Steely Agenda: Gulf States Aim High In Aluminium Market

The big story in regional aluminium production is the commencement of operations of the joint venture between Saudi Arabian Mining Company and US market leader Aluminium Company of America (Alcoa) in December 2012. This is the sixth smelter to come into operation in the GCC region. AFP quoted Ma’aden President and CEO Khalid al-Mudaifer as saying, “Today we see the first aluminium produced in Saudi Arabia, and the launch of a new industry.”

The plant will be located at Ras al-Khair in Eastern Province. The Saudi aluminium joint venture is owned 74.9 per cent by Ma’aden, with the rest held by Alcoa. AFP said the joint venture was agreed in 2009, and that the complex cost $10.8 billion to construct. The smelter will have an initial annual capacity of 740,000 metric tonnes per annum (mtpa), and will also feature a bauxite mine with an initial capacity of four million mtpa, and an alumina refinery with an initial capacity of 1.8 million mtpa.

The five other smelters of the GCC produced almost 3.75 million tonnes of aluminium last year, or about nine per cent of global production, the Gulf Aluminium Council said [Table 1]. This was up from the almost 3.5 million tonnes produced in the region in 2011. Dubai Aluminium (Dubal) remains the region’s largest producer, although the plans of Emirates Aluminium (Emal) to bring capacity up to 1.3 million mtpa in 2014 will make it the largest single-site production line in the world (see box for the recent merger announcement between Dubal and Emal).

The Gulf’s quest to become the world’s leading aluminium production region is on track, says Saeed Al Tayer, vice chairman of Dubal and managing director of Dubai Electricity and Water Authority, speaking as he inaugurated the Aluminium Middle East 2013 event at Dubai World Trade Centre.

“What we are seeing here in the Gulf… is growth. Also the [natural gas] fuel is available. There is no reason that the Gulf cannot become number one in the industry. The aluminium business is the backbone of [regional] industry. We are seeing international companies present here today. This indicates that investment in the region is growing, especially in the aluminium industry.” Al Tayer puts GCC production at seven per cent of the global total and praised Dubal’s performance in 2012 as “great.”

Emirates Aluminium (Emal) began operations in 2009 and by 2012 was producing 800,000 tonnes a year, expected to rise to 1.3 million mtpa in 2014, when a second line becomes operational. On completion, Emal will become the largest greenfield, single-site aluminium smelter in the world, says Salman Abdulla, Emal’s vice president of operations. The plant took 90 million man-hours to construct and involved 60 different contractors. Emal reached the one million tonne production mark in November 2011, and in February 2013, doubled total cumulative output to two million tonnes.

Emal is currently a 50-50 joint venture between Dubal and Mubadala. “Dubal brings all the technical know-how. They are always there for us,” says Abdulla. “This is the strength of Emal: our own people, our own technology, starting it up. Emal is the biggest project between Dubai and Abu Dhabi.”

Abdulla is impressed with the government’s efforts to drive forward productivity at the new Khalifa Port and adjacent Khalifa Industrial Zone Abu Dhabi (Kizad). “There is huge amount of downstream [activity] today in UAE. This is now focussing on how to increase efficiency and be closer to the smelter to reduce transport and other costs. There are inefficiencies, so that’s why they are coming in closer in Kizad. Downstream, we have a number of MoUs. It’s a very attractive place for anyone, to be in Abu Dhabi. Your energy is secure, next to the biggest smelter in the Middle East. What else could you ask for?”

At the event, Cast Aluminium Industries (CAI), a UAE-based midstream aluminium producer and recycler announced that it had become the
latest investor at Kizad. It specialises in aluminium dross recycling and other aluminium-related waste materials produced by aluminium smelters. Aluminium is one of 10 industrial clusters planned at the free zone.

“Downstream, Kizad is targeting rolling mills, extrusions, castings, forgings and other downstream manufacturers in areas such as construction, transportation, packaging and engineered metal products. Additionally Kizad is consulting potential tenants about their requirements for service suppliers such as dross recyclers that require easy access to a smelter,” says Kizad’s website.

Although GCC aluminium output is gradually rising, when compared to global output, Abdulla is quick to quell bullishness on the GCC aluminium industry’s prospects. “The GCC is not the world’s biggest aluminium producer,” he says. “We are big player, but Rusal Alcoa… they are big boys. On a global scale, we are very small. What we are proud of is that this is a new frontier. We are in no way in competition with those [players]. We are developing our nation towards new frontiers, such as different types of alloys. We are not saying that [the region] is the biggest; we are not.”

Emal is not the only company in the GCC in expansionary mode. Qatalum, a 50-50 joint venture between Qatar Petroleum and Hydro Aluminium of Norway is also looking to the future. “The idea is there, but we haven’t decided so far whether we will go ahead with the expansion or not,” said a Qatalum official. “Energy in the GCC is cheaper, compared to other regions like Europe or North America. I believe that the GCC or the Middle will be the [future] hub of production of aluminium.”

He is bullish about Qatar’s economic fortunes, after the tiny GCC country won the right to host the 2022 FIFA World Cup. “What we saw in the April budget was encouraging. [The government] will spend a lot on infrastructure, education, and health, although the focus is on infrastructure.”

Although global economic headwinds show signs of persisting in 2013, global aluminium production has been steadily increasing, with a total of 41 million metric tonnes in 2010, rising to 45 million in 2012 [See Table 2]. Daily output rose from 113 metric tonnes (mt) in 2010 to 124 mt in 2012. In the first quarter of 2013, this figure had risen to 128 mt. However, the GCC has a long way to go to become the world’s largest producing region by volume, as in 2012, China, with over five times the GCC’s output, North America and East and Central Europe all had higher production levels last year.