charges per month and it had increased to 6.75 crore now following the two hikes thereafter in power tariff introduced by the State electricity board. At this rate, the unit cannot be run profitably and it has become economically unviable, they said.

The company had brought this issue before the State Government and the latter has yet to respond, they said. The company cannot indefinitely wait for a decision from the KSEB as it would incur heavy losses, they argued.

In fact, the Power Trading Corporation (PTC) had agreed to supply power to the unit at Rs 2.50 per unit. But to draw this power, permission is needed from the Regulatory Commission and the State electricity board. The trade unions and the management had already approached the authorities for permission, Mr K.N. Gopinath, General Secretary, Aluminium Factory Workers Union (CITU), told Business Line. He said that as per the Central Power Bill, the consumer could purchase power from any of the grids.

The State Electricity Regulatory Commission had written to the Electricity Board and the State Power Secretary asking them intimate in one month if they had any objection to the company drawing power from the PTC.

Their response, he said, had to reach the regulatory commission before August 3.

Closing down of the Indal unit, which has been functioning in the State since 1943, apart from rendering hundreds of workers jobless, would deprive the State of around Rs 168 crore towards power charges and taxes. Power is the major raw material of this plant and that constituted 61 per cent of the cost of production, Mr Gopinath said.

According to him, even if the company decided to go for a captive power plant, that would take at least two years for commissioning.

Power intensive units came to Kerala long ago as electricity was then cheap here.

Alcoa alliance plans $65M expansion in Suriname

Pittsburgh Business Times, PA 8/5/03

Alcoa World Alumina & Chemicals will spend $65 million to expand capacity at a plant in Suriname, according to Alcoa Inc.

Alcoa owns 60 percent of Alcoa World Alumina & Chemicals, an alliance with Alumina Ltd., which owns the remaining 40 percent. Alumina Ltd. is a unit of BHP Billiton Group.

According to Alcoa, which is based in Pittsburgh, the alliance will spend the money to expand capacity at the Paranam alumina refinery by 250,000 metric tons per year, or roughly 12 percent. After the expansion, the Paranam facility will have the capacity to produce 2.2 million metric tons of alumina a year.

BHP Billiton, a natural resources concern based in Melbourne, Australia, has approved the project, Alcoa said Tuesday. Work should begin immediately and finish by July 2005, the company said.

Alcoa, the world's largest aluminum producer, with operations in 40 countries, has had a presence in Suriname since 1916.

Alcoa, Kobe Steel switch focus

Pittsburgh Post Gazette, PA Thursday, August 07, 2003

Alcoa Inc. and Japan's Kobe Steel Ltd. said yesterday that they would scrap a joint venture that produced aluminum stock for beverage cans and instead collaborate on aluminum products for the auto industry. Kobe Steel will buy Alcoa's stake in their Kaal Japan joint venture from Alcoa, while Alcoa will take Kobe Steel's stake in their Kaal Australia joint venture. The companies decided to end the can stock joint ventures in the face of tough competition, figuring they would fare better working independently in that area, Kobe said. Financial terms weren't disclosed.

Süd-Chemie acquires Alcan technology for organo-clays in fire retardants for the polymer industry

Chemie, Germany 08/06/2003 -

Alcan Aluminium UK Limited, London/UK and Süd-Chemie AG, Munich/Germany, are pleased to announce that Süd-Chemie has acquired the intellectual property and know-how relating to the use of organoclays with inorganic fire retardants from Alcan. Alcan and Süd-Chemie were previously involved in a co-operative development programme to exploit the benefits of this technology. Alcan closed its chemical operations in Burntisland, Scotland late last year. Alcan believes that the technology combining organoclays and inorganic fire retardants such as aluminium hydroxide offers exciting opportunities for a new range of environmentally safe and very effective fire retardants. Süd-Chemie, who offer the Nanofil® range of organoclay products, will continue to support the development of polymer based materials with advanced fire retardant properties.

The advantages of this fire retardant technology are to delay ignition, reduce smoke emissions, eliminate slumping and dripping of the molten polymer by the formation of a strong stable char, i.e. cable and wire manufacturing will become more effective. These benefits are supported by improved processing characteristics such as a lower melt viscosity and higher temperature stability. This application is considered by Süd-Chemie as an important progress step in the development of Nano-composite technology.

The Nanofil® product range available from Süd-Chemie combines the benefits and advantages of inorganic flame retardants and organic modified nanoclays and offers the user a premium performance fire retardant.

Source: Süd-Chemie AG

ICU delegates conference runs into confusion

GhanaWeb, Ghana Sunday, 10 August 2003

Kumasi, Aug. 10, GNA - The seventh delegates' quadrennial conference of the Industrial and Commercial Workers Union (ICU) has run into confusion with the breakway by 13 institutions under the union to form a new national union.

These include the Ghana Commercial Bank (GCB), Agricultural Development Bank (ADB), Ghana Cement Company (Ghacem), the BBC, FPC Limited and the La Community Bank.

The rest are Bank of Ghana (BOG), Merchant Bank, Standard Chartered Bank, Volta Aluminium Company (VALCO), State Insurance Company (SIC), Oyko Europat and the Ghana National Procurement Agency (GNPA).

Mr Smart Abbey of the Merchant Bank announced the decision by the institutions to split away from the ICU just after the Credentials Committee had presented its report to the conference on the number of accredited delegates who could vote in the election of new officers. The announcement was greeted with boos from those who opposed the idea, whilst those in agreement carried him on their shoulders as they filed out of the conference hall to the bemusement of the foreign observers present.

A resolution signed by the leaders of the breakaway institutions accused the ICU leadership of lack of transparency, mismanagement and dictatorship.

It said, "the leadership has amply demonstrated complete disregard for the delegates by manipulating the electoral process just to perpetuate themselves in office".

It expressed indignation at what it said was the electoral fraud to disenfranchise some of the delegates and disqualify some contestants. Their action is widely believed to be the result of attempts by the ICU leadership to disqualify Mr Francis Davor, the ICU Administrative Secretary from contesting the position of the General Secretary.

Mr Davor, by a clause in the ICU's constitution did not qualify to contest for the position since he did not satisfy the requirement of having worked for the union for six years.

The Ghana News Agency (GNA) learnt that efforts by some of the delegates to get the clause expunged to allow him contest Mr Napoleon Kpoh, the incumbent General Secretary, for the position were met with fierce resistance by the leadership of the Union.

China warns of excessive industrial investment

China has sounded a warning about excessive investment in the steel, building materials, nonferrous metals, and automobile sectors, and vowed to curb the wasteful duplication in construction using market, legal and technological measures.

A leading official with the State Development and Reform Commission said that duplication in construction in those sectors had accelerated with outstanding structural problems since early last year, the official People's Daily newspaper reported on Tuesday.

The official noted that the new round of excessive investment, which was triggered partly by a growing market demand, was "worth attention from various sectors".

Ma Gai, minister in charge of the commission, has called for resolute measures to curb the excessive investment and duplicationin construction.

The warning first emerged at a meeting convened by the Political Bureau of the Communist Party of China (CPC) Central Committee on July 21.

