VZCZCXRO2167
RR RUEHBZ RUEHDU RUEHMR RUEHRN
DE RUEHJO #0467/01 3211304
ZNR UUUUU ZZH
R 171304Z NOV 06
FM AMCONSUL JOHANNESBURG
TO RUEHC/SECSTATE WASHDC 5460
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUCNSAD/SADC COLLECTIVE
RUEHJO/AMCONSUL JOHANNESBURG 2139

UNCLAS SECTION 01 OF 07 JOHANNESBURG 000467 
 
SIPDIS 
 
SIPDIS 
 
STATE PLEASE PASS USTR, USAID AND USGS 
USDOC FOR 4510/ITA /MA/AME/OA/DIEMOND AND ITC/VDESAPIO . 
 
E.O. 12958: N/A 
TAGS: EMIN ETRD ENRG ECON ELAB EIND SF
SUBJECT: SOUTH AFRICA:  STATE OF ALUMINUN INDUSTRY 
 
JOHANNESBU 00000467  001.2 OF 007 
 
 
Summary 
------- 
¶1. (U) The South African aluminum industry is well developed and 
a major contributor to the economy.  During 2005, primary and 
semi-fabricated aluminum sales amounted to 920,000 tons valued 
at about $1.7 billion, of which exports accounted for more than 
70% by mass and value.  All plants are currently working at full 
capacity and plans are in place to expand production after 2010, 
contingent upon electricity generation capacity simultaneously 
expanding to keep pace with rising demand.  Local downstream 
manufacturers provide for nearly all the various market sector 
requirements.  Aluminum smelters and fabricators both have 
active workplace programs to encourage testing and treatment of 
HIV/AIDs for infected and affected employees. 
 
¶2. (U) Additionally, local smelters provide most of the alloys 
required by the automotive, building and construction, 
engineering and fabrication, mining, packaging, and transport 
sectors as well as for the wheel and cable industries and a 
variety of other niche industries.  Where local demand for 
special alloys and/or semi-fabricated products cannot be met, 
these are imported.  Expansion opportunities exist for local 
consumption in niche areas and in the automotive industry, and 
for export of ingot and semi fabricated products, also for the 
automotive industry.  However, there is concern about whether 
exports can remain competitive, given rising input costs, a 
volatile currency and the availability of the requisite skills. 
On the local demand side, threats are posed by cheap imports 
from China and other Far East exporters.  End Summary. 
 
Aluminum Metal 
-------------- 
¶3. (U) Aluminum metal has a unique combination of properties 
that make it one of the most versatile materials for a variety 
of applications.  It is a strong light metal used extensively in 
the packaging, automotive, electrical, engineering, 
construction, metallurgical, and chemical industries.  The 
addition of small quantities of other metals (the major alloying 
metals are manganese, copper, zinc, magnesium, and silicon - a 
wide range of secondary alloying elements as also added to tweak 
characteristics), together with a variety of temperature and 
mechanical treatments (cold - strain hardening - and  hot - 
solution heat treatment) enable metallurgists to impart specific 
properties required for different applications.  In addition to 
the core markets products like aluminum powder, flake and paste 
products are used in explosives, rocket fuel, metallurgy, 
chemicals, inks, and decorative materials. 
 
¶4. (U) Aluminum is a light highly reflective metal with a 
density equal to about 35% that of steel and 30% that of copper. 
 Nevertheless, some of its alloys have strengths greater than 
structural steel and are highly corrosion-resistant under most 
service conditions.  Aluminum is non-toxic, non-magnetic, 
non-sparking, has good electrical and thermal conductivities, 
can be easily worked into any form, accepts a wide variety of 
surface finishes and does not become brittle under extreme low 
temperatures.  It has a relatively low melting point and cannot 
be used where strength is needed at high temperatures - 
practical sustained performance is limit to 200-300 degrees 
Fahrenheit. 
 
