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The brick industry last year faced a steady increase in production costs that, compared to 2020, were 70% higher.
The situation of Albanian producers
Difficulties for the producer sector and mainly those of the brick did not arise overnight. The whole of last year, with the post-pandemic developments in the global markets, has given a successive effect in several segments, which directly affect the brick industry. But what is the situation of this industry today?
“I want to summarize, in general, what happened to 70% of our production costs in the last year (2021):
- Pet Kok, or otherwise known as oil coke, in 2020 cost less, 16 lek per ton, without VAT, and today is 30 lek without VAT.
- Liquefied gas from 50 lek without VAT, now costs 132 lek per kg without VAT
- Electricity was 10 lek without VAT, now it is 20 lek without VAT
- Auxiliaries, such as pallets and plastics, have increased by 40% or more
- Meanwhile, wages that occupy a cost of not less than 20% of the production cost, due to lack of manpower and specialists have increased by not less than 20%. In total, the above elements make up all together, 90% of the cost of brick production.
In the conditions we are talking about, the cost of production compared to a year ago, has increased not less than 70% and the price as a result of these increases, has increased 50-60%, realizing a drastic decrease in profit margin, or to say, we are on the verge of survival “- says Mrs. Baraj.
The effect of rising costs has been transmitted in a chain to the increase in the price of products, leading to a significant decline in exports. To illustrate, in 2019, the company exported approximately 50% of production, while during 2021, exports did not exceed 15% of it.
Exports to Kosovo fall, the industry there is supported by the government
In recent years, the Government of Kosovo has had a positive approach towards the expansion of the brick industry in the country, reducing in this form the high imports from Serbia, but also affecting the imports it made in Albania. In fact, the price at which the Albanian product affects the Kosovo market is not competitive and this is related to the support that the Kosovo government gives to its industry.
“In contrast to Kosovo, where before 2016, the main line of generation of inert materials, and in particular, bricks, was the import from Albania and Serbia, specifically 80% Serbian product and 20% Albanian product, the government of Kosovo decided in 2016 to change course:
In order to increase investment in production, the Government of Kosovo has also changed tax policies. With the amendments made to the Law on Value Added Tax (VAT), which entered into force in the second half of 2015, production lines have been excluded from VAT.
According to the MTEF, this measure would improve the liquidity of domestic manufacturing businesses; in the medium term it would encourage the growth of private investment, domestic production and the creation of new jobs; and in the long run it would enable the gradual increase of the competitiveness of Kosovar businesses, also in the international markets.
In the context of not having a clear policy for the development and support of domestic production, today we are faced with the fact that Albanian bricks (KID – Alb Company, Edil Centro Brick Factory, Milis Bricks Lezha and Fushë-Krujë occupy over 80% of production domestic) have not at all competitive prices at least with the Kosovo product.
Unlike the Albanian government, fuels in Kosovo, oil coke have no carbon tax and excise tax, which means they have a cost 30% cheaper than “Made in Albania”.
In order to protect domestic production, Kosovo today has taxes on non-Kosovar products, as well as other facilities in terms of domestic product “- said Mrs. Baraj. The concern has previously passed to the government, before the approval of the fiscal package, but it seems that the authorities did not see fit to include any points.
Energy between the key problem and the solutions for the sector
The recent energy crisis is directly affecting all those in the liberalized market. Businesses that are connected to 35 kilovolt voltage have received from suppliers prices twice as high as they had before. Meanwhile, another 7,358 other businesses will enter the market as part of the government’s liberalization plan. The brick industry will again take another hit from the second phase.
“As for electricity, we have two sources, 20 kv and 35 kv and on average we have a bill of
10 million ALL per month, which corresponds to 17-20% of the cost (energy price 10 ALL per kw / hour). This year, according to the announcements of the government for free access to all energy sources, and the current prices of the electricity exchange, this item will at least occupy 30-35% of the production cost “, claims Mrs. Baraj, underlining that this will make the activity even more difficult.
Aspects that penalize the industry
In the conditions where the industry is located, even earlier it has addressed some requests to the government to alleviate the situation somewhat.
First, it is required that the electricity billing be done according to the usage packages. This means that in the third shift, as in all EU countries, to be billed with the lowest price (according to the Exchange).
Second, to remove the limitation for the photovoltaic system, but to be conditioned by the consuming and user capabilities of the business itself (which means if a manufacturing company consumes 2 MWh, it can never be limited to only 0.5 MW (as currently envisaged) today Law No. 7/2017 ‘On promoting the use of energy from renewable sources’) which limits the Albanian producer to the same levels of electricity production as the citizen.
Third, commercial banks should receive incentives from the Bank of Albania and the Albanian government to support Albanian manufacturing businesses, in this time of global crisis. Such a thing would enable lending at the lowest possible lending rates (countries in the region and the EU in terms of green energy production have well-structured policies to increase the initiative and support this industry with grants from the EBRD and the World Bank).
Fourth, it is required to immediately remove the scanning fee for all vehicles that have a value of less than 2,000 euros. For a vehicle with a total value of 1001 euros in total goods, 25 euros are paid for the scan, which is not performed and has never been performed.
Solutions that can be provided for the industry
There are five proposals the brick industry is proposing to the government, as measures that could somewhat alleviate its costs. Mrs. Baraj points out that these points have been sent to the authorities before for consideration, but there has been no reaction. But what are these points?
“First, the facilitation of investment conditions in photovoltaic systems: the production permit should be at least equal to the contract that the entity has with OSSHE. In our case, the contract is 1.7 MWh, normally that should be at least the permit for power generation.
Second, measures should be taken to exempt fuels, which are the main production costs in inert materials – cement and bricks, from the above-mentioned taxes, in order to make these products affordable.
Third, remove the vehicle scan (or make it really effective).
Fourth, to subsidize by the state the acquisition of specialists from school banks for a period of 6 months, a necessary deadline for the preparation of specialists in production lines in order to increase the number of Albanian professionals.
Fifth, the Albanian government, if it is to support the Albanian producer, must make an urgent national investment from Semani to Montenegro of the methane gas line supplied by TAP. This will greatly reduce production costs and the business is ready to invest in projects to bring gas to the manufacturing businesses.
This gas comes from Azerbaijan and goes to Italy. Why shouldn’t Albania also benefit from this. “Investing in the central gas line would significantly reduce the cost of production of our products and would make them competitive in regional markets,” said Ms. Baraj./ Monitor
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