By: The Quinnipiac University Economics Research Team, Nicholas Ciampanelli & Christopher Longchamp
The Slovakian aluminum market may look a little different by the end of next year. Slovalco, one of the nations largest aluminum producers, may close its doors. Following an increase in electricity prices, insufficient compensation from the national government, and higher prices on emission allowances, the company is reducing its net output by 20%. This will result in an annual fall in production from 160,000 tons to 128,000 tons of aluminum. The company may further cut its production since it currently consumes approximately 8% of the nation’s total electricity. Despite these anticipated price changes, the company cites that the fixed rates of compensation for their aluminum recycling initiatives from the Environmental Fund prompted their further struggle in navigating the market.
In the long-run, if Slovalco were to cease its operations, approximately 2,500 employees would be estimated to lose their jobs. Furthermore, Slovakia would be required to find substitutes to their domestic aluminum, ultimately importing it from the Asian aluminum market. Given that the price of electricity continues rising across the country, this outcome may be likely as the company struggles to maintain a profit as its compensation remains unchanged.