This essay is about the aluminum industry in South Africa. What is positive for this particular company is the cheap rate of electric power, which is tied to the price, consequently, the supplier Escom gets 16% of the per ton price.
The Hillside project should be considered feasible, although bearing in mind the situation in 1994 when all major suppliers were cutting production. Increase in supply followed by the cheap aluminum flooding the market from former soviet states, created a reserve of aluminum and the prices fell steadily. However, the what is positive for this particular company is the cheap rate of electric power, which is tied to the price, consequently, the supplier Escom gets 16% of the per ton price. The equipment will be bought 20%- 30% cheaper than the estimated costs, and total capital cost would be $1.6 billion instead of $2 billion.
The cost of electricity and alumina were 41% of the price of aluminum, and other costs came to $ 338 per ton. Therefore if the price of alumina was $ 1,110/- per ton then the operating profits would be $317/- and the total operating cost would be cost would be 793. If the price of aluminum increased as did in the first quarter to $1250 per ton then the costs would be $512.5 for alumina and electricity and 338 of other cost. The operating profit would be $399/ton. Since the primary target markets for Hillside was Europe and Fareast, the location of this project was ideal, its location being next to the deep-sea port of Richard bay.
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