AluNews - August 2007

China's Alumina Price to Fall Due to Domestic Market Surplus

Resource Investor, VA - 01 Aug 2007

By Ida Chen

HARBIN, China (Interfax-China) -- China's alumina market will face surplus pressure, with prices likely to fall in the remaining months of this year, industry insiders told Interfax yesterday at the China 2007 Alumina Market Conference held in Harbin.

"China's alumina market will be in surplus for the remaining months of this year, as new capacity comes online, and this will lead to a fall in the domestic alumina cash price. However, the price decrease will be relatively mild compared to the same period last year due to current high bauxite prices," Zhang Ronghui, China Minmetals Corporation's chief analyst, said.

Zhang predicts that the domestic alumina cash price will fall to a low of RMB 3,000 ($396.30) per tonne over the following months, down from a current price of between RMB 3,600 ($475.56) per tonne and RMB 3,700 ($488.77) per tonne.

However, he was optimistic about the aluminum market and forecast that the London Metal Exchange's three-month aluminum price will soar to new highs over the following months both this year and next year, to between $2,500 and $3,500 per tonne in the second half this year and between $2,500 and $4,000 per tonne in 2008.

"Market speculation, the increasing cost of raw materials and strong downstream consumption will push up aluminum prices in the near future," he explained.

An official from the Henan Province-based private alumina producer Orient Hope Group, who asked to remain anonymous, said that alumina prices will fall steadily over the remaining months of this year to a low of RMB 3,000 ($396.30) per tonne due to market surplus. However, the price decrease will have a minimal effect on the company, as the majority of their bauxite is self-supplied.

The company's third-phase 400,000-tonne alumina project is scheduled to come online in September, increasing company alumina capacity to 1.4 million tonnes per annum. The company also plans to produce more than 900,000 tonnes of alumina this year, according to the official.

According to Ru Xiaojie, senior analyst at Chalco's Henan branch, a total of 4.75 million tonnes of alumina capacity will come online from now till the end of the year, as well as an additional 985,000 tonnes of aluminum capacity, requiring a supply of approximately 1.97 million tonnes of alumina.

Ru forecasts that China's alumina production for this year will soar to 20.67 million tonnes, up from 13.42 million tonnes last year. Aluminum production will also continue to rise to 13 million tonnes this year, up from 9.34 million tonnes last year, with total capacity climbing to 15 million tonnes.

"Although there will be a slight alumina surplus of 600,000 tonnes in the domestic market this year, this is not really a threat to the domestic market. In regions with a high concentration of alumina producers, tight transport capacity will result in localized oversupply, leading to regional competition that will have a knock-on effect on the whole domestic market," Ru commented.

An official surnamed Liu from Shandong Weiqiao Aluminum and Electricity Co. Ltd., a large-scale private alumina and aluminum producer, said that there is still an alumina surplus in the domestic market, despite major alumina producers cutting production from the beginning of the year in an attempt to stabilize prices.

The joint production cuts and price hike measures adopted by several major alumina producers have caused alumina prices to recover slightly from RMB 2,100 ($277.41) per tonne at the end of last year to RMB 3,900 ($515.19) per tonne in May this year. Liu commented that his company reduced alumina production by 40% each month from March to June.

The company has a current alumina production capacity of 1.6 million tonnes per annum and imports its bauxite.

Although other major non-Chalco alumina producers, including Weiqiao, recently pledged to keep prices at RMB 3,700 ($488.77) per tonne, supply surpluses have forced some alumina smelters to reduced prices to RMB 3,600 ($475.56) per tonne, Liu admitted.

Chalco, China's largest alumina smelter, has maintained an alumina cash price of RMB 3,900 ($515.19) per tonne since March 21 this year. However, this is only possible because more than 60% of the company's alumina is supplied through long-term contracts at a fixed price of 17% of the average monthly aluminum futures price on the Shanghai Futures Exchange.

© InterFax-China 2007. For more intelligence on Chinese metals and mining, click here or contact David Harman in Hong Kong at or (852) 2537-2262.

Alcan Rated Top Performer in Innovest's 2007 Global Metals and Mining Sector Report

PR Newswire UK (press release), UK 02 August 2007

MONTREAL, Canada, August 2 /PRNewswire/ --

- Company Attains AAA Rating for its Environmental, Social and Governance Practices and Performance

Alcan has been rated the top metals and mining company in a recently released report by Innovest Strategic Value Advisors. The report analyzed the environmental, social and governance practices and performance of the world's 57 largest mining and metals companies (based on market capitalization) and ranked Alcan first with an AAA rating for 2007.

"Alcan is pleased to be recognized as having the mining and metals sector's strongest environmental, social and governance practices and performance record, an honour that reflects the significant efforts of all of our 68,000 employees around the world," said Dick Evans, President and Chief Executive Officer, Alcan Inc.

The report draws on the findings of Innovest's global review of the industry and its companies, based on the key pillars of strategic governance, human capital, stakeholder capital and environmental performance. The report assigns Innovest's Intangible Value Assessment (IVA) ratings on all companies using its seven tier rating scale ranging from AAA (highest) to CCC (lowest).

"At Alcan, two of our highest priorities are the health and safety of our employees and the stewardship of our environment and the communities in which we operate. To be ranked first out of the major metals and mining companies worldwide for our governance and environmental efforts is an important recognition of the Company's commitment to long-term sustainable, profitable growth," said Mr. Evans.

In 2003, Alcan implemented EHS FIRST, a key component of Alcan's Integrated Management System (AIMS), as the framework and mindset through which the Company's commitment to putting environment, health and safety first is translated into recordable and measurable actions.

Between 1990 and 2005, Alcan's total GHG emission intensity was reduced by 25 percent. The Company recently committed to a further 10 percent reduction in direct C02 equivalent emissions intensity from 2006 to 2010. Alcan has also been a leader in the climate change debate: the Company chaired the Executive Forum on Climate Change in 2005; took part in the Carbon Disclosure Project; joined the United States Climate Action Partnership; and recently signed the UN Global Compact's "Caring for Climate" statement.

Innovest Strategic Value Advisors was founded in 1995 with the mission of integrating sustainability and finance by identifying non-traditional sources of risk and value potential for investors. Its analysis is designed to assist its clients in constructing and managing portfolios that out-perform the market. Innovest does this by tracking company performance and strategic positioning on over 120 factors that are not captured or explained by the traditional, accounting-driven securities analysis.

Alcan Inc. (NYSE, TSX: AL) is a leading global materials company, delivering high quality products and services worldwide. With world-class technology and operations in bauxite mining, alumina processing, primary metal smelting, power generation, aluminum fabrication, engineered solutions as well as flexible and specialty packaging today's Alcan is well positioned to meet and exceed its customers' needs. Alcan is represented by 68,000 employees, including its joint-ventures, in 61 countries and regions, and posted revenues of US$23.6 billion in 2006. The Company has featured on the Dow Jones Sustainability World Index consecutively since 2003. For more information, please visit:

Distributed by PR Newswire on behalf of Alcan Inc.

Rio Tinto Plans to Name Other Aluminum Executives (Update2)

Aug. 3 (Bloomberg)

By Dale Crofts

Rio Tinto Group plans to appoint aluminum-unit executives next month ahead of the completion of the $38.1 billion acquisition of Alcan Inc., creating the world's biggest producer of the lightweight metal.

Those people will report to Dick Evans, the Alcan chief executive officer who will head the aluminum business, Rio said today in a U.S. Securities and Exchange Commission filing. The Alcan purchase should close in October, London-based Rio said. Rio, the world's third-largest mining company, will overtake Russia's United Co. Rusal as the biggest aluminum producer.

Rio, led by CEO Tom Albanese, agreed in July to buy Montreal-based Alcan for $101 a share in cash. That topped a hostile bid by Alcoa Inc. by 33 percent. Rio Tinto is acquiring 3.5 million metric tons of aluminum capacity and low-cost power rights in Canada.

``Considerable confidential discussions'' are being held among Alcan's managers on positions, Evans said in a July 31 interview. Financial compensation from the change of control of Alcan gives some executives ``a certain optionality'' to leave, he said.

Shares of Rio fell 28 pence to 3,307 pence in London. They have gained 19 percent in the past year. Alcan dropped 97 cents to C$100.93 ($95.60) on the Toronto Stock Exchange.

The first formal meeting on combining the aluminum teams was on July 27 in London, Rio said.

Financial Chief

Evans and two Alcan non-executive directors will join Rio's board as part of the takeover agreement. Rio has said it probably will choose a chief financial officer for the new aluminum business from its own personnel.

Rio Tinto plans to sell some businesses to help pay for the transaction, including Alcan's packaging unit. Alcan considered selling the unit before Rio made its offer and has received interest from both private-equity firms and other buyers, Evans said in the July interview.

Albanese said on July 19 that other companies may be preparing offers for Alcan. Rio would get a $1.05 billion breakup fee should another company acquire Alcan.

To contact the reporter on this story: Dale Crofts in Chicago at .

Ghana: Hydro-Power Crisis Getting Worse

UN Integrated Regional Information Networks, Washington 3 August 2007


Ghana is undergoing its worst power crisis since 1998. People here currently have an average of only 12 hours of electricity a day, and, with insufficient rain to keep its hydropower stations functioning, the situation is likely to deteriorate, affecting individual livelihoods and the economy as a whole.

The water level of Lake Volta, the largest man-made lake in West Africa, which normally supplies 60 percent of Ghana's energy needs, is at an all-time low, 234.96 ft below the critical minimum.

The lack of water in the lake has created a 300 MW power shortfall.

Weather forecasters predict drought in all three northern regions of Ghana where the sources of the rivers that feed Lake Volta are located.

"The masses are suffering." John Atipoe, an electrician and father of four, told IRIN.

"The frequent power cuts destroyed my refrigeration system and I had no money to repair it," said 51-year old Juliet Adjoa Serwah who used to make money selling food and drinks. "Now I have to resort to basket weaving to look after my three kids."

Economic warning

According to Ghanaian economist Nii Moi Thompson, "It's almost certain now that low productivity due to the crisis will block the attainment of the 6.5 percent GDP [Gross National Product] growth forecast for this year."

The impact of the power cuts have already been huge for small and medium scale enterprises, which, according to Ghana's finance and economic minister, account for about 90 per cent of all businesses in the country.

Big industries are also feeling the pinch: The mining industry is currently spending 8.6 million dollars a month to make up for the shortfall from the national grid. In March, Ghana's only aluminum smelter company, VALCO, shut down due to the inadequate supply of power, laying off 500 workers.

Energy conservation

In the offices of the Ministry of Energy posters encourage people to save energy. The ministry said it was importing 6 million energy-saving bulbs to be distributed to the public free-of-charge.

"Conserving energy is the best way to deal with this crisis," Energy Minister Joseph Adda told IRIN. "We expect to save up to 200 MW of energy with this approach."

The government said it was also encouraging independent power producers to assist in meeting the energy shortfall. The Wood Group, a private company from the UK has agreed to provide 50 MW; mining companies in Ghana have come together to create an 80 MW plant.

In the meantime Adda said the government was setting up emergency thermal plants that are expected to generate up to 126 MW.

But the costs of power from fossil fuels are high. The government said it has been spending close to US $42 million a month to fuel the generators. "The consumer must be prepared to pay more if we are to run these emergency plants at full capacity," Adda said.

The ministry is commissioning additional power plants to be installed in the next 12 to 18 months. "This forms part of the plan to have an installed capacity of over 3,000 MW by 2010," Adda told IRIN.

But switching from renewable hydro power to power fueled by gas and diesel is also likely to have negative environmental impacts

The government has started construction of another hydro-electric plant which is expected to be completed in 2012, providing 400 MW. But leaders in the main political opposition, the National Democratic Congress (NDC), have criticized the move, questioning why the government thinks it can successfully build a new hydro plant given the on goings problems with the old one.

Political analysts say the handling of the power crisis could determine whether the ruling New Patriotic Party wins or loses next year's general elections.

Norsk Hydro Chair Quits After Stock Option Criticism

Aug. 5, 2007 (Bloomberg)

By Christian Wienberg

Norsk Hydro ASA Chairman Jan Reinaas resigned from his position at Norway's second-largest oil producer after the government criticized the board for overpaying executives when ending a stock-option program.

Reinaas, 63, resigned at the request of Trade and Industry Minister Dag Terje Andersen, who represents the government's 44 percent stake in the company, Oslo-based Hydro said today on its Web site.

