SINGAPORE China is still
the big story in primary aluminum production on a global scale,
but India and the Middle East are coming up as rival hubs,
analysts and participants in the sector said.
Lower energy costs and easier
access to raw materials are the biggest attractions in India
and the Middle East, regions that market players say have room
to grow as producers close shop in developed countries as power
costs make their plants uneconomic.
Energy costs per tonne of
aluminum produced range from $255 to $368 for major producers
in the Middle East, a market source told AMM sister
publication Metal Bulletin. In India, the energy costs
range from $514 to $904 per tonne, the source added.
"Energy is by far the largest
portion of production costs (for aluminum smelters) and a
growing portion given the global rise in energy prices, so
having access to lower-cost or more competitively priced power
is a real advantage," Barclays Plc analyst Gayle Berry
"The operating costs of the
Middle Eastern smelters are in the bottom quartile or the
lowest-cost quartile for the entire industry, while in India
they are within the bottom-half quartile," she added.
Middle Eastern total operating
costs are about $1,300 to $1,400 per tonne of aluminum
produced, while those in India are near $1,700 per tonne, she
In some developed countries,
older smelters sometimes report operating costs as high as
about $2,000 a tonneor above the cost of aluminum itself.
On Friday, three-month aluminum closed at $1,861.5 per tonne on
the London Metal Exchange.
Besides having affordable power,
the Middle East has a major edge in terms of location, sources
"Lets say you are
producing in Icelandyou dont ship products out to
Asia. But if you are in the Middle East, you can ship product
to Asia, you can ship it to Europe and use it in the Middle
East, which is booming itself," a Singapore market source
The Middle East today accounts
for 8 to 9 percent of total global aluminum production, but
that will expand with the ramp-up of Alcoas joint-venture
Maaden smelter, among other projects.
"Following that, theres
the expansion of Emal (Emirates Aluminium Co. Ltd.), which will
go from 800,000 tonnes in 2012 to 1.3 million tonnes in 2014,"
said Ron Knapp, secretary general of the International
Meanwhile, "India offers
(better-priced) energy as well as availability of bauxite plus
good domestic markets," an Indian producer added.
A version of this article was first published in AMM sister
publication Metal Bulletin.