Hulamin CEO Richard Jacob said on Monday US President Donald Trump’s
trade war had effectively locked Chinese competitors out of that market, which
accounts for 22% of the Pietermaritzburg-based company’s sales.

But while the trade spat had buoyed prices and opened up a number of
“niche opportunities” for Hulamin in the US — despite the imposition
of a 10% import duty on its products — Jacobs said the company faced greater
competition from Chinese suppliers in its other markets.

“Given that 78% of our volumes are in our domestic market [SA], in
Europe, Australia, Southeast Asia and South America, the fact that Chinese
capacity can’t sell in the US means that they’re now a bit more hyperactive in
the rest of our markets, so that’s where the biggest concern is.

“There are hyper levels of what we would call dumping of Chinese
product … and that’s really what’s going to play out over the next 12 to 18
months.”

Hulamin’s US clients include electric car maker Tesla, which has a
multiyear contract to buy battery box base plates from the JSE-listed company.

Jacob said Hulamin was in talks with other electric vehicle suppliers,
which tend to favour lightweight and durable materials such as aluminium.

“We have quite unique capabilities and we’re in discussions with a
range of electric vehicle producers in the East and in the West. We’ll continue
to explore the opportunities that come before us.”

Aside from issues beyond its control, including the trade war and
volatile rand, Jacob said Hulamin was “in good shape” going into the
second half of 2018. “From a trading and operational point of view, our
customers are happy with us, we’ve got a full order book for the balance of the
year and solid dollar selling prices.”

Hulamin said on Monday its turnover rose 3% to R5.3bn in the six months
ended June, even as growth was restrained by the stronger rand. Most of its
sales are dollar-based while costs are largely denominated in rand.

Earnings before interest and taxation fell 66% to R99m because of
currency movements and “metal price lag”, whereby the rand cost of
aluminium changes between purchasing aluminium and selling end-products.

But Jacob said the aluminium company had posted “three successive
years of quite positive cash returns”.

“We’ve returned about R800m worth of cash over the past five halves
and we plan to get that to over R1bn by the end of this year.”

Even though Hulamin’s order book was full for the rest of the year,
Jacob said the firm had no immediate plans to splash out on expanding capacity.

“While we’re still some way off our long-term cash-return targets,
we’re probably not going to spend big capital. We’ve done a couple of capital
investments in the recent past, and we’re very focused on getting returns from
those, the most recent of which is the significant investment in
recycling.”

The company also planned to use more natural gas in its energy mix, he
said.

Source: Business Live