Hydro's board said July 25 it will pay 35 executives 210 million Norwegian kroner ($36 million) in return for ending its stock-option plan, prompting criticism from politicians and shareholders who oppose high executive bonuses. Reinaas reiterated today that he believed the nine-member board acted correctly.

``The minister made it clear that my resignation would be a condition for him to help put an end to the discussion about the board of directors' handling of the termination of Hydro's stock option program,'' Reinaas said on the Web site. ``I experienced this as pressure from one shareholder.''

Andersen said last week that Norway may reconsider the positions of all board members by October, when Hydro's energy operations become part of Statoil ASA, Norway's biggest oil company.

Corporate Assembly

Shares in the company, which will continue as the world's fourth largest aluminum producer, have gained 39 percent since the sale of the oil unit was announced on Dec. 18.

Hydro ended the stock-option program after the Norwegian government decided companies in which it owned large stakes shouldn't have such plans. Hydro's board paid compensation because the government said it would respect existing plans.

Reinaas said yesterday the board would let its governing body, the Corporate Assembly, which consists of 12 shareholder and six employee representatives, decide whether the compensation was excessive. The Assembly is scheduled to meet tomorrow night.

``I maintain that the board, after having evaluated this thoroughly, has come up with a decent way to terminate the stock option program,'' he said today.

Two government-sponsored legal evaluations have come to different conclusions on the board's compensation plan. Oslo- based law firm BA-HR found the compensation exceeded what executives would have received from the options, while Selmer, also based in the country's capital, said the Hydro board had acted correctly, the government said last week.


Hydro said on July 27 a review by its own lawyers showed that it had acted within the law.

Reinaas resigned effective immediately leaving Vice Chairwoman Elisabeth Grieg in charge of the board, Hydro said.

``Although I respect his decision, it is disappointing,'' Chief Executive Officer Eivind Reiten called Reinaas's decision ``disappointing,'' in a separate statement on Hydro's Web site. ``The `new' Hydro could use a man like him on the team.''

Reiten would get the most from the compensation plan with a total of 27.8 million kroner, while Chief Financial Officer John Ove Ottestad would receive 23.3 million kroner.

Norsk Hydro's second-quarter net income rose 2.1 percent to 5.95 billion kroner because of higher metal prices, the company said July 24. Norsk Hydro has a market value of 279 billion kroner.

To contact the reporter on this story: Christian Wienberg in Copenhagen at

Rio, CMS to sign agreement for mega- aluminum smelter study

Mineweb, South Africa - Monday , 06 Aug 2007

The potential for inexpensive power from the controversial Bakun dam project has apparently convinced Rio Tinto to enter into a joint venture for one of the world's largest aluminum smelters in Malayasia.

Author: Dorothy Kosich


London-based mega-miner Rio Tinto and Malaysian construction firm Cahaya Mata Sarawak Bhd (CMS) are scheduled to sign an agreement Tuesday for a study for what could become one of the world's largest aluminum smelters.

The Malaysian federal government is likely to approve the construction of two aluminum smelter plants in the Malaysian state of Sarawak (located on the island of Borneo), using cheap hydro-energy resources to be provided by the controversial Bakun hydro-electricity project.

The Bakun Hydroelectric Project involves the building of the tallest concrete-faced rockfill dam in the world, and the largest dam in Asia outside of China. It is expected to generate 2,400 megawatts of electricity. It is being built by the Malaysia-China Hydro JV consortium, led by Sime Engineering Berhad of Malayasia and Sino-Hydro Corporation of China.

Originally proposed in the early 1960s, the dam, which was scheduled for completion this year, is 18 months behind schedule and should be completed by 2010. The project--which involves flooding a 70,000-hectacre area the size of Singapore, and the relocation of 9,000 native peoples from the project site-has attracted strong environmental opposition. Malaysian and international environmental groups have expressed their opposition to the dam and to the development of a Malaysian smelter industry.

According to the agreement to be signed Tuesday, Rio Tinto and Cahaya will carry out a study of $A2.33 billion (US$1.99 billion) smelter in Similajua, Sarawak.

The AFP reported that an industry source familiar with the plan said it is expected to begin production in 2010. "If the project takes off, it has the potential to be one of the biggest aluminum smelters in the world," the source told AFP.

Rio Tinto is currently in the midst of a $38.1 billion friendly bid for Canadian aluminum producer Alcan, which, if successful, will result in the creation of the world's largest aluminum manufacturer.

Reuters said a Rio Tinto spokesman reiterated that the mega-miner's earlier comments that it was interested in developing a Malaysian smelter utilizing Bakun's power supply. Chinese smelters have also expressed interest in obtaining cheap power from the Bakun project.

UC Rusal May Build a Bauxite-Alumina Complex in Indonesia

Financial Information Service(Registration), Russia August 7, 2007

MOSCOW, August 7. /FIS/. The united company 'Russian Aluminum' may become a participant in the Indonesia's Aneka Tambang's project to construct a bauxite plant of the capacity of 300 thousand tons per annum. Indonesia's Aneka Tambang specializes in nickel, bauxite and gold production. According to a locally distributed statement of a representative of the Ministry of Energy and Mineral Resources of Indonesia, the corresponding application was submitted to the department. The new plant of the capacity of 300 thousand tons of alumina per annum is expected to be put into operation by 2010. Investments into the construction will total about USD220 million.

Russian hostages released in Nigeria

RussiaToday, Russia - August 8, 2007, 8:21

Six Russian aluminium factory workers have been released after being kidnapped and held for over two months in Nigeria. The four men and two women were handed over to the country's state security services in Port Harcourt.

Russia's Foreign Ministry has welcomed the release, saying that they were glad the situation has had a positive outcome. No further details of the release have been provided to date.

Those released are staff members of an aluminium-smelting plant, which belongs to the Russian company RUSAL. They had been taken hostage at gunpoint on July 3 when militants stormed the residential compound of the plant. A Nigerian driver was killed in the attack.

And in its official press-release the Russian company Rusal says, the positive outcome is a result of effective measures taken by Russia and Nigeria.

Bauxite import doubt may slow China alumina growth

The News - International, Pakistan - August 7, 2007

HONG KONG: Uncertainty about bauxite imports could be a constraint on alumina output growth in China next year, industry sources said on Tuesday.

China, the world’s top producer and consumer of aluminium, may produce 66 per cent more alumina, or about 22 million tones this year. Output could rise further to 29 million tonnes next year due to new capacity, the sources estimated.

Increased alumina output requires more imported bauxite, the ore from which the feedstock for aluminium is produced. Bauxite imports nearly doubled to 10.1 million tonnes in the first half of this year of which 70 per cent came from Indonesia.

"Supply of bauxite from Indonesia could be an uncertainty in alumina production," a trader in Beijing said. "Recently, two shipments were detained in Indonesia, worrying many people." Two ships carrying more than 110,000 tonnes of bauxite to China were detained by Indonesia authorities in Bintan Island in late April on tax issues. The shipments were released later. Industry sources said Indonesia held abundant bauxite reserves and did not produce much alumina.

China’s second-largest supplier of bauxite, India, also has large reserves. But it is developing its own aluminium industry and unlikely to export large amounts of high-grade bauxite to China, they said.

But Indonesia might try to preserve its resources and impose taxes on bauxite to cut exports in coming years, they said. Indonesia is considering setting aside strategic mining areas to secure resources such as nickel, tin and copper, a mineral official said last month.

"If supply from Indonesia faces problems, China could have a shortage," Heng Kun, Beijing-based chief analyst at Essence Securities said. China should develop suppliers in other southeast Asian countries such as Vietnam and Laos, Heng said.

Rising demand has pushed up prices of spot bauxite imports to between $43 and $60 per dry tonne, depending on alumina and silicon content and origin, for delivery to Chinese ports, versus between $35 and $50 in late 2006, traders said.

China’s alumina production capacity is likely to rise to 27 million tonnes this year from 18 million tonnes last year, industry sources estimated. Capacity may rise to 36 million tonnes next year of which at least 11.8 million tonnes would rely on imported bauxite. "We are worried about Indonesia’s supply of bauxite too," a smelter official said, adding this could push up alumina prices.

Alumina prices have fallen to 3,500 to 3,700 yuan per tonne in China versus 3,900 yuan in May thanks to increased capacity. Prices for spot imported alumina have dropped 5 per cent since May to about $380 a tonne for delivery to Chinese ports.

Balco set to become world power in aluminium

Hindustan Times, India - Aug 8, 2007

Chhattisgarh-based Bharat Aluminium Company Limited (Balco) is all set to become the world’s largest producer of aluminium from a single location.

In a major expansion programme, the aluminium giant has set up a target to produce one million tonnes per annum (mtpa) in the next three years.

The Vedanta Group, owning a 51 per cent equity share and management control of Balco, signed a Memorandum of Understanding (MoU) with Chhattisgarh government on Wednesday late evening, in the presence of chief minister Dr Raman Singh and Chairman of Vedanta Group Anil Agrawal, to set up an additional capacity of 6.5 mtpa smelter plant in Korba district. The company currently produces 3.5 mtpa aluminium.

Talking to Hindustan Times the CEO Balco, Pramod Suri said, "After the completion of the Rs 8100-crore expansion plan, the Balco would become the leading producer of aluminium in the world". Presently, the world’s largest aluminium and alumina producer remains Russian Aluminium Companies located at Bratsk (9.8 lakh tonnes per annum) and Krasmyarsk (9.6 lakh tonnes per annum), and Balco would surpass the two to become a largest producer, opined Suri.

"For Chhattisgarh it would be a matter of pride to see a world record on aluminium production from a single location created in Balco", additional chief secretary P J Oomen, Commerce & Industry, told HT.

The company will also set up a Cancer Hospital & Research Centre at Saddu in Raipur for which a foundation stone was also laid today. It would be a 100 bedded hospital.

Balco, which has a large integrated aluminium construction complex at Korba, about 225 km from the state capital, has got a 20-year lease for mining bauxite in around 625 hectares of land in Mundadadar, Keshamrada, Radda and Semsatha villages of Kawardha district.

The aluminium major was incorporated in 1965 as a state-run firm. In 2001, the Indian government sold 51 percent of Balco's equity to Sterlite Industries for Rs.5.51 billion.

ABB's System 800xA helps Alunorte Brazil boost production by 75% (press release), MN - 09 Aug, 2007

Baden, Switzerland, August 9, 2007 - The ABB plant-wide automation system has helped Alunorte Brazil boost production capacity by 75 percent and become the largest, most technologically advanced alumina refinery in the world. The solution, based on ABB’s System 800xA extended automation system, equips Alunorte with a unique capability to control, manage and optimize the plant’s thousands of field devices, regardless of manufacturer.

The $800-million Phase III expansion consists of two new production lines (Nos. 4 and 5) that significantly raise capacity at the plant from 2.4 to 4.2 million tons of alumina a year, making it the largest alumina refinery in the world.

Working closely with Alunorte, ABB completed the commissioning of the system in just 20 weeks, enabling the two lines to go quickly onstream and reach full production speed in record time. Ramp up to full production usually takes several months, but the unique capability of System 800xA enabled it to be completed in an unprecedented 12 days.

The entire refinery – including all five production lines, the material handling systems and harbor – is controlled, monitored and optimized by ABB automation systems. With only one shutdown in 12 years (planned and for just eight hours), Alunorte has operated at close to 100 percent availability since 1994.

"The ABB control systems have contributed much to increasing production and to achieving the results obtained by Alunorte during its 12 years of operation," said Carlos Roberto Abrunheiro Trinidade, Alunorte Manager.

The ABB solution for the two new production lines integrates 35 different types of intelligent field device (protection relays, frequency converters, process analyzers, etc) made by 11 different manufacturers.

Staff can access the technical and operational data for all devices with a single click of the mouse and perform advanced asset management procedures like monitoring the performance and energy consumption of each instrument.

Functions like these provide Alunorte with the ability to manage each item of equipment and ensure it is operating optimally and at a level of cost efficiency not previously possible.

Future Expansion Plans

Further expansion of Alunorte is already underway. Two additional lines will increase production capacity to 6.26 million tons in mid-2008. The refinery will be linked by a 244-kilometer pipeline – the first of its kind in the world – through which up to 14.4 million tons of bauxite a year will be delivered from the Paragominas bauxite mine. (Note: bauxite is the ore used to produce alumina, which is the main raw material in aluminum production)

ABB has been selected to supply complete automation solutions for both the mine and the pipeline, making the entire Alunorte – pipeline – Parogominas chain one of the largest upstream automation projects ever undertaken.