¶5. (U) A major feature of aluminum is its ability to be recycled 
and some 50% of annual production is from recycled material. 
Scrap can be transformed into aluminum metal using about 5% to 
7% of the electricity used in the original alumina-to-metal 
conversion with all the attendant benefits attributable to 
energy saving and recycling of an otherwise waste material. 
There is no difference between primary and recycled aluminum in 
terms of quality or properties. 
 
Aluminum Production 
------------------- 
¶6. (U) Aluminum ore, most commonly bauxite (a weathered clay 
with a high aluminum content), is relatively plentiful in 
tropical and sub-tropical areas of Africa, the West Indies, 
South America and Australia.  Some deposits also occur in 
Europe.  Bauxite is refined into an aluminum oxide (alumina) and 
then electrolytically smelted to the metal.  The basic 
meta-production unit is known as a 'pot' in which one to three 
tons of metal can be produced per day.  Pots are usually 
assembled in rows known as 'potlines' that contain up to 250 
pots. 
 
¶7. (U) Primary aluminum production facilities (to produce 
aluminum metal) are located in many parts of the world, 
particularly where there is sufficient inexpensive energy 
available (hydro-electric, coal, natural gas or nuclear) - some 
50% of aluminum is powered by hydro, 36% by coal, 9% by natural 
 
JOHANNESBU 00000467  002.2 OF 007 
 
 
gas, 5% by nuclear, and less than 1% by oil.  Based on 50% 
alumina content two tons of bauxite produce one ton of alumina 
(at 1,100 degrees C) and about two tons of alumina produce one 
ton of aluminum metal (smelted at about 900 degrees C, but once 
formed has a melting point of only 660 degrees C).  In the case 
of coal-generated electricity, some eight tons of coal 
(dependent on the heat content) produce one ton of metal.  The 
production of metal from alumina is highly energy-intensive 
requiring on average 15.7 MW-hours to produce a ton of metal. 
Thus, a smelter the size of Hillside (700,000 annual tons) 
requires a supply of some 1,000 MW of electricity. 
 
¶8. (U) The basis for all modern primary aluminum smelting is the 
Hall-Hiroult Process, HYPERLINK 
"http://www.world-aluminium.org/history/index .html" invented in 
¶1886.  Inputs to the process include: alumina, cryolite (sodium 
aluminum fluoride), a carbon- or graphite-lined steel container 
(the pot) that acts as the cathode (negative), large quantities 
of electricity at low voltage but very high current - typically 
120,000 to 150,000 volts and 354 amperes - and a carbon anode 
(positive) made of petroleum coke and pitch and consumed at the 
rate of 400kg/ton of aluminum.  During the process molten 
aluminum is deposited at the bottom of the pot and is 
periodically siphoned off, taken to a holding furnace where 
alloying metals may be added, cleaned, and then cast into the 
required shape. 
 
¶9. (U) The smelting process is continuous.  A smelter cannot 
easily be stopped and restarted.  If production is interrupted 
by a power supply failure for more than four hours, the metal in 
the pots may solidify, requiring an expensive rebuilding 
process.  Most smelters produce aluminum of 99.7% purity, which 
is acceptable for most applications.  However, super purity 
aluminum (99.99%) is produced for some special applications, 
typically those where high ductility or conductivity is 
required.  The marginal difference in the purities of smelter 
grade and super purity aluminum results in significant changes 
in the HYPERLINK 
"http://www.world-aluminium.org/production/pr ocessing/prope 
rties.html" properties of the metal. 
 
