Delays make sense for Emal's smelter plans

02 March 2010

The business case for an Algerian smelter still makes sense even if the Sonatrach scandal delays it. Fuel allocation issues in Saudi Arabia are beyond the firm’s control

The news of delays and cuts to initial production targets for two of Emirates Aluminium’s (Emal) major smelter projects should come as no surprise to anyone familiar with the current crisis engulfing Algerian state energy company Sonatrach or the bureaucracy surrounding the process of Saudi Arabian fuel allocations.

Emal seems to be taking the sensible view that both problems are out of its control so there is no point panicking. The decision to take this pragmatic approach is no doubt helped by the fact that the first rule in the aluminium smelter’s survival handbook is to not fall out with the firm that is supplying your scheme with fuel.

In Algeria, Emal would rather work with a company free of any allegations of corruption and if that is going to mean the Beni Saf plant has to start a few months late, then so be it.

The business case for the smelter makes sense. The abundance of gas in Algeria, the proximity to the North African and European markets, and the financial muscle of Emal’s joint venture partners Abu Dhabi sovereign wealth fund Mubadala Development Company and technical expertise of Dubai Aluminium Company (Dubal), all weigh heavily in its favour. 

The problem facing Emal’s proposed smelter in Saudi Arabia is rather different and one people would never expect to have in the kingdom: fuel.

While there is plenty of fuel in the kingdom, there are a lot of facilities being built that require hydrocarbons.

While the country undergoes massive growth in its industrial base, it is not surprising the Saudi government does not want to make promises it cannot keep.

On factor that remains in Emal’s favour is that late 2014 has been the date tipped for the upturn in both prices and demand for aluminium and these two projects are due to come online just after this time. Serendipity can be a wonderful thing.  

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