Alunorte is jointly owned by CVRD (57 percent), Norsk Hydro (34 percent), and other partners. Paragominas and the pipeline are both owned by CVRD.

ABB is a leader in power and automation technologies that enable utility and industry customers to improve performance while lowering environmental impact. The ABB Group of companies operates in around 100 countries and employs about 111,000 people.

Request more information : Phone Inquiry: 262-785-3200

RusAl Upgrades Bratsk Smelter

The Moscow Times, Russia 09-Aug-2007

United Company RusAl will spend $350 million to modernize its Bratsk aluminum smelter in Siberia, the world's biggest, the firm said Thursday.

Upgrades at the plant in the Irkutsk region will reduce emissions by 40 percent, RusAl said. The first stage will be completed in 2011, the company said. (Bloomberg)

Kaiser Aluminum Announces $91 Million Investment Program to Enhance Rod, Bar and Tube Capabilities, Improve Efficiencies, and Leverage Growth

Business Wire (press release), CA - August 13, 2007 04:09 PM Eastern Daylight Time

Provides Kaiser Select® Rod and Bar Products for Nationwide Market

Commits to New, State-of-the-Art Extrusion Plant in Midwest to Manufacture High-Quality Extruded Rod and Bar Products

Improves Value Stream Efficiencies and Increases Capacity

FOOTHILL RANCH, Calif.--(BUSINESS WIRE)--Kaiser Aluminum (NASDAQ:KALU), a leading producer of fabricated aluminum products, today announced that the company’s Board of Directors has approved a $91 million investment program to significantly improve the capabilities and efficiencies of rod and bar and seamless extruded and drawn tube operations and to enhance the market position of its broad offering of general engineering products. The company announced plans to invest in a new Midwestern facility as well as three existing operations. Completion of the projects contemplated by the investment program is expected to occur by late 2009.

"This program will allow us to significantly improve our logistics and manufacturing efficiencies which, when coupled with our strong market position, offer attractive returns," said Jack A. Hockema, chairman, president and CEO of Kaiser Aluminum. "When fully implemented, the program will enable us to provide Kaiser Select for our full national rod and bar product offering."

The program will leverage state-of-the-art technologies and the latest in Kaiser Production System methodology. The investments will also enable the company to focus certain facilities on its rod and bar and seamless extruded and drawn tube value streams.

Investments targeted to enhance Kaiser Select rod and bar product offerings consist of the new Midwestern facility and upgrades to extrusion presses in the existing Los Angeles facility. The new facility will be equipped with two extrusion presses, a remelt operation, warehousing space, and laboratory and office facilities. The final location of the new facility will be chosen following completion of site selection work.

Complementing the rod and bar investments, the company will focus its Bellwood, Va. and Chandler, Ariz. operations on seamless extruded and drawn tubing products. Investments at these facilities will include relocation of equipment to streamline product flows as well as new ancillary equipment to increase capacity and improve efficiency.

"We’re further enhancing our strong position in rod, bar and tube products," added Hockema. "These investments demonstrate our continued commitment to these strategically important elements of our general engineering product offering."

Kaiser Aluminum is a leading producer of fabricated aluminum products for aerospace and high-strength, general engineering, and automotive and custom industrial applications. The company has more than 2,000 employees and 11 plants in North America and produces more than 500 million pounds annually of value-added sheet, plate, extrusions, forgings, rod, bar and tube. For more information, please visit

Citigroup: No anticipated cyclical price spike for aluminum

Mineweb, South Africa - Monday , 13 Aug 2007

While rising costs pressure should support aluminum prices at their current level for the medium term, Citigroup suggests that a cyclical spike in the aluminum price is unlikely to occur.

Author: Dorothy Kosich


In a recent analysis, Citigroup forecast that "we are unlikely to see a cyclical spike in the aluminum price that we have seen in other base metals."

Citigroup's analysis also suggests "that aluminum could remain at or around current spot levels for the foreseeable future."

In their analysis, Citigroup metals analysts Heath Jansen, Clarke Wilkins, John Hill, Craig Sainsbury, Liam Fitzpatrick, Graham Wark, Mikhail Seleznev, Meg Brown, Timothy Thein and Mark Bloomfield suggested aluminum has lagged for several reasons. These include a lack of the same supplied side constraints of other metals; a flattening cost curve; technology advancements which have lower production costs; and the availability of cheap or stranded zones of power.

Nevertheless, the analysts suggested the aforementioned factors will moderate, supporting the aluminum price in the medium term. "However, we are unlikely to see a cyclical spike in the aluminum price that we have seen in other base metals such as copper, nickel and zinc."

While Citigroup's analysis found that the trend demand for aluminum has exceeded that of copper, the underperformance of aluminum "has been driven by a lack of supply side constraints, and short lead times." While a new copper project can require a lead time of 10 years from discovery production, the analysts explained that new aluminum capacity can be added in less than two years in China, and around three years in the West.

However, aluminum industry costs have actually increased more rapidly for low-cost aluminum producers. "We now expect increased cost pressures at the top end of the cost curve as rising energy and alumina costs hit the higher end producers," Citigroup predicted.

The largest cost drivers for the international aluminum industry are energy and alumina. Energy costs represent 28% of aluminum smelting costs and 30% of the cost of producing alumina, therefore, on a combined basis, Citigroup suggested energy accounts for 40% of the cost of aluminum production. Between 2004 and 2006 the average cost of smelting aluminum increase by 9% while production increased by 15%, according to the analysts' estimates. However, these were partially offset by lower labor costs (-9%).

Emerging nations are believed to account for the majority of power generation and aluminum growth. "The primary energy mix is expected to come from coal and gas, which is very sensitive to rising fuel costs," Citigroup forecast. "Long-term power generation of 2% is expected to lag aluminum demand of greater than 4%. However, in the short-term excess power capacity in China is likely to keep a cap on power prices and facilitate further capacity additions."

Meanwhile, a rising cost curve, higher capital costs and the tightening of global energy markets "should provide support to the aluminum price," according to the analysts. Citigroup forecasts a US$1.18/lb aluminum cost this year, $1.10/lb in 2008 and 2009, $0.90/lb in 2010 and $0.89/lb for 2011. The long-term price forecast is 80-cents per pound.

Citigroup's analysts found that the top ten aluminum producers can control about 56% of the market, up from 53% in 2006. Nevertheless, "the aluminum industry has yet to consolidate to the same level as the copper industry, where the top 10 producers control around 69%. Further the aluminum industry is not as susceptible to production disruptions, such as strikes, process outings or geological events," the analysts said.

China is the world's largest aluminum producer, comprising 23% of total production last year, followed by North America at 17%, Europe at 16% and Russia at 12%. The largest increase in production between 2004 and 2006 was 61% in China, followed by India at 30%. In the meantime, more than 90% of the aluminum now produced in China is consumed domestically.

Citigroup forecasts that world consumption of aluminum, excluding China, to be in line with global GDP at an average growth of 2.7% versus production growth of 2.1% "In contract we expect average Chinese consumption over the next four years to average 10.4% versus production growth of 14%."

The analysts found China and Europe have the highest operating costs ($1,519/t and $1,499/t in 2006) while the rest of Asia and Africa at the bottom with costs below $1,200/t. Nonetheless, Chinese capex costs are 30-40% below that of the West.

Labor costs decreased 20% in Russia and China, but increased by 30% in South America, making it the most expensive of the developing world. Energy cost increases were the highest in South America (30%) and Russia (19%), according to the analysts.

"Over the medium term we expect energy cost pressure to persist," Citigroup said. "In the short-term we expect energy cost increases to remain low in China."

"Our Chinese power analysts expect capacity additions to exceed demand in 2007 and 2008 and then begin to reverse in 2009/10 onwards as supply growth slows," the analysts added.

Citigroup found alumina costs are highest in Europe and North America because of high energy, freight and labor costs, while the lowest costs are found in Australia due to low bauxite, freight and energy. China and Russia benefit from cheap labor costs.

Based on their analysis, Citigroup asserted that the primary energy mix for electricity generation is expected to be coal, noting that "China's dependence on coal-fired electricity generation will not change.

Citigroup suggested that the introduction of global carbon pricing schemes for emissions trading is unlikely to steepen aluminum's cost curve. Thus far, the aluminum sector has not been included in the only mandatory emissions trading scheme in the European Union.

The analysts concluded that Norsk Hydro and Alcoa are their preferred exposures globally.

BALCO to triple aluminium output in 3 yrs

Economic Times, India - 13 Aug, 2007, 1235 hrs IST, REUTERS

NEW DELHI: Bharat Aluminium Co aims to triple its aluminium output to more than one million tonnes in three years to meet surging domestic demand for the metal, the company's chief executive said on Monday.

BALCO, a unit of UK-based Vedanta Resources Plc, runs two smelters at Korba in the central Indian state of Chhattisgarh, with a total capacity to produce 345,000 tonnes of aluminium a year.

"In three years time, we will have about three times the production capacity," Pramod Suri said.

India's rapidly expanding economy that is growing at about 9 per cent annually has spawned demand for new homes, offices and automobiles -- all consumers of aluminium.

Suri said domestic consumption of aluminium was rising 15-16 per cent a year, at double the world rate of 7-8 per cent.

To meet this demand BALCO will spend $2 billion to build a new smelter at Korba to produce 650,000 tonnes of aluminium annually over the next three years, he said.

It also aims to double the capacity of one of the existing smelters to 200,000 tonnes by upgrading technology. The capacity of the other smelter that can produce 245,000 tonnes annually will be raised by about 3 percent, Suri said.

BALCO, India's third-biggest aluminium producer, hopes to raise output to about 350,000 tonnes in the fiscal year that ends in March 2008, up more than 10 percent from the previous year's 310,000 tonnes, he said.

Suri said the company was hoping to meet its requirement of alumina, a semi-processed raw material, from within the group through a refinery in the eastern Indian state of Orissa.

It now partly relies on imports for alumina.

The company is also looking for new bauxite mines in Chhattisgarh, where it has a mine in Kawardha and another in Mainpat, he said.

Kaiser Aluminum sales, earnings up in 2Q, NC - 9:43 AM PDT Tuesday, August 14, 2007

Kaiser Aluminum Corp. reported strong results in both fabricated and primary products that led to increased revenue and net income, the company said Tuesday.

For the second quarter, the company reported net income of $35 million, or $1.73 a share, up from a net loss of $3 million, or 3 cents a share, in the year-ago period. Net sales for the second quarter were $385 million, up nine percent from $354 million in the year-ago period.

In the first six months of the fiscal year, the company reported net income of $52 million, or $2.59 a share, up from $36 million, or 45 cents a share, in the year-ago period. The current period's results were net of an income tax provision of $44 million, $33 million of which is non-cash. Net sales for the first six months of the fiscal year were $777 million, up 13 percent from $690 million in the year-ago period.

Foothill Ranch-based Kaiser Aluminum Corp. (NASDAQ: KALU) produces fabricated aluminum products for aerospace and high-strength, general engineering, and automotive and custom industrial applications.

DEALTALK-Alcoa's new exec may open door to a spin-off

Reuters - Wed Aug 15, 2007 10:49 PM BST

By Caroline Humer and Eleanor Wason

NEW YORK/LONDON, Aug 15 (Reuters) - U.S. aluminum giant Alcoa Inc. (AA.N: Quote, Profile , Research) named a new top manager and likely successor to Chief Executive Officer Alain Belda on Wednesday, possibly opening the door to a dramatic strategic move like a spin-off that sources say is needed.

Belda, who is 64 and expected to retire next year, will likely be replaced by Klaus Kleinfeld, the former president and CEO of Siemens AG (SIEGn.DE: Quote, Profile , Research), who is taking the president and chief operating officer jobs with the expectation of being offered Belda's spot.

Alcoa's failed attempt at a hostile takeover of Canadian rival Alcan Inc.(AL.TO: Quote, Profile , Research) left a question mark over the company's future, leaving it with few choices to compete effectively against its now larger rivals, metals industry sources say.

The best tactic, they say, may be for Alcoa to split up between upstream mining and smelting operations and downstream businesses that produce aluminum for aerospace, auto and consumer products.

"Why shouldn't they look at splitting themselves up? It makes a lot of sense. Upstream is where the margin is and downstream is where it gets eroded," said one industry source.

Alcoa spokesman Kevin Lowery said the company was focused on downstream operations, had exited the soft extrusion business and was reviewing its packaging business.

The remaining downstream businesses were "excellent" he said, setting earnings records. As for upstream operations, shareholders recognized Alcoa was beginning to bear the fruit of expansion.

