The owners of the world's largest aluminium smelter, which is being built in Abu Dhabi, are studying the addition of an alumina refinery to the site that could transform the emirate into a global hub for aluminium production.
Mubadala Development, a strategic investment company owned by the Abu Dhabi Government, has issued a tender to study the feasibility of developing a refinery at its existing Emirates Aluminium (Emal) smelter site in Taweelah.
That would give the operation much greater control over its own supply chain by allowing it to convert bauxite ore into alumina.
"In terms of single-site smelters, Emal is going to be huge," said Olivier Masson, an aluminium consultant at CRU, a London-based metals intelligence company. "It shows that Abu Dhabi is looking at ways to put its gas to productive use. No other smelter in the Gulf has a refinery yet."
Emal, a joint venture between Dubai Aluminium (Dubal) and Mubadala, is building the world's largest single-site smelter at a 6-square-kilometre location at the Khalifa Industrial Zone in Taweelah, between the cities of Dubai and Abu Dhabi.
About US$5.7 billion (Dh20.9bn) has already been spent developing the first phase of the project, with $4.5bn being spent on the second phase, putting the country among the world's top aluminium producers. The second phase of the project is expected to be completed by 2014.
The plant will also be able to supply molten aluminium to processors based around the site, reducing the cost of transporting the metal in solid ingots and billets that have to be remelted.
"In the context of our continuing collaboration in the aluminium sector, Mubadala and Dubal are currently conducting preliminary studies as to the feasibility of constructing an alumina refinery in relative proximity to Emirates Aluminium," Mubadala said in a statement yesterday.
The business magazine MEED earlier reported a refinery could cost upwards of $1.5bn.
Gulf states continue to pump investment into aluminium production at a time when many global players are closing smelters and scaling back expansion plans.
Saudi Arabian Mining Company, better known as Ma'aden, this week awarded a contract to build an aluminium refinery in the Eastern Province. South Korea's Hyundai Engineering & Construction won the $1.5bn order to build the 1.8 million tonnes-a-year plant.
However, a global supply glut has forced some of the world's largest producers of the metal to scale back. Norsk Hydro this week said it had shut its 180,000-tonne capacity smelter in Australia because of low prices and an uncertain economic outlook. Rio Tinto closed a similarly sized plant in the United Kingdom in March and also scrapped plans to build a $2bn smelter in Malaysia.
The Gulf's six main aluminium producers produced about 3.1 million tonnes of the metal in 2010, or 7 per cent of global supply, according to Deloitte. But that is predicted almost to double to 13 per cent by next year as smelters such as the one being built in Taweelah add capacity.
Emal has been in talks with two metal processors interested in building facilities alongside its $10.2bn plant in Abu Dhabi, Saeed Fadhel Al Mazrooei, the chief executive, said in an interview with The National this month.
"We are encouraging downstream industries to set up around Emal, and we have already committed with two companies and are in negotiations with another two," he said.
iPad users can follow our twitterfeed via Flipboard - just search for Ind_Insights on the app.