During the first six months of this year, production and investment in the steel and iron sectors grew by 21 percent and 130 percent respectively, following last year's rapid growth, according to the report.

Small iron and steel works, which were closed by local governments because of pollution and inefficiency, had resumed production, but their products were in poor quality, while products such as cold rolling steel sheet and galvanized sheet were in short supply, noted Ma.

Cement plants using outdated production technological processes accounted for 60 percent of China's total, yet some new plants under construction chose the same technologies, reported the newspaper.

The supply of electrolytic aluminum exceeded demand in China, and electrolytic aluminum projects with a combined capacity of nearly 4 million tons were under construction, but new plants were still being planned in some areas.

Meanwhile, in the automobile sector, noted Ma, small scale and weak independent development capabilities were some of the problems, and only some 70 of the 123 plants capable of producing whole vehicles manufactured less than 10,000 units each per year.

He warned that duplication in construction was still an issue that would have serious consequences if it is left unchecked.

Ma explained that it would aggravate oversupply in the processing sectors, affecting China's economic restructuring and industrial upgrading and resulting in a waste of both capital and resources.

Serious oversupply would also plunge the sectors and plants involved into difficulty, causing more bad loans in the banking sector, and unemployment, Ma said.

In a bid to curb excessive investment, the central government would make public information on supply and demand concerning those sectors, and projects under construction, improve the market entry system, and closed down illegal plants and those producing inferior products and causing serious pollution.

The commission also planned to cooperate with banking sectors to restrict loans to firms deemed to have high energy consumption and pollution, and backward in technology and industrial safety.

Sual Group, has hired Brent Hegger

Moscow Times, Russia 12Aug03

No. 2 aluminum producer, Sual Group, has hired Brent Hegger, a manager from engineering group SNC-Lavalin, to run a $2 billion mining refinery and smelter project in the Komi republic.

Moscow Times, Russia

The project plans to produce 1.4 million tons of alumina per year

Alcan says Pechiney bid on track

IDC seen investing in Coega smelter

Africa South African News, South Africa Posted Tue, 12 Aug 2003

The Industrial Development Corporation (IDC) and electricity utility Eskom are expected to each take a 12.5 percent stake in the planned aluminium smelter to be built at Coega.

Business Day reports the IDC board is expected to finalise their decision later this month.

French group Pechiney has pledged to sign up for a 49 percent stake in the planned $2-billion smelter, with empowerment groups and construction and project management company Bateman, owned by the Beny Steinmetz group, also expected to invest in the project.

According to the daily, IDC chief executive Khaya Ngqula said the Coega project is vital for South Africa, and appears to be viable and robust, suggesting the IDC will invest in the smelter.

The IDC is also expected to be a lead arranger in loan financing, Business Day reported.

Chinese, others vying for Vietnam bauxite project

Reuters, 08.15.03, 1:01 AM ET By Ho Binh Minh

HANOI, Aug 15 (Reuters) - Competition is heating up for a $1.35 billion bauxite complex in Vietnam's Central Highlands with a Chinese company planning to re-submit a feasibility study by year-end, a Vietnamese official said on Friday.

Tran Minh Huan, head of the Industry Ministry's International Cooperation Department told Reuters a delegation of China's Nonferrous Metal Corp (NFC) would visit Hanoi late this month for further talks on the project in Daklak province.

Two other firms eyeing the project are U.S. firm Alcoa Inc (nyse: AA - news - people), the world's biggest aluminium producer, and Australia's mining giant BHP Billiton <BHP.AX>.

Vietnam estimates it has bauxite ore reserves of up to eight billion tonnes, the world's largest after Guinea and Australia, and mostly unmined. Daklak officials say the province may hold bauxite ore reserves of 2.5 billion tonnes.

Bauxite is the raw material used for making alumina, a white powder for producing aluminium. In 2001, state-run Vietnam National Mineral Corporation (Vimico) signed a memorandum of understanding with NFC to study the possibility of mining bauxite and producing alumina in Daklak's Dak Nong district.

"The Chinese firm completed the pre-feasibility study but it appeared too basic so we asked it to redo one," Huan said. "The Chinese are striving to complete it within this year."

Supply from Vietnam could help China overcome a shortfall of raw materials to feed its fast-growing aluminium industry. Most of its alumina imports now come from Australia. China charts the fastest economic growth in Asia.

But China is not the only country interested in the project. Huan said his ministry had held talks with BHP Billiton on it. The cost of setting up mining operations and an alumina production plant would be $794 million.

Building a railway to move the alumina to a seaport would cost $495 million and $62.5 million for harbour facilities.

Huan said Alcoa had also expressed an interest in the project but that Vietnam had yet to finalise any deals.

Vietnam metals industry experts say the Chinese firm may not have enough experience to run such a large bauxite and alumina project even though it has lobbied Hanoi hard for the deal.

Hanoi is also weighing a $680 million project in Daklak's neighbouring Lam Dong province to mine bauxite for eventual production into aluminium.

That feasibility study is being done by French consultant Pechiney <PECH.PA>.

Copyright 2003, Reuters News Service

Alcan smelters escape blackout, one rolling mill hit

Reuters, 08.15.03, 1:11 PM ET

MONTREAL, Aug 15 (Reuters) - Canadian aluminum giant Alcan Inc.<AL.TO> (nyse: AL - news - people) said on Friday all but one of its smelters had escaped the massive blackout that swept Canada and the U.S. Northeast.

Montreal-based Alcan, the world's second-largest aluminum producer, said only its smelter in Oswego, New York, suffered a brief power outage "for a couple of minutes."

"We have also auxiliary power, but there was concerns about surges so we brought it up slowly. It was really a hiccup, not a concern," Alcan spokesman Joseph Singerman told Reuters.

A rolling mill in Kingston, Ontario, was also shut down on Thursday evening.

"It's back on line but Ontario Hydro doesn't want us to bring it up to quickly so we are doing it in stages because there are concerns about power spikes," Singerman said.

Alcan's smelters in Quebec and British Columbia were unaffected, but the head office of its American operations in Cleveland, Ohio, had to use backup power to keep operating.

Alcan stock was up 22 cents at $35.72 on the New York Stock Exchange on Friday, and up 3 Canadian cents at C$49.51 in Toronto.

Power was slowly coming back in Ontario and the U.S. Northeast on Friday, but grid operators warned it could take a few days or even more before the power is fully restored. Rolling blackout were to be expected in Ontario next week.

($1$1.39 Canadian)

Copyright 2003, Reuters News Service

Chinese Government Throws Brakes on Electrolytic Aluminum Expansion

People's Daily Online, China 18 Aug 2003

The Chinese government on Monday put the brakes on the feverish expansion of electrolytic aluminum production by stopping approval of any projects to expand or construct electrolytic aluminum plants.

An official from the State Development and Reform Commission, which oversees the country's economic restructuring, said the government would not allow new electrolytic aluminum projects in any form to be started.

Proposed foreign-funded projects would also undergo strict scrutiny according to due procedures, the official said.

Ma Kai, minister in charge of the commission, total local reporters that bank loans and funds raised from the security market could not be used for the construction of electrolytic aluminum plants without government approval.

