Aluworks Limited

1. Preamble.

Aluworks Limited has been going through a long and difficult period.

In 2009 and continuing into 2010 and 2011, there has been an influx of extremely cheap aluminium finished products imported from China by Ghanaian companies enticed by the very low prices offered, despite the obviously higher quality of Aluworks products. The low Chinese prices have been enabled by the offer to Chinese export companies by the Government of China of very deep export rebates.

They have deemed this necessary to firstly provide quick penetration into West Africa following the dry up of demand in the traditional markets in the US and Europe, following the world wide recession and the credit crunch, and secondly to ensure continued industrial production in China to keep the populace at work and to prevent a diminution in incomes.

The rebates are so deep that it enables Chinese quote prices that simply signify the blatant dumping of material from China into Ghana and West Africa. Chinese price quotes are at slightly above the cost of the raw material imported into Ghana and therefore stifle local competition that has to add value to convert raw material into finished goods.

The situation has been severally brought to the attention of the Government of Ghana (and simultaneously to the Government of Nigeria in concert by our Nigerian counterparts) and it is expected that Government will respond through suitable countervailing measures within WTO rules to level the playing field. However the effect will only be felt from 2012.

Prior to this current phenomenon, Aluworks had been subject to huge cost pressure arising from

1. The effects of the energy crisis that hit Ghana in the last few years and tremendously increased the costs of producing aluminium for Ghana and West Africa, especially from having to import raw material rather than source cheaply from Ghana.
2. Having to use very high cost metal from the local producer – VALCO; because it was itself caught out holding metal produced from very high cost imported alumina, which cost it passed on to Aluworks in the early part of 2009.
3. The effects of the global downturn i.e. the recession and credit crunch
   1. Which caused demand of aluminium to collapse world wide
   2. Which generated huge stocks of aluminium around the world, leading to record low aluminium prices especially on the London Metal Exchange (LME) on which both our input and output prices are based..
   3. Thus causing badly reduced exports (to negligible levels) which have in the past represented almost half of the sales performance.
   4. Thus leaving Aluworks to work with in very restricted revenue flow (from also reduced local sales only), with implications on working capital and debt finance management.

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