Aluminum Processing and Uses 
---------------------------- 
¶10. (U) Aluminum can be alloyed with other metals to make a 
variety of products with different properties.  The main 
alloying metals are manganese, silicon, zinc, copper and 
magnesium but other metals are also used.  Aluminum can be 
rolled into plate, sheets, or wafer thin foils half the 
thickness of a human hair.  The rolling process changes the 
characteristics of the metal, making it less brittle and more 
ductile.  Aluminum can be cast into an infinite variety of 
shapes; extruded at about 500:C to form intricate shapes and 
sections; forged by hammering to make stress-bearing parts for 
aircraft and internal combustion engines; and joined by welding, 
adhesive bonding, riveting or screwing.  In general, the 
properties of aluminum alloys can be modified either through 
solution heat treatment or strain hardening and mechanical 
working (rolling and drawing), and its appearance can be 
modified by various surface treatments. 
 
The South African Aluminum Industry 
----------------------------------- 
¶11. (U) The South African aluminum industry has no indigenous 
supply of aluminum ore of which bauxite, an aluminum-rich 
leached clay found mainly in a tropical belt around the equator, 
is the major raw material.  While there are known deposits of 
bauxite in many parts of the continent they remain relatively 
under-explored and the only producer of any consequence is 
Guinea.  South Africa imports raw material in the form of 
processed bauxite or aluminum oxide (alumina) mainly from 
BHP-Billiton's (BHP-B) plants in Australia and Brazil. 
 
¶12. (U) The industry also imports other inputs to the process, 
including petroleum coke (from the US Gulf and BP refinery), 
pitch and aluminum fluoride.  Two primary metal smelters and 
four semi-fabricators are the cornerstone of the South African 
aluminum industry and provide the basic inputs to numerous local 
downstream manufacturers.  Locally manufactured products ensure 
that South Africa is virtually self-sufficient in its aluminum 
requirements.  Specialist products are imported where necessary. 
 The country has a thriving and growing export trade in primary 
metal and in semi-fabricated and final aluminum products - some 
90% of overall aluminum production is exported.  Aluminum has 
wide and growing applications across most of the countries 
industrial sectors. 
 
Primary Metal Production 
------------------------ 
 
JOHANNESBU 00000467  003.2 OF 007 
 
 
¶13. (U) Africa has five aluminum metal producers, South Africa 
(900,000 tons), Mozambique (505,000 tons), Egypt (244,000 tons), 
Cameroon (90,000 tons) and Ghana (13,000 tons) - the latter two 
probably from scrap metal.  South Africa has two smelters that 
together produce about 900,000 tons per year of primary aluminum 
metal at 99.97% aluminum content.  These are located on the east 
coast of KwaZulu/Natal at Richards Bay, about 200 kilometers 
north of the city of Durban.  Both are wholly owned and operated 
by BHP-B, which is the biggest diversified mining company in the 
world. 
 
¶14. (U) The region hosts a third smelter at Maputo in 
Mozambique, which lies about 150 kilometers north of Richards 
Bay.  The Mozal smelter has a capacity of about 506,000 tons per 
year of aluminum metal, all for export.  It is also operated by 
BHP-B, but ownership is shared between BHP-B (47%), South 
Africa's state-owned Industrial Development Corporation (24%), 
Mitsubishi Corporation (25%), and the Government of Mozambique 
(4%).  The three smelters contribute 84% of BHP-B's world-wide 
primary aluminum production and 4.4% of global output.  Should 
the mooted plant expansions and new 500,000 to 600,000 ton per 
year Alcan plant at Coega materialize, this proportion would 
increase to about 6.4%.  Our BHP-B interlocutors noted that 
among the BHP-B smelters, Mozal was the most cost-effective and 
most likely to be expanded. 
 
¶15. (U) The South African smelters, Bayside and Hillside, are 
separate and different in technology and output and currently 
produce above design capacity (as does Mozal).  Output from the 
smelters include rod casting used by the electrical and steel 
industries, rim alloy bar used in the manufacture of wheels, 
extrusion billet for architectural and engineering profiles and 
for tubing, ingots for remelting and casting, and rolling slabs 
for milling into flat products such as sheet, plate and foil. 
Some 70% of smelter output is exported and, similarly, 70% of 
downstream products are exported as value-added products. 
 