"The aluminum business will double in the next 14 years and our focus is on where we can expand and capture opportunities in the marketplace," Lowery told Reuters.

The strategic vacuum - created when Rio Tinto (RIO.L: Quote, Profile , Research) (RIO.AX: Quote, Profile , Research) beat Alcoa's offer for Alcan by about $24 per share with its $101 white-knight deal - was first filled by speculation that Alcoa would soon be taken out by a larger metals company, namely BHP Billiton (BHP.AX: Quote, Profile , Research) (BLT.L: Quote, Profile , Research).

But that rumor was put to rest last month after several news reports citing unnamed sources said BHP was not interested. Hedge funds and investors moved out of the stock and its shares crashed, falling 29 percent from their peak of $48.77 on July 16.

The loss put Belda, who was behind the nearly two-year attempt to buy Alcan that finally ended up as a hostile tender offer, in a weak spot. He had already been under pressure to make the stock perform, but had resisted plans that sources said might now need to be reconsidered.

Without a takeover as an immediate possibility - though some experts still think one might be forthcoming down the road - the company could try to find another metals company to buy or it could pick up with plans to sell small parts.

In April, before announcing its plans to go after Alcan, the company hired Lehman Brothers to consider selling its packaging business, which has sales of more than $3 billion.

The sale of the business seems unlikely to go through, several sources said, as interest among private equity firms for the business has been limited in part as they have pulled back on investments because of the tightening credit markets.

In addition to packaging and consumer goods, Alcoa has a flat-rolled products business, a primary metals business, engineered solutions, extruded and end products.

US Jun Aluminum Output 209,000 Tons, +11% On Year - USGS - August 16, 2007: 11:54 AM EST

LONDON -(Dow Jones)- U.S. primary aluminum production in June was 209,000 metric tons, up 11% on the year-earlier figure at 189,000 tons, but slightly lower than the 210,000 tons produced in May, according to the U.S. Geological Survey Thursday.

The average daily production rate was 6,967 tons, 3% higher than the previous month and 11% higher than the rate for June 2006.

Primary production for the first six months of 2007 was 1.232 million tons, 7% higher than the year-earlier period.

This was primarily owing to increased production from three smelters, USGS said.

First, Ormet Corp. (ORMT) restarted production in December 2006 at its smelter in Hannibal, Ohio, which had been closed since January 2005.

Then, regional energy supplier Bonneville Power Administration signed deals with Alcoa Inc.'s (AA) Intalco smelter at Ferndale, Washington and Glencore International AG's Columbia Falls Aluminum Co. smelter in Columbia Falls, Montana. As a result, Alcoa restarted an additional potline at Intalco in February and a second potline was restarted at Columbia Falls during the first quarter of the year.

Total aluminum recovered from scrap in June was 259,000 tons, essentially unchanged from the previous month but 2% higher than in June 2006.

In June 2007, 155,000 tons of aluminum was recovered from new scrap, which was 2% higher than in May but 4% lower than in June 2006. Aluminum recovered from old scrap totaled 104,000 tons in June, which was 5% lower than the previous month and 13% higher than in June 2006.

-By Andrea Hotter, Dow Jones Newswires; +44 (0)20 7842 9413; andrea.hotter@

Kaiser Aluminum upgraded to "strong buy" - update

Thursday, August 16, 2007 7:54:37 AM ET

Davenport & Co.

NEW YORK, August 16 ( - Analysts at Davenport & Company upgrade Kaiser Aluminum Corporation (ticker: KALU) from "buy" to "strong buy," while raising their estimates for the company. The target price is set to $93.

In a research note published yesterday, the analysts mention that the company has posted its 2Q07 adjusted EPS ahead of the estimates and the consensus. Kaiser Aluminum is making investments to improve the efficiency in its extrusions business and is growing its high-margin aluminum plate capacity to cater to an expected rise in demand, the analysts say. Davenport & Company expects these initiatives to result in substantially improved cash flows going forward. The EPS estimates for 2007, 2008 and 2009 have been raised from $3.20 to $4.05, from $5.01 to $5.82 and from $6.29 to $6.75, respectively.

Alcan reaches power deal for Kitimat smelter upgrade

CBC News, Canada - Thursday, August 16, 2007 | 4:08 PM ET

Surplus electricity to go to BC Hydro until end of 2034

CBC News

Alcan Inc. says it has signed a contract with BC Hydro that clears an obstacle to a $1.8 billion US modernization of its Kitimat aluminum smelter.

The deal calls for delivery of Alcan's surplus electricity to BC Hydro until the end of 2034, Alcan said in a statement on Thursday.

Alcan three-month chart

Pricing arrangements were not specified.

Water rights at Alcan's Kemano power dam — whose turbines feed power to the big smelter — have been a subject of controversy in Kitimat.

Local officials have accused the company of putting profits ahead of jobs at times by selling power rather using it to refine aluminum.

In March, the B.C. Supreme Court rejected the District of Kitimat's bid to stop Alcan from selling electricity, saying there was nothing to prevent the company from doing so.

Alcan, which is subject to a takeover offer from Britain's Rio Tinto PLC, said the power agreement will be filed with the British Columbia Utilities Commission and will be made public as part of the commission's approval process.

The commission rejected a previous version of the agreement in January, but Alcan said it is confident that the new power contract meets the commission's concerns and jibes with an energy policy announced by the B.C. government in February.

"This is a significant step toward the modernization of Kitimat works,"

Michel Jacques, head of Alcan's primary metal group, said in a statement. "Alcan is as committed as ever to realizing this project in B.C."

The company said it reached a labour agreement on the modernization plan in May but it won't give it a green light until it gets environmental permits and final approval from Alcan's board of directors.

VRA makes $17 million losses monthly

Modern Ghana, Ghana - Thursday, August 16, 2007

Even though the Volta River Authority spends $42 million a month in generating electricity from the dam, it recoups only 25 million dollars.

The Plant Manager of the VRA, Mr. Kwasi Brenu Amoako, said on Wednesday, "The books of VRA does not look good, meaning 17 million out of the 42 million cannot be accounted for."

Mr. Amoako was speaking at a visit to the Akosombo Dam site, organised by the Ghana Electrical Contractors Association GECA to interact with the authorities of the VRA on the current energy situation in the country.

"The new thermal plant at Tema does depend on crude oil running at 25 cents per unit, this shows that a second look should be taken on the seven cents of tariffs paid by Ghanaians and also Ghanaians do pay the lowest in the sub region, compared with countries like Togo 14 cents and Benin 15 cents," he stated.

Mr. Amoako said, "Currently the water level is rising at 0.1 foot as at today and we hope the rains will continue to rain in the northern region".

"But currently, Ghana is receiving 20 to 80 megawatts of power from Cote d'Ivoire and this can explain why we are experiencing the change in the power shedding", he added.

Mr Amoako said, the low water in-flow being experienced by the VRA could also be attributed to environmental degradation in the catchments area.

He said that the VRA would collaborate with the Forestry Commission and the District Assemblies to enact by-laws to protect the ecology along the banks of rivers feeding the Akosombo Dam.

Mr Amoako noted that, there were 70 District Assemblies in the catchments area of the Volta Lake and stated that some of them allowed sand winning and other environmentally unsound practices, which affected the rainfall pattern and water inflow into the dam.

The first stage of the construction began in 1961 when the Volta River project was established and work started on the Akosombo dam and power Station.

Four units with total installed capacity of 588 megawatts were completed in 1965, marking an important step for industrialization and economic growth of the newly independent sate of Ghana.

In 1976, Volta Aluminum Company (VALCO) became the main purchaser of power generation from Akosombo apart from ECCG and the mines.

In 1972, the second stage of the project was completed with the addition of two generating units, with installed capacity of 324 MW to bring the total units capacity to 912 MW at a time.

Retrofits of the dam took place between October 1999 and March 2005; each generating unit was up rated to a maximum output of 170 MW. Total plant capacity is therefore 1020 MW.

12 years and counting?

Trinidad News, Trinidad and Tobago - Thursday, August 16 2007

By Linda Hutchinson-Jafar Special Correspondent

A desperate hunt is now on for gas as the long-awaited Ryder Scott report confirmed what everyone else in the energy industry had known for some time - that gas reserves are depleting rapidly and that more discoveries are urgently needed to sustain the expanded gas needs of the country.

The Houston-based Ryder Scott report showed that natural gas reserves declined by more than three trillion cubic feet of gas (tcf) over a two-year period from 2005 to 2007. "This means we have been using more gas than we’ve been bringing on stream and available from the various regions that we have," Energy Minister Dr Lenny Saith told reporters.

Based on a production rate of 4.5 billion cubic feet (bcf) per day, the gas will last a mere 12 years — unless new discoveries are made.

The country’s current total 3Ps (Proved, Possible and Probable) reserves were put at 31.04 tcf compared to the 34.87 tcf identified in 2005. Proved reserves in 2007 totalled 17.05 tcf; possible at 6.23 tcf and probable at 7.76 tcf.

One of the immediate consequences of the decline in gas reserves is the government’s decision to review proposed energy projects that have been categorised in an A-list and B-list — until the reserve ratio improves to an acceptable level. Among those in the A-list which carry a huge investment of close to $9 billion are the MHTL AUM (UAN/Melamine), First UAN (Ammonium/UAN), Alutrint Aluminum Smelter, Alcoa Smelter, Essar Steel and Westlake Ethylene Complex.

It has also put government plans for an LNG Train X — separate from the mega Atlantic LNG — in cold storage for the time being. The country currently has a daily gas production rate of 3.9 bcf with 59 percent being allocated to LNG production and 41 percent to the domestic market which is dominated by ammonia and methanol production. By 2016, daily natural gas production is estimated to increase to 5.9 bcf with the allocation to LNG amounting to 53 percent and 47 percent to the domestic market.

Read the whole article here,62504.html

Aluminium firm to invest $400m; largest Chinese FDI

Economic Times, India - 18 Aug, 2007, 0130 hrs IST, PTI

YINCHUAN: China's second-largest aluminium maker, the Qingtongxia Aluminium Group, will make the country’s biggest investment so far in India by pumping in $400 million in a joint venture in Gujarat to produce alumina, Chinese officials said on Friday.

"The Qingtongxia Aluminium Group’s proposal to invest in India has received approval from the National Development Reform Commission," vice-governor of Ningxia Hui Autonomous Region, Qi Tong-Sheng said. Qi, also a senior member of the ruling Communist Party of China, said NDRC, China’s top planning body has approved the Chinese company’s planned investment of $400 million in two phases in its JV with Mumbai-based Ashapura Minechem to produce alumina.

In the first phase, the 50:50 JV project plans to produce 500,000 tonnes of alumina which would go up to 1 million tonne.

This is the Ningxia-based Chinese company’s first investment in alumina, the main raw material for aluminium production. The investment is set to be China’s biggest investment in India so far, officials said.

The Ashapura Group is India’s largest mine owner, processor and exporter of bentonite, bauxite, allied minerals and their multi-application, multi-industry value-added products. It is also among the five largest bentonite producers in the world.

However, officials with the Ningxia government said the project is facing "trouble" in getting approvals from the Indian government.

"As far as I know, the project is not going well. The licence has not been issued so far by Indian authorities," the deputy director general of Investment Promotion Bureau of Ningxia, Chen Zhigang said.

Chen said CPC secretary of Ningxia, Chen Jianguo, who visited India earlier this year, is keen to push forward economic and business links between Ningxia and India.

The Qingtongxia Aluminium Group’s proposal to invest in India comes at a time when the Chinese government is actively encouraging domestic companies to go global in view of the severe resource shortage faced by the country, which has to sustain its double-digit economic growth by relying more on overseas supplies.

According to experts, the Qingtongxia Group has an annual production capacity of 430 000 tonne of electrolytic aluminium.

The major raw material for alumina is bauxite, which is in short supply in China.

India, however, has the fifth-largest bauxite reserves in the world, with proven reserves of some 3 billion tonnes. Gujarat alone has more than 80 million tonne of bauxite, enough to sustain the Qingtongxia-Ashapura JV alumina refinery for 30 years.

Aluminium makes strange bedfellows – Norsk Hydro's mystery deal in Tajikistan

Mineweb, South Africa - Friday , 17 Aug 2007

Big Power games are afoot in Tajikistan, and big mining and metal assets are at stake – Part 1 of a series.

Author: John Helmer


Norway is one of those countries, inhabited by one of those peoples, which have exercised some of the greatest comedians in the English language - to little avail.

