Sourcing bauxite for smelters a challenge

Sourcing bauxite for smelters a challenge

Finding enough bauxite sources to feed the upcoming aluminium smelters in the Gulf will be a challenge as the region begins to emerge as a major producer of the metal. Availability of cheaper energy has encouraged new investment in aluminium production in the region.

Power is responsible for roughly one-fourth of a smelter’s operating costs, while alumina supplies account for 45 per cent.

Aluminium Bahrain (Alba) and Dubai Aluminium (Dubal), the Gulf’s two existing plants, produce more than 1.6 million tonnes of primary aluminium annually.

At least four more plants are under construction or planned, giving each Gulf state except Kuwait an aluminium production facility.

“It is important to secure long-term supplies of alumina before you commit to building a smelter,” says Tony Klinsman, chief executive officer of Sohar Aluminium, the upcoming 650,000-tonne per annum (tpa) smelter in Oman.

Sohar has an alumina supply contract with Canada’s Alcan group, which has a 20 per cent stake in the project. It is scheduled to start production in 2008.

Growing share

The Middle East had six per cent of the world’s 33.9 million tpa aluminium production capacity in 2006, according to Alcan.

It estimates the region will have 10 per cent of the world’s projected total 57.5 million tpa output in 2020.

Industry sources say growth in aluminium consumption in China has averaged 19.3 per cent over the past two years. The demand growth in India has been 13.5 per cent over the same period.

Finding stable and secure supplies of alumina is crucial for Gulf smelters, David Stribley, a technical marketing manager at Australia’s Rio Tinto Aluminium, said at the recent Meed aluminium conference.

Alumina is a white powdery substance produced from bauxite.

Between four and five tonnes of bauxite are required to produce about two tonnes of alumina, which in turn yields one tonne of aluminum.

While independent producers such as Sohar tie up with integrated companies like Alcan for secure supplies, companies like Dubal have decided to become involved in alumina production in bauxite-rich countries.

Dubal and Abu Dhabi’s Mubadala Development Company are major partners in a three million tpa capacity alumina refinery project in the West African country of Guinea. The existing deal will give Dubal 40 per cent of the output.

Dubal also holds a 74 per cent stake in a joint venture in the Indian state of Orissa to develop bauxite mining and an alumina refinery.

The current smelter developments in the Gulf will require an additional 10 million tpa of alumina. The UAE will need an additional 3 million tpa of alumina when the 1.4-million-tonne Emal, a joint venture between Dubal and Mubadala, achieves its full output capacity in 2013.

Qatar’s 585,000 tpa Qatalum project is scheduled to come onstream in the fourth quarter of 2009. Saudi Arabia’s mining firm Ma’aden is also developing a 623,000 tpa smelter.

Other major bauxite producers are Australia, Brazil and Jamaica.

Major alumina output expansion projects are planned across the world. China’s alumina output is expected to increase by 12 million tonnes to 25 million tonnes and Australia will see an increase of 9.8 million tpa to remain the world’s top producer at 28.3 million tonnes.

Another significant growth will be in Latin America, where alumina production will surge by 8.4 million tonnes to reach 23.2 million tonnes.

While most of China’s alumina will be consumed domestically, reduction in Chinese imports will help global prices of the commodity.

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