¶16. (U) Bayside (previously Alusaf) supplies the bulk of the 
common alloys required by the local semi-fabricators such as 
extruders, rolling mills and casters.  It is the older of the 
two smelters and was established in 1969 as a so-called border 
industry to provide employment to the apartheid Bantustan 
(homeland) population.  Its design capacity was 50,000 tons per 
year of aluminum metal.  Ownership of Alusaf was shared between 
the state-owned Industrial Development Corporation (30.7%), the 
Swiss aluminum company Alusuisse (23%), and Gencor, the 
forerunner to BHP-B (46.3%).  First metal was poured in 1971 and 
since then the smelter has been expanded to the current annual 
design capacity of 180,000 tons.  While Bayside's annual 
production is more than 200,000 tons, it also imports some 
80-140,000 tons of liquid metal from Hillside.  Because it was 
initially South Africa's only aluminum smelter, it was designed 
to produce a wide range of products for input to downstream 
industries. 
 
¶17. (U) Bayside products include rod for electrical conductor 
applications and for de-oxidizing steel, billets for the 
extrusion sector, rim alloys for wheel manufacturers (40,000 
tons per year), and rolling ingots for slab, sheet and foil 
producers.  Bayside also has its own anode casting facility for 
the manufacture electrodes to supply power to aluminum pots. 
All Bayside's output goes to local semi-fabricators.  In 2005, 
the semi-fabricator's produced some 260,000 tons of value-added 
products of which 70% was exported. 
 
¶18. (U) Plans to expand Bayside's capacity to 250,000 tons are 
awaiting the availability of a guaranteed supply of power. 
South Africa's 4% growth in power demand has impacted on Eskom's 
(power utility) ability to guarantee an uninterrupted supply of 
electricity.  The smelter currently requires a 350 MW 
electricity supply.  Bayside's expansion capability is limited 
by old technology (1 ton aluminum per pot per day verses 
Hillside's 3 tons per day) and high costs (in the third quartile 
of global smelter costs).  It probably needs to be totally 
re-engineered and re-built or replaced by the proposed new 
smelter (decision pending) at Coega on the Eastern Cape. 
Bayside's product is priced at the London Metal Exchange (LME) 
spot price plus local premiums. 
 
¶19. (U) The Hillside smelter poured its first metal in 1996 and 
had a capacity of 295,000 tons per year.  In 2001, this was 
increased to 507,000 tons and then to 705,000 tons in April 2006 
by the addition of half a potline.  Hillside (and Mozal) is a 
modern, state-of-the-art plant and is the tenth lowest cost 
smelter in the world (Mozal is rated the third lowest cost 
smelter).  It is currently producing in the range of 700,000 
tons per year of T-bar, billet and ingot, most of which is 
exported (140,000 tons to the United States and the rest to 
 
JOHANNESBU 00000467  004.2 OF 007 
 
 
Europe) with a small proportion going to local fabricators and 
some 80-140,000 tons of liquid metal to Bayside. 
 
¶20. (U) Hillside has two-and-a-half potlines, each requiring 400 
MW of power (a total of 1,000 MW for the plant) and a total of 
600 pots, each producing about three tons of aluminum per day 
(compared to one ton per day at Bayside).  The plan is to expand 
production by 2010 but is dependent on the availability of a 
sufficient and stable supply of power - during the past year 
both Bayside and Hillside smelters have had forced power 
interruptions.  The current high demand for power has forced 
Hillside into a load-shedding agreement with Eskom to go 
off-power for one to a maximum of two hours per day during peak 
demand.  A power outage for longer than this causes 
inefficiencies in production and beyond four hours could cause 
metal to 'freeze' in the pots.  Hence rumors that BHP-B is 
looking to secure its own power supply - possibly a coal-fired 
generation plant using fine coal discards from the Richards Bay 
Coal Terminal.  Hillside employs 1,160 permanent staff and 1,500 
contractors. 
 