China, already the top electrolytic aluminum producer in the world with an annual capacity of 5.1 million tons, is likely to double the capacity in a few years if the projects under construction or to be launched are taken into account. At that time, the output will far exceed market demand.

However, as the cost of electricity climbed and prices of raw materials soared, most of the electrolytic aluminum plants were expected to lose money in the next few years, according to the commission.

The commission encourages regrouping of the existing electrolytic aluminum companies by means of to merger or acquisition so the sector can improve efficiency and internationalcompetitiveness

Hulett Aluminium in vodka deal

Independent Online, South Africa August 18, 2003

By Margie Inggs

Durban - Hulett Aluminium, the fastest growing, export-orientated aluminium rolling business in the world, had broken into the Russian market with orders for enough high-pressure aluminium sheet to manufacture 245 million screw tops for vodka bottles, Peter Staude, the Tongaat-Hulett Group chief executive, said at the weekend.

The Tongaat-Hulett Group owns 50 percent of Hulett Aluminium; the balance is held by Anglo American and the Industrial Development Corporation.

"While Russian producers make this closure sheet product for locally sold vodka, they rely on a consistently high quality for export," Staude said.

Hulett Aluminium has continued to grow its sales in step with its increased capacity utilisation, which has reached 60 percent and is expected to grow to 75 percent in 2004.

Margins are expected to improve as capacity increases; the company is incurring full operating costs on current capacity.

Sales have also continued to grow as the company harnesses the full capacity of its recently expanded rolled products manufacturing capacity.

"With this success, Hulett Aluminium has extended its international customer base to 58 countries, with exports accounting for 24 percent of revenue."

Despite the Tongaat-Hulett group's primary focus on sugar, Staude defended its continuing position as Hulett Aluminium's parent. He said the company still required protection in the world market, which is dominated by Alcoa, Alcan, Pechiney and VAW/Hudro.

The company aims to double its share of the world market from 1 percent in 2002 to 2 percent in 2005, and to increase this share to 5 percent over the next 10 years.

Overcoming its drawbacks as a small player that is distant from the world markets, Hulett Aluminium is producing sophisticated products in low-cost regions.

This has enabled it to make some significant strides in niche export markets, where it has already claimed up to 30 percent market share.

As a result, it reaps the highest earnings before interest, tax, depreciation and amortisation, giving it a big enough bite for its size to present a threat in certain market segments and making it a tasty potential morsel for the major players.

Focusing on the production of rolled and extruded aluminium for a wide range of industrial downstream products, Hulett Aluminium's activities provide one job for every six tons of aluminium processed, compared with one job provided for every 5 000 tons in primary aluminium manufactured at BHP Billiton's Hillside and Mozal smelters.

It provides 2 000 jobs countrywide, about 1 200 of them at the Pietermaritzburg plant.

Southern Africa has a primary aluminium smelting capacity of more than 2 million tons and is responsible for more than 10 percent of the world's primary aluminium capacity.

Staude said expanding total capacity and value-added investment opportunities presented the best platform for growth.

He said growth in the total rolling margin from volume and mix would lead to strong growth in earnings and cash flow. There would also be a potentially big impact from improved dollar margins, which hit the company hard in its recent results.

AMI Metals nets Lockheed Martin, GKN Aerospace contracts

Nashville Business Journal, TN August 19, 2003

The Brentwood-based subsidiary of Reliance Steel & Aluminum Co. has been awarded a contract to provide aluminum plate processing for the Lockheed Martin Aeronautics Co.

AMI Metals Inc.'s $38 million contract runs through the end of 2008, but can be extended with optional years.

The company has also won a contract to offer aluminum sheet processing for GKN Aerospace. That $1.2 million contract runs through 2005, but can be extended.

"We are proud of our long-term relationship with Lockheed Martin and our ability to assist them going forward with the aluminum products and services needed for the manufacture of their military aircraft," says AMI Metals President Scott Smith. "We also look forward to assisting GKN Aerospace by providing global coverage through our six strategically located U.S. facilities and our new European facility located in Belgium.

Sual Smelters Kick In

Moscow Times, Russia - Aug 18, 2003

MOSCOW (Bloomberg) -- Sual Group, which produces a fifth of the country's aluminum, said Monday that first-half output of the metal rose 29 percent after it took over two smelters.

Aluminum production rose to 441,900 tons, the company said in an e-mailed statement.

Sual increased its mining of bauxites by 10 percent to 2.1 million tons. Bauxites are required to make alumina, which is smelted to produce aluminum.

Sual this year bought two smelters from holding company Sevzapprom, making it the world's No. 7 aluminum producer, with an output of about 850,000 tons a year.

The company has agreed to build a refinery and smelter complex with Pechiney SA, Europe's No. 2 aluminum maker.

Alcom sells extrusion biz to Press Metal for RM8 mln

The Edge Daily, Malaysia - Aug 18, 2003

By Thomas Soon, 9.34pm

Aluminium Company of Malaysia Bhd (Alcom) is exiting from the aluminium extrusion business and selling it to Press Metal Bhd for RM8 million cash in what forms part of the latter's expansion plan.

Alcom is disposing of all 30.56 million shares in Alcom Extrusion Sdn Bhd to Press Metal unit Wesama Sdn Bhd, which is now involved in general drafting services and construction project management.

In separate statements on August 18, both parties said they had agreed on the proposed transaction, which could be completed by year-end.

Press Metal said they were both leaders in the aluminium extrusion industry. It said the acquisition formed part of its expansion plan, thereby reinforcing its dominant position in the extrusion market in the region.

For its fiscal year ended Dec 31, 2002, Alcom Extrusion lost RM9.02 million that included the provision of non-recurring employee severance cost of RM8.6 million.

Alcom said the proposed deal would result in a loss of about RM10.82 million to the group. It invested RM30.56 million on Jan 1, 2000 in the extrusion business.

It said the extrusion business had not been profitable due to a weak building and construction industry and few barriers to entry because of low capital costs required.

Alcom said it lacked an extensive distribution network, while its structural costs were too high to compete against others. It also said the business was no longer the core activity of its major shareholders Alcan Inc and Nippon Light Metal Company, Ltd.

It said the proposed disposal would enable it to focus on its rolling business, which Alcan and Nippon Light Metal were good at.

Valco/Kaiser Transaction No Longer Relevant

GhanaWeb, Ghana 20 August 2003

The Minister of Energy, Paa Kwesi Nduom returned from four days of talks in Washington to announce that: “Valco/Kaiser transaction really is no longer that important to Ghana. He pointed out that “we are not in the 1960s” when the Akosombo Dam was the all-important source of electricity to Ghana and the country had high hopes to open up not only a bauxite industry, but a myriad of industries to feed on the Volta Lake.
With the continuing growing of thermal energy and gas in the pipeline, the percentage of the nation’s historic reliability on hydropower is ever decreasing.

Today, the long awaited extraction of Ghana’s bauxite is in the offing. Yet it is not Valco, but Billington Mines. Ironically, the Ghana government is working to offer Valco a lifeline by encouraging, possibly, some level of synergy for the distressed company with Billington in the bauxite project.