John Cleese once explained his assignment on behalf of the Norwegian Tourist Board, as he stepped out of a wet summer fjord wearing a business suit and snow-shoes. He said the only way to interest tourists in Norway was to make them laugh at the place. Much earlier, Saki had told the tale of a rich Londoner who paid a group of kidnappers, not to return his wife, but to keep her as reliably away from him as he thought possible -- on a Norwegian island, above the Arctic Circle.

When Norwegians insist on their superiority in business ethics, English readers shouldn't think it a case for comedy, nor is the Norwegian approach a devious bluff. Nonetheless, when the aluminium production unit of Norsk Hydro, one of the largest of the Norwegian state's conglomerates, announced recently that it has formed a partnership with the Tajikistan Aluminium Plant (Talco), somebody must have stumbled. For Talco, previously known as TadAZ, is the only aluminium producer in the world to have been adjudged recently by three different judges of the UK High Court, plus the International Court of Arbitration in London, to be a corrupt organization, a forger, fraudster, and all-round wrongdoer.

Mineweb has already reported in detail on this litigation, focusing primarily on the role of Russian Aluminium (Rusal), which had been funding the Talco litigation, according to rulings of the High Court bench. This story is about the new twist to the aluminium business which the Norwegians and Talco have been arranging behind Rusal's back.

Ruling on a lawsuit which the Tajik company had itself initiated, Justice Morrison of the UK High Court, Queens Bench Division, wrote in an opinion dated May 18, 2006, that Talco/TadAZ "are not the victims of fraud, they have been the perpetrators of it in this litigation.... [Talco] has been involved in deliberate attempts to mislead the [Arbitration] Tribunal and have committed acts which in this jurisdiction are serious crimes [forgery and attempting to gain a pecuniary advantage by fraud]"?

Morrison was ruling after the International Court of Arbitration in London had issued a judgement the previous November that Talco had violated its aluminium delivery contracts with Hydro, and should repay Hydro $145 million, plus charges and costs. Talco appealed, and attempted to have the High Court keep its ruling secret. Both applications were rejected by the court.

In April 2006, Justice Morrison had reaffirmed the earlier findings of fact by the Arbitration Court, and a parallel High Court ruling by Justice Blackburn that Talco had conspired with Rusal for the corrupt purpose of ousting from the smelter a rival Tajik group, and skimming off profits of the smelter operation "for the benefit of unnamed persons".

In July 2006 the High Court ruled that Rusal should face trial for alleged fraud and racketeering in its takeover tactics at Talco. This decision was the first ever to oblige the Russian company to submit to the jurisdiction of a reputable foreign court. It was issued by Justice Cresswell of the High Court.

In October 2006 Justice Morrison ruled against further claims by Talco and its lawyers, and formally accused Talco of "wrongdoing". The judge added: "[Talco's] approach to litigation demonstrates a contempt for the normal constraints which control parties' conduct in highly charged adversarial proceedings". Morrison has added, also in a public document: "in short, Tajik [Talco] and those behind them cannot be trusted".

A year ago, Hydro confirmed to Mineweb that it had won the arbitral award, and was seeking enforcement of the $150 million payment. Hydro told shareholders the same thing. But this week Hydro executives refuse to say what has become of the money in the eight months since Hydro signed the December agreement. Sources close to the negotiations in Dushanbe, the Tajik capital, have told Mineweb that Hydro has agreed not to enforce the cash award. Instead, it has signed a partnership agreement with Talco for much more value, in metal.

According to the press release issued by Talco and Hydro, and posted on the latter's website, "Hydro and Tajik Aluminium Plant of Tajikistan have entered into new commercial arrangements. These incorporate a final resolution of the recent Award of the London Court of International Arbitration, which related to the supply of alumina and aluminium between the parties in the latter half of 2004.As part of the arrangements, TadAZ will deliver to Hydro between 120,000 and 200,000 tonnes of primary aluminium per year over a four year period and Hydro will supply 150,000 tonnes of alumina to TadAZ. Hydro will also provide technical assistance to TadAZ, with a view to improving the efficiency of the smelter and its environmental and health and safety performance, as well as corporate and social responsibility issues. Both TadAZ and Hydro believe that with this agreement they will be able to receive further support from these institutions.

"We are pleased to have resolved our differences with TadAZ and to have reached a positive new commercial arrangement with TadAZ," said Torstein Dale Sjøtveit, Executive Vice President of Hydro's Aluminium Metal business area. "We see this as a mutually beneficial agreement, where Hydro will receive the primary aluminium needed for our remelting operations and at the same time give assistance to TadAZ regarding operational issues. Hydro is committed to supporting TadAZ to increase their efficiency and production for the benefit of the Republic of Tajikistan," commented Simon Storesund, Senior Vice President of Hydro."

At present, Hydro has a 5% share of the global market in primary aluminium; that's 1.8 million tonnes out of 34 million tonnes. This is bigger than most international producers; but the Norwegians trail behind the Alcan-Rio Tinto combination (4.3 million tonnes), United Company Rusal (3.9 million tonnes), and Alcoa (3.6 million tonnes). Hydro is a vertically integrated producer, with its own bauxite and alumina feedstock at sites around the world. According to the most recent investor presentation from Hydro, dated July 2007, last year the Norwegian company held equity stakes in 2.2 million tonnes of bauxite from Brazil and Jamaica; this amounted to one-quarter of Hydro's requirement for the year.

Hydro says it isn't planning a significant increase in its bauxite mining output in the foreseeable future. But it is planning to lift alumina output from 1.9 million tonnes in 2006 - 55% of the feedstock required for smelting - to 2.8 million tonnes in 2010. At that point, Hydro expects to control 71% of its alumina supply requirement. Hydro will still be buying alumina on the open market to meet the smelter requirements it already has. Seven months after signing supply and offtake agreements with Talco, Hydro did not include in its investor presentation an explanation of why it proposes to supply alumina to Tajikistan.

If Norsk Hydro's claims are to be believed, it intends its agreement with Talco to produce and deliver between 120,000 and 200,000 tonnes of primary aluminium over four years. Even that wording is unclear, however, and the Hydro executive now in charge, Simon Storesund, refuses to provide clarification. Storesund told Mineweb: "Hydro will assist Talco in improving the efficiency of its smelter, reduce emissions and improve the working conditions. Hydro's contribution will primarily be in the delivery of know-how and consultancy services." But when asked to say what the total amount of alumina Talco's smelter will require for production over the next four years, what total tonnage of aluminium will be produced, and what arrangements are being made for inputs and outputs not directly under control of the Talco-Hydro partnership, Storesund claimed: "We do not have precise information and would suggest that you ask Talco for these details."

Talco publishes a website, which identifies a telephone number in Dushanbe, the Tajik capital, for contact with the company. Mineweb has repeatedly called this, plus six other telephone numbers for the company secured from different sources. These either do not ring, or if they ring, they are not answered. Talco's press releases and website postings do not provide comprehensive production or financial details. Also, Hydro refuses to provide a working telephone number for Talco. "When it comes to telephone registers we are not the experts," Tor Steinum, a senior vice president of Hydro, told Mineweb. .

Talco metal trades at a discount to the London Metal Exchange (LME) daily cash fix, but the most this metal would be worth to Hydro at the current LME price would be between $300 million and $500 million. That is more than double Talco's debt to Hydro.

However, comparing the Talco tonnage to Hydro's 1,799,000 tonnes of primary aluminium output in 2006, the Talco deal represents less than 3% of annual physical volume. Comparing the Talco metal value to Kroner 68.4 billion ($12 billion) in Hydro's aluminium sales revenues for 2006, the deal amounts to about 1% of revenue for the Norwegian company.

Since the UK arbitration ruling and the High Court judgements were all issued last year before Hydro executives made their deal with Talco, they knew Talco's reputation, and they knew the risks they were running to convert a past-due debt of $150 million into a long-term business relationship with the Tajik government's prime revenue-generating enterprise, Talco.

In July 2006, Hydro had announced it was participating in a survey of corporate ethical risks in their relationships with suppliers; the survey was conducted by Achilles, a Norway-based management group. Why then is Hydro now pressing ahead with a business in Tajikistan which it refuses to answer questions about; which it has not disclosed in its most recent investor presentation; and which flies in the face of UK judicial rulings?

Hydro's in-house legal counsel, Odd Ivar Biller, refused to respond to emailed questions about his litigation against Talco in London, and the terms of settlement of the $150 million London award. If he has decided against enforcement of Talco's arbitral obligations to Hydro by seizing metal in the marketplace, or by lodging claims against Talco's international bank accounts, he isn't saying why. Nor is Biller, whose official job title is "Executive Vice President, Legal and Corporate Social Responsibility", ready to argue the responsibility his corporation has undertaken in a long-term business relationship with a company condemned for ethical and legal violations in the UK courts.

By telephone at Biller's office in Oslo, his secretary refused to identify herself by name, and then cut the telephone line.

Storesund was asked by Mineweb to confirm the calculations for the Hydro-Talco deal, reported above. He replied: "you are correct that our primary production is approx. 1.8 mill tons. Hydro is obviously paying a price which is very close to the LME price for the metal delivered by Talco. The Talco tonnage represents approx. 3.5% of the total tonnage Hydro is handling. At the same time it represents approx. 10-15% of our remelt ingot needs." He avoided responding to the financial calculation.

Storesund also refused to explain why no presentation to investors by Hydro this year has mentioned the Talco deal of last December. He claimed also: "I do not know whether the settlement contract was mentioned in our Annual Report or not."

Hydro might be stumbling into Tajikistan for lack, or loss, of executive direction at the top in Oslo. On August 5, the board chairman of Norsk Hydro, Jan Reinaas, was forced to resign his post, after he clashed with the Norwegian government over the latter's order to halt lucrative stock options schemes; these had resulted in payouts of almost $37 million to Hydro executives, months after the government, which owns 44% of the company, said it should stop.

As a conglomerate, Hydro itself is undergoing structural change, starting from the announcement last December that Statoil will take over Hydro's oil and energy business, creating an expanded company, of which the government in Oslo plans to own 67%. That will leave the current Hydro management in charge of the aluminium business. Hydro shareholders will gain Statoil shares (amounting to 32.7% of the enlarged company), while their Hydro shares will based on the aluminium assets. Just how far Hydro management has put these assets at commercial risk by the Talco deal Hydro shareholders can't know, because they haven't been briefed on the details.

And why would Hydro take commercial risks with Talco, a court-confirmed defaulter? The answer appears to be that Hydro has moved into Tajikistan for political, not commercial reasons; and that the Norwegian government, Hydro's controlling shareholder, has reasons for the move it doesn't want to share with Hydro's other shareholders.

Their Tajik partner, President Emomali Rakhmonov (Rahmon), is not so reticent, for he is publicly touting the return of Hydro to the aluminium plant as a major step in the direction of ousting Russian influence from Tajikistan, and replacing Russian investment with US and European commitments. Last December, when Talco and Hydro signed, Sherali Kabirov, Talco's Deputy Director, announced: "TadAZ regards Hydro as an important strategic partner in the aluminium industry. Hydro's commitment to its relationship with TadAZ demonstrates TadAZ's ability to trade successfully with international counterparties."

In July 2007, according to Rahmon's chief prosecutor, Bobojon Bobkhonov, in a statement reported by a Tajik government newspaper, the agreement between Talco and Hydro "is in compliance with all international standards, is a transparent and open document, a sign of increased confidence that the international business community has in this country." Never mind that Talco and Hydro have refused to provide a text of this agreement, nor answer questions about it. According to Bobkhonov, in a statement issued on July 13, published by Asia-Plus, the chief prosecutor claimed that "all rulings handed down at the High Court in London have been in favor of TadAZ."

Bobkhonov has also ordered the London law firm of Herbert Smith to sue Rusal for fraud in its management of the smelter, just as Bobkhonov, and Rusal, had earlier sued in the same court the previous management, headed by Avaz Nazarov. Then, after High Court Justice Steele threw the new suit out, Rahmon told Bobkhonov to refile the claim in the British Virgin Islands; there the case alleging Russian corruption of the Tajik aluminium sector remains to be adjudicated.

A World Bank report dated June 2004, entitled "Case Study - Tajik Aluminium Plant - TADAZ", implied that if Talco has been a fish, the rot starts at the head. The Bank report noted "the company is not governed by a Board of Directors or any other type of executive committee. Instead, it is under the sole command of its director, who reports only to the Tajik President at a monthly meeting". The arrangement is exceptional in Tajikistan, the Bank report noted, and only one other state enterprise, Vostok Redmet, a precious metals producer, is organized on the same lines. The Bank thus confirmed that throughout the period in which Talco now accuses both the Nazarov group and Rusal of fraud, Rahmon himself was in direct control of the plant every month.

