Global trends in aluminium
The GCC is producing 5.5m tonnes roughly today. Okay, with Line 6 – that’s a lot over 500,000 tonnes – so that’ll bring it up to roughly 6m. The world is consuming over 60m tonnes, so that’s roughly 10% of the world output. China consumes 35m of the 60m, so if you exclude China, the GCC is 6m of the 25m. Outside of China we’re roughly 20% of the world production. If you look at the production footprint in the world, actually the GCC is the biggest market outside of China. So again, it’s rapid growth and if you look, a lot of it’s being consumed in the GCC and a lot of it’s being exported.
When you look at GCC smelters, once we do Line 6, that’ll take us to 1.5m tonnes. This will make Alba the biggest single-site smelter in the world, and in the GCC again we have around 6m tonnes of production with Line 6, so EGA, which is EMAL and DUBAL, so this is Emirates Global Aluminium, is about 2.5m; EMAL is 1.3m; the DUBAL is about 1.2m. In Saudi Arabia we have Ma’aden, which is roughly 750,000 tonnes; in Qatar we have Qatalum, which is 640,000 tonnes; and in Sohar in Oman we have about 380,000 tonnes.
Expansion strategy
Line 6 was approved in June of 2015. In terms of capital expenditure, it’s $3bn – $2.1bn is for the smelter, and then we have $900m for the power station and the power distribution system, so it’s a very big project. We are putting in an 1800-MW power station, so we are self-generating. This is a big leapfrog for us in terms of efficiency. We’re putting in H-class turbines, which are the biggest turbines in the world now. These will be the first H-class in the MENA region, not just in Bahrain, so this will give us an advantage on energy and energy consumption, which we need as energy prices continue to rise.
Today we are selling approximately 50% of our production downstream. With Line 6, the target is a similar number, so about 250,000 tonnes we’re assuming will go downstream to further development. If you look today, our metal goes in lots of different places. We sell to a rolling mill, we sell to a cabling company, we sell to a company that makes paints and powders, we sell to a company that makes alloys.
You have the downstream around you, and you have the metal around you, so if you’re a downstream customer you save on the logistics cost, you save on the melting cost. You have the opportunities to feed into Saudi Arabia. Our logistic advantage is that we’re right next to Saudi Arabia; we have a bridge; it’s very easy to go back and forth. Saudi Arabia is growing rapidly so there are probably some opportunities – whether you set up in Bahrain or Saudi Arabia, again in terms of metal or in terms of aluminium – to help construction and manufacturing. All those things are very much growing, based upon the demographics of the region.
Boosting efficiency in manufacturing
Safety has a direct impact on the bottom line. If your employees feel safe, they are more productive. You have to have an educated workforce. We are competing globally; this is a global business; we have to be educated. You know, we’re selling into global markets; it’s not like it’s just local regional markets, and we’re putting in new technologies that are typically from other countries, so the education level is very critical. In Bahrain we have a great education system; I think that people are very well educated; I think it’s a big advantage.
The newer smelters are much better, so we should be more encouraged to put in new smelters and maybe even close down some of the older, inefficient smelters, because smelters run for a long time. To encourage more new smelters would obviously help in terms of environmental friendliness.
In terms of cost, when we talk about cost cutting, it’s all things; it’s improvement in productivity, so a big one would be energy consumption. We want to reduce energy consumption, because you know, obviously we want to be safe. We also want to increase production with the same assets, so by doing that, we get the gain in production, and in terms of maintenance and efficiencies, you do look at this. It’s not saying cut it, but you know, can you do it better; can you do it faster; can you do it cheaper? Savings on freight, logistics, bigger ships, buying more from a region where the freight is closer to you and cheaper – it’s not just cutting cost, I mean, it’s really cost optimisation, performance optimisation.
When you look at Bahrain’s Vision 2030, obviously this is the vision of the crown prince in the country. This is economic growth, development. Line 6 and the aluminium sector I believe are a big part of this. Line 6 is specifically mentioned in the Vision 2030. Again, we’re 12% of the GDP of the country and growing, and I think they want to have a steady manufacturing base. Of course, you know, services and technology, all those things are probably more sexy, but if you look at industrials, you know we employ a lot of people.
People also want manufacturing jobs because typically the ripple is 4:1 on manufacturing. So if you have a steel plant or aluminium plant manufacturing around you, you have another four jobs with it. This is a big ripple effect, so this is why everybody wants manufacturing jobs, and you see in the US there’s this big push to bring back manufacturing jobs.
I think the outlook is generally good for metals, and if you look at the world economies, they are good. The US is growing; I think the rest of the world has a GDP that’s pretty good, and when GDP is good, people are consuming.