The Minister told the Statesman newspaper that the American government, which was involved in an embarrassing diplomatic tussle with Ghana over Valco, has come around to understand the diminishing relevance of Valco to Ghana’s economy.

Ghana’s First President, Dr Kwane Nkrumah signed an agreement with Kaiser Aluminium, owners of Valco, which mandated Valco to pay 1.1 US cents for a kilowatt of electricity supplied from the Volta Lake.

Four decades down the line, Valco was standing by the old contract and demanding to continue paying 1.1 cents/KWh while the rest of Ghanaians pay 7.8 cents/KWh. It costs the Volta River Authority 6.5 cents/KWh to generate power from hydro and thermal sources combined.

So acrimonious was the dispute between the Government of Ghana and Ghana that until recently, it was top of the priority list of Ghana’s bilateral relationship with the United States.

Noranda $3 bln Chile plant seen hurt by rule change

Reuters, 08.20.03, 3:43 PM ET By Louise Egan

SANTIAGO, Chile, Aug 20 (Reuters) - Canadian miner Noranda <NRD.TO> was caught off guard when the Chilean president spoke against the location of its planned $3 billion aluminum plant, leading to the sudden suspension of the project, a source close to the company said on Wednesday.

The company perceived a "change in the rules of the game" after Chilean President Ricardo Lagos earlier this month suggested a new location, and will not reactivate the project until the government clarifies its position, the source said.

Noranda announced last Thursday it was putting the project on hold, citing market conditions. The plant, known as Alumysa, was one of the biggest current foreign investment projects in Chile.

But this week the miner cited opposition from Lagos when it notified Chilean authorities it would not deliver a revised environmental impact study due in November. Economy Minister Jorge Rodriguez has also spoken out against the aluminum reduction plant's proposed location in Chacabuco Bay, southern Chile.

"The declarations by the president and minister Rodriguez took the company completely by surprise. The company considers this to be a change in the rules of the game," a source close to Noranda told Reuters, requesting his name be withheld.

Lagos said on Aug. 1 he supported Alumysa, but that its location at Chacabuco Bay was inappropriate.

He suggested Noranda install the plant in other nearby bays where it would not threaten the salmon farming industry, one of the world's largest, or the pristine forests that draw tourism revenues.

Alumysa's aluminum reduction plant would have an annual capacity of 440,000 tonnes and would also include three hydro-electric plants and a port.

A few days after Lagos' comments, Rodriguez spoke in favor of new regulations that would divide up the region to allow industrial activity such as Alumysa in one zone only.

In a letter to the state-run National Environmental Commission, Noranda said it would halt investments until learning more about the proposed new rules.

"The ball is in the government's court," the source said.

Despite fierce opposition from environmentalists and salmon producers, Noranda considers relocation unfeasible. It also argues it complies with international environmental standards.

Aluminum prices ended on Wednesday at $1,436 a tonnes, slightly up from a 2003 low in April of $1,322 a tonne.

Copyright 2003, Reuters News Service

SUAL Aluminum Output Up 29% So Far in 2003

Rosbalt, Russia

MOSCOW, August 20. Company production of first-stage aluminum totaled 441.9 thousand tons for the first half of 2003, an increase of 29.1% from the same period of 2002, SUAL has reported. The increase was largely the result of the group's acquisition of the Volkhov and Volgograd aluminum plants, the group's press office reported. Significant gains for the first half of 2003 over the same period of 2002 also were achieved in the fabrication of aluminum. An increase of 17% was reported for the Kamensk-Uralsk Plant in production of rolled and other worked aluminum. The Mikhailovsk plant for non-ferrous metals doubled its output of foil and film as compared with the same period a year ago with a production of 4,600 tons.

Bauxite production for the first half of 2003 totaled 2.1 million tons, up 10.4% from the same period a year ago. The total production of aluminum ore for all >SUAL enterprises for the first half of 2003 came to 1.01 million tons, up 17.2% from the year before. The increase was attributed to the addition of Glinozem, the Pikalevsky complex, to SUAL and to the implementation of a number of technological improvements in the work of several enterprises in the SUAL group. In addition, output of silicon was down 1.3%, as compared with the first half of 2002, with production of approximately 25.6 tons. The drop reflected the introduction of a tariff barrier to the US market at the beginning of 2003.

The SUAL group (created on the basis of the Siberial-Ural Company) is a vertically integrated company and one of the top 10 world producers of aluminum. It includes 21 enterprises in 11 regions of Russia. It is the leading producer of aluminum ore in Russia and No. 2 (after Russian Aluminum) in the production of first-stage aluminum. Some 22% of the group's output goes to the Russian market, 14% is exported to the US, 16% to Asia and 48% to Europe. In annual terms, SUAL produces 4 million tons of bauxite, approximately 2 million tons of aluminum ore, more than 860,000 tons of first-stage aluminum, approximately 50,000 tons of silicon and more than 105,000 tons of aluminum products.

Only giants can buy Montenegro aluminium plant

Reuters, 08.21.03, 9:37 AM ET

PODGORICA, Serbia and Montenegro, Aug 21 (Reuters) - Only one of the world's five or six major aluminium makers would be suited to buy Montenegro's sole producer of the metal, Kombinat Aluminijuma Podgorica (KAP), its chief executive said.

Mihailo Banjevic declined to name any companies as potential buyers of the plant, which the government hopes to sell within a year, Podgorica daily newspaper Pobjeda reported on Thursday.

"KAP can be bought only by a strategic investor, a company with a lot of money, financial power and which is an aluminium producer," he was quoted as saying.

He said the buyer would have to pay the firm's debts, upgrade the plant, resolve environmental problems and offer an acceptable social programme for workers -- a term which normally refers to job safety, a minimum income level and redundancy pay.

Banjevic said KAP's debts of some $300 million might be bought from creditors at a large discount. He said one dollar of the debt could fetch around 30 cents in such transactions and there had been some buying interest for the debt.

"Considering the debts and modernisation, a realistic price for KAP could be around $250 million," he said.

Banjevic said a rising U.S. dollar and higher aluminium prices meant the time was right to sell the plant.

Montenegro in July invited bids for a financial adviser for the planned sale of KAP, the country's main exporter. Banjevic said six out of 20 companies were had been shortlisted and the adviser would be chosen in early September.

The sale of a 65.53 percent stake in KAP, which has installed annual output capacity of 280,000 tonnes of alumina and 102,000 tonnes of aluminium, is the government's top priority in 2003.

Aluminium firms from Germany, France, Italy, Russia, Canada, Scandinavia and the United States have expressed interest in the plant, company sources earlier told Reuters.

Pobjeda said industry sources had listed Swiss trader Glencore, France's Pechiney <PECH.PA>, Norsk Hydro <NHY.OL> of Norway, Canada's Alcan <AL.TO>, U.S. major Alcoa (nyse: AA - news - people) and Russian firm Rusal as among the interested parties.

Copyright 2003, Reuters News Service

Aluminium producers say not affected by LME probe

Reuters, 08.21.03, 10:15 AM ET By Lorna Hutchinson

LONDON, Aug 21 (Reuters) - Two weeks after the London Metal Exchange launched an investigation into its aluminium contract, the world's major producers of the metal said they had not been contacted, but welcomed the market transparency a probe would bring.

