Abu Dhabi's metal manufacturers integrating downstream production

At present, some of the world’s largest steel and aluminium outfits are no longer based in Europe, North America or Asia, but in the UAE. This is the result of regional economic dynamism and careful long-term planning by the UAE’s leadership, with the government of Abu Dhabi playing an essential part in that strategic thinking. Indeed, the Abu Dhabi Economic Vision 2030, the emirate’s long-term economic strategy, sees capital-intensive and export-oriented industries, such as metals, as a central component of its evolution.

Part of the achievement, too, is that despite the emirate lacking any local provision of the raw materials necessary for the production of these commodities, it has nonetheless established itself as a global centre, thanks to a number of key advantages. These include historically low energy costs, advanced local industrial infrastructure, and well-developed transport and logistics links that span the globe. An affordable labour force and access to international expertise and financing have also added to Abu Dhabi’s appeal as a base for this global industry.

Sector Players

The two main local players in the metals field are Emirates Global Aluminium (EGA) and Emirates Steel. EGA is one of the world’s five-largest primary aluminium producers, and is the result of a 2013 amalgamation between the Abu Dhabi-based Emirates Aluminium (EMAL) and Dubai Aluminium (DUBAL). EMAL began operating in 2009, with Potlines 1 and 2 coming on-stream at the end of that year. DUBAL, meanwhile, set up shop in 1979, and was one of the first major primary industrial projects in the UAE.

EGA is owned jointly by two key Emirati entities. The first is the Mubadala Investment Company of Abu Dhabi and the second is the Investment Corporation of Dubai (ICD). Mubadala is a government-owned entity that operates as a wealth fund for the emirate and has a broad mandate that includes the management of long-term, capital-intensive strategic projects, such as metals. It is also a significant player in the emirate’s oil and gas, ICT, aerospace, defence and infrastructure sectors. ICD, is also a wealth fund, managing and supervising the Dubai government’s major investment portfolio.

Production

EGA’s core operating assets are the EMAL and DUBAL smelters, which have a combined production capacity of 2.4m tonnes per annum (tpa). EMAL’s facility is based at Al Taweelah, approximately 70 km north of Abu Dhabi City and adjacent to the major Al Taweelah power and desalination complex and Khalifa Port. EMAL holds a 1.3m-tpa-capacity smelter, along with a power station, with capacity for 3100 MW, to supply the substantial amounts of electricity required by the smelting process. These facilities make EMAL the world’s largest single-site primary aluminium producer.

DUBAL, meanwhile, is further north still, in the emirate of Dubai at Jebel Ali. It has a 1m-tpa smelter, fired by a 2350-MW power station. Both smelters are therefore strategically located, next to ample power supplies and a major international port. Both also use technologies that were developed in-house. EMAL operates the DX and DX+ systems, which are reduction cell technologies that enable operations at 400 kiloampere and 450 kiloampere, respectively. Both boost efficiency and reduce power inputs, with two further variants, DX+ Ultra and DX18+, also currently being piloted by EGA.

Four main forms of aluminium are produced by the combined sites: billets, for use in construction and the automotive sector; re-melt ingots, for electronics and aerospace, as well as more sophisticated automotive parts; slab ingot, for lithographic sheets, packaging and again, automotives; and liquid metal. The company also produces the anode blocks and bus bars used in its own electrolytic processes. Approximately 90% of total production is also exported, with Asia, Europe, the MENA region and North America the main destinations.

Benefits Downstream

In October 2016 EGA began delivering molten liquid metal to Khalifa Industrial Zone Abu Dhabi (KIZAD), via a specially built transfer facility – the first of its kind in the UAE – called the Hot Metal Road. The development is part of EGA’s efforts to integrate smaller downstream industries into its supply mix. KIZAD is developing a cluster of aluminium businesses that are set to benefit from reduced re-melting costs as a result of the Hot Metal Road. Once all of the downstream industries at KIZAD are up and running, EGA will deliver up to 25,000 tpa of liquid aluminium, according to local press reports.

Integrated Steel Plant

Emirates Steel, meanwhile, is 100% owned by Senaat, the UAE’s largest industrial conglomerate. Senaat is also a state-owned entity, which invested more than Dh16bn ($4.4bn) in the metals sector in 2010-15, with Dh5bn ($1.4bn) more planned for 2015-17.

Emirates Steel was set up in 1998 and remains the only integrated steel plant in the UAE. Located at the Industrial City of Abu Dhabi, approximately 35 km from the capital, it has grown from being a simple re-roller to a sophisticated producer.

At present, the plant produces steel billets, via continuous casting, while its rebar is known for being of high quality. The company currently has a 1.8m-tpa production capacity for this product. Also in the product portfolio is wire rod, with an annual production capacity of around 550,000 tpa, heavy sections and sheet piles, which are Z- or U-shaped long structural sections that can be interlocked for the construction of retaining walls and bulkheads.

The plant has the ability to produce and sell direct reduced iron, too, which can be used as an alternative to scrap steel in electric arc furnace steel making. The firm also has the ability to make Q-class steel – the quality level necessary for use in nuclear power plants. This is particularly useful, given the UAE’s own nuclear power project at Barakah.

Raising Efficiency

Emirates Steel has also been working in partnership with Abu Dhabi National Oil Company (ADNOC) and Masdar, Abu Dhabi’s renewable energy and clean technology company, on the first commercial carbon-capture facility in the region. Launched in November 2016, Al Reyadah is designed to transport CO to ADNOC oil fields, via a 50-km pipeline. Emirates Steel’s plant currently emits some 800,000 tpa of CO . Under the scheme, this will be transferred from the plant to a compression and dehydration facility in Mussafah. A CO stream of over 98% purity will then be delivered down the pipeline to ADNOC for use in enhanced oil recovery processes at its onshore fields.

Meanwhile, Emirates Steel has undergone two expansions in recent years, worth a combined total of Dh11bn ($3bn), boosting its capacity to 3.5m tpa.

Global Conditions

Base metals prices fell sharply in 2015 and hit multi-year lows at the start of 2016. China was one widely cited reason for this, with the slowdown in the country prompting many domestic metals producers to sell more surplus output on world markets. The global market also became more competitive as producers from other countries, such as Turkey, South Korea and the Commonwealth of Independent States, also became more aggressive in trying to offload their surpluses. These developments led to calls from local businesses for the authorities in the UAE to be stricter in its management of imported metals, which might undercut local producers.

Nonetheless, in the middle of 2016 Emirates Steel reported that it had been able to maintain a 52% share of the domestic market in steel, with reported sales of 1.82m tonnes of finished products – up from 1.56m tonnes in the first half of 2015. Saeed Ghumran Al Remeithi, CEO of Emirates Steel, told the local press that this had been achieved thanks to the development of long-term supply contracts and a “focus on customer service”.

At the same time, the decline in oil and gas prices has had a significant impact on many Gulf economies, as revenues for the government – often the main driver of growth in construction and other metals-using industries – have declined and projects have been cancelled or put on hold. However, longer-term indicators paint a more positive picture: construction is set to be strong throughout the Gulf, as projects such as Expo 2020 Dubai, the 2022 FIFA World Cup in Qatar and a number of other major regional initiatives continue to draw in a wide range of construction materials.

In The Pipeline

Therefore, Emirates Steel and EGA will both be looking very carefully at the way the global markets are moving in 2017. EGA is also examining various ways to boost production efficiency and further reduce energy consumption through the use of new technologies and processes.