¶21. (U) South Africa's conversion profile for alumina is similar 
to that of the western world, namely, 52% rolling products, 13% 
secondary smelters, 13% extrusion profiles, 11% wheel plants, 7% 
rods, and 4% deoxidizing products. 
 
Semi-Fabricators and Manufacturers 
---------------------------------- 
¶22. (U) South Africa has four major companies that operate a 
number of semi-fabricating plants.  These produce aluminum metal 
in the shapes and qualities required by downstream 
manufacturers.  Semi-fabricators include secondary smelters that 
produce metal from scrap, and extruding and rolling plants that 
produce profiles and flat products.  Further processing is 
carried out by a variety of downstream wheel casters, 
manufacturers and service providers to produce value-added 
finished goods. 
 
¶23. (U) The country's major semi-fabricator is Hulett Aluminium 
Ltd, 60%-owned by Anglo American, South Africa's biggest and the 
world's fourth largest diversified mining company.  Hulett owns 
Hulett-Hydro Extrusions, which operates two extrusion furnaces 
of different sizes and produces about 20,000 tons per year of 
profiles.  Other extrusion plants in other centers produce an 
additional 33,000 tons per year.  Hulett also owns Hulett 
Aluminium (Rolling), which operates the only two rolling mills 
in the country and produces 200,000 tons per year of hot- and 
cold-rolled plates and sheets.  For flexibility, the plant 
operates seven furnaces in batch mode on a 362-day by 24-hour 
schedule.  Hulett is located in Pietermaritzburg, the capital 
city of KwaZulu/Natal, and lies some 100 kilometers west of 
Durban.  Hulett also has an extrusion plant and manufacturing 
facilities in Cape Town and Johannesburg. 
 
¶24. (U) In addition to the smelters that produce metal from raw 
materials, South Africa has fourteen secondary smelters that 
produce aluminum from scrap metal.  Some 60,000 tons of scrap 
are collected annually of which about 50% is exported and the 
rest melted locally.  The resultant metal is of the same quality 
and has the same properties and uses as primary metal. 
Processing of scrap requires only 5% to 7% of the power input of 
the original metal and is therefore in great demand and fetches 
a high price.  Consequently, the local industry has to pay 
international prices for scrap and would like to see government 
put restrictions on its export.  Africa has a number of other 
secondary smelters located in Egypt, Ghana, Kenya, Nigeria, 
Tanzania, Uganda, Zambia and Zimbabwe, but only Egypt has any 
significant output. 
 
¶25. (U) The production profile for value-added aluminum products 
produced in South Africa is 24% automotive, 24% light and heavy 
engineering, 21% packaging, 14% electrical, 7% deoxidizing rod 
and powder, 2% consumer durables, and 8% other uses.  A major 
difference - compared to most other countries where beverage 
cans are entirely made from aluminum - is that in South Africa 
the beverage can cylinder and bottom are made of steel and only 
the top section is aluminum.  The industry is striving to 
capture this very lucrative market. 
 
Strengths and Weaknesses of the Industry 
---------------------------------------- 
¶26. (U) The South African aluminum industry is well developed 
and a major contributor to the economy.  During 2005, primary 
and semi-fabricated aluminum sales amounted to some 920,000 tons 
valued at about $1.7 billion, of which exports accounted for 70% 
by mass and value.  All plants are currently working at full 
capacity and have plans to expand production after 2010 when an 
adequate supply of reliable power is seen as likely to be 
 
JOHANNESBU 00000467  005.2 OF 007 
 
 
available.  Local downstream manufacturers provide for nearly 
all the various market sector requirements. 
 
¶27. (U) Additionally, local smelters provide most of the alloys 
required by the automotive, building and construction, 
engineering and fabrication, mining, packaging, and transport 
sectors as well as for the wheel and cable industries and a 
variety of other niche industries.  Because of the relatively 
small size of the local market and wide variety of products 
demanded, the industry has developed the expertise to produce 
efficiently over short production runs. 
 
