Norsk Hydro eyes Qatar to cut aluminium energy bills

 LONDON: Norsk Hydro, the world's third largest integrated aluminium producer, is looking to expand into the Middle East to pare its power costs, Chief Executive Eivind Reiten said yesterday.

"All our energies are focusing on expansion in the Middle East," Reiten said.

Norsk Hydro is concentrating on primary aluminium, with plans for a $4.5bn investment in a 585,000-tonne smelter in Qatar.
It made moves to divest its oil business late last year via a proposed merger with energy group Statoil, which is currently awaiting approval.

"We plan to expand this smelter further and double production in Qatar...to 1.2mn by 2012," Reiten said, adding the expansion plan for phase two had still to be agreed with its Qatari partner.

Hydro has a 50% share in the Qatalum smelter, expected to start producing in 2009/10, and the rest is held by state-run Qatar Petroleum (QP), which will supply the smelter with natural gas.

"The availability of cheap energy will determine future aluminium capacity over the next 20 to 30 years," Reiten said.
Energy accounts for some 40% of aluminium's total production cost.

The firm was also looking at Australia and a hydro-powered smelter in Angola with an annual capacity of 600,000 tonnes.
High energy costs increased the value of recycled metal, Reiten said, adding that the firm's remelting capacity was expected to grow.

Aluminium made from scrap uses 95% less energy than metal produced from bauxite ore.

A recent Citigroup report suggested Europe's only listed pure aluminium player could be a potential take-over target, but Reiten said the firm was not for sale.

"Instead we ourselves are looking at future targets," he said, without giving any details.

Reiten said growth in Norsk Hydro's products division was driven by strong demand, particularly from Europe, for rolled and extruded aluminium, with expected production in 2007 of 1mn tonnes and 600,000 tonnes respectively.

Hydro aims to produce 1.1-1.2mn tonnes of aluminium from scrap in 2007 and 1.7mn tonnes of primary aluminium, which would rise to 2mn in 2010.

Alumina output was set at 2.1mn this year.

Growth in demand for aluminium was seen sluggish in the United States, but Chinese consumption was seen rising at around 7-8% annually.

Reiten said world aluminium demand would grow by around 4-5% this year and expected aluminium futures prices to hold around $2,200-2,800 a tonne over the next six to 12 months.