The story of Vostok Redmet, Tajikistan's most important mining company, will be told in the next episode.

The World Bank's three-year old case study also reported "more than 98 percent [of the plant's aluminium] is exported to a limited number of customers incorporated overseas, under exclusive contractual agreements. The ownership of these companies is unclear." The litigation record in the UK has now established what the World Bank claimed not to know - that before December 2004 the tolling companies offshore were controlled by Nazarov and Hydro, and that after December 2004 they were controlled by Rusal. The one continuity the Bank acknowledged was that both schemes of offshore tolling were directed by Rahmon.

Storesund of Hydro has hinted in a remark to Mineweb that Rahmon still does, this time through a trading company registered in the British Virgin Islands called Talco Management Ltd (TML). Referring to the aluminium produced by Talco, but not delivered to Hydro, Storesund said: "We assume that the metal not delivered to Hydro is sold to our competitors, but we are not familiar with the details. We believe that the metal is brought to the market by a company Talco Management Limited."

Last Christmas Talco publicly announced a call for tender bids for "procurement of supply to TadAZ of raw materials (in required volumes and types) and electricity during the contract term." The notice also acknowledged that the winning bidder would arrange tolling contracts, and that "the toller will be required to pay tax on the products of processing on the customs territory of the republic of Tajikistan." The winner of this tender was subsequently announced as Talco Management Limited (TML).

According to Talco's website, the tender was an open one, but TML itself is a closed book.

World Bank officials refuse to say if they believe TML is controlled by Rahmon and his associates, just as Talco itself is directed by Rahmon. But in 2004, the Bank report had proposed removing Rahmon from Talco's line of command. "The [Tajik] Government should create a unit to monitor [TadAZ's] quarterly financial flows, debt and arrears, as well as financial and other performance targets. In addition, the unit should oversee governance arrangements, including appointment of Directors and the publication of regular financial information, audited financial statements and company charters."

Asked to verify what the World Bank has done subsequently, Bank officials in Washington will not answer, except to say the Bank is "cognizant of the governance and corruption risks in Tajikistan and we continue to help the Government address these risks in all sectors. We take very seriously any allegations of corruption because it can deny valuable development assistance from reaching the poor who need it most."

Just how big the political stakes may have become in Tajikistan since Rahmon began his anti-Russian campaign is acknowledged by sources in Moscow, and by two recent BBC and local Tajik reports of recent military visitors to Dushanbe. US Admiral William Fallon was reported in Dushanbe on June 19; he is head of the US Central Command, headquarters for US military operations in Kuwait, Afghanistan, Iraq, and Iran. Fallon met President Rahmon.

Between June 18 and 21, also according to a Tajik press report, General Sir Michael Jackson spent three days in Dushanbe, meeting the Tajik ministers of foreign affairs, finance, and trade, plus Hasan Saduloev, a senior bank chairman, and kinsman of President Rahmon. Jackson retired as chief of the UK general staff last December. On his visit to Tajikistan, Jackson claimed to be conducting business on behalf of the Saddleback Gold Corporation, a junior prospector. Exactly whose saddle Jackson was in, and which way he was riding, will be reported in the next episode.

Such high-level military interest in Tajikistan from NATO commanders is no surprise in Moscow, or in Beijing, where China is calculating its own interests as Tajikistan's largest creditor. As a member of the NATO alliance, Norway may very well approve Rahmon's change of strategic direction.

However, it is odd for Norsk Hydro, now merging with Statoil, to be contemplating anti-Russian strategy in Tajikistan, while at the same time publicly bidding for the Kremlin to award it substantial contracts, even equity stakes, in the Shtokman gasfield project, the world's largest undeveloped gas reserve. The value of that project to Norway dwarfs the value of Hydro as a going concern worldwide, let alone the value of Talco.

Tajikistan's most important industrial plant and the country's leading exporter, TadAZ changed its Russian acronym to the more westernized version, Talco, in line with the nationwide campaign this year to de-Russianize Tajikistan's names. When TadAZ became Talco, Rakhmonov became Rahmon.

The Talco smelter currently produces almost 400,000 tonnes of aluminium per annum. At the current international market price, that is worth about $1.1 billion. But the plant's recorded value of exports is less than $200 million. Even so, it is the dominant industrial enterprise of the country, the largest employer in the economy, accounting for 35% of Tajikistan's electricity consumption, 48% of its export revenues, and a large part of the Tajik treasury's tax collection.

Tajikistan has a great many mineral resources potentially available to be mined, but bauxite isn't one of them. It thus cannot supply alumina, the product refined from bauxite, which is the feedstock for Talco's aluminium smelting line. This didn't matter when central planners in Moscow arranged to rail the alumina in from neighbouring Kazakh and other Soviet refineries. But when the Soviet Union stopped, Talco had no cash or working capital to buy its feedstock. At first, it wrote barter contracts, exchanging raw material inputs for output of metal. Rahmon then introduced what are called tolling contracts.

According to a Tajik press report from the December 2006 press conference in Dushanbe, which followed the meetings Hydro's Storesund and Sjotveit had with President Rahmon, "henceforth company Hydro Aluminium and Т?а?dAZ become partners in the manufacture of aluminium. Thus, the head of Hydro has emphasized the importance of transparency in all activity, having named this as one of the defining factors of support by the World Bank and the European Bank for Reconstruction and Development".

Transparency clearly isn't what the Norwegians want from a series of transactions too minuscule to amount, in Hydro terms, to a partnership that would justify disclosure to Hydro shareholders. If Anglo-American political strategy is underwriting Hydro's aluminium business, and General Jackson's Saddleback Gold Corporation, then the future for Tajikistan's mineral and metal sector should prove to be quite a saga. Stay tuned.

Alcoa Curtails AWAC Jamalco Refinery in Advance of Hurricane Dean

Business Wire (press release), CA 19-Aug-2007

NEW YORK--(BUSINESS WIRE)--Alcoa today announced it temporarily curtailed production at its 1.4 million metric ton Jamalco alumina refinery in Clarendon, Jamaica on Saturday, August 18th as part of safety precautionary measures in advance of Hurricane Dean.

All production and operations at Jamalco -- including the mine, port, and refinery -- began shut down procedures on Saturday in advance of the hurricane.

Any impact from the hurricane, amount of production lost, and a re-start schedule will be reported after a full assessment can be safely made.

The Jamalco refinery is 55 percent-owned by Alcoa World Alumina and Chemicals (AWAC) and 45 percent owned by the Government of Jamaica. Alcoa World Alumina and Chemicals is a global alliance between Alcoa and Alumina Ltd, with Alcoa holding 60 percent.

Alcasa pledges to help Cuba's aluminum fabrication industry - Venezuela

BNamericas - Tuesday, August 21, 2007 18:07 (GMT -0400)

Venezuelan state aluminum reducer Alcasa is looking at providing Cuba with technical assistance for downstream aluminum fabrication, an Alcasa executive told BNamericas.

"We're performing a study right now to help us determine the potential of Cuba's processing industry and to see if a downstream industry can develop," the official said.

Since Cuba does not have enough power to install aluminum reduction plants, it is more likely that development will occur in metal transformation, the executive said.

The Venezuelan smelter plans to support the island's aluminum industry for six months, said the executive.

The official also said that state heavy industry holding CVG, which owns Alcasa, is carrying out studies into the metal transformation capacity of other Caribbean countries like Jamaica, the Dominican Republic and Trinidad & Tobago.

"Depending on the studies, we'll see if the zone can become a major distribution center for processed aluminum," the executive said.

Alcasa, located in Puerto Ordaz city in Bolívar state, aims to produce 180,000t of primary aluminum this year. It churned out 178,124t in 2006, down 4.6% compared to 186,707t the year before.

The smelter is 92% owned by CVG, while the remaining 8% belongs to US company Alcoa (NYSE: AA).

Chalco says China demand for aluminum will rise 33 pct this year August 21, 2007: 01:09 AM EST

SHANGHAI (XFN-ASIA) - Aluminum Corp of China (Chalco), the listed unit of state-owned Chinalco, said China's demand for aluminum will rise 33 pct this year.

Xiao Yaqing, chairman and CEO of Chalco, said at a news conference here that demand for aluminum is expected to increase to between 11.5 mln and 12 mln tons this year.

Xiao said Chalco's aluminum production capacity is projected to reach 3.5 mln tons by the end of this year, but did not provide a current figure.

He also said China will suffer a shortage of 5 mln tons of alumina in 2007, but that prices will not fluctuate wildly.

'The price for alumina will be reasonable this year,' he said.

Xiao added that the country's demand for alumina -- the chief raw material used in the smelting of finished aluminum -- will rise 40 pct this year to around 12.2 mln tons.

Chalco's alumina production capacity will be over 10 mln tons this year and more than 13 mln tons within the next three years, Xiao said.

Speaking on behalf of parent company Chinalco, also said that the group is in talks over 'many big' copper projects overseas, but did not elaborate.

Chalco recenlty acquired a 91 pct stake in Canada's Peru Copper (AMEX:CUP) (TSX:PCR) , and Chinalco yesterday announced it had bought a 49 pct stake in China's Yunnan Copper Group rj/ap/net xfnap/xfnnt Copyright AFX News Limited 2007. All rights reserved.

Alcan breaks ground for its new world-class facility in China

CNW Telbec (Communiqués de presse), Canada 22-Aug-2007

Specialty alloy cable plant will be completed in fourth quarter of 2008

PARIS, Aug. 22 /CNW Telbec/ - Alcan Inc. today broke ground at the Tianjin Airport Industrial Park in China for its world-class specialty alloy

cable manufacturing facility. The US$40 million facility will produce specialty alloy cable products for commercial, institutional and industrial

applications. The new plant is expected to be completed in the fourth quarter of 2008.

"Alcan is very proud to be breaking ground on this new state-of-the-art facility. We are excited about the continued growth of Alcan Engineered

Products into China with cost effective and innovative solutions to support China's rapidly expanding commercial construction market," said Christel

Bories, President and Chief Executive Officer of Alcan Engineered Products.

"Today's ground breaking ceremony is a demonstration of Alcan Cable's ability to tap new market opportunities for its aluminum alloy products," said

Ian Hewett, President of Alcan Cable. "Alcan is also very appreciative of the support provided by the Tianjin government to help Alcan Cable establish a

presence in China. We look forward to further developing our relationships with the local business community and the Chinese construction industry," he


As a welcoming gesture Tianjin's Mayor Dai Xianglong met with Alcan's senior officials prior to the ground breaking event. Attending the ceremony

were Tianjin's Vice-Mayor Yang Dongliang and Mr. Feng Zhijiang, President of the Administrative Committee of Tianjin Free Trade Zone & Airport Industrial

Park, along with Mr. Ian Hewett, President - Alcan Cable and Alcan International Network.

Chalco Expects China to Be an Aluminum Importer (Update4)

Bloomberg Aug. 23, 2007

By Xiao Yu

China, the world's largest producer of aluminum, is on course to become a net importer of the metal for the first time since 2001 because of surging demand from automakers and packaging producers.

``For China as a whole to turn from a net exporter of aluminum to a net importer is entirely possible, it's only a matter of time,'' Xiao Yaqing, chairman of the Aluminum Corp. of China Ltd., the country's largest producer, said in an interview today in Hong Kong. He didn't give a timeframe for the reversal.

Increased demand will lift prices of aluminum, which have lagged behind other base metals in London in the past five years, rising less than half as much as copper and nickel. That would support Rio Tinto Group and Chalco's strategy of expanding and curb profit at users such as China Vanke Co. and Qingdao Haier Co.

``There will be a strong boost to global aluminum prices,'' said Wang Feihong, chief analyst at Beijing Antaike Information Development Co. He projects China will become a net importer of aluminum as early as 2009.

A reversal in China's aluminum market may follow a similar path to oil, where the nation's imports have more than doubled since 2001, contributing to a fourfold gain in crude prices since.

China, also the biggest consumer of aluminum, encouraged imports by changing tax rates last month to curb output growth and save energy, which accounts for a third of the cost of making the metal. The government wants to reserve resources such as bauxite by urging imports. Bauxite is used to make alumina, which is refined to make aluminum.

Aluminum Corp., known as Chalco, rose for a fourth day in Hong Kong trading, gaining 1.8 percent to HK$15.82 at 11:25 a.m. local time. The company is on course for a record four-day gain of 47 percent since Aug. 17.

