Expanded Aluminium Capacity Under Consideration by Sohar Aluminium

Expanded Aluminium Capacity Under Consideration by Sohar Aluminium

The CEO of Oman’s Sohar Aluminium told domestic media late last week that his company plans to increase its smelting capacity and its downstream capabilities over the next several years.

Said Mohammed Al Masoudi said that Sohar is aligning its priorities with Tanfeedh, the Omani government’s plan for economic diversification, which recommends a multi-million-dollar plan to increase production. The government anticipates that a production increase will lead to a rise in both industrial activity and overall employment.

“As Sohar Aluminum, we are proposing to expand our plant but this will require shareholder appetite to invest. It is under discussion in Tanfeedh as well. We are always hoping to expand, because the plant itself was designed from day one to have more than 1 pot line.”

Although policy goals have been set, Al Masoudi says that there remains a great deal of groundwork to be done before Sohar can break ground on a new potline.

“We are still in the very early stages. There are many things that need to be done first, such as conducting socioeconomic studies. Our first pot line was a Greenfield project. The brownfield is less of a challenge but is a capital-intensive project that requires billions of dollars in investment. However, we are hoping Sohar Aluminum can expand as it will benefit Oman.”

Of Sohar’s 375 thousand metric tons of annual aluminium production, forty percent of it is exported. Though Al Masoudi believes exports aren’t a problem, he says that increased output would help boost the sultanate’s downstream sector.

“At the moment we have to export minimum of 40 percent to our Shareholder, Rio Tinto and I think we have the right kind of balance. If a decision to expand in the future is made, I believe Sohar Aluminum will enhance the local downstream market while balancing local and export requirements. We also need good policies that can help Aluminum dependent industries and create an economic cycle. We are working hard to promote these downstream industries.”

He went on to say that aluminium prices have begun to rebound on news that Beijing is reigning in excess capacity. In addition, Al Masoudi finds little reason to believe demand will slow, which bodes only good things for aluminium prices at the LME.

“We have no issues with demand, and demand will continue. We have seen a demand growth of two to three percent over the past few years. The issue with supply is due to the increased capacity from China. Problems may arise if China starts exporting products or semi products to the rest of the world. That is when you will see the LME or metal prices dropping. Fortunately, for the last couple of months, the LME is going up. Whether there is a change in fundamentals or not we are positive that demand will continue. China will start to curb on environmental issues, closing smelters that are not meeting their own environment regulations.”

As with most of the aluminium world, the focus is upon China and its domestic aluminium sector. That being the case, Al Masoudi revealed that the Middle Kingdom would be a hot topic at ARABAL 2017, which will take place in the second week of November.

“During Arabal 2017, we will have experts present, including ones from China who can shed some light on the current situation. Clearly, the role of China is important, because it currently produces 50% of primary Aluminum in the world.”

Sohar Aluminium was founded in the fall of 2004 and is jointly owned by Oman Oil Company (40%), Abu Dhabi National Energy Company PJSC – TAQA (40%), and Rio Tinto Alcan (20%). The US$2.5-billion joint venture produced 375 thousand metric tons of aluminium last year, which was approximately 10 percent of the world’s ex-China production.