Qatalum upbeat about region's future

Dubai: Aluminium smelting capacity in the Gulf is expected to rise to 4.20 million tonnes annually from the current 3.48 million when Saudi Arabia's Maaden adds 720,000 tonnes of capacity next year.

Out of the Gulf's total, two smelters in the UAE — Dubai Aluminum Ltd. (Dubal) and Emirates Aluminum (Emal) — have a combined production capacity of 1.67 million tonnes per annum. The prime question now is what is in store for the region's aluminium industry and what could drive its growth?

In 2000, the GCC produced 1.8 million tonnes per annum. By 2008, this figure had risen to 2.2 million tonnes, or 5.4 per cent of global production. And in 2012 it is expected to almost double.

"GCC countries are rich in the energy resources required to produce aluminium, which also lowers the production cost in the region significantly. Over the past ten years, GCC member states have begun implementing long-term strategies that aim to develop the region's aluminium industry, and the region is now well positioned to be one of the world's main aluminium producers," Jan Arve Haugan, CEO of Qatalum, told Gulf News.

Qatar Aluminum (Qatalum), with a capacity of 585,000 tonnes, has been playing a major role in the industry. It is a joint venture between Qatar Petroleum and Norwegian aluminium producer Hydro.

Haugan, 52, has had a broad career in Hydro. He had leading positions in its former oil and gas business, and played a key role in the expansion of the Sunndal primary aluminium plant in Norway from 2002 to 2004. Until April 2009, he headed the Primary Metals technology area, and until recently headed the company's international smelter portfolio.

In an interview with Gulf News, Haugan gave some insight into the industry. Excepts:

Gulf News: Looking into the longer-term aluminium market and the importance of the Middle East to the world market, can you outline the developments and the creation of a downstream sector in Qatar and the GCC?

Jan Arve Haugan: The steady increase in the global demand for aluminium products is an advantage for the GCC economy. By 2015, GCC nations plan to invest $22 billion (Dh80.7 billion) to increase their overall annual aluminium production capacity from the 2008 figure of 2.2 million tonnes to six million tonnes per annum in 2015, and nine million tonnes per annum in 2020 — 12 to 13 per cent of global aluminium production, which is estimated to be 70 million tonnes per annum.

Where does Qatalum figure in it?

Qatalum is a state-of-the-art greenfield aluminium smelter that was constructed as a 50-50 joint venture between Qatar Petroleum and Hydro in line with Qatar's long-term economic diversification strategy, and which will enable the country to contribute significantly towards GCC aluminium production.

Our aim is not only to be a leading aluminium producer in the region and globally, but also to be a strong catalyst for the development of aluminium-related industries in Qatar.

At Qatalum, our main focus over the next few months will be continuing to ramp up to full production. Once the plant is up and running, we will turn our focus to the downstream industry.

The Qatalum project was launched with the idea of a second phase expansion to 1.2 million tonnes per annum already in mind — although no decision has yet been taken as to when exactly this will happen.

The opportunities for creating downstream industries are immense, with a 2005 social impact study estimating that Qatalum would contribute $1.5 billion to Qatar's economy and saying the figure could be doubled if downstream industries were created.

The development of a downstream aluminium processing sector in Qatar would definitely maximise Qatalum's revenue-generating potential, and would generate a lot of revenue for Qatar, and the region as well. The challenge will be finding the local or foreign investors to establish the metals sector around the smelter.

How important will Qatalum be to the world market in the medium term?

Given the increased global interest in aluminium production for intermediate and downstream industries, aluminium's status as an important element in a large number of heavy industries, such as the automobile industry, will ensure a consistently growing demand for the foreseeable future.

Given that Qatalum is in the final phases of a ramp-up to full production, what are your plans once this has been achieved? Where do you go from here?

Well, the Middle East is emerging as a significant new primary aluminium producer, taking advantage of the region's low production costs and good transport links for exporting.

According to the Gulf Aluminium Council, by 2020 the region is expected to be producing around 20 per cent of the predicted 50 million tonnes per year of global production, up from four per cent of the 38.1 million tonnes globally in 2007.

But while the region's primary production as a percentage of the world market is rising fast, the downstream aluminium products sector is significantly underdeveloped, which has made the Middle East a net exporter of aluminium — approximately 83 per cent of primary aluminium produced in 2008 was exported as billets and ingots to be converted into finished products elsewhere.

By developing a downstream industry, Gulf smelters could raise the region's captive consumption to at least 50 per cent.

Qatalum is committed to being a part of this development process and to help create a strong and robust intermediate and downstream aluminium industry for Qatar.

Our aim is for the smelter to be a strong catalyst for the development of aluminium-related industries, and one of our main areas of focus, particularly given the amount of development still underway in the region — and Qatar's winning the 2022 FIFA World Cup bid — is in building and construction.

The downstream sector is expected to grow over the next decade as Gulf governments encourage the development of local industry for the purposes of job creation and econ-omic diversification.

Together, with Qatalum creating the primary aluminium and other firms utilising it to create value-added products, I see Qatar becoming one of the main centres of aluminium trade and production not only in the region, but in the world.

Qatalum is only one of three aluminium smelters to have started production in the region since 2008. How much do you think the sudden increase in capacity will affect the region, and do you see the competition as beneficial to regional plants?

I would have to say not much at all, really, for a number of reasons. First, despite the number of new and existing smelters in the region, Gulf producers will be competing globally and not with each other, and I believe regional plants will be very competitive on the global stage.

Secondly, aluminium's status as an important ele-ment in a large number of heavy industries like the automobile, construction and marine industries will ensure a consistently growing demand in the foreseeable future, so the fact that there is competition within the region is not really a problem in that respect.

Thirdly, Qatalum have focused heavily on environmental sustainability right from the very beginning. As the issue becomes more and more important, I believe the fact that we have worked hard to minimise the impact of the plant on the environment at all levels will be an important distinguishing and value-adding factor as well.

Last, but definitely not least, is the quality of our product. We strive at all times to adhere to the highest standards in all aspects of our work, and I believe that the quality of our product will speak for itself.