Growing Demand

Rio, based in London, agreed to pay $38.1 billion to buy Alcan Inc. this year to become the world's largest producer. It expects the Asian nation's demand to rise by 15 percent a year.

Demand for aluminum in China will rise 33 percent this year, triple the rate of global growth, Xiao said. Global aluminum consumption will increase 10 percent this year, up from a forecast of 8.9 percent, Alcan Inc. said July 31.

China's rate of production growth of aluminum slowed in June, when it rose 28 percent from a year earlier, compared with a 38 percent year-on-year growth in April. It produced 5.7 million tons in the first six months, a rise of 35 percent from a year earlier, National Bureau of Statistics data showed July 20.

``Consumption growth is still very strong,'' Xiao said. ``I am very optimistic about growth of the packaging industry as richer Chinese increase consumption of beverages and food.''

Aluminum Gains

Aluminum for delivery in three months on the London Metal Exchange rose 0.8 percent to $2,535 a metric ton at 11:37 a.m. Hong Kong time. In Shanghai, aluminum price rose 0.5 percent to 19,410 yuan ($2,559) at the same time.

``China will continue to curb the growth of energy-intensive industries and restrict the start-up of new aluminum smelters,'' said Wang of Antaike, a research affiliate of the China Nonferrous Metals Industry Association.

Some Chinese aluminum smelters are yet to meet the higher environmental standards on emissions imposed this year, Xiao said, casting doubt on forecast capacity expansions.

``These days people think China will produce everything the world needs, but in reality we don't have the natural and energy resources to support that,'' Xiao said. ``We are already paying a high price to meet domestic demand, not to mention exports. In the long term, China won't be able to support large demand for metals by itself.''

Real estate, automobile and packaging industries account for the lion's share of China's aluminum consumption. China's economy grew 11.5 percent in the first half, boosting demand for trucks and cars. The nation's vehicle sales grew 23 percent in the first half, according to the China Association of Automobile Manufacturers.

To contact the reporter on this story: Xiao Yu in Hong Kong at

ABB clinches $140m contract from Qatalum

Gulf News, United Arab Emirates - August 23, 2007, 01:01

Dubai: ABB, the power and automation technology group, has been awarded a $140 million contract by Qatalum, a joint venture between Qatar Petroleum and Norway's Hydro Aluminum. The partners are constructing what will be the world's largest aluminum plant built in one phase in Qatar.

ABB will supply a high-voltage power rectifier station consisting of 10 high-current rectifiers rated at 1750 volts, 10 regulating and rectifier transformers, System 800xA control and protection systems, two Scada (supervisory control and data acquisition) systems, two direct-current measuring systems and various auxiliary systems. ABB will also provide high-voltage cabling, engineering, training, installation and commissioning.

"This milestone project reflects our extensive expertise and experience in the primary metals and minerals industries," said Veli-Matti Reinikkala, head of ABB's Process Automation division. "By combining standard ABB products and systems with industry-specific knowledge, we have established a strong track record for meeting customers' needs in terms of productivity, reliability and energy efficiency."

The greenfield Qatalum project will include an aluminum smelter with a capacity of 585,000 tonnes per year, and a dedicated 1,350-MW power plant station to ensure a stable supply of electricity.

The smelter will be located in the Mesaieed Industrial City, about 40 kilometres south of the Qatar's capital, Doha, near a natural bay on the southern coast of the Qatar Eastern Peninsula.

ABB has equipped an estimated 80 per cent of the smelting facilities in the Gulf. Deliveries to the Qatalum site will begin in the fourth quarter of 2008, with metal production set to commence in late 2009. The order was booked at the end of the second quarter 2007.

Alcoa declares force majeure on alumina after plant outage, MA August 23, 2007

Rusal reopens alumina refinery in Jamaica

By Tom Stundza

The 1.4 million metric ton/year Jamalco alumina refinery in Jamaica remains closed while its owners assess damage caused by Hurricane Dean. The world market has hardly blinked, though, since United Company Rusal of Moscow has restarted the Alpart and Windalco alumina refineries in Jamaica that had suspended operations last weekend ahead of the hurricane.

"In light of the temporary shutdown of the Jamalco facility, damage to the port, and likely resulting delays in shipments, the company has declared force majeure to its customers," says majority owner Alcoa in a statement. Early reports are that the bauxite mine and refinery were damaged, as was the port from which Jamalco ships processed alumina. Jamalco is 55% owned by Alcoa World Alumina and Chemicals and 45% owned by the government of Jamaica. Alcoa World Alumina and Chemicals is a 60-40 global alliance between Alcoa and Alumina Ltd. of Australia.

UC Rusal says in a press release that its Jamaican facilities were undamaged. Alpart Alumina Refinery, situated close to Mandeville in Jamaica, has a production capacity of 1.65 million metric tons/year. The bauxite used for alumina production is extracted from the facility's own bauxite mines. Windalco’s two refineries (Ewarton Works and Kirkvine Works) have combined annual capacity of 1.25 million metric tons.

Meanwhile, the world alumina/aluminum market today is more interested in the views of major Chinese producers that the country, the world's largest producer of aluminum, is on course to become a net importer of aluminum for the first time since 2001 because of surging demand from automakers and packaging producers. "For China as a whole to turn from a net exporter of aluminum to a net importer (of aluminum) is entirely possible, it's only a matter of time,'' Xiao Yaqing, chairman of the Aluminum Corp. of China, the country's largest producer, says in an interview with Bloomberg News.

© 2007, Reed Business Information, a division of Reed Elsevier Inc. All Rights Reserved.

Spot Alumina $332/Ton In Latest Nalco Tender - Sources -2- - August 22, 2007: 10:40 AM EST

Spot tenders prior to this were going for over $400/ton.

But traders said alumina prices could be set to stage a recovery if force majeure at Alcoa Inc's (AA) Jamalco refinery in Jamaica is protracted.

Alcoa temporarily curtailed production at the Jamalco alumina refinery in Clarendon on Aug. 18 as part of precautionary measures in advance of Hurricane Dean. Russia's United Company Rusal also halted output at its Windalco and Alpart refineries but has since restarted them.

"It depends on how long the situation lasts and the magnitude of the problems, " said a trader at one major aluminum producer. "It's too soon to know for sure, but we saw what happened with Guinea."

A strike in Guinea aimed at toppling Lansana Conte, the country's long-time president, saw production of bauxite, a key ingredient to make alumina, halted at Alcoa's CBG operations, the country's main producer. Alumina output at Russian Aluminum's Friguia refinery was also cut by less than 10%.

Alumina prices rallied from below $300/ton to over $400/ton rapidly.

-By Andrea Hotter, Dow Jones Newswires; +44 (0)20 7842 9413; andrea.hotter@

Alcoa restarting power in Jamaican refinery after Hurricane Dean

Caribbean Net News, Cayman Islands Saturday, August 25, 2007

By Dale Crofts

CHICAGO, USA (Bloomberg): Alcoa Inc., the world's second-largest aluminum company, said it was restarting power at a Jamaican alumina refinery that had been shut down for almost a week because of damage from Hurricane Dean.

The company continues to assess damage to facilities at the port used to ship alumina to North America and is "in the process" of restarting power at the Clarendon refinery, spokesman Kevin Lowery said by phone on Friday from Pittsburgh. He declined to comment on when production may resume.

Alcoa, based in New York, was the worst hit of the major bauxite and alumina producers in Jamaica after Hurricane Dean bore down on the island last weekend, flooding streets and downing power lines. The company's 1.4 million-metric-ton refinery was closed August 18. United Co. Rusal said August 22 that it resumed production after facilities were "undamaged."

Alcoa has invoked force majeure on any delayed shipments, a contract clause allowing companies to default on commitments because of circumstances beyond their control, such as hurricanes and floods.

Alumina is refined from bauxite, a rock found mostly in tropical and subtropical regions. Alumina is further processed into pure aluminum.

Century Aluminum Co., the second-largest US producer of the metal, had "no significant damage" from the hurricane and operations are "up and running," spokesman Michael Dildine said by phone from Monterey, California. The company mines about 4.5 million tons of bauxite a year, which it processes at an alumina plant in Louisiana.

Rusal, which overtook Alcoa as the world's largest aluminum producer earlier this year, produces as much as 2.8 million tons of alumina in Jamaica.

Alpart, Windalco, Scotiabank pour $100 million into hurricane recovery

Jamaica Observer, Jamaica Saturday, August 25, 2007

Just over $100 million was yesterday pumped into the island's hurricane recovery programme by bauxite alumina firms Alpart and Windalco, as well as the country's largest commercial banking institution, The Scotiabank Group.

The larger portion of the contribution - $83 million - was committed by the owners of the bauxite alumina companies, while The Scotiabank Group's contribution amounted to $17.5 million which the bank said should be used to rebuild primary schools ravaged by Hurricane Dean.

Category four Dean brushed the eastern and southern shore of the island Sunday night, killing four people and destroying homes, crops and infrastructure.

Yesterday, the managing directors of Alpart and Windalco, Alberto Fabrini and Gabriel Henn respectively, said that the contribution was "an expression of the deep concern the companies share with employees and neighbouring communities who have suffered losses and trauma from the disaster".

The money, they said, would be used to aid the recovery efforts of employees and community-based institutions in their operating areas.

The employee funding would be used to assist employees of both companies "who suffered substantial damage to their homes, as well as to recognise the dedication and commitment of the workforce in securing and maintaining the operational integrity of the plants", the firms said in a joint news release.

The other portion will focus on a number of education, health, and agricultural facilities directly affected by Hurricane Dean.

The Scotiabank Group said that its contribution was a continuation of its tradition of supporting growth and development in the critical areas of health and education.

"Many of our primary schools have suffered severe damage at a time when students are getting ready to return," a news release from Scotiabank quoted the bank's president and CEO Bill Clarke. "We at Scotiabank recognise the implications for back-to-school preparations and have directed our efforts at restoring normalcy for the children during this difficult time."

Alcoa to Sell Soft-Alloy Mills to Golden Aluminum (Update1)

By Stewart Bailey and Kevin Orland

Aug. 27 (Bloomberg) -- Alcoa Inc., the world's second- largest aluminum producer, agreed to sell two soft-alloy plants in the U.S. to closely held Golden Aluminum for an undisclosed price.

A third plant in Tifton, Georgia, which employs 200 people, will be closed by the end of October after a buyer couldn't be found, New York-based Alcoa said today in a statement. The factories to be sold together employ 330 people in Warren, Ohio, and Plant City, Florida.

Alcoa excluded the facilities from a joint venture formed in June by the combination of its own soft-alloy business and the Sapa AB unit of Oslo-based Orkla ASA. The venture, the world's largest maker of aluminum parts used by automakers, shipbuilders and construction firms, is expected to have annual sales of $4.5 billion and 12,000 employees.

Kevin Lowery, a spokesman for Alcoa, declined to disclose the selling price of the factories.

Alcoa shares rose 29 cents to $36.98 as of 4:15 p.m. in New York Stock Exchange composite trading. The shares have gained 23 percent this year.

To contact the reporter on this story: Stewart Bailey in New York at .

Official: China Need to Import Aluminum

Houston Chronicle, United States - Aug. 27, 2007, 12:48PM

© 2007 The Associated Press

SHANGHAI — China, the world's biggest aluminum producer and consumer, is likely to go back to being a net importer of the metal in a few years, despite its surging production, a senior industry official said Monday.

"(To shift back to being a net importer) is entirely possible. It will probably come after 2010," Pan Jiazhu, secretary general of China Nonferrous Metals Industry Association, told Dow Jones Newswires in an interview.

China's rapid economic expansion will result in demand growth surpassing growth in production, and its shift back to a net importer for the first time since 2001 will provide support to global aluminum prices.

Data provided by the National Bureau of Statistics show the country's total aluminum production surged 34 percent on year in January-July to 6.71 million metric tons.

However, "we see particular potential growth in the consumer market for aluminum foil and the use of extruded products in the construction and industrial sectors," said Pan.

Booming growth in China's real estate industry, packaging needs, as well as rising demand for alternatives to steel for use in automobiles and railway cars will be some areas that will see particularly fast growth, Pan said.

China scrapped the import tax on aluminum at the beginning of this month as a government gesture to encourage imports of the metal, production of which consumes lots of electricity.

Although market participants believe the move won't lead to any material change in imports soon, Pan said "it's a signal of a strong government intention to curb the growth of high energy consumption sectors."