The investigation, initiated on August 4, is looking at possible collusion among aluminium market participants, warehouse inventory levels, individual trading patterns and the price curve.

The LME has also reduced the market's large position reporting level to just one lot from 100 lots -- a move that effectively scrutinises every dealer's position.

The probe is set against a backdrop of a long-running technical shortage of aluminium, which has seen backwardations intensify, while warehouse stocks have ballooned to 8-1/2 year highs at 1.34 million tonnes.

A backwardation occurs when the cash price is more expensive than forward prices, reflecting scarcity of availability.

"On behalf of our company and our customers we appreciate their (LME's) efforts to ensure a fair and efficient market," Marianne Aamodt, spokeswoman for Norway's Norsk Hydro <NHY.OL>, said, adding that the company had not been contacted by the LME.

Asked whether the current LME three-months aluminium price <MAL3> at around $1,430 a tonne reflected the market's fundamentals, where supply is largely acknowledged to outweigh demand, Aamodt said: "We feel that the three-month price is reflecting the market."


A spokesman at France's Pechiney <PECH.PA> said it seemed normal that the probe should go ahead in line with a policy of market transparency.

"Pechiney is in favour of market transparency and therefore considers the investigation as positive," the spokesman said.

"We have been informed of the LME investigation just like all other producers, but we have not been questioned," he added.

One of the world's largest producers, Canada's Alcan, said it had no comment on the investigation, given that it was not a trading member of the LME.

"I am not aware that Alcan have been contacted by the LME, I would be surprised if they had been," Alcan spokesman Joseph Singerman, said.

Russian number one and number two aluminium producers Russian Aluminium (RusAl) and SUAL said they were monitoring the investigation, but also declined to comment, saying the probe could not have a direct impact on them.

"RusAl sells just an insignificant portion of its output on the LME," a RusAl spokeswoman said.

A spokesman for SUAL said: "We supply all our metal under long-term contracts to our commercial partners and end users."


Paolo Menossi, managing director of downstream producer Hydro Aluminium Metal Products S.r.l. in Italy, said he believed the LME probe was justified as it should give a clearer picture of any possible collusion among warehouse inventory levels, trades and prices.

"At least we will have a better idea of the extent of any problems," Menossi, whose Varese-based company sells primary metal products, told Reuters.

Asked if he thought the current three-months LME price was justified, Menossi said, "If I look at the world economic situation and the level of aluminium consumption, I feel that the LME price is a bit high when compared to the fundamentals."

He said Hydro Aluminium's company in Italy had not been contacted by the LME regarding the investigation.

Alcoa Italia was unavailable for comment.

In Germany, Armin Weinhold, president of the association of German aluminium producers Gesamtverband der Aluminium Industrie, said the association did not regard the LME probe as a matter for the industry.

"We are not commenting on this as an association as we regard this as an internal matter for the LME," he said.

He did not know if any German producers have been approached as part of the LME investigation.

Michael Peter Steffen, spokesman for leading German producer Hydro Aluminium, said: "In our interests and in the interest of our customers we support all efforts to secure a fair and efficient market. We can make no further comment on this."

An executive at another German aluminium company who asked not to be named, said: "These are very tough times in the industry and we are not very likely to complain if we can get more for spot sales."

"This is a trading issue and I cannot see any connection to the industry."

The LME, for its part, said it had no fresh developments on the investigation to report.

"We won't be giving a running commentary on the investigation and I cannot give any idea of the timeframe involved," Jonathan Haslam, LME director of corporate affairs, said. (Additional reporting by David Brough in Rome, Nicole Mordant in Vancouver, Rebecca Harrison in Paris, Michael Hogan in Hamburg, Inger Sethov in Oslo)

Copyright 2003, Reuters News Service

China's Chalco May Say First-Half Earnings Almost Tripled

Aug. 25 (Bloomberg) --

Aluminum Corp. of China, the nation's only producer of the raw material used to make aluminum, may report profit almost tripled in the first half as surging demand allowed it to raise prices four times this year.

Chalco, as the company is known, will probably say profit in the first six months rose to 1.5 billion yuan ($181 million) from 572 million yuan, according to the median forecast of five analysts polled by Bloomberg. Chalco is due to report on Tuesday.

Hong Kong-listed shares in Chalco, also the world's seventh-biggest producer of aluminum, doubled this year on soaring demand in China for the metal used in car parts, office towers and power lines. While that's prompting rivals to expand smelting capacity, threatening margins on aluminum production, Chalco's grip on the domestic supply of the raw material offers a cushion.

``There's more uncertainty in the aluminum price, and Chalco's buffered against that,'' said Mike Harrowell, an analyst at Merrill Lynch & Co. in Sydney, who has a ``buy'' recommendation on the company and expects it to show a 1.2 billion yuan profit.

China's 8 percent economic growth helped Chalco's shares outpace the 23 percent rise for the world's biggest aluminum company Alcoa Inc., which owns 8 percent of Chalco, and an average 45 percent rise for its rivals worldwide.

China's refined aluminum output in the first six months rose 27 percent from a year earlier to 2.6 million metric tons, and rose 25 percent in June to 447,700 tons. Chalco accounts for about one fifth of the country's refined aluminum output.

Output Rising

China's aluminum output may rise to 7 million metric tons a year by 2005, exceeding the government's 6.5-million- ton target, because efforts to control expansion are failing, Kang Yi, president of the China Nonferrous Metals Industry Association, told delegates at an aluminum conference last year.

Government efforts to rein in aluminum smelting capacity growth are failing because of competition between regional authorities to encourage local producers to take advantage of increasing demand, Kang said.

Alumina demand, however, is protected against a rise in smelting capacity because the high cost of restarting a smelter means producers are reluctant to cut back on production when margins are being squeezed, said Geoffrey Cheng, an analyst at Core Pacific-Yamaichi Hong Kong Ltd., who expects the company to announce a 1.3 billion yuan profit.

`Chalco the Winner'

Chalco smelted 27.3 percent of its alumina, made from bauxite, into aluminum in 2002, selling the remainder to aluminum producers.

Tight alumina supply in China prompted Chalco to boost alumina prices by a third to an average 2,625 yuan a metric ton in the first half this year, while China's aluminum price rose 6.6 percent to an average 14,267 yuan a ton.

``Alumina prices have shot up more than aluminum,'' said Jessie Jiang an analyst at China International Capital Corp., who has a ``buy'' recommendation on the company and expects it to announce a 1.5 billion yuan profit. ``Chalco is more an alumina play than aluminum, making them the winner.''

Analysts point to Shandong Aluminum Industry Co., an alumina producer 70 percent owned by Chalco, as an indication of Chalco's first-half profit. The company announced a threefold profit rise to 235 million yuan on July 31.


Government concern over how mineral shortages may affect China's economy looks set to erode Chalco's dominance of the domestic alumina market and may put downward pressure on Chalco's prices by 2005, analysts have said.

China must boost its supply of alumina and other minerals to meet domestic demand for refined fuels and metals, the International Business Daily reported in March, citing a National People's Congress member Wang Mili.