¶28. (U) The construction of large primary metal smelters in 
South Africa (and the region) was predicated on the availability 
of a cheap and reliable supply of electric power.  During the 
1980's and 90's, electricity utility Eskom had a surplus of 
generation capacity and offered discount and risk-sharing deals 
to bulk users.  Since early 2000, the upturn in economic 
activity increased electricity demand to 4% per year (from the 
planned 2.8%).  This caused a rapid depletion of the excess 
capacity, to the extent that Eskom is currently battling to meet 
peak demand.  Eskom's supply/demand safety margin is currently 
below 10% (desired standard is 15%) and this situation is likely 
to continue until new capacity (under construction) starts to 
kick in over the next few years.  As a result, planned 
expansions at the three regional smelters - and filtering down 
to the semi-fabricators - could be delayed (or relocated 
elsewhere). 
 
¶29. (U) Further weakness and threats include: cheap imports of 
aluminum products from China and the Far East, rising price of 
inputs and scrap metal, competition for new production from 
Australia, Jamaica and possibly Guinea, where BHP-B is 
negotiating the construction of a $100 million alumina refinery 
project.  While the ability of the South African aluminum 
industry to export is well developed in niche and general 
industry markets, the problems lies with its inability to 
compete on price in certain export sectors (partly due to strong 
Rand that prevailed until a few months ago) or to produce the 
volumes demanded for certain products and components.  This 
limits the economic potential of the industry.  Industry 
believes that real volume growth depends on exports and 
consequently on longer production runs in order to compete in 
the export market. 
 
Future Plans for the Industry 
----------------------------- 
¶30. (U) As mentioned above, the future of the aluminum industry 
in South Africa (and the region) depends on growth and exports. 
Mooted plans include the addition of a new potline at Mozal 
(250,000 tons), a half potline at Hillside (200,000 tons), 
expansion by 50,000 tons at Bayside, the possible construction 
of a new plant in the Eastern Cape (starting at about 250,000 
tons per year), and the announced 50,000 ton expansion of the 
Huletts rolling plant.  Smelter capacity increases will likely 
await the availability of guaranteed power from Eskom, which 
could be at a higher price. 
 
¶31. (U) Note: On November 15, the media reported that Alcan, the 
world's second largest aluminum company, had concluded an 
electricity supply agreement with Eskom to pave the way for the 
establishment of a $2.7 billion aluminum smelter at Coega in the 
Eastern Cape.  Agreements with Eskom and the Coega Development 
Corporation (as landlord), will be signed next week.  The 
project calls for the construction of a 700,000 ton per year 
smelter, beginning in 2008 and with first metal poured in about 
¶2011.  The signing will conclude the drawn-out negotiations that 
began with Pechiney of France at the turn of the decade and 
continued with Alcan after the latter's takeover of Pechiney 
three years ago.  Financing and the ownership structure has 
still to be finalized.  End Note. 
 
GSP and Trade in Aluminum Products 
---------------------------------- 
¶32. (U) Hulett Aluminium Marketing Manager Lloyd Darby said 
their products were highly competitive in the U.S. market and 
that Hulett Aluminium had the option of growing this market. 
Although its total output was just 2% of the global market, 
Hulett had a market share of between 5% and 10% in some product 
lines.  He said that the U.S. was 40% of their export market, 
and exports constituted roughly 70% of sales.  Darby noted that 
the local market tended to be more profitable for them, and more 
advantageous in terms of lead-times, given that shipping to the 
U.S. generally took four weeks.  Additionally, 2005 exports to 
Africa were less than 10% of total shipments and, according to 
the Aluminium Federation of SA, are unlikely to increase 
substantially. 
 
