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Ecuador 2015 | INDUSTRY | FOCUS: ALUMINUM

The production of aluminum is an increasingly key industry in Ecuador's expanding economy. The government is doing its utmost to promote the sector, with its integral plan for the development of key natural resources-based industries.

According to the Coordinating Ministry of Strategic Sectors, the most significant cost in the production of aluminum is that of electricity—and this is remarkably low in Ecuador, making it a high competitive country for the metal's manufacturing. China is the world's number one aluminum consumer (around 50% of the total amount), while Brazil is the principal producer of alumina (the metal from which aluminum is produced), and also one its main buyers. Both countries have an excellent diplomatic relationship with Ecuador and are strengthening their trade relationships with the country considerably.

The production of aluminum starts with the raw material bauxite, mined from a few meters below the ground. This material is then transported to a plant to be ground, before the alumina is extracted through refining. Then the alumina is transferred to a metal plant where it is transformed into the aluminum that shapes so much of modern life.

Alumina is an essential element for the production of this material. In order to produce 1 ton of aluminum, 2 tons of alumina are needed. This metal can be imported from Brazil or Jamaica allowing transportation costs to remain low. With the development of smelting plants in Ecuador, other companies would most likely arise, producing final products like cans, plane pieces, automobile and construction materials, among others. Ecuador currently imports finished aluminum products such as tubes, bars, and wires for around $129 million, while it just exports around $33 million. With the development of the industry, this balance would be considerably reduced.

The current state of industry in the country is still underdeveloped and hungry for investment. Some local companies have been in the market for several years and are demanding the government to promote the industry in order to keep increasing a business that never stopped growing. This is the case of Corporación Ecuatoriana de Aluminio (CEDAL), which has already suggested that the local government motivate the development of a plant for the production of aluminum ingots, which they are at the moment importing from abroad.

The government is planning to participate in discussions in order to promote the private and public collaboration, given the increasing interest of foreign companies to make alliances to develop basic industries in the country. It is in this context that some opportunities have started to arise. In a visit to China, seeking investments for the government plan to develop strategic sectors, Ecuador signed an agreement with the aluminum giant Chinalco, the first producer of this material in the country and the third supplier in the world. In this agreement the company commits to cooperate in the construction of a new production plant in the Latin-American country.

As a result of this new approach to the aluminum industry, the government of Ecuador is expecting a decrease of $174 million in exports, as well as the generation of more than 1,000 direct jobs and a total of $987 million in exports per year. At the same time, the development of this industry in the country would immediately have a positive impact on other companies in different sectors like the automobile and the construction, which could immediately reduce their costs.

Due to its importance to the economy, the development of a sector such as aluminum could shape a new economy for the country in which the use of natural resources in manufacturing become the main economic strength. In fact, other materials such as plastic, steel, or copper are also included in the government's plan to develop new strategic industries in the country and could follow a similar path in the coming years.