Saudi to invest $17bn in aluminium projects

Saudi Arabia has approved projects worth more than $17 billion to produce over three million tonnes of aluminium per year and become the dominant exporter of the metal in the Middle East, a leading Saudi bank said last saturday. One of the biggest smelters in the Gulf Kingdom is a joint venture between Saudi Arabia and the UAE as it will have an initial output capacity of nearly 700,000 tonnes per year, with a potential to double that capacity. The planned investments to build five major smelters will turn Saudi Arabia into a net aluminium exporter as it currently relies heavily on imports given the absence of upstream aluminium projects, the National Commercial Bank (NCB) said. "Saudi Arabia is on the verge of becoming a net exporter, if not a global supplier of primary aluminium. Five upstream aluminium projects have been announced in the Kingdom, valued at nearly $17.1bn (SR64.1bn)," NCB said in a study on Saudi Arabia's aluminium industry, sent to Emirates Business. "Once commissioned, the projects will allow the Kingdom to possess a combined production capacity of 3.1 million metric tonnes per annum (mmtpa) of primary aluminium by the end of 2012, making it a major global upstream player." The UAE and Bahrain are currently the main aluminium exporters in the Middle East, with the combined production capacity of their smelters in Dubai and Manama exceeding 1.8m tonnes at the end of 2007. With the recent commissioning of another smelter in Oman and planned projects in Qatar and Kuwait, the Gulf region is set to become a dominant aluminium supplier that will control more than 10 per cent of the world's output. According to the NCB, four key factors have prompted the massive investments in the Saudi aluminium sector, mainly a surge in domestic demand for aluminium, the absence of upstream aluminium industry, a sharp rise in imports because of an economic boom, and a government drive to diversify the oil-reliant economy. It estimated the local aluminium market at around SR5.5bn, with annual consumption estimated at 195,624 tonnes by the end of 2007. Domestic consumption is forecast to grow 37 per cent by 2010, reaching 267,541 tonnes. Imports of all types of aluminium products, which are currently the main source of input for the industry, rose 14 per cent to SR3.7bn in 2006 while in volume, it grew by 15 per cent to 385,270 tonnes during the same year. "We believe that the volume of the imports will continue to grow at around 10 per cent per annum to reach 564,073 tonnes in 2010," the study said. According to the study, the Saudi aluminium sector is currently concentrated in downstream fabrication activities based on the processing of various types of imported aluminium components in the absence of aluminum smelters. It said the Kingdom, the world's top oil exporter, has around106 aluminium processing factories, which supply the market with aluminium fixtures for construction, kitchens, cooking utensils and other aluminium-related products. "With the exception of a few large companies, such as the Aluminum Products Company (Alupco), the Saudi aluminium sector is highly fragmented, consisting of small fabricators," NCB said. "The feedstock for the final aluminium products sold by these factories is mainly semi-finished imported products…. Alupco is considered to be the largest player in the Kingdom, housing a productive capacity of more than 50,000 tonnes. The company's output is satisfying the bulk of local demand for extruded products, in addition to some regional and global markets." The study said many factors are driving growth in the Saudi aluminum sector, including a rapid rise in demand and government initiatives to rapidly expand the non-oil economy. UPCOMING VENTURES Emal international, a JV between Mubadala Development Company and Dubai Aluminum Company, has signed an MoU with Emaar to build a smelter in King Abdulla Economic City. The aluminum smelter will have a production capacity of 700,000 tonnes in the first phase, with the potential to double its capacity. An MoU was signed between Malaysia's MMC International Holdings, Saudi Binlandin Group and Aluminum Corporation of China to set up the second aluminum smelter at Jizan Economic City. A Maaden-Alcan JV plans to develop a vertically integrated 'mines to metal' aluminum project at Ras AzZawr. Source：Emirates Business