Key fact

Aluminium Bahrain plans to increase its smelting capacity to 1.29 million t/y by 2014

t/y=Tonnes a year. Source: MEED

Bahrain has been a leader in the Middle East’s metals industry since Aluminium Bahrain (Alba) opened the GCC’s first aluminium smelter in 1971. When Alba produced its first primary metal, the capacity was 120,000 tonnes a year (t/y), a relatively large figure for a first-phase smelter in the 1970s.

Fast forward 40 years and Alba’s five pot-lines now produce 870,000 t/y of aluminium and the company heads the GCC’s most diversified aluminium industry, which accounts for 12.5 per cent of Bahrain’s gross domestic product. But the growth of the country’s metals sector is not over.

Alba is looking to expand further with the addition of a sixth pot-line. The plans are being presented to the company’s board for approval during the first quarter of 2011.

Increased smelter capacity

The sixth pot-line will add 320,000 t/y of capacity to the smelter at the relatively low cost of about $1bn. Alba says most of the initial infrastructure required is in place and that if permission to proceed is granted, then work will take about three years to complete.

The success of the Alba smelter will depend on whether it can maintain its low cost-base and secure low-cost energy

Marco Georgiou, CRU

The firm also says a report concluded that debottlenecking certain aspects of the plant’s operations with a minimum amount of capital expenditure would add a further 100,000 t/y of capacity. This part of Alba’s expansion has already been approved and work is progressing.

If Alba goes ahead with its sixth pot-line, the project will be completed in 2014. With a new total capacity of 1.29 million t/y, the smelter would overtake the Dubai Aluminium (Dubal) smelter in the UAE as the GCC’s largest aluminium plant. Dubal’s annual production now regularly exceeds 1 million t/y.

“The success of the Alba smelter will depend on whether it can maintain its low cost-base and secure low-cost energy,” says Marco Georgiou aluminium analyst for London-based consultancy CRU.

“If it can survive the current uncertainty surrounding Bahrain and overcome certain risk issues that may arise while securing finance, it makes sense.”

The recent protests in Bahrain have not affected Alba’s production, nor indeed any of the local companies located in the downstream aluminium cluster next to the facility. However, no one involved in Bahrain’s aluminium industry underestimates how much of an important role it has to play in the kingdom’s future.

Industry and investment … will go a long way to solve a lot of problems Bahrainis are demonstrating about

Khalid al-Qadeeri, Foulath

“The demonstrations are going to continue and we have to respect the right for Bahraini’s to protest,” says Hamid al-Zayani, managing director of Bahrain-based Midal Cables. “One of my responsibilities … is to contribute to Bahrain’s industrial base and ensure that local people have access to good job opportunities that require technical skills.”

Well-established local companies, such as Midal Cables and Gulf Aluminium Rolling Mill Company (Garmco), have operations close to Alba and have grown in tandem with their primary metal supplier.

“Being so close to Alba is a very good arrangement for us,” says Al-Zayani. “And it has been that way since we started.” Midal Cables began its operations in 1977 and produces 180,000 t/y of aluminium rod and wire. The proximity of Alba and Midal Cables means hot metal can be delivered straight to the company from the smelter.

Garmco is located next to Midal Cables and was formed in 1981. The firm produces 160,000 t/y of aluminium sheet and coil from its plant and sources its metal from Alba.

The facility was the first of its kind in the Middle East and, until the 380,000 t/y plant at Ras al-Zour in Saudi Arabia is completed in 2014, it will remain the largest.

The Saudi mill currently under construction has made Garmco take stock of its operations and was one of the reasons it withdrew as the technology partner on a $350m rolling mill project in Oman in August 2010.

Garmco is now looking at the feasibility of its operations in Bahrain and exploring methods of improving productivity and effectiveness.

Aluminium diversification plan

In a move that has surprised many of the region’s aluminium industry professionals, Garmco has also said it intends to diversify its aluminium supplies and take metal from other smelters in the region.

“That did come as a surprise to many people,” says Al-Zayani. “It will be interesting to see if they can match the current price at Alba, especially as they will have to cover shipping costs.”

One of its future strategies could be to expand its Bahrain operations, but although Garmco chief executive officer Adel Hamad says expanding this is an option, nothing has yet been announced.

While aluminium production has been woven into the fabric of Bahrain’s industrial development for four decades, steel production is a newcomer to the state.

Bahrain’s major steel projects have, for the most part, been conceived by the local Gulf United Steel Holding Company (Foulath).

“Foulath identified that Bahrain is a good location to develop our steel projects,” says Foulath chairman and managing director, Khalid al-Qadeeri. “This is why we have built our complex in the Hidd area.” The centrepiece of Foulath’s complex will be the $1.2bn steel mill it is currently constructing with Japan’s Yamato Kogyo Company.

A joint venture company has been formed called United Steel Company (Sulb) and this is also headed by Al-Qadeeri. On completion, the Sulb mill will comprise a 1.8 million t/y direct reduction iron (DRI) plant with a melt shop and a 1 million t/y heavy-section rolling mill.

Construction of the plant is well under way and completion is expected at the end of 2012. There has been no news of any delays due to the demonstrations in Bahrain.

“The Sulb mill will be one of most advanced plants of its type in the world,” Al-Qadeeri says. “Work is on schedule and we are excited about the future in Bahrain. We have had no delays yet.”

Job creation in Bahrain

Al-Qadeeri also stresses the importance of creating jobs for Bahraini nationals and says that investment in such projects is vital for the country if it is to placate frustrated Bahrainis.

“Industry and investment in Bahrain will go a long way to solve a lot of problems that Bahrainis are demonstrating about,” he says. “Jobs and money and securing their children’s futures is what this is about.

The Sulb plant is expected to create about 1,000 jobs when completed, about 70 per cent of which will be initially taken by Bahrainis.

“Many of these jobs will require training and the employees will be able to develop very specialist skills,” says Al-Qadeeri.

Foulath seems committed to emulating the local aluminium industry’s model by developing its steel operations right throughout the steel value chain.

In 2010, Foulath subsidiary, Gulf Industrial Investment Company, inaugurated a $700m, 6 million t/y pelletising plant that will process iron ore into the pellets required by the DRI plant at the Sulb mill.

“Controlling as much as the production chain as possible is vital in today’s steel industry,” says Al-Qadeeri. “Producing the pellets in Bahrain plays a vital role in remaining competitive.”

Moving further downstream, another Foulath subsidiary, United Stainless Steel Company, operates a 10,000 t/y cold-rolled stainless steel mill in Bahrain. The facility is the first of its type in the Middle East.

Middle East metal supplies

With its proximity to Saudi Arabia and Iraq, the metals industry in Bahrain is well positioned to supply their major construction programmes.

The civil unrest that is growing across the Middle East and North Africa region may also help persuade governments in the region to dig a little deeper and finance additional projects, aimed at dispelling the demonstrations.

“I would not be surprised to see a few marquee projects being announced as part of a stimulus package to get people back into work in key markets such as Saudi Arabia,” says a Middle East-based steel industry executive. “In Iraq, I can also see power and housing projects being fast-tracked by the government.”

Both the aluminium and steel industries in Bahrain will be hoping to tap into both markets and take full advantage.

Bahrain has set the standard for how a successful metals industry should be run. Despite the frustration voiced by many Bahrainis, the country’s industrial diversification plans are still some of the most sophisticated in the Middle East.