September 13, 2018 / 11:45 AM / in a month

Bosnia's Aluminij calls for government help to ensure survival

SARAJEVO, Sept 13 (Reuters) - Aluminij Mostar, Bosnia’s sole aluminium smelter, is at risk from high alumina and electricity prices and only urgent government intervention can help it stay on line, its general manager said on Thursday.

Heavily-indebted and loss-making Aluminij, which is among Bosnia’s top exporters, has narrowly avoided closure several times. In June, its debt stood at 343 million Bosnian marka ($203 million).

U.S. trade policy has worsened the situation, newly-appointed General Manager Dražen Pandza said in a letter to the government of Bosnia’s autonomous Bosniak-Croat Federation.

“Unprecedented turmoil at metal bourses, at which Aluminij sells metal and buys raw materials, accompanied with the rise of electricity prices, makes our further operation impossible,” Pandza said in the letter, which was reviewed by Reuters.

“If the government does not act, we cannot go on,” Pandza said, adding that in July alone Aluminij recorded a loss of 5.2 million Bosnian marka because of a rise in alumina prices caused by U.S. sanctions on Russia’s Rusal.

Government officials were not immediately available for comment on the letter.

The government needed to subsidise electricity prices for industries and divide transmission payments between importers and exporters, Pandza said, adding that the price of electricity has reached a “stunning” 70 euros per megawatt hour.

Pandza also asked for cuts of subsidies for power exports and incentives to support business development.

With a 900-strong workforce, Aluminij is a major employer in the southern Mostar region and has been undergoing restructuring after failed efforts by the regional government to privatise it.

Pandza said that about 10,000 jobs at dozens of Bosnian aluminium processing firms relying on Aluminij’s supplies, as well as at contracting firms, were at risk.

The Federation government owns a 44 percent stake in Aluminij, small shareholders another 44 percent and the Croatian government 12 percent. (1$ = 1.688 Bosnian marka) (Reporting by Daria Sito-Sucic; Editing by Alexander Smith)

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