Aluminium vision gathers pace in Saudi Arabia

14 February 2011

Riyadh’s plans to launch financing for the second phase of Ras al-Zour aluminium complex will put the megaproject on track for completion

Saudi Arabia key fact

The $590m contract for Maaden’s rolling mill was awarded to South Korea’s Samsung Engineering

Source: MEED

In the first quarter of 2011, Saudi Arabian Mining Company (Maaden) is due to launch the financing for the second phase of its $10.8bn aluminium project. The first phase of the kingdom’s minerals railway is also expected to start operating at about the same time. The two events take Saudi Arabia’s vision of becoming an integrated aluminium producer one step closer to becoming a reality. 

The smelter is on schedule and it should be completed by the end of 2012 as planned, Bechtel is working well

Abdullah Dabbagh, Maaden

The aluminium project will see Maaden and its joint venture partner initially build a 740,000 tonne-a-year (t/y) smelter and a 380,000 t/y rolling mill. This will be followed later by a 1.8 million t/y alumina refinery. All three facilities will be built as part of the Ras al-Zour complex on the eastern coast of the kingdom. Once completed in late 2014, it will be the largest aluminium complex ever to have been developed.

Maaden integratd aluminum complex
ProjectCapacity (tonnes a year)Budget ($m)
Bauxite mine4,000,000200
Rolling mill380,0002,500
Alumina refinery1,800,0002,800
Aluminium smelter740,0005,000
Source: MEED

Bauxite feedstock for the alumina refinery will be transported by the new minerals railway from a new 4 million t/y mine being developed at Al-Baitha in the north of the kingdom.

Early aluminium plans

The idea for building a fully integrated aluminium industry was first mooted in 2002. “We first started thinking about building a minerals city just under a decade ago,” says Abdullah Dabbagh, Maaden’s chief executive officer.

“At the beginning, we knew we had world-class deposits of bauxite and we knew that it was essential to create an industry around these deposits. The initial challenges were looking for a suitable site and then taking the necessary steps to secure the land, the energy and the power for the whole project.”   

Middle East smelters
 LocationCapacity (tonnes a year)
Dubai AlumniumUAE1,000,000
Emirates Aluminium UAE750,000
Qatar AluminiumQatar585,000
Bahrain Aluminium Bahrain870,000
Sohar Alumnium Oman360,000
MaadenSaudi Arabia740,000
Source: MEED

The plan was to build an integrated Minerals Industrial City at Ras al-Zour, some 60 kilometres north of Jubail that would produce aluminium and fertiliser, using deposits of phosphates, also at Maaden’s disposal.

The first joint venture agreement for the project was signed between Maaden and Canada’s Alcan in 2007, with the former taking a 49 per cent stake in the project. Following Alcan’s merger with the UK/Australian Rio Tinto to create the world’s largest aluminium company, the decision was made to pull out of the project.

In December 2008, Rio Tinto Alcan announced it could no longer have a stake in the project due to the global financial crisis. However, the firm said it was still keen to be involved in a technology transfer agreement for the smelter project and offer advice on other aspects of the complex.

Maaden decided against this proposal and instead signed a new agreement with US-based aluminium producer Alcoa in December 2009. Alcoa initially took a 40 per cent stake in the scheme, but in April 2010, decided to lower its involvement to 25.1 per cent. “It is more likely that Alcoa lowered its stake rather than Maaden deciding to raise [its] stake,” says a contracting source familiar with the project. “However, something must have happened at those meetings because since then the whole scheme has been very much on a fast track.”

The joint venture partners decided the smelter would be the first part of the aluminium complex to be built, followed about 12 months later by the rolling mill. A year later, the alumina refinery and the bauxite mine will come on stream, making the scheme fully integrated.

The US’ Bechtel was awarded the engineering, procurement, construction and management (EPCM) contract for the smelter in 2009 and work is well under way. The first concrete was poured in October 2010 and the majority of the other contracts for the project have now been awarded.

Smelter on schedule

“The smelter is on schedule and it should be completed by the end of 2012 as planned,” Dabbagh says. “Bechtel is working well and we envisage no problems so far.”

The next stage of the project, the rolling mill is also reaching a critical part of its development. Maaden and Alcoa have already procured the equipment for the hot and cold mills, a coil coating line and preheat furnaces from Germany’s SMS Siemag and BWG Bergwerk and Austria’s Ebner, respectively. The US’ Wagstaff will also provide the facility with ingot and billet casting systems.

The capacity for the rolling mill has now been set at 380,000 t/y, making it the largest can producing plant to be built outside China in the past 20 years. There is no other rolling mill of its type in the Middle East and North Africa region, so all the stock will be sold on the domestic market, with any surplus being exported to the GCC and beyond. Under the partnership agreement, Alcoa will sell directly to its existing global customer base.

The EPC contract for the rolling mill was awarded in mid-February to South Korea’s Samsung Engineering in a deal estimated at $590m. Samsung beat fellow South Korean company Hanwha Engineering & Construction to the deal, despite submitting a higher bid.

“Samsung is currently working on a fertiliser project with Maaden, so it is possible that they decided to stick with what they know,” says a South Korean contracting source. “Hanwha did have the lowest bid, so they will disappointed to miss out on this.”

Aluminium contract awards

The US’ Fluor is project managing the rolling mill and working alongside Australia’s WorleyParsons on the alumina refinery and bauxite mine.

The alumina refinery is still in the early stages of planning, although a $200m tank farm contract is currently being tendered from WorleyParsons’ project office in Brisbane. Ten firms have been prequalified for the deal.

Financing for the smelter and rolling mill was completed at the end of November 2010. Maaden is expected to go to the banking market to finance the refinery and mine in the first quarter of this year.

When complete, the aluminium project will sit alongside Maaden’s fertiliser joint venture as the two main elements of the Minerals Industrial City at Ras al-Zour.

The Minerals Industrial City will be connected to the Maaden mines by the North-South minerals railway. The 1,486km line will transport phosphate and bauxite to the processing plants at Ras al-Zour.

The first 800km is due to open by the end of the first quarter. In order to facilitate exports of the finished product, two berths are under construction at Ras al-Zour port as part of an $85m contract secured in December by China Harbour Engineering Company.

Cost advantages

The development of the kingdom’s bauxite reserves and the alumina refinery are vital to the scheme. It is this aspect that distinguishes the Maaden project from other aluminium schemes in the Middle East. Not having to negotiate prices to ship in bauxite or alumina will offer considerable cost savings, making Maaden’s end products more competitive. “We have the bauxite, the energy, the caustic soda and the carbonates in-kingdom,” says Dabbagh. “I cannot stress how important this is. This is a major difference between what we are doing and what everyone else is doing in the Gulf.”

Compared with Bahrain, Oman, Qatar and the UAE, Saudi Arabia has been slow to develop an aluminium industry. The Gulf region is already well established as a low-cost centre of production. But with its large bauxite deposits, as well as access cheap gas and power, Maaden is well placed to establish itself as a global aluminium producer.

A MEED Subscription...

Subscribe or upgrade your current 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.

Get Notifications