The number of divestures and shut-downs is growing; the number of greenfields is diminishing; China’s share in world primary aluminum capacity keeps growing slowly.

Worldwide, energy costs are escalating, and the good news is that it makes green energy more competitive: See here a survey.
We notice a growing trend for existing older smelter in downstream integration, going as far as jumping directly to the compounding of alloys to address specialty markets. Here is a superb example.
China combines shutdowns, extensions, new greenfields, and slow energy reconversion to greener generation technology.
This North American smelter was expected shutting down. Instead it seems to find a new life. But this metal producer will shut down about 500 ktpy capacity, including a permanent shutdown. This other producer is putting for sale a large chunk of its world capacity after spending years and zillions acquiring it… But this smelter which was shut down for several years keeps showing signs of possible resurrection.
In Europe, this excellent smelter is for sale, and in our opinion will find a buyer; while this other producer intelligently pursues energy integration.
The biggest Greenfield in the world seeks several billion dollars funding, and will find it.
In Asia, here comes another Greenfield on the horizon, and a well-established producer planning to double its capacity…
Down under, cards are being shuffled for the game of who will buy and who will sell shares in this smelter.
As for this African smelter, it probably is the one which can claim the record for the lowest actual production in relation to actual capacity since it was built. But its owner keeps trying to bring it to viability.

A cold wind is blowing on aluminum investments as LME prices fall down and energy costs move up.

Should we expect a shutdown of some 15% of world capacity as some say? A cold wind is blowing from China, which forecasts new capacity but also many shutdowns and is now paying high prices for domestic energy; but also from other countries. Energy costs are moving up, and not only because of CO2 taxes. This smelter seems doomed because of such taxes, however. In Iceland the golden days of cheap energy are over, but this last Greenfield may finally take off. This huge, modern and excellent smelter keeps attracting investors. These 2 smelters using the now old but still very effective AP18 cell and this pioneer of the AP30 cell are investing. This small Greenfield in a far away country silently nears completion. And this world aluminum leader seems in real deep trouble.

Rio Tinto’s decision to divest from primary aluminum and concentrate on iron ore shows how absurd has become corporate strategy since SVE was invented. However…

Back to Square One! Alcan was born some decades ago to take advantage of low cost hydropower in Canada. Now Rio Tinto acquiring Alcan, after Alcan acquiring Pechiney and Alusuisse, after a restructuring which destroyed significant competitive advantages in these acquisitions (plus countless jobs worldwide), after diving up to the neck into debt, after divesting all downstream businesses which were providing a strategy to the acquired metal producers, rediscovers that the old Alcan strategy was the right one, while reshuffling and dealing its cards simply because, right now, China needs a lot of steel and iron ore prices are up for the time being. For how long? These are the marvels of Stockholders Value Enhancement (SVE): Rio Tinto claims they must not invest in an industry which doesn’t pay at least 40% of gross return. And yet, the history of either Alcan (ante acquisition) or Rio Tinto stock prices shows that SVE has been a destructive illusion. And the real future of primary aluminum is written elsewhere. There even is a risk that the allegedly new AP60 technology, which is really the ancient AP45 prototype which Pechiney had been operating for decades before becoming Alcan, will soon be the most modern obsolete (energy intensive,CO2 generating) technology coming on line. Wait and see… Meanwhile, this smelter , this smelter and several others are for sale.
Here are two other countries (Angola, Indonesia) which will become new metal producers. This excellent smelter,still state of the art, is going to almost double capacity within a few years. This smelter, the sole one in a country naturally favored for aluminum production, was doomed for more SVE reasons. The Chinese, who do think long term, consider acquiring it. The Chinese also contribute heavily to financing this Greenfield (Taishet) in Europe. This country (Iceland) was earmarked as the ideal site for primary aluminum. The financial crisis has changed everything, and this producer abandons his Greenfield project. This smelter gets the green light to integrate 600 MW of energy capacity. And this smelter located in what should have been an aluminum paradise if it wasn’t for rampant corruption, will finally get financing (Chinese again) to undertake a badly needed, major revamping

Aluminum is beginning to reflect the icy slow down of the world economy.