 
JOHANNESBU 00000467  006.2 OF 007 
 
 
¶33. (U) Darby expressed concern that if South Africa was removed 
from the GSP program, it would have an impact on their business. 
 He noted that Hulett had already made representations to the 
Department of Commerce.  Darby also said that there were no 
duties on processed aluminum into South Africa.  Hulett, said 
Darby, was one of very few companies to have successfully 
defended an anti-dumping charge brought by Alcoa in 2004, which 
resulted in fines against Russian and Chinese suppliers.  Alcoa 
later purchased the Russian firm, according to Darby. 
 
Occupational Health and Safety 
------------------------------ 
¶34. (U) ConJoburg personnel were able to tour both Aluminum 
fabrication plants in Pietermaritzburg, after donning a full set 
of protective gear.  The fabricating plants were clean, well 
ventilated, and well organized, with walkways and off-limit 
areas clearly marked.  In both plants, workers were kitted out 
in full protective gear, including safety glasses or visors and 
ear protection.  Hulett-Hydro Extrusions prominently posted 
signs that indicated how many shifts it had managed since its 
last workplace accident. 
 
¶35. (U) Similarly, both BHP-B smelters were immaculate with 
clearly defined levels of hazard by area, considerable signage 
on safety, and minimal human exposure to metals being processed. 
 All employees wore extensive safety gear, and vehicles were 
fitted with a variety of alarms.  Bayside managers noted that 
the recent incursion onto the plant property by two crocodiles 
from a nearby wildlife preserve had posed a short-term safety 
hazard, until a local wildlife officer was able to remove them. 
Hillside managers noted that their plant, and Bayside, was 
highly unionized with 85% of operators belonging to either the 
National Union of Metalworkers South Africa (NUMSA) or to 
Solidarity. 
 
HIV/AIDS and Corporate Social Responsibility programs 
--------------------------------------------- -------- 
¶36. (U) Hulett-Hydro managers had no specific figures on 
HIV/AIDS in their facility but noted that they ran HIV/AIDS 
prevention campaigns and offered free ARVs.  It was "not a huge 
problem yet", but stigmatization was an issue, and adherence to 
medication protocols was "not good."  A manager at Hulett 
Aluminium also emphasized that HIV/AIDS was a significant 
concern, noting that they had lost a manager to the disease in 
the past year. 
 
¶37. (U) Both Bayside and Hillside Smelters had programs in place 
to test and assist HIV/AIDS affected employees and assigned 1% 
of their profits to community projects.  Hillside General 
Manager Gustav Griessel said that social responsibility programs 
were focused on clinics, schools and crhches, as well as 
projects encouraging job creation.  Both smelters had HIV/AIDS 
prevalence levels of about 13% of their tested staff, and 
thought prevalence levels among their workers were stable 
although the province is believed to have the highest prevalence 
of HIV/AIDS in South Africa.  According to Griessel, the 
smelters together had spent in excess of R40 million 
(approximate $7 million) on community social programs over the 
past several years, in addition to spending on workplace 
HIV/AIDs programs. 
 
Skills Shortages 
---------------- 
¶38. (U) Hulett-Hydro, which forecast 5-8% growth rates for its 
sector, noted the "huge" skills shortage" for industrial 
engineers in South Africa.  Its comments were echoed by managers 
at Hulett Aluminium, who had recently lost a number of its 
engineers and managers to Australian competitors.  Bayside and 
Hillside also confirmed that poaching by Australian competitors 
was having an impact on their ability to retain staff. 
 
Environmental Impact 
-------------------- 
¶39. (U) Environmental controls seemed to be in place and working 
well.  Air quality in Pietermaritzburg, where the two Hulett 
fabrication plants are located, appeared excellent, and managers 
confirmed that monitoring systems were in place.  Monitoring 
systems were also used and publicly reported on in Richards Bay. 
 Hillside GM Griessel noted that the agreement reached with the 
community prior to constructing Hillside required that total 
emissions of both smelters not exceed those of Bayside prior to 
its renovation; both smelters now produced well under Bayside's 
prior emissions levels.  Because Hillside still had problems in 
meeting sulfur emissions targets, it currently imported 
low-sulfur pet-coke from the U.S Gulf and India. 
 
