The closure puts thousands of jobs at the factory, its contractors and suppliers at risk.

A file photo of a factory in Bosnia.
A file photo of a factory in Bosnia. (AP)

Bosnian aluminium smelter Aluminij will file for bankruptcy after closing on Wednesday, putting at risk some 10,000 jobs, including contractors and those at the processing firms it supplies.

The smelter was disconnected from the power grid just after midnight over debts incurred because of high electricity and alumina prices, officials said.

The asset is one of Bosnia's biggest exporters, employing 900 workers in the southern town of Mostar.

Nermin Dzindic, energy minister in the government of the autonomous Bosniak-Croat Federation, Aluminij's biggest single shareholder with a 44 percent stake, said the company would file for bankruptcy.

Small shareholders hold another 44 percent stake in the firm and the Croatian government the rest.

The closure followed a failed attempt to find a strategic partner for the company, which has total debts of nearly $219 million.

Dzindic told reporters his government planned to continue talks with potential strategic partner Emirates Global Aluminium and seek new investors for the firm.

More than 70 percent of the company's debt is owed to state power utility EPHZHB, which in June stopped supplying it with power at favourable prices agreed with the government last December.

The news comes as the country is already struggling to revive its long-stalled economy. 

The smelter has since been forced to buy day-ahead electricity, which is more volatile than long-term power contracts.

The federation government has refused to subsidise power for the smelter, saying it should purchase it on the open market. It has been in talks with several firms about a possible takeover of the smelter and its restructuring.

"What we need now is a detailed analysis that will show if it is possible to restructure Aluminij into a company that will be self-sustainable and capable of operating under market conditions," Dzindic said.

The plant's closure will have little impact on the global aluminium market but will be a big blow to dozens of local metal processors in Bosnia and Croatia that rely on its supplies.

The metal sector is crucial to Bosnia, impoverished after the 1992-95 war, and accounts for about half of its exports.

Source: Reuters