As of October 8, the Economist’s commodity-price index shows that prices for all commodities, even petroleum, are down since last year, except gold. Yet even gold is calming down. And the drop within last two weeks is significant. Bahrain is choosing a strange moment to charge more Alba for gas. Seen from our observation post covering aluminum and energy, it looks like a world recession is beginning. We expect this Asian country to get its first smelter later than planned. This old British smelter, in our opinion, may possibly shut down despite having its old but sound power plant. We expect the same for this excellent US smelter. The government of this East-European country ( desperately wants to nationalize its sole smelter to keep it in operation. In this African country, which is waiting for its first smelter since 1937, alumina and power projects are delayed, but in this other African country a sound decision is made to invest in second transformation downstream of the sole smelter. And elsewhere in Africa an awesome megaproject integrating energy aluminum and alumina is delayed. But these two greenfields, which had been regularly delayed, seem now in progress. And India keeps investing, despite signs that its protected coal industry is showing signs of shortages. Canada, where investments were delayed for a long time, seems getting in a full swing of retrofitting and expansion including some shutdowns.
Hatch designates the five producers which own and know how to transfer smelting technology, and doesn’t perceive yet that a truly innovative technology will be indispensable in the not too far future.

Activity is waking up in viability studies and exploratory talks regarding some long term Greenfield integrated projects.

The world recession outside the BRICs may not affect them but may affect the differential between aluminum prices and energy rates. Which is why all long term projects integrate energy generation. We also notice, for the same reason, that the decisions whether to maintain or shut down an older smelter are very volatile, because short term forecast is becoming uncertain. Could it be that the know how in Operational Research is vanishing? China remains optimistic: Metal demand, says this report, will double over decade. This old but good smelter has its own, old fossil-fired plant. Will it shut down, or revamp the power plant? This country has never produced aluminum. It definitely will have a smelter, and first plans for alumina refining. This other country already has alumina but always suffered of the worst corruption. It doesn’t discourage China… This well known EPC firm secures a major contract for a Phase 2 Extension. This old, huge Soderberg Subscribers, click here and scroll down to read more. has finished an ambitious renovation and extension, and remains a permanent market for equipment. It seems that Soderbergs will never die… This leading equipment supplier just secured a major contract in pollution control. This ancient smelter, which made history many times, at last has a new energy contract. Stock representing 15% of ownership of this leading producer is for sale because of a management conflict. This smelter expansion was delayed, now is moving ahead. This small producer has 3 smelters and a greenfield project which isn’t stalled anymore.

Investment activity reflects present uncertainties

LME prices trend upwards ended around March. Since then they are hovering around $2,500 per tonne. New capacity investments tend to be on hold. This smelter project has been growing by small stop and go increments and is now expected to be completed next year. The saga of this other project eternally in progress takes a new dimension with investments in its energy source. This old but excellent smelter, cursed for being state-owned in the wrong country, seems on its way to be privatized, which will help. But this other old but excellent smelter, privately-owned with the same foreign owner for decades, is going to be nationalized, which will also help! And this giant, integrated smelter costing close to $ 6bn. is finally due to begin production next year… hopefully.

Aluminum’s bright yet uncertain future…

Aluminum demand keeps growing. So do aluminum prices, and energy prices too, same as all basic commodities. Yet, a second, major phase of the world crisis is lurking on the horizon.
Will Malaysia finally become a primary producer? This time, a serious and huge project seems in the pipeline.
This old but quite competitive smelter was due to shut down. Yet, suddenly, buyers are seriously considering a take-over, a symptom of new market conditions. Thousands of miles away, another smelter of same technology, which was expected to shut down, signs a barter contract (energy versus metal) which is the first step towards survival in the long term, and maybe some extension…
I heard in 1980 that all Soderbergs would be shut down by 2000. Yet they are alive and kicking, and, for the same reason, another batch of Soderbergs is going to be revamped to better comply with regulations.
In China, which today represents 40% of world capacity, government imposes a serious temporary shutdown to calm down an overcapacity due to the the investor’s irrational enthusiasm of the last decade…
A recent and huge smelter is already considering doubling its capacity. And this Greenfield, which was delayed due to energy uncertainties, is moving ahead.

LME prices calmed down a bit while energy costs keep escalating.