Last month, the nonferrous metals industry association reported that animal feed maker, Shanghai-based East Hope Group began construction of a 1.1 million-ton-a-year alumina plant, which will start producing next year. Days later, the body said Gansu Liancheng Aluminum Co. and Shanxi Changxin International Trade Co. plan to build a 2.4 million ton-a- year alumina project.

``Everyone rushes to get into profitable businesses when times are good,'' said Core Pacific's Cheng, who has a ``sell'' recommendation on Chalco . ``All the new capacity comes on line just when the cycle is turning down, then you need three to four years'' to reach a balance between supply and demand.

China's production of alumina may almost triple to 15 million tons by 2010 as the government encourages, China Metals, a publication of state news agency Xinhua, reported this month.


Tyler Morning Telegraph, TX - ASSOCIATED PRESS August 24, 2003

CLEVELAND (AP) - With all the headaches involved in commandeering strips of land for new power lines, interest is growing in several new technologies that can wring more capacity out of the existing electricity infrastructure.

Whether they're cables that can carry more juice or digital switches that can make rapid-fire routing decisions, experts say there is no shortage of ways to improve upon the 1960s-era technology that pervades today's delicate electricity grid.

"The existing rights of way are going to be the first areas to be exploited," said David Kurzman, an alternative energies analyst with New York investment bank H.C. Wainwright.

Technology is the easy part. A knottier problem is the regulatory morass the industry finds itself stuck in.

"Most of these problems could be fixed today with existing technologies," said Eric Prouty, an energy technology analyst with Boston investment bank Adams, Harkness & Hill. "It's more a legislative and policy issue than it is a technology issue."

The Department of Energy said as much three years ago.

The agency's report on a wave of power outages that hit East Coast cities in 1999 found that utilities' cost-cutting had "considerably eroded" the grid's reliability.

Now the system is under heightened scrutiny again because of the Aug. 14 blackout, in which a cascade of failures and automatic shutdowns turned out the lights for some 50 million people in parts of Ohio, Michigan, Ontario, New York, Vermont, Massachusetts, Connecticut, New Jersey and Pennsylvania.

Many feel that the blackout will turn attention toward adding more capacity to the grid - especially in heavily populated swaths of the United States and Canada - but not necessarily by erecting new transmission towers and lines.

Two companies are developing wires made of ceramic-based superconductors that can carry as much as five times the power of current steel-reinforced aluminum cables while withstanding the high temperatures that produces.

One, Intermagnetics General Corp. of Albany, N.Y., has developed a cable made of strands of ceramic-coated tape. Like conventional underground electric cables, the ceramic cables have a liquid core that carries a coolant. But instead of filling them with oil, these cables are cooled by 300-degree-below-zero liquid nitrogen, said Glenn Epstein, the company's chief executive.

Intermagnetics has already completed short demonstration projects and is preparing a quarter-mile connector between two electric substations in Albany, Epstein said. The expensive cable is meant to replace conventional cables in urban areas where capacity is tight.

In a similar project, American Superconductor of Westborough, Mass., is overseeing a project that will bury a half-mile-long, high-capacity cable on New York's Long Island to carry power for 300,000 homes. It's expected to be in use by 2005, with cables ready for commercial use a year or two later, said company vice president John Howe.

"Superconductors really provide the bandwidth increases that are going to be necessary to run the grid in the future," Kurzman said.

In the shorter term, 3M Co. and other manufacturers have developed high-capacity overhead power lines made of an aluminum-zirconium composite. The cables, which already are being manufactured for sale, can carry two to three times as much power as current cable, said John Cornwell, spokesman for 3M, based at St. Paul, Minn.

While superconductors must be buried, the 3M cables could replace existing lines on transmission towers, and connect directly into substations without modifications, Cornwell said.

Other grid-boosting solutions include software and switches to steer power around bottlenecks and onto less crowded wires, and line sensors that transmit temperature and wind data to a utility control room, telling computers to reduce a load when wind stops cooling a power line, for example, said Luther Dow of the Electric Power Research Institute in Palo Alto, Calif.

Investors are also looking into stringing more high-voltage power lines ferrying direct current rather than the usual alternating current, said Steven Taub, a power technology researcher with Cambridge Energy Research Associates. A few long-distance DC cables are already in use in North America.

DC lines are cheaper and can share rights of way with AC lines. The cables can carry far more power, and can be turned on and off like water spigots, making billing more accurate, Taub said.

"Space is very tight," said Paul Halas, chief operating officer GridAmerica, which is taking over long-term control in October of the grid at the center of the blackout inquiry, owned by Akron-based FirstEnergy Corp.

GridAmerica, which also will take over interstate power transmissions for two other Midwest utilities, says it will invest $500 million in adding more capacity to the lines, or building new lines.

"Our best estimate is that the bulk of the effects would be on existing rights of way," Halas said.

©Tyler Morning Telegraph 2003

Kaiser wants to sell

Looking buyers for Alpart, bauxite facility in Jamaica

Jamaica Observer, JamaicaTuesday, August 26, 2003

KAISER Aluminum Company, which has operated in Jamaica for more than half a century, has moved closer to selling its facilities here, with six potential buyers having declared interest in acquiring the assets. They will, by next week, begin a six-week due diligence study of the companies in Jamaica before making a firm offer to Kaiser.

But Gene Miller, Kaiser's vice president for US and Jamaica said yesterday that any sale of the operation was still far away.

"There is no imminent sale," Miller told the Observer . "Six companies will conduct due diligence over the next four to six weeks and then make an offer. It's part of an exploratory process that was announced at the time of the Chapter 11."

Kaiser owns 65 per cent of Alpart alumina refinery in Nain, St Elizabeth, in which a Norwegian firm, Norsk Hydro is minority partner. It also owns 49 per cent of Kaiser Jamaica Bauxite Company in which the Jamaican government has 51 per cent. Kaiser manages the operation, which largely exports raw bauxite to the Kaiser Gulf port alumina refinery of Gramercy.

Yesterday, Miller stressed that the American company was not in the process of liquidation, and was only selling those assets "that may not fit into its going forward strategy".

The National Workers Union (NWU), which represents most of Alpart's more than 1,000 employees, told workers in a newsletter that the due-diligence would involve site visits in September and October, for a possible sale early next year. Kaiser Jamaica Bauxite employs approximately 500 people.

Kaiser in February last year filed for Chapter 11 protection from creditors under US bankruptcy laws, as it sought breathing space to reorganised its operation. At the time, several of its global assets, including its interest in Jamaica, were excluded from that filing.

However, in January this year, the company bought the assets in Jamaica as well as eight other entities under the umbrella as it sought to widen the bankruptcy protection. It argued at the time that this was "an appropriate and prudent protective measure".

Yesterday, the NWU told workers it would "carefully monitor all aspects of this ongoing process".

"This development could raise fears about the local bauxite and alumina industry, especially in light of Kaisers history as a good corporate citizen and a partner in Jamaica's progress," said Norman DaCosta, a vice-president of the National Workers Union.

But at the same time DaCosta, in a notification to workers, said that that the sale, should it materialise, "could represent a positive step for the future of Alpart, KJBC and Jamaica".

