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Call for Int’l Collaboration to Develop Aluminum Industry

Call for Int’l Collaboration  to Develop Aluminum IndustryCall for Int’l Collaboration  to Develop Aluminum Industry

Iran is seeking $10 billion of investment to develop its domestic aluminum industry that could export 60% of its output to meet growing global demand for the metal used in cars, jets and beverage cans.

The raw material bauxite needed to achieve the goal is proving hard to find.

“Iran’s aluminum production of 350,000 tons per year is below the manufacturing capacity of 470,000 tons because of a shortage of bauxite and insufficient electricity generation,” Mehdi Karbasian, the head of Iranian Mines and Mining Industries Development and Renovation Organization, said at Iran International Aluminum Conference 2016 held in Tehran on Wednesday.

“With an additional investment, Iran could boost output to 1.5 million tons by 2025,” he said.

The fourth iteration of IIAC, which ended on Thursday, was attended by a host of domestic and foreign industry players.

“Iran is weak when it comes to bauxite reserves,” Bloomberg quoted Karbasian as saying in an address to the conference, emphasizing that bauxite and alumina procurement have always been one of the industry’s primary challenges.

The country’s only source of bauxite is Jajrom Mine located in the city of Jajrom in North Khorasan Province, with reserves of less than 20 million tons.

Karbasian noted that mineral explorations undertaken during the previous two years have sparked glimmers of hope for finding new reserves, but sustaining the industry in the long run requires cooperation with global suppliers of bauxite and alumina.

  Hunting for Bauxite in Guinea

Iran’s aluminum business has been held back because a 25-year effort to develop a bauxite mine in the West African nation of Guinea still has not yet borne fruit.

The 50-50 partnership with the Guinean government was recently renewed for another 25 years and Iran is now awaiting a consultant’s recommendation by September on how to make the mine operational.

The mine, possessing more than 500 million tons of bauxite, is located in Guinea’s Dabola City about 370 kilometers from the coast.

According to Bloomberg, Iran expects to issue a tender by the end of 2016 to build a pipeline in the African country to transport the bauxite mined to a port for shipment. The tender would be issued after an economic feasibility study is received by German consultants DMT GmBH in the next two to three months.

  Crowded Market

Iran will be entering a crowded market in the Middle East where production has grown to represent almost 10% of global output, in part because of low energy costs.

Emirates Global Aluminium, based in the UAE, boosted output by 4% last year to 2.4 million tons while Aluminium Bahrain BSC wants to increase its production by 540,000 tons to 1.5 million tons.

Aluminum prices have dropped about 40% in the past five years as economic growth cooled in China, the world’s biggest producer and consumer. The metal traded on London Metal Exchange has advanced about 4% this year.

Iran has invested $2.7 billion in its aluminum industry, and that figure needs to be raised “substantially” to meet domestic and Middle East demand, Karbasian told the conference.

  Rising Demand

Global aluminum demand will climb 5% in 2016 while production expands 2%, leaving a deficit of 1.1 million tons, Alcoa Inc., the biggest US aluminum producer, said in an April investor presentation.

 Middle East and North Africa consumption expanded 5% in the first quarter, driven by 12% growth in Saudi Arabia, Aluminium Bahrain said in its investor presentation this month.

Guinea holds 7.4 billion tons of bauxite, more than any other country, according to US Geological Survey data, but only accounts for 6% of global output due to limited exploration and infrastructure, Bloomberg Intelligence industry analyst Yi Zhu said in a report on May 6.

Australia and China are the biggest bauxite producers, according to USGS.

  Keynote Foreign Speakers at IIAC

Representatives of some of the world’s largest aluminum producers delivered speeches at the conference on Iranian aluminum industry’s potential for growth and investment opportunities in the sector.

Ralf Ohrrndorf, SMS Group’s technical sales manager, described Iran as the world’s “new aluminum market” and said: “Considering Iran’s long-term plans for aluminum, we will soon witness increased demand for aluminum in downstream industries.”

The SMS Group is internationally active in plant construction and mechanical engineering for the steel, aluminum and non-ferrous metal industry.

“The auto and aviation industries’ demand for aluminum is on the rise and aluminum producers are competing to cut down production costs and win a bigger share of the market,” said Roman Berstenev, an official with Rusal, the world’s second largest aluminum company.

“Energy prices are the main determinant in this race, and Iran’s large energy reserves provide it with a considerable advantage.”

Giovanni Nigris, deputy manager of the Italian Danieli, said strategic geographic location, abundant reserves of energy, access to free waters and a talented workforce leave no doubt for Iranian steel industry’s potential for growth.

The Italian firm is among the world’s largest suppliers of equipment and plants to the industry.

 

Financialtribune.com