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Alba positions for the future

6 November 2024

 

Aluminium Bahrain (Alba) is a key player in the Bahraini economy. It began aluminium smelting in Bahrain more than 50 years ago, in 1971. Today, it is the largest company listed on the Bahrain Bourse by market cap, and its smelter in Asker is the world’s largest single-site aluminium smelter outside of China. 

Its capacity has been growing since the opening of Line 6 in 2019. In 2023, it set a new record with 1,620,665 metric tonnes of production, up 1.3% from 2022.

Despite this success, it is far from business as usual for Alba this year, as it seeks to position itself as an industrial leader for the next 50 years. On 24 October, it informed the Bahrain Bourse, where it is listed, that it had appointed advisers to guide its due diligence process as it explores a potential business combination with Saudi Arabian Mining Company (Maaden).

“The logic is that Maaden will contribute its aluminium smelter assets, which are held within Maaden Aluminium Company, their alumina refinery and bauxite mining, in return for the issuance of shares in Alba,” said Alba chairman Khalid Al-Rumaihi while speaking on stage at the Gateway Gulf investor forum in Bahrain on 4 November. 

The deal gives Alba vertical integration with Maaden’s bauxite mines and alumina refining and local access to the growing Saudi market. For Maaden, the deal gives it greater market reach using Alba’s established sales network.

The appointed advisers for the transaction are Moelis & Company as financial adviser, Hatch as technical adviser, McKinsey & Company as commercial adviser, PricewaterhouseCoopers as financial and tax adviser, Teneo as public relations adviser and Freshfields Bruckhaus Deringer as legal adviser.

The announcement to merge with Maaden followed the signing of an agreement in September by Saudi Basic Industries Corporation (Sabic) with Maaden to sell its 20.62% shareholding in Alba. Sabic expects to make sales proceeds of $965m-$1.06bn from the transaction, the completion of which is subject to regulatory approvals from relevant authorities in Saudi Arabia and Bahrain.

Change of plan

Alba has also changed its expansion plans. Instead of building a new Line 7, the aluminium producer plans to install new production facilities to replace the existing lines 1, 2 and 3. 

“Now the intention is to demolish or stop the old lines, which are efficient from 1971. They are more than 50 years old, and we will replace them with new lines. Technically, this is not a new Line 7 project anymore because we are going to close lines 1, 2 and 3,” Alba CEO Ali Al-Baqali told MEED on the sidelines of Gateway Gulf. 

The feasibility study for the project has already started and is being executed by US firm Bechtel. In 2022, Bechtel was appointed to conduct a feasibility study for Line 7. The firm was also the contractor for Line 6, which was commissioned in 2019. 

Replacing lines 1, 2 and 3 will also allow Alba to increase capacity by installing more efficient, modern production plants while at the same time utilising existing assets at the Alba site in Bahrain. 

“There is no need for power because we are going to utilise the same power,” Al-Baqali said. “We also do not need a new cast house.”

The plans to replace lines 1, 2 and 3 are separate from plans to enhance the capacity of lines 4 and 5. In September this year, the Alba board approved an estimated $30m project known as Lines 4-5 Creep-up, which, upon completion, is expected to increase Alba’s metals production capacity by 8,000 metric tonnes a year.

Further announcements

Alba also made two other announcements at Gateway Gulf. Alba and Japan’s Daiki Aluminium Industry Company will form a joint venture known as Alba-Daiki Sustainable Solutions (ADSS) to develop an aluminium dross processing facility in Bahrain. Alba will hold a 70% stake in the joint venture, while Daiki will own the remaining 30%. Both partners intend for the aluminium dross plant to commence operations by September 2026.

Alba and Bahrain-based Array Innovation also announced plans to accelerate Alba’s Industry 4.0 digitalisation journey with advanced artificial intelligence (AI), data analytics and automation solutions to optimise Alba’s operations and boost efficiencies.

Looking to the future, Bahrain is also seeking to move up the value chain and further develop its downstream aluminium production capabilities. 

“Alba existed in a certain time. We were looking at electricity being cheaper in this part of the world. You could import alumina, apply electricity to the production process and export. We live in a new reality now where that electricity competitiveness is no longer present,” said Al-Rumaihi.

“What we have to do is think about what the industries will be like in the future. Every country in the Gulf is thinking about this. How can we introduce manufacturing in my economy? How can we widen the manufacturing base to move from being a consumer to a producer?” 

Steps have been taken to achieve this. For example, Spain’s Aleastur, in partnership with the kingdom’s sovereign wealth fund Bahrain Mumtalakat Holding Company, has established an aluminium grain refining operation in Bahrain.

“We want to do more. We’re still very low on the value chain, and aluminium is a metal of the future,” said Al-Rumaihi.

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Colin Foreman

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    Indrajit Sen