The opening of Bahrain's aluminium smelter in 1968 has spawned a significant downstream industry. The first company got going in 1972; the most recent was set up in 1994. Investing in aluminium processing has paid off and all the established enterprises are expanding.
Not that it is all plain sailing. Bahrain Aluminium Extrusion Company (Balexco) has been battling to maintain profits as the market for extrusion products
has weakened. 'Growth in the regional market has not been as fast as we expected,' says Mahmoud al-Soufi, Balexco's general manager. 'At the same time regional capacity [for extruded products] has increased over a very short period of time.'
No fewer than five new extruders have come onstream in the Gulf over the last year, creating a highly competitive environment for Balexco. 'The new extruders mean that profit margins are shrinking throughout the region,' says al-Soufi. Balexco is constantly increasing sales volumes, with 1995 setting a new record in terms of tonnage, but margins were squeezed and profits slipped to about BD 800,000 ($2.12 million) in 1995.
Balexco's current expansion project is set to bring capacity to 21,000 tonnes a year (t/y) by early 1997. By that time the company will have invested about $28 million in the project. The third and final phase, now nearing completion, adds a third extrusion line with a capacity of 8,000 t/y and a new administrative building.
Such a large expansion in an increasingly competitive market has had to be accompanied by other measures to boost efficiency and add value to the Balexco product range. 'We are working towards a more integrated operation,' says Al-Soufi. 'We are taking on services which have previously been subcontracted out.' Two examples are the 12,000 t/y scrap recycling plant and powder coating facility, both of which have come onstream during 1996. The recycling plant will enable Balexco to make use of the estimated 20 per cent of scrap generated by every tonne of extruded aluminium. The two new facilities will gradually build up to capacity over the next three years. 'Powder coating and recycling are new activities for us,' explains al-Soufi. 'So we have a steep learning curve to progress along.'
This drive to streamline operations is apparent in the company's ideas for the future. These include a second scrap re-melt facility, a new die manufacturing plant and the upgrading of the first extrusion line, although none of the proposals has been finalised. 'New projects could move ahead within the next three years,' says Al-Soufi. Upgrading operations and new technology are always a priority, which is why the relative merits of upgrading the existing plant or building a new one are under study.
Balexco is not alone in expanding activities. Gulf Aluminium Rolling Mill Company (Garmco) has added an additional 50,000 t/y to capacity at its main rolling mill this year. The company has added a second-hand rolling mill, which is now operational and should reach full capacity by the end of the year, bringing total production at Garmco to 120,000 t/y.
New foil plant
The main thrust of future activities at Garmco is to diversify the product range. In July this year, the company awarded a construction contract to the local Mannai Engineering Company for work on a new foil manufacturing plant, which is scheduled for production start-up by mid-1997. The mill will have an initial capacity of 5,000 t/y but the company says that it anticipates increasing this to 15,000-20,000 t/y by 2000. The company is looking at introducing other new products and says that it may have something to announce by the end of the year.
The Midal group is active in different parts of the downstream industry and has adopted an integrated approach. Midal Cables has recently raised production of aluminium rods and coils to 50,000 t/y and has a target of 90,000 t/y to be reached 'in the foreseeable future', says one manager. Midal's wholly-owned company Aluwheel has almost doubled production of semi-finished aluminium wheels this year to 600,000. In 1994, Midal established its Metal Form subsidiary which uses Midal's own aluminium rods to produce coiled products, tubes and shaped solid electrical conductors.
The vast majority of Bahrain's aluminium products are exported, forcing companies to compete internationally for markets. This is why there is such a remorseless focus on improving the efficiency of management and production processes at all the downstream companies. At Balexco, now wholly in the private sector since the last public stake was sold in 1995, privatisation has provided another incentive to improve efficiency on every front. Greater efficiency and product innovation will remain the key goals for Bahrain's aluminium producers amid the increasing competition in their core markets.
A MEED Subscription...
Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.