International Aluminum 
---------------------- 
 
JOHANNESBU 00000467  007.2 OF 007 
 
 
Production of Bauxite and Alumina 
--------------------------------- 
¶40. (U) During 2005, more than 160 million tons of bauxite were 
mined and reserves estimated at about 23 billion tons from a 
resource base of 33 billion tons.  Of these, some 70% of 
reserves and production occur in only four countries.  The major 
deposits of bauxite are found in a wide belt around the equator. 
 According to the USGS, the major resources are located in South 
America (33%), Africa (27%), Asia (17%), Oceania (13%), and 
elsewhere (10%).  Recorded United States bauxite production was 
nil with reserves of 20 million tons.  Major bauxite-producing 
countries were: 
 
Country           Production         Reserves 
                 (tons x 1000)     (tons x 1000) 
Australia           56                  4,400 
Jamaica             14                  2,000 
Brazil              20                  1,900 
Surinam              4                    580 
Venezuela            6                    320 
Guyana               2                    700 
Guinea              19                  7,400 
India                9                    770 
China               15                    700 
Russia               5                    200 
Others              12                   4,300 
Total              162                  23,000 
 
¶41. (U) While the bulk of bauxite production takes place in some 
five countries, global production of alumina is more widely 
distributed in more than 30 countries, mostly using imported 
bauxite.  Global production for 2005 was 56.2 million tons 
verses plant capacity of 59.4 million tons.  Production for 2006 
is projected to be 63.4 million tons, an increase of nearly 13%. 
 Regional production was from: 
 
Region           Alumina Production         Percent 
                   (tons x 1000) 
Africa (Guinea)         740                     1 
North America         6,930                    12 
Latin America        13,190                    23 
Asia                  5,390                    10 
W Europe              6,560                    12 
E and Central Europe  5,430                    10 
Oceania (Australia)  17,920                    32 
Total                56,160 
Note: Independent statistics show Chinese production (grouped 
under Asia above) as 8.51 billion tons. 
 
Production of Aluminum 
---------------------- 
¶42. (U) During 2005, primary aluminum production was recorded 
(according to the USGS) by 44 countries.  However, this number 
could decrease in the future as aluminum smelters, which require 
huge amounts of energy, could succumb to increasing fuel 
shortages and rising prices.  Only producers with access to 
abundant, cheap and reliable electricity are likely to survive 
in a high-cost energy environment.  The top ten producers 
accounted for 75% of the total aluminum output.  Since 2001, 
total production has increased at an average annual rate of 7% 
and could exceed this for 2006.  Global prices have increased by 
about 60% over the past two years, from $1,700 per ton to the 
current $2,700 per ton.  Most smelters produce aluminum of 99.7% 
purity for most applications.  However, a super purity product 
of 99.99% aluminum is used in special applications requiring 
high ductility or conductivity.  The top eleven primary aluminum 
producers are: 
 
Country       Tons(millions)    Percent     Rank 
China             7.80            24         1 
Russia            3.65            11         2 
Canada            2.89             9         3 
United States     2.48             8         4 
Australia         1.90             6         5 
Brazil            1.50             5         6 
Norway            1.37             4         7 
India             0.90             3         8 
South Africa      0.85             3         9 
Bahrain           0.75             2        10 
Dubai(UAE)        0.75             2        10 
Rest              7.06            22 
 
¶43. (U) Note:  On September 18 and 26 to 28, Labor, Minerals and 
Energy Officer and FSN Resource Specialist visited the Aluminium 
Federation of Southern Africa in Johannesburg, Hulett Aluminium 
Limited's semi-fabrication facilities in Pietermaritzburg, and 
BHP-Billiton's aluminum smelters at Richards Bay (both in 
KwaZulu/Natal).  End Note. 
COFFMAN##