Alpart, with a production capacity of 1.45 million tonnes a year, is Jamaica's largest alumina refinery. A US$21-million investment was approved for the company late last year for an expansion that would increase its capacity by 200,000 tonnes.

DaCosta told the Observer that the "expansion will continue and that the workers memorandum of understanding on the company will continue".

Pechiney and Batou Agree to Aluminium JV Posted August 26th, 2003

Pechiney and Batou Aluminium Co have reached an agreement regarding the construction of a joint venture high purity aluminium plant in Batou, inner Mongolia.

Under the terms of the agreement, Pechiney will invest USD$13 million and own 51% of the joint venture. Batou Aluminium will own the other 49%.

The plant will use high grade aluminium produced by Batou Aluminium to make high purity aluminium. They will use patented Pechiney technology to upgrade the aluminium, so that it can be used to make electronic components such as capacitors.

Construction on the plant is due to start in the Autumn on this year (northern hemisphere), with production due to commence in October 2004. The plant has an initial production capacity of 5000 tons of 4N aluminium.

Fears over sale of Alpart, Kaiser

Jamaica Gleaner, Jamaica Wednesday August 27, 2003

By Angelo Lawrence, Gleaner Writer Mandeville:

UNION LEADERS and others are busy trying to calm the fears of those in the region's bauxite industry who may be affected by the proposed sale of the assets of Kaiser Aluminium and Chemical Corporation in Jamaica.

The company, which owns 65 per cent of Alumina Partners (Alpart) in Nain, St. Elizabeth and 49 per cent of Kaiser Jamaica Bauxite mines in Discovery Bay, St. Ann filed for bankruptcy protection in February 2002, after it piled up liabilities of US$1.3 billion. According to a release from the company's United States headquarters, it has not made much improvement in its financial position since filing for bankruptcy (Chapter 11) protection.

Alpart, which does mining in both Manchester and St. Elizabeth, is the region's main employer with close to 2000 persons directly employed and spin offs affecting another 20,000 persons.

Residents in Far, Downs, New Forest and other districts surrounding the Nain plant told The Gleaner that they have been concerned about the company's future since it filed for Chapter 11, despite many assurances from the management that the local operation would not be affected. One resident in Comma Pen said, "Alpart is our government, anything we need is them wi ha fi go to". The company has been the sole provider of water and other recreational facilities to various communities in northern St. Elizabeth and south Manchester.

National Workers Union (NWU) vice-president and deputy Island Supervisor, Norman DaCosta, told The Gleaner from his Mandeville office that the sale of the local operations by Kaiser may be a 'blessing in disguise'. He said many of the fears that are being expressed are due to Kaiser's history as a "good corporate citizen". Mr. DaCosta, however, insist that the impending sale could represent a positive step for the future of both the Discovery Bay and Nain operations.

Members of the Mandeville commercial sector are also watching the development closely having experienced the sale of Alcan now WINDALCO in Williamsfield some years ago. That sale caused the displacement of several hundred workers and affected small businesses bordering its operations negatively.

The relationship between the sector and residents within the mining belt also nose dived and currently there is a tense situation developing in Kendal, which adjoins the Kirkvine plant, and the residents. Windalco wants to expand its mud lake, which runs along the Winston Jones Highway, to the dismay of the residents who claim the acid from the mud lake is destroying their homes and particularly the roofs.

Jamaica's Bauxite Institute says... Kaiser sale, no threat

Jamaica Gleaner Wednesday August 27, 2003

By Andrew Green, Acting Business Co-ordinator

JAMAICA'S BAUXITE/alumina industry will suffer no damage from the sale of the local assets of Kaiser Aluminum & Chemical Corporation (Kaiser), said Parris Lyew-Ayee, general manager of the Jamaica Bauxite Institute (JBI).

Kaiser announced on Monday that it was exploring the sale of some of its bauxite assets in its global commodities business unit, which include its bauxite and alumina operations in Jamaica and Australia.

This is of major local interest as Jamaica earned a significant US$712 million (approximately $40 billion) from the sector last year and Kaiser's local operations produce close to half the industry output.

"Jamaica will come out the better from the process," Mr. Lyew-Ayee said. "Either Kaiser comes out of Chapter 11 bankruptcy, or somebody else comes on who has the cash."

Kaiser is now considering expressions of interest from six potential buyers.

Local authorities have been approached to determine whether the bidders are seen as acceptable partners, he said.

"We have said we will welcome you with open arms and you will get the same kind of treatment as we deal with any of our foreign partners," the JBI general manager added.

Kaiser Aluminium Corporation, the parent company for Kaiser and the number three aluminium producer in North America, filed for bankruptcy in the United States in February, last year. It said then that its 65 per cent interest in Aluminum Partners of Jamaica (Alpart), and a 49 per cent stake in Kaiser Jamaica Bauxite Company (KJBC), would not be affected.

But, "Kaiser made an announcement earlier in the year they called it exploration to see if anybody would be interested in the bauxite and alumina sector," Mr. Lyew-Ayee said. To emerge from bankruptcy, the company decided to sell off this less profitable side of its operations.

The exploratory offer involved the Jamaican bauxite/alumina operations, along with that at Gramercy in Louisiana, United States, and in the state of Queensland, Australia.

"What is going on now is that the people who are expressing interest are putting their credentials on the table," Mr. Lyew-Ayee said. "Then of course, Kaiser has to go through the due diligence process to weed out the sheep from the goats. That is the process which is about to start."

The Jamaican policy is that the Government does not have to own any of the production facilities. "All we want to ensure is that we maintain viable, profitable operations. Our objective is to ensure that the industry stays on the growth path and can bring in the earnings the country badly needs."

Based on the direction the divestment process is taking place, "no matter where the chips fall, I think Jamaica will come out on the positive side," Mr. Lyew-Ayee said. "Our operations will continue fully on the same trend in terms of the expansion mode for Alpart because they are a good, competitive organisation right now. They have done remarkably well and can stand up to the tests of the global market."

Chalco To Focus On Alumina, Up Contract Sales

DOW JONES NEWSWIRES Wednesday August 27, 8:14 PM By Loretta Ng

HONG KONG (Dow Jones)--Aluminum Corp. of China Ltd. (ACH), or Chalco, is keeping alumina at the center of its expansion plans and expects to improve earnings stability by selling more of it through fixed-price contracts.

China&apos;s only alumina producer and the second-largest in the world after Alcoa Inc. (AA) is planning to boost its annual alumina production capacity by 41% to 7.27 million tons by 2005 from 5.14 million tons last year. It expects to produce 5.17 million tons this year.

"Until 2005, our number-one priority will always be alumina," Chairman Chairman Guo Shengkun told Dow Jones Newswires Wednesday.

The company&apos;s expansion plans are based on robust domestic demand and expectations that alumina prices will continue to rise. Alumina is an upstream material for producing aluminum.

In the first half of 2003, the average selling price of Chalco&apos;s alumina jumped 49% on year to 2,603 yuan ($1CNY8.28) a metric ton.

Chalco said Tuesday that its first-half net profit almost tripled from a year earlier to CNY1.58 billion, lifted by the rise in alumina prices.

