South Africa - AJAX Manufacturing, one of the Cape’s oldest aluminium foundries, which has been operating for more than 56 years, now faces some of its greatest challenges, according to managing director Charles Rowe.
“Our foundry and indeed the entire industry has to find solutions to a number of major challenges. These include the increases in the price of aluminium, due mainly to the exporting of scrap to China, South Korea and other big global users and of course the uncertain supply of electricity, which is critical to our operation,” says Rowe.
He continues: “Let’s start with the cost of aluminium and the various influences on it. At present there is a huge amount of scrap aluminium being exported because of the high rand prices which can be obtained.
The present permit system verifies the volumes exported, however a duty on exports would put the local industry on equal terms, which is very necessary to compete internationally. As an industry we have had frequent representations to the department of trade & industries (DTI) to regulate the export of our scrap aluminium. To this end the Aluminium Federation of South Africa (AFSA) and the DTI have been researching the industry for some years and we await their findings with a great deal of interest. One of the possible reasons for the delay on a decision on the proposals for a duty or levy on exports of scrap is the perceived complication of a challenge from the scrap merchants on the grounds of a duty being unconstitutional.”
“There is a growing demand for non-ferrous metals on the world market generally, however the playing fields are not level for all countries, in terms of there being a so-called international free trade agreement for the commodity. For example some countries such as Russia, Ukraine, Brazil and Malaysia, impose rigid import/export duties on non-ferrous metals and in some countries like China, there is a complete ban on scrap exports. This keeps their aluminium prices artificially low and cheaper for their own industries, while having the effect of distorting the world market.”
“Unfortunately for South Africa we do not have the same restrictions in place and our weak currency still makes it attractive to export the commodity to emerging powerhouses such as China and South Korea, amongst others. So we feel that there is a need for this to be properly regulated.”
Rowe says that aluminium pricing is influenced by a number of other factors. He acknowledges that the cost of local production of the metal and its alloys has had to increase because of various local economic pressures.
“In some cases the metal price has risen by more than 50% in the past year alone and is expected to go up even more this year. The aluminium alloys which we use in the foundry come in the form of ingots, which are produced from recycled or secondary aluminium by secondary smelters. The alloys are made according to the specifications required for various tolerances and usages. With the increased export demand for our scrap, the local market must meet the prices offered from overseas,” says Rowe.
He says that the second major challenge is how to cope with power outages. He insists that if Eskom and its local supplier, the City of Cape Town, stick to a rigid timetable of load shedding, his foundry will be able to manage their operation around this. It is the unannounced and unexpected type of power cuts that is damaging to his business. At the time of writing this article Eskom had suspended the planned load shedding schedule, however there is still a great deal of uncertainty regarding this issue, especially during the winter months when national demand usually increases.
Rowe says: “The power issues directly effect the resistance and oil fired furnaces which have a blower for the air. When the power is cut we are able to make a few more castings in some cases before the melt drops below the specified temperature for the article on the process sheet. The electrical furnaces are then closed and do not solidify for about two hours. The oil furnaces are emptied to save the crucibles, which will crack if solidified metal is remelted in them. Over an hour is needed to bring the metal back to casting temperature. It must also be remembered that delivery schedules for our customers are difficult to accurately forecast.”
“Electricity outages also present problems for Ajax from a staffing perspective during downtime, particularly for hourly paid workers. The foundry has negotiated with the factory committee to work time in to achieve a full pay week, but now starting early is a problem due to security these dark mornings.
With the current scheduled power cuts we have been working later on Fridays to make up some of the time.
Night shifts have been considered, but are more expensive and not suitable for the female employees we have,” he adds.
Rowe concludes: “Industry has been asked by Government and Eskom to reduce our electricity usage by 10%.
The foundry has previously implemented efficiencies in the foundry where the most power is used and further energy savings will have to be researched. Presumably all industry in this country, particularly the heavy electricity users, will have to engage and interface with Eskom to their mutual advantage for as long as the crisis prevails. As a foundry we will have to be enterprising and resourceful.”
“We have an excellent record of long serving and loyal personnel and wish to respect this by growing our market share through efficiency and service which our customers have benefited from.”
“Our industry is eagerly awaiting a viable scheme to enhance our export efforts and give us the opportunity of trading on equal terms with countries in the developing world.”