TIRANA, Feb. 9 – After the oil industry, the sharp cut in international commodity prices is also affecting the country’s mining industry which is one of the top exporters and employs thousands of people nationwide, especially in northern Albania.
Chrome export prices are reported to have currently dropped as low as $70 per metric ton compared to $220 in 2014, with a negative impact on dozens of small companies and their workers. Producers complain they have been forced to cut production and staff as the current prices don’t even meet their extraction and transport costs to Durres Port, from where it is exported mainly to China.
“The job cuts will have a significant negative impact on the economic and social situation of the local residents. Some businesses are on the brink of closure while a considerable number of operators with 15 to 75 workers are cutting staff,” says Asllan Daxha, of the Bulqiza Employment Office.
The situation is more critical in the Bulqiza chromium mine and Fushe-Arrez cooper plant where hundreds of jobs have been cut to handle the sharp decline in international prices. Mining is one of the few job opportunities in the two poor northern small towns of Bulqiza and Fushe-Arrez, with thousands of households relying on it to make a living.
Earlier this year, the Albanian government said it was considering incentives to the country’s key mining industry after representatives of the mining industry appealed for a review of reference prices on chrome and copper, the two key minerals Albania produces and exports.
Mining royalty in Albania currently ranges from 4 to 10 percent of sale prices compared to 2 percent in November 2007. The royalty levied on chrome and copper stands at 6 percent, but producers claim they suffer extra costs due to humidity of the mineral which is not taken into consideration. They also claim the 6 percent royalty on domestic sales is collected after the 20 percent value added tax which increases their costs.
Energy Minister Gjiknuri has said the critical situation the mining industry is facing, is a result of a 30 percent cut in international base metals in the past couple of years and a slowdown in the Chinese economy, which has been the main destination of Albanian chromium.
The mining industry had a volume of $175 million in 2014 with a key contribution to the country’s economy and employment in some remote areas.
The situation has further aggravated as starting this year, the application of the mining royalty on minerals such as coal, bitumen, and construction materials will be made at fixed rates based on their quantity in tons and cubic meters to compensate for lower revenue from the sharp cut in base metal prices. The changes are expected to bring an extra 400 million lek (€2.85 mln) in income to government, according to the 2016 budget.
Last September, a Turkish-Chinese consortium operating a copper plant in the northern Albanian district of Puka announced the suspension of its activity for one year due to a sharp decline in international prices, leaving hundreds of workers jobless.
The cut in commodity prices has also affected country’s largest steelmaker, Turkish-run Kurum steel plant in Elbasan, central Albania, which cut some 200 jobs last September.
In its latest Commodity Markets Outlook report last January, the World Bank said metals prices are projected to decline 10 percent, following last year’s 21 percent drop, due to weaker demand prospects in emerging market economies and new capacity. Downside price risks include a further growth slowdown in China and larger-than-expected production associated with cost reductions and exchange rate depreciation in producing countries, says the report.
With international oil and base metal prices at a record low affecting the country’s exports, the Albanian government has been suffering a sharp cut in income from the mining royalty, the key tax Albania collects from oil and mining production in the country.
The extractive industry is expected to continue contracting by 1.9 percent in 2016 before revering to positive growth rates of 0.8 percent and 5.7 percent in 2017 and 2018, says the Albanian government in its 2016-2018 programme of economic reforms.
Mining has attracted a series of foreign investments to Albania including Canadian, Austrian, Turkish, and most recently Chinese ones.
Since 2013, the country’s biggest chromium mine of Bulqiza has been operated by Albanian-owned Balfin Group. The Bulqiza mine employs 660 people and currently has an annual output of 82,000 tonnes of the lumpy ore and fines.
