One of the leading manufacturers of primary steel, Alcan Inc. warned of a rise of 20-25 % in costs on its project worth US $1.5 billion for the expansion & up gradation of Gove, its north Australian alumina refinery.

According to Jacynthe Cote, Alcan Bauxite & Alumina CEO, the increase is observed due to severe conditions in Australian construction market along with necessary integration work as project nears its competition. However, she said, that returns on the Gove expansion project would be bright.

The project is about to complete with around 90% of work already finished. This will see an increase in the capacity of Gove refinery from 2 million tons to 3.8 million tons.

The project, about 90 percent complete, will increase the refinery's capacity to 3.8 million tons a year from about two million tons. This expansion is also expected to bring down costs to around US $ 30 per ton.

"The US aluminum industry relies heavily on imports to meet its demand. With the continuing rise in imports, the country is becoming more and more dependent on them. Aluminum is chiefly imported from a number of countries such as china, Australia etc where the cost of production is relatively less. This makes imported aluminum cost-effective, thereby posing a significant challenge for the domestic producers," as per the report "US Aluminum Market (2006)" published by RNCOS.

Alcan deployed a PAM (pre-assembled module) strategy in the beginning of the expansion according to which majority of components of the refinery were produced in low-cost nations. Cote said that PAM worked to some extent but was not able to balance all costs.