Emal Gets Orders for Smelter to Start Next Year

May 11 (Bloomberg) -- Emirates Aluminium Co., the project to build the world’s biggest smelter, has orders for output from the $5.7 billion facility set to start next year, the company’s chief executive officer said. “We have some sales commitments already,” Duncan Hedditch said today in an interview at the CRU World Aluminium Conference in Dubai. “We are pleased with the early response,” he said, without elaborating on how much output was contracted for sale. The project, known as Emal, is on schedule to produce “first metal” next April after commissioning of the facility starts this December, Hedditch said. Middle Eastern countries such as the United Arab Emirates are seeking to expand into businesses including metals, petrochemicals and plastics that can benefit from access to ample supplies of cheap fuel. Emal will have an initial capacity of 700,000 metric tons and aims to double in size in a planned second phase. Dubai Aluminium Co., the largest smelter in the Middle East, and Mubadala Development Co., the Abu Dhabi state-run investment vehicle, are partners in the Emal project. Output will likely reach as much as 300,000 tons a year by the end of 2010 before ramping up to full capacity within a year of starting production, Hedditch said. The smelter will come on line at a time when aluminum demand is falling as the financial crisis cuts consumer appetite for products such as automobiles, airplanes and consumer goods. Companies such as Rio Tinto Group have shelved projects because of falling prices. Dubal said today that orders fell 30 percent in the first quarter and will decline 20 percent this quarter. Power Difficulties London-based Rio, the second-largest producer, scrapped an Abu Dhabi smelter project in July, citing power difficulties. It also pulled out of a planned $10.5 billion smelting venture with state-owned Saudi Arabian Mining Co. Aluminum producers such as Emal, Dubal and other facilities in the region can benefit from lower production costs by using advanced technology and cheaper fuel, allowing them to profit even in difficult market conditions, Hedditch said. Aluminum for three-month delivery slid 36 percent on the London Metal Exchange in 2008 as the recession cut demand. The lightweight metal, used in industries from packaging to aerospace, traded at $1,544 a ton on the LME at 2:21 p.m. local time today. Stockpiles monitored by the LME have more than tripled over the past year to a record 3.86 million tons. “There is a lot of metal in storage,” Hedditch said of global stockpiles. “We’ll need to see an increase in fundamental demand to work through inventories.” Emal’s start up schedule and expansion is based on long- term growth plans and won’t be affected by the slow down. “We’re working to a schedule that’s independent of the market,” he said. “We’ll build up to full production when it’s sensible to do so.” Emal’s partners have yet to decide whether to go ahead with the second phase of the project, the CEO said. The company has already secured natural-gas supplies for the second stage of expansion, he said. To contact the reporters on this story: Anthony DiPaola in Dubai at adipaola@bloomberg.net; Brett Foley in Dubai at bfoley8@bloomberg.net.