The company is resorting to further cost-cutting and productivity-enhancing steps to stay competitive in the face of higher raw metal prices and retain customers
A 400 per cent increase in premium that Alba is charging for its metal has put aluminium powder maker Bahrain Atomizers International (BAI) in a tight spot.
“The outlook is gloomy,” said BAI general manager Tim McLaughlin, who estimated that the impact on his firm’s bottomline would be in excess of $2 million per year. “The prime issue for BAI is how to stay competitive and increase productivity to mitigate the impact of Alba’s high premium,” he said.
“We have a lot of work to do. We’ve known for some time the increased charge was coming. We can’t absorb the increase and have to pass it on. We’re putting the message across.”
BAI’s contract with Alba expired on December 31, 2014 and the powder maker has no alternative but to accept the new metal pricing.
The company is negotiating with its customers new prices and hoping its competitors will also be affected by increased premiums, which, as McLaughlin said, would then become a timing issue. “It becomes a question of how long you can survive in the competition mode. Some aluminium powder companies may have premiums taking effect at different times, so it may be much later before all aluminium powder companies come to parity. It’s not going to be a very good year in terms of profitability.”
The company, part of the global Ecka Granules group, is implementing a couple of projects to increase productivity. The focus is on minimising downtime and increasing plant efficiency.
While BAI has to struggle to keep its customers and penetrate new markets, it expects to benefit, albeit indirectly, from the closure of a major competitor in the US. “With capacity taken out of the market, volume has been freed up that we can help supply,” commented McLaughlin.
BAI is also hoping a trend in favour of niche products that use aluminium powder will gather momentum such as in powder metallurgy applications, especially in relation to automobile parts.
BAI’s output in 2014 was 8,800 tonnes against 8,000 tonnes in 2013. Profitability was better in 2014 with the company opening its second automatic line, Atomizer 2, which it had not been operating since mid-2012. The company also installed new mixing equipment which gave a productivity increase as well as safety and environmental improvements. Turnover was $25 million in 2014 against $22 million in the previous year
The chemical sector accounted for 50 per cent of BAI sales in 2014, metallurgy 30 per cent, refractories 15 per cent and pigments 5 per cent.
As much as 60 per cent of sales go to Ecka Granules companies, in various locations, for internal use or distribution to end users.
As in recent years, exports to Europe were down because of continuing economic problems there. The company’s overall distribution pattern remained unchanged from 2013 with the US as the single largest market, accounting for 25 per cent of exports. Europe and India each made up 20 per cent, Japan accounted for 10 per cent, other Asian states 15 per cent and other markets including South America and South Africa made up the remainder sales.
India continues to be a strong market for BAI despite the subcontinent having its own aluminium powder production facilities. Indian importers opt for BAI because of its quality edge, said McLaughlin.
BAI began supplies to a Saudi petrochemical plant in 2013 while it was in the commissioning stage. The plant has since become operational but while its volume is growing it is still less than anticipated. Two other Saudi plants, which were on the drawing board and could have used BAI material, will not be built.
Prospects for shipping BAI material to Gulf plants are low because of the general absence of manufacturing that consumes aluminium powder. So BAI has to look at global markets well beyond its own region.
Ecka Granules is an international leader in the metal powder business with a history of more than 130 years. Its three main operations are alloy manufacture, metal powder manufacture and application technologies.
Group products include ingots, pellets, granules and powders of aluminium, magnesium, copper, tin, lead, zinc, silicon and alloys of these metals. “The benefits we offer are quality of products and excellent customer technical support thanks to our world class research and development units,” a group statement said.