In that environment, smelters who integrate their own energy source are more favored than ever, as illustrates this old smelter divested a few years ago by a major producer and now thriving. This Greenfield project is a joint venture presently negotiating its energy contract in a controversial context. This new venture undertakes to exploit using an innovative process replacing new metallurgical alumina sources from clay the traditional Bayer. This Chinese producer invests in an alloy compounding plant in the US. This one in Middle-East builds a huge extrusion plant. This old prebake smelter will undergo a significant refitting. This country was famous for its exceptional hydro energy resources, went through financial trouble, and now sees that then only way out is doubling its capacity. This extension project had produced more ink and political debates for decades but is now in progress. This old smelter is still hanging on a renewed power deal held back apparently by no other causes than political shilly-shallying. This African nation, an old aluminum producer, attracts more and more interest for greenfields and brownfields. This European one, also an old producer, was due to shut down an antiquated Soderberg, but it looks like it will be nationalized again…

Investment growth, including by new players, follows favorable trends of metal demand and prices.

In Africa, this old but efficient smelter is going to double production, conditions being favorable for a restart. In Asia, this new joint venture is adding to a long list of potential Greenfield investors. China is restricting capacity extension, due to inflationist tendencies. In India this Greenfield is at last ready to pour metal, and this producer plans to invest in South Asia. In the Middle-East, this new smelter is already planning doubling capacity, and this country, a new producer, has grandiose plans of upto $20 Billion investments. In the Americas, this smelter is in trouble and benefits a significant rescue package from two governments covering its most urgent needs to maintain a badly needed production. The owner of these two older smelters is disclosing a detailed investment plan here. This European producer and this Latin-American producer both have plans for more capacity in Brazil. In Europe, this flagship smelter is restarting some capacity while this antiquated inefficient smelter is finally shutting down for good.

LME prices keep going up, while investment conditions get more and more complex.

Icelanders ask themselves whether the whole plan to create their primary aluminum industry since the 70’s might have been a mistake if one considers the really big picture. Yet hanging their future to the sole fishing industry could have been a mistake too… Hydropower for aluminum finally lurks on the horizon of Malaysia. . This will represent a huge market for engineering and equipment, witness market forecasts of this leading local group. This Asian Greenfield project is moving ahead as planned. This African country confirms future greenfields and a brownfield. Here comes a small but sure and unexpected smelter extension in an unexpected location. Quite the reverse situation than this smelter which was sure to obtain a new energy contract and just learned it won’t. This country has been producing a big share of the world aluminum thanks to State-owned hydropower plants. Yes, it is called Russia . Guess what? Now Russia will privatize them!

Investment climate is affected by conflicting trends: LME is up, but so are energy prices; demand is good, but inventories are sky-high.

Two biggest takeovers which changed the whole structure of the world aluminum industry are being analyzed today and turn out to have represented disasters for the stockholders. Could it be that the days of megamergers allegedly justified by stockholders value enhancement ‘strategies’ are coming to their end?
This major takeover, on the contrary, seems to be good business for the seller, the buyer, the country, and the industry.
This megasmelter project is still forecast for 2014. However it is risking delays because of energy and logistics issues.
This old but excellent smelter benefits downstream investments, we think they prelude to a major refitting or extension in the future.
This other old but competitive smelter may finally obtain its new energy contract. It would mean some investments later.
This Chinese smelter is reactivating idled capacity before the summer.
This Middle East smelter is going to go the usual way: Integrating energy and water desalting. This means good news for this equipment supplier…

The climate in primary smelters investments remains cautiously positive as metals prices keep consolidating and demand increases.

This greenfield is 60% complete, but progress was on hold.. Work will resume in June. Construction of this other greenfield will begin now that its funding has been secured. New smelting technologies (less energy-intensive, less CO2 emissions…) will be demonstrated in North America and in Russia. In this equatorial country this huge hydroelectric project, many times delayed, is expected to deliver its first MWh’s in March 2011. These 3 old but sound smelters which were idled for quite some time in North America are about to restart. The same is happening in central Asia with 2 other ancient smelters. In equatorial Africa seaport investments will supplement power generation investments and prepare ground for expansion of existing aluminum industry.

Main news for early 2011 come from China, Canada and Indonesia.

China is resuming at least one major integrated greenfield and further invest in energy capacity. Indonesia remains on course to restructure and develop its aluminum industry with new investors. Canada, after many endless hesitations , is on course for two major projects. Meanwhile, one African smelter shows persistent signs of life, and one antique and small smelter finally shuts down in Latin America. In Australia, the future of this excellent smelter suddenly seems in question.

General slow down this month affecting well-known investment projects, but new ones are surfacing.