"I think the high level of (alumina) prices is highly sustainable in the coming three years," Guo said in an interview.

He expects a domestic shortfall of seven million tons of alumina by 2005, compared with 4.57 million tons in 2002.

"This time, the industry cycle has;s different from the previous short-term rallies," Guo said.

Russia also is experiencing an alumina shortage, he said.

On the supply side, Guo said he doesn&apos;t see any sizable new entrants coming into the market in the near term. A greenfield project with one million tons of production capacity takes three to four years to develop, while an expansion project needs at least two years, he said.

Guo said Chalco doesn&apos;t have any immediate plans to raise its alumina spot price from the current level of CNY2,950 a ton. The company has raised the price seven times since December.

"Alumina and aluminum producers coexist. If we&apos;re too greedy, our clients will be under pressure to run losses and eventually we&apos;ll get hurt," he said.

In fact, Chalco has sharply increased the amount of alumina it is selling through fixed-price contracts. Guo said that 40% of its total alumina sales between 2003 to 2005 will be made through fixed-price contracts, compared with 10% previously.

These contracts, he said, should help reduce the impact of spot price fluctuations on the company&apos;s bottom line and are in line international practice.

The company has raised it alumina contract prices to take advantage of the price uptrend. Its alumina contract price is now linked to the price of the three-month aluminum contract on the Shanghai Futures Exchange. Guo said the contract price will be set at more than 18% above the three-month aluminum price, compared with 15% previously.

He said Chalco may expand into high-margin processed aluminum products in the years beyond 2005 if this segment of the business looks promising. These products are used by industries ranging from packaging to aviation.

Chalco&apos;s parent, Chinalco, is developing this end of the business, but Guo didn&apos;t rule out the possiblity of taking it over.

"It is still at the embryo stage and not fit for the listed company&apos;s interests. But it can have big potential in the future," Guo said.

Copyright © 2002 Dow Jones & Company Inc. All rights reserved.

CORRECTION: New Chalco Contracts In 2004-06 Not 2003-05

Yahoo News Wednesday August 27, 4:32 PM

HONG KONG (Dow Jones)--Aluminum Corp. of China Ltd. (ACH) said Wednesday it has sharply increased the amount of alumina it is selling through fixed-price contracts to reduce the impact of spot price fluctuations on the company&apos;s bottom-line.

Chairman Guo Shengkun said that 40% of its total alumina sales between 2003 to 2005 will be made through fixed-price contracts, compared with 10% in the previously.

Alumina is an upstream material required for producing aluminum.

The company has also altered its alumina pricing formula, which will result in higher contract prices.

Chalco&apos;s alumina contract price is linked to the price of the three-month aluminum contract on the Shanghai Futures Exchange.

The contract price will be set at 18% above the three-month aluminum price, compared with 15% previously, Guo said.

The increased sales via contracts and new pricing formula will enable Chalco to take "advantage of market price recovery in the first half and review its sales strategies to minimize the impact of alumina spot price fluctuations," he said.

"This is in line with international practice ... we aren&apos;t only eyeing short-term profitability."

The new pricing policy should also ease analysts&apos; concerns that the company&apos;s future earnings will be dragged down by cheaper contract prices.

Chalco said Tuesday that its first-half net profit almost tripled from a year earlier to a net profit of 1.58 billion yuan (US$1CNY8.28), lifted by a rise in alumina spot prices.

The company is the world&apos;s second-largest alumina producer and the only one in China.

Guo said he expects demand for alumina to remain strong in China in the coming years on the back of its robust economic growth.

He expects the country to import a net 7 million metric tons of alumina by 2005 even as Chalco strives to boost its annual alumina production capacity to 7.27 million tons by 2005 from 5.14 million tons in 2002.

Rain Calcining to cash in on smelter expansions

The Hindu Business Line, India Hyderabad , Aug. 27 C.R. Sukumar

Aimed at cashing in on several brownfield aluminium smelter expansions taking place across Africa, West Asia, Europe and India in the next couple of years, Rain Calcining Ltd (RCL), the Rs 333.22-crore producer of calcined petroleum coke and power, has chalked out a programme to enhance its capacity for production of calcined petroleum coke.

In a communiqué to shareholders, the RCL management said the main driving force for calcined coke demand would continue to be the aluminium industry, the primary end user of calcined coke that accounts for 75 per cent of overall consumption. The balance 25 per cent was consumed by the titanium dioxide, graphite and other metallurgical industries.

Stating that the fundamentals of calcined coke pricing were based on the fortunes of the aluminium industry, RCL informed the shareholders that in the West, calcining demand increased from 9.06 million tonnes in 1997 to 9.5 million tonnes during 2000.

Though the demand decreased during 2001 owing to closing of several aluminium smelters in the US Pacific Northwest for unfavourable power pricing structures, the demand for calcined coke improved during last year and reached the levels of 2000.

During the current year, the demand for calcined coke was estimated to increase by 4 per cent with improving worldwide economic fundamentals. The demand was further expected to increase by 4-5 per cent during the next couple of years.

"This strong upsurge in demand anticipated over the next two years is based on several brownfield aluminium smelter expansions coming online in Africa, West Asia, India and Europe. It is expected that by 2005, approximately 3 lakh tonnes of additional calcined petroleum coke would be required," the RCL management said.

According to the company, another Calciner would be required to meet the growing demand for calcined coke from the world aluminium industry. It was widely expected that once the 4-lakh-tonne Astral Calciner was built in Rotterdam, it would cater to some of the demand. However, according to the RCL management, the Astral Calciner project appears to be stalled since major construction activities were yet to commence. As a result, the outcome of the project would be known only later this year. Similarly, the 4-lakh-tonne Alba Calciner in Bahrain was currently running at only around 50 per cent capacity and has been catering mostly to its own internal requirements.

Alcoa says no pressure to raise Elkem stake

Reuters, UK Thu August 28, 2003 02:18 AM ET

OSLO, Aug 28 (Reuters) - U.S. aluminium giant Alcoa AA.N feels no pressure to try to raise its stake in Norwegian metals group Elkem ELK.OL after a failed 2002 bid to win control, Chief Executive Alain Belda was quoted as saying on Thursday.

"We do not feel any strong pressure to do anything at all," Belda told the Norwegian daily Aftenposten.

Alcoa has a 46.5 percent stake in Elkem after steady buying in recent years but has received almost no acceptances for an offer last October to buy an extra seven percent that would have given it control over the group.

Alcoa has long faced opposition from Norwegian industrial group Orkla ORK.OL , which owns about 40 percent of Elkem, and from some other big Norwegian investors.

Belda noted that Alcoa and Elkem, which has in the past voiced concern about Alcoa's rising stake in the group, have a long-running cooperation via their jointly owned Elkem Aluminium unit.

"We have a 50-50 cooperation in aluminium. We've been doing this for more than 20 years, and it's worked very well," Belda said. He also said he had confidence in Elkem Chief Executive Ole Enger.

"So there is no need to do anything to change the situation," he said.

Elkem shares closed on Wednesday on the Oslo bourse at 158 Norwegian crowns ($20.65). The market reopens at 0800 GMT.