WHEN new capacity comes on stream in 1997 Aluminium Bahrain (Alba) can make the proud boast that it has the largest modern smelter in the world. It will also be able to crow about the growing contribution that aluminium makes to the Bahraini economy. The metal accounts for about half of non- oil exports, and one-fifth of total exports. Alba's output also feeds a range of local downstream industries, which add value by fabricating finished and semi-finished products for export. None of this is lost on Alba's shareholders who have been happy to see the aluminium industry maturing into the mainstay of Bahrain's non-oil economy.

The current expansion project is focused on pot line three. The work will add 76 new cells, as well as upgrading existing infrastructure, giving a total increase of 36,500 tonnes a year (t/y). The programme will bring total capacity to about 500,000 t/y, making Alba the biggest smelter outside Russia where the plants are generally considered inefficient and in need of modernisation.

Value-added products

As supply and demand are roughly in balance in the global aluminium market, the extension of pot line three will be Alba's last capacity expansion for the foreseeable future. However, work does not stop there and the company is constantly examining and implementing schemes to add value to its products, increase capacity within existing systems and improve its record on environmental protection. 'Development never stops,' says chief executive Gudvin Tofte. 'There is always something happening and we always need to stay in line with developments to maintain our position in the market.'

One example of the company's policy of constant adjustments is the recent changes to production capacities for different products. During 1996 Alba has increased to 200,000 t/y the production of extrusion billets, which will account for 40 per cent of total production after the expansion comes on stream. The smelter's rolling slab casting facility has also been upgraded to produce 100,000 t/y. The slabs are used by rolling mills and Alba can now meet increased demand from the local Gulf Aluminium Rolling Mill Company (Garmco), which is also expanding capacity. Extrusion billets and rolling slabs are premium products; the remainder of Alba's output is ingots for remelt.

Another area of concern to Alba is the protection of the environment. The company recently announced a project to build a liquid coal tar pitch terminal which will enable the smelter to useliquid rather than solid pitch in the production of carbon anodes. 'The motivation for this change is mostly environmentally related,' says Tofte. 'Use of liquid pitch is an increasing trend throughout the world and we feel it is better to be early with such developments.' The local/Danish COWI-Almoayed Gulf, Alba's consultant for the project, confirms that using liquid pitch eliminates the dust formation associated with solid pitch. The consultant also points out that the change will ensure the smelter's future supply of pitch. The process for handling the liquid pitch uses specialist technology which keeps it at a high temperature in order to maintain its liquid state. The work on the project will include land reclamation, installation of storage tanks, provision of specialist loading equipment and transportation trucks.

Alba is also one step ahead when it comes to power generation. The smelter already feeds about 240 MW into the national grid and a new 164-MW gas turbine is being installed. Plans are also afoot to add even more power capacity.

All this activity is needed to keep Alba at the forefront of a volatile and increasingly competitive market. Prices have fallen from $1,700-a-tonne at the beginning of the year to a low of about $1,300. The price is currently hovering around $1,370. '$1,300 is pretty close to an all time low if inflation is accounted for,' says Tofte. But Tofte is convinced that Alba can cope with low and volatile prices. 'Alba is one of the lowest cost producers in the world. We can sit out a weak market for a long time.'

As well as low production costs Alba has the advantage of being a well- established producer located close to its markets. About one-third of production is currently sold within the GCC, mostly within Bahrain itself. 'Much of the downstream industry has actually been built up around Alba,' says Tofte, who also sees the regional market as continuing to grow.

Tariff barrier

A further potential area for expansion is Europe despite an EU tariff of 6 per cent on aluminium imports which acts as a barrier to real development of the market. Both Alba, and the Gulf's other producer, Dubai Aluminium Company (Dubal), consider the tariff to be anti-competitive. Tofte believes that the status quo cannot be maintained and that the Gulf producers will eventually benefit from future changes. 'Europe will need to remove the customs barrier,' he says. 'It is actually damaging to Europe's own downstream industry, pushing up their raw material costs,' he says.

He also questions the long-term viability of some of the upstream industry in Europe. 'A large part of Europe's capacity will be forced to close down in the future...there is a shortage of clean energy in Europe and those smelters will not be able to compete.' The good news for Alba is that outside Europe, the Gulf has the best-placed modern aluminium industry to fill any gaps. 'Europe will become a very important market for us,' Tofte adds.

Alba's investment in technology and constant improvements in efficiency are essential if the impact of low prices is to be minimised. All producers

are affected by poor prices, but the more efficient ones suffer the least. Analysts expect prices to pick up again in 1997 and the metal should recover

to about $1,700-a-tonne. If it materialises the recovery will coincide with the completion of Alba's expansion programme, promising a double dose of good fortune for Bahrain's biggest industrial company.