Disputes are going on between government and stockholders around this old but sound smelter, which will eventually have to invest and remains in our forecast. Alcoa’s efforts in this other old smelter indicate possible revamping investments. This down-under state-of-the–art smelter just obtained a new long term energy contract, and this other one will get geothermal energy. This Asian producer confirms shifting site for next greenfield . This major producer leads the trend towards more metal recycling.. This Chinese producer is expanding. This North American smelter is restarting. This African one will restart next year, they say, but we are not too sure. This Asian extension is a bit late, but should be on line next month. reaches pre-feasibility stage and should get on line by 2015. This greenfield project will be implemented, but not before 2016.

Context: As aluminum consumption growing 5.3% per annum and LME prices stay above $2,000/tonne, investment plans keep progressing.

Despite strong opposition on energy issues, Malaysia seems poised to become an aluminum producer. New investors testify that Brazil’s capacity will increase. This Latin-American country will become a producer around 2016. So will this northern country perhaps as soon as 2014. This 40-year old but good smelter will increase capacity and invest in its cast house. However, this very old greenfield project, the first in its country, is again delayed.. This slow moving extension of a very modern but faraway smelter will get on line by steps between 2013 and 2016. This shutdown North American smelter will very probably reopen quite soon. And this major extension in the Middle-East Subscribers, click here and scroll down to read more. reaches pre-feasibility stage and should get on line by 2015.

As LME prices move slowly up, the investment climate keeps improving.

As LME prices move slowly up, the investment climate keeps improving.
This well known aluminum producer is investing in Indonesian coal mines to secure energy supply and control his future energy costs for his future smelter.
This Asian one is confirming his expansion program in both energy generation and smelting, driven by the successful growth of its recent acquisition in 2nd transformation.
In a country where smelting capacity has been dwindling for decades, this smelter is going to build an extension thanks to a new energy contract. In this other country which, 20 years ago, was a huge power island well-known for his prosperous and growing smelting industry, the major utility is confirming amendments in energy contracts which compromise further the industry.
A complete newcomer in the energy-related industries invests $100 mn in various joint ventures in the energy/aluminum arena.
This metal producer plans a debt financing of $1.7 billion for its on-going capacity increases in smelting.
This government confirms that it is finally canceling a major greenfield project after several years of feasibility studies and primary site development work. It is the 8th time since the eighties that a greenfield projects is advertised, pre-financed and then abandoned in its country.
In Latin America, this old smelter announced a $670 million investment in refitting and capacity increase.
In the far North, this producer will invest in a 20% capacity increase of its old but very efficient smelter.
In Africa, this other newcomer plans $2.8 billion investments in a combine of one aluminum smelter and two hydropower plants.
This huge independent producer will wait a bit more before investing in its 6th potline.
In Malaysia, another country which is famous for numerous feasibility studies in numerous greenfield projects but hasn’t produced one tonne of aluminum yet, a famous Japanese conglomerate joins forces and commits to co-invest in one of the more serious projects.

The thaw on aluminum investments keeps progressing.

This aluminum producer is putting on stream 2.4 GW of dedicated power plants. This country is nationalizing its sole smelter and will certainly extend it in a few years. This country will for the first time demonstrate how a wind mill forest of 420MW can participate to the energy supply of its sole smelter. But two and may be three greenfields are dependent on a gigantic hydropower project which is almost completed but causing mega-scandals in their country: ecological, financial, controversial technology issues, corruption linked to cost overruns, etc. This small European smelter gets a long term loan: It is going to invest. Here is another country making the news because they consider a primary smelter for this first time; a sound project, but long term.This older smelter was plagued by energy shortage. It seems now that the government is putting its act together, in which case expect an extension. Will Iceland remain a Power Island enjoying cheap, clean energy? Well, read this. But this smelter close to completion, is now hurrying ahead after some delays.And this big smelter extension in North America, the soundest project on the continent, is finally progressing after endless political disputes. We expect it will start producing metal in 2012. This Indian greenfield is a cert, but it will have to relocate within India. This Indian extension should start producing in 2011.
We remind you that Andre Teissier-duCros, our Publisher, will be a speaker on Nov. 25-27, at the ICSOBA 2010 conference. ICSOBA is the Int’l Committee for the Study of Bauxite, Alumina and Aluminum. This event is their 18th convention. We shall discuss challenges and opportunities for the smelter equipment industry facing macro-trends in world aluminium investment.

