Bosnia aluminium producers seek govt aid to survive

* Plead for access to more and cheaper loans soon

* Revenues substantially down, raw material costs up

SARAJEVO, March 10 (Reuters) - Bosnia's aluminium producers and processors, the country's top exporters, warned on Wednesday that many of them will not be able to survive unless the government helps them get access to more and cheaper funds soon.

"The water has risen to our neck and some of us will drown if the government fails to help us," said Predrag Covic, general manager of the Kapis cable plant and head of the aluminium industry association, which groups 12 Bosnian companies.

The base metal sector is key in the small Balkan country, impoverished after the 1992-95 war, but the global economic downturn last year has triggered a 25 percent fall in output and halved its exports. The metal sector accounts for about half of the country's overall exports.

Covic said the aluminium sector's revenues had declined substantially as prices of final products on western markets had fallen, while raw material prices had risen at the same time. The sector directly and indirectly employs 5,000 workers.

"We still have steady demand but we lack trading capital. The situation on world markets is changing and our suppliers and buyers do not accept deferred payment any more," he said.

Covic called on the government to either set up a development fund to provide trade financing or introduce mechanisms that would kickstart bank lending.

Bosnia's commercial banks, which are 80 percent foreign-owned, have kept a lid on lending since last year, when the value of commercial loans fell by three percent or 404 million Bosnian marka ($282.5 million).

"The situation is very serious, if we do not get loans at more favourable terms, we will be forced to further cut production and number of our employees and the state will suffer as well," said Covic.

Bosnia's sole aluminium plant Aluminij Mostar called on the government to use its control over electricity prices to supply the company on more favourable terms.

"The price of electricity for Aluminij in 2005-2009 was increased by 62 percent, in contrast to a 39 percent rise for other consumers," Vlado Bozic, an adviser to Aluminij's general manager said.

The smelter produced 96,000 tonnes of primary aluminium in 2009, down from 123,000 tonnes in 2008. Its exports fell by a third to around 260 million marka last year. ($1=1.43 Bosnian marka) (Reporting by maja Zuvela; Editing by Knut Engelmann)