Despite last year's predictions that the peak had been reached, the price of a tonne of aluminium hit $2,000 recently and is still running at about $1,880 a tonne. Availability of alumina and power are the twin price drivers. For most of 2004, alumina was the culprit. Now, however, shortages of economical power combined with still-high alumina prices are forcing producers to adjust profit forecasts and take into account the future impact of higher costs on their revenue streams.

'Alumina remains a worry,' says Tariq Salaria, analyst at the London-based Commodities Research Unit (CRU). ' But brownfield alumina projects in Brazil and Australia and some greenfield projects in China are due for commissioning during 2006, which should help ease the situation.' Chinese bauxite is of lower quality, but the main government research institute has developed new technologies which allow for the recovery of the alumina content economically.'.

However, such is the shortage of affordable power that precious smelting plants are threatened with closure in the US and Western Europe. 'Power has become the pre-eminent issue driving high metal prices,' says Salaria. CRU estimates put the level of capacity under threat due to power shortages at 280,000 t/y in 2005 and potentially 600,000 t/y in 2006 - enough, in a tight market, to move prices.

And the market is indeed tight. Global demand is running at about 31.8 million t/y, compared with supply of a little over 31.5 million t/y, forcing consumers to pay the price for drawing down diminishing stockpiles. Demand growth has fallen off a little from the frenzy of 2004, but remains at about 4 per cent. 'The growth will probably flatten to a trend rate of 3.5 per cent over the next few years,' says Salaria. 'Chinese appetite is still driving the increases. Demand is also soaring in places such as India and Eastern Europe, but the low base means it will be a while before changes in patterns of the latter two make any major impact on prices.' In global terms, transport applications are leading the appetite for aluminium, as lighter, less fuel-intensive, more environmentally friendly - and on current oil prices, considerably cheaper to run - vehicles rise in popularity. Spiralling steel prices have also prompted a shift towards aluminium and the metal's use in the construction industry is increasing.

So for those countries in the Middle East fortunate or prescient enough to join the rush towards aluminium in the first wave, times are good and existing producers are hoping tocash in. Alba's Gulf counterpart Dubai Aluminium (Dubal) is expanding again, with a project under way to add 100,000 t/y to the seventh potline, taking total capacity at the Jebel Ali site to 861,000 t/y. Alba itself is still mulling further expansions but the exact timing is dependent on finding a long-term alumina feedstock guarantee following the breakdown of discussions with the US' Alcoa. In Iran, the Almahdi smelter at Bandar Abbas is being expanded.

Cheap feedstock

Aluminium has always been an attractive diversification play in the region, as a means of capitalising on the advantage of cheap and plentiful gas feedstock. Middle East plants can survive at a price for their product far below that of counterparts in North America and Europe. And a new wave of grassroots facilities is making progress. In Oman, the US' Bechtel has the engineering, procurement and construction management (EPCM) contract on the smelter at Sohar planned by Oman Oil Company, Abu Dhabi Water &