Join the ENAL Newsletter in Zhengzhou, China:

Andre Teissier-duCros, our Publisher, will be a speaker on Nov. 25-27, at the ICSOBA 2010 conference. ICSOBA is the Int’l Committee for the Study of Bauxite, Alumina and Aluminum. This event is their 18th convention. We shall discuss challenges and opportunities for the smelter equipment industry facing macro-trends in world aluminium investment. Context: The world demand for aluminum is fundamentally sound. It is sustained by two factors: The exceptional growth of demand in China, of Brazil (+25% consumption expected in 2010), but also of Europe where the automobile industry is huge and consumes more and more light metal in view of its slow conversion to the electric/hybrid car. World consumption outside China will rise by around 6.5-7.0 percent. But smelter operating costs remain hampered by energy costs. The way the industry will adapt to this context will deeply affect the equipment industry: new opportunities, but also new constraints. How? Andre will describe and discuss this situation while exposing the competition arena in smelter equipment.
Meanwhile, recent events show that the aluminum industry must become politically more credible. This very promising greenfield was going to be the first one in this country, and its government finally forbids the project for reasons which gradually developed while the project was waiting for too long. This country was famous for its natural excess power and its impeccable smelters, but the future ones meet with ferocious opposition on political grounds. The same is true of this region (scroll down). Here is a far away region never heard of in the aluminum industry. Nevertheless its population has sent thousand of demonstrators to vandalize an existing smelter because of urgent pollution issues. This country is still assessed as ideal while waiting for its first greenfield, but the same issue may block the project. In this country, an old but viable smelter waits still waits for future investments that an energy dispute be settled. Here is another country which is more famous – scroll down - for its totalitarian regime. than for its energy or aluminum industry. Will it nevertheless build its first smelter thanks to a friendly neighbor? This country starts from almost nothing and plans for 13 nuclear plants within the next 20 years. And this smelter will shut down in China – scroll down - showing that it happens even in that booming country… This smelter waits a little more to be taken over by new owner and then invest. Brazil is compensating for his lack of primary capacity by investing in 2nd transformation.

Changing constraints lead to changes in site selection for serious greenfields, but greenfield investments keep piling up on the horizon.

LME prices are tentatively forecast around $2,000/tonne until end 2011. Environment constraints and political concerns about rational use of mineral resources are getting more acute. This Asian greenfield and this one are relocating without crossing borders. This other one was already under construction but seems stalled to the point that another country nearby may welcome it. This greenfield project in Africa is compromised by another scandal. This old smelter may be partly nationalized with a new investor to further major investments. In the US, the energy market seems more flexible and allows survival of remaining smelters; this one might even invest. This engineering firm obtains a major contract for an integrated fossil-fired power plant, smelter and rolling mill. This Asian producer (Comp Hindalco) explains here in a comprehensive description why he envisions borrowing $ 3bn. for major domestic investments, and in what kind of facilities. This European producer presents similar plans including pursuit of an innovative smelting technology. And this greenfield smelter, power plant and cast house for automobile parts seems to be on schedule for a start up around 2015.

Massive energy investments will prepare a new deal for primary aluminum, while new greenfields are planned.

The industry lives a paradox: In the short term, LME inventories remain high. Yet, in the long term, metal demand is obviously going to explode and wipe out excess capacity, most of which is located in China. Primary aluminum is no more seeking for the vanishing power islands offering excess power and therefore sweet long term rates, and is more and more participating to new energy investments. The leading utility in this African country is finally renegotiating intelligently long term contracts with the local metal industry and preparing for future investments. This country, an old timer in both hydropower and primary aluminum, is preparing a comprehensive investment program in new energy generation and metal recycling. This other country, a big aluminum producer traditionally lacking energy, undertakes investments in energy, primary and secondary capacity to counter a foreseeable metals trade deficit. This greenfield project is now engaging the procurement contracts for its first greenfield. This country has been waiting for ages for its first smelter. Now early construction stages are in progress. The first greenfield in this other country is at the same stage. This leading producer expects its country to absorb twice more aluminum in 2012.This western producer will invest in a new greenfield on the horizon to compensate for planned, but delayed shutdowns of obsolete capacity.These three projects were announced in ENAL some years ago. Our information is that they are only Dormant and may be revived soon. This western producer has only barely succeeded its IPO, raising some $100million which will not allow any significant change in productivity.