In line with the tax changes to encourage imports, the government will probably introduce more policies to curb exports of aluminum products, Pan said.

China's imposition of a 15 percent export tariff on aluminum late last year prompted more exports of semi-finished aluminum products, which already aroused government concern.

As a result, it began imposing a 15 percent export duty on aluminum rods and bars, two preliminarily processed products, from Aug. 1.

China, which is also the world's biggest aluminum products maker, is expected to produce more than 10 million tons of products this year, up from 8.15 million tons last year, according to data provided by the association.

In the first half of this year, China's exports of aluminum products reached 681,000 tons, already exceeding total exports in 2006 of 554,000 tons.

"Representing the industry, we hope the government can at least exclude exports of high-value added products" from any export duties, Pan said.

"But its endeavor to curb consumption of energy and resources is decisive."

The CNIA is comprised of members of the domestic nonferrous metals industry and assists the central government in collecting market data and drafting industry policies.

Oxbow Calcining will be getting new manager

Enid News & Eagle, OK 27-Aug-2007

By Robert Barron Staff Writer

The Oxbow Calcining, formerly Great Lakes Carbon, plant north of Enid soon will get a new manager.

Scott Hoag is moving to Enid from West Palm Beach, Fla., where Oxbow Group, the parent company of Oxbow Calcining is located. He will replace Don Rosendale, who has been named a vice president and transferred to Houston.

"We’re excited about it," Rosendale said Monday. "It’s very positive. I think it will be outstanding for the Enid plant and for the community."

Oxbow recently completed its acquisition of Great Lakes, and the name change happened in July.

Oxbow owner and founder William I. Koch said he believed the acquisition is a great strategic fit for the company.

"We had our eye on Great Lakes Carbon for quite sometime," he said in a prepared release. "They have a lot of strengths, including their four calciners, a large number of talented employees and quality facilities. We think it is a good fit for both companies."

No major changes are planned. The business has been ongoing for nearly 100 years, and Koch said Great Lakes has a depth and presence in the marketplace.

Great Lakes had nearly 310 employees who became part of Oxbow, which brings the total number of employees at Oxbow to 1,200.

The Enid plant operates three kilns and has the capacity to produce 500,000 short tons per year of anode and industrial grade calcined petroleum coke, a byproduct of the oil refinery business. Petroleum coke is used in power generation, cement kilns, sugar mills and aluminum manufacturing.

The plant’s three kilns were built in the late-1960s and early 1970s. In the mid-1990s the company modernized and automated its crushing facilities here.

RusAl Eyes China as a Primary Market

The Moscow Times, Russia - Tuesday, August 28, 2007. Issue 3730. Page 7.

Daniel J. Groshong / bloomberg

A worker in an aluminum plant in Zhaoqing, China. RusAl says the country will be a net importer of the metal by 2009.

RusAl officials Monday said the company planned to double its cathode block capacity in China and predicted that the country would become a net importer of aluminum by 2009.

The company, the world's biggest producer of primary aluminum, plans to raise its cathode block capacity in the country to up to 30,000 tons this year, largely through a planned acquisition, said Grigory Goryachikh, general manager of Shanxi RusAl.

"We have three or four target companies. ... We expect a deal would be signed by the end of this month," Goryachikh told reporters on the sidelines of an industry conference in Shanghai.

All the acquisition targets are based in the northern Chinese province of Shanxi, and the acquisition is expected to go through by year's end, he said.

RusAl had been in talks to buy Shanxi Qixian Yutong Carbon, a leading Chinese firm that produces 20,000 tons of cathode blocks per year, but negotiations broke down, Goryachikh said. Shanxi RusAl has an annual capacity of 15,000 tons of cathode, which account for about 30 percent of supply to the Russian company's aluminum smelting units.

RusAl would not expand capacity at an existing plant, in Linshi, Shanxi, due to difficulties with approval and equipment sourcing, he said.

China, the world's largest producer and consumer of aluminum, may become a net importer of the metal from 2009, RusAl sales director Peter Finnimore told the conference.

The country will probably account for 36 percent of global consumption of the metal used in beverage cans and aircraft by 2010, up from 25 percent currently, he said.

China is the key driver of global aluminum demand, which will grow by 3.6 percent annually, according to RusAl.

World aluminum demand is forecast to increase by 11 million tons by 2010 with China, Russia and India accounting for 75 percent of the increase, and more than double with a gain of 45 million tons by 2030, Finnimore said in his presentation.

RusAl and Indonesian mining firm PT Antam are nearing a preliminary joint-venture agreement to produce aluminum in Indonesia's West Kalimantan province, a representative of the Indonesian firm said Monday.

Executives from the two companies expect to sign a memorandum of understanding Sept. 6, said Bimo Budi Satriyo, Antam's corporate secretary, AFX reported Monday.

A spokeswoman for RusAl, Olga Sanarova, would not confirm the deal with Antam but said the company was interested in Indonesia's rich bauxite resources.

Kommersant reported earlier this month that RusAl was investigating opportunities in Indonesia to build a bauxite mine and aluminum smelter.

Indonesia is very attractive for metals companies, thanks to its large resources of bauxite, an essential raw material for aluminum, and its close proximity to China.

"Indonesia is very well-located, and is close to alumina resources," said Yury Vlasov, a metals analyst with Renaissance Capital. "Provided [RusAl] can get good rates for electricity, it will be able to provide alumina at very competitive prices."

RusAl has previously said that it is seeking investment opportunities in Vietnam, where it opened an office in May. Vietnam boasts the fourth-largest bauxite reserves in the world.

United Company RusAl, which is controlled by Oleg Deripaska, was created in March, following the merger of Russian Aluminum, SUAL and the alumina assets of Swiss-based Glencore. It has operations in 19 countries.

Bloomberg, MT, Reuters

Tajikistan cancels contract with Russia's Rusal for giant hydropower project

International Herald Tribune The Associated Press August 29, 2007

DUSHANBE, Tajikistan: Tajikistan has canceled a contract with the Russian company OAO Rusal for completion of a giant hydroelectricity project seen as a substantial boon to the impoverished Central Asian country, the government said Wednesday.

Rusal, however, said it was unaware of any changes.

Tajikistan and Rusal signed a US$1 billion contract in 2004 for completion of the Rogun project that is to include the world's highest dam. The project was begun when Tajikistan was part of the Soviet Union, but stalled in the economic chaos that followed the Soviet collapse.

But the contract became mired in disputes between Tajikistan and Rusal, including over the size of the dam, the materials used in it and how much of the electricity generated by the project would be sold to Rusal's energy-hungry aluminum plants.

The office of President Emomali Rakhmon, which announced the cancellation of the contract, said the government has decided to create an open-stock company to undertake completion of the project. A Rusal representative in Tajikistan, Konstantin Zagrebelny, said he had not been informed of the decision and could not comment.

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In a statement, Rusal said it was unaware of any changes in its participation in the project. It said it was contracted by the Russian government, which is an equal partner in the project under an agreement with Tajikistan, and that the work it has done "was in full compliance with the provisions set forth in the agreement."

Tajikistan's fast-flowing mountain rivers have a potential hydropower capacity of 527 billion kilowatt hours a year, among the largest in the world, according to international experts. Energy sales would bring a substantial boon to the former Soviet republic, racked by rampant unemployment and problems caused by increasing amounts of drugs being smuggled from neighboring Afghanistan.

The plant's completion could substantially increase sales of electricity to neighboring China, as well as to Pakistan and Afghanistan.

The Rogun project, designed in 1976, was the biggest of several that Soviet planners had in mind for Tajikistan. Workers had built the dam on the Vakhsh River, about 74 miles (23 meters) east of the capital, Dushanbe, up to 40 meters (131 feet) high when funding ran dry in 1992. While the Moscow-backed secular government and Islamic opposition were fighting a civil war, flooding washed away the dam.

Rusal wanted to build a 280-meter (918-foot) concrete dam to generate electricity primarily for its own use. The government wants the dam to be 55 meters (180 feet) higher and built out of earth and rock, just as the original Soviet plans specified, saying that would be safer and generate more electricity.

China to build aluminum plant in Iran

PRESS TV, Iran - Thu, 30 Aug 2007 21:29:27

Iran and China sign a contract of Aluminum production unit.

A deal for the establishment of an aluminum production unit in southern Iran has been concluded with a consortium of Chinese companies.

The contractor for the project, Shahriyar Taherpour told IRNA that the unit is projected to have an output of 276,000 tons of aluminum annually. This would make the unit the largest aluminum smelter in Iran.

The contract specifies a 4-year construction period for 850 million Euros. About 85 percent of the sum would be provided as credits. The remaining would be supplied in cash by shareholders, including the Iran Mining Industries Development and Renovation Organization, as well as Ghadir Investment Company, said Taherpour.

The project is expected to create 1,300 jobs directly and more than 20,000 indirectly.

"The Chinese contractors are expected to implement the project in four years and deliver it to us. The aluminum production unit would be established in Lamerd to the south of Shiraz," he concluded.

Ormet Delays Restart of Sixth Potline

Business Wire (press release), CA August 30, 2007

Hurricane Dean Affects Alumina Supply

HANNIBAL, Ohio--(BUSINESS WIRE)--Ormet Corporation, a top U.S. producer of aluminum, today announced that it will delay the restart of its sixth and final potline due to affects from Hurricane Dean. Ormet receives alumina from various sources. The current source is from the Jamalco alumina refinery located in Jamaica.

In the meantime, Ormet is evaluating its alternatives and timing. Mike Tanchuk, the company’s CEO, confirmed that aside from the alumina supply, the sixth potline is ready to begin production.

Headquartered in Hannibal, Ohio, Ormet Corporation is a major U.S. producer of aluminum, aluminum billet products and smelter-grade alumina. Ormet employs approximately 1,000 people. For more information, visit the website at

Alcoa to upgrade Tennnessee smelting, fabricating plants

Mining Journal Online, UK - August 30, 2007

Alcoa Inc said on Thursday it will spend more than US$100 million on capital improvements at its smelting and rolled products fabrication operations in Tennessee.

The world`s largest aluminum producer said in a press release it expects to complete the improvement projects in 12 to 18 months.

The latest expenditures include an US$80 million upgrade in the rolled products area and US$33.5 million to enhance its primary products.

It said Thursday`s announcement is part of US$265 million in capital investments planned over the next three years for the Tennessee smelting and rolling facility, and for the Tapoco hydropower facilities that powers the plants.

Based in Blount County, Tennessee, Alcoa`s operation is the world`s largest producer of rolled aluminum sheet for beverage cans.

The Tennessee operations employ more than 1,800 people at the smelting and fabrication plants, the hydropower facilities, and the Knoxville office.

(Reuters August 30)

Aluminium smelter veteran gearing to deliver yet another megaproject success

Engineering News (press release), South Africa, 31 Aug 07

By: Terence Creamer

The newly appointed CEO of Alcan’s $2,7-billion Coega aluminium smelter project effectively went full circle when he accepted the position earlier this year. Brent Hegger began his postuniversity career working at Alcan’s Arvida facility in northern Quebec, before "developing an allergy to mosquitoes", and has since, almost certainly, developed unparalleled experience in delivering aluminium smelters in Southern Africa.

After leaving Alcan, Hegger worked on various mega aluminium ventures on the contractor end of the business, including on the Grande-Baie and Becancour smelter projects in Quebec. He then relocated to South Africa to participate in the development of the Hillside aluminium smelter, initially developed by Gencor (now BHP Billiton), in KwaZulu-Natal.

Hegger emerged as an integral member of the SNC-Lavalin/Murray & Roberts joint-venture team that successfully deployed the AP30 (now referred to as AP3X) aluminium smelter technology at Hillside and later at Mozal, in Mozambique, a project that was awarded the international Project Management Institute’s prestigious ‘Project of the Year’ title in 2001.

"I have the T-shirt and the scars," Hegger quips, adding that it is this experience that he hopes to replicate and improve upon in the delivery of a new 720 000-t/y aluminium smelter project to be built at Coega.


A desire to build on those successes has arguably been made tangible with the recent signing by Alcan of a $100-million contract with a joint venture comprising SNC-Lavalin, Murray & Roberts and Hatch for the front-end engineering design (Feed) and management for the first phase of the planned 360 000-t/y aluminium smelter.

"The [SNC-Lavalin/Murray & Roberts] joint venture has a 15-year record of successful delivery of smelters in Southern Africa. The addition of Hatch, we believe, strengthens the joint venture further, as it gives us access to even more project management, engineering and construction management personnel. This is vital in the skills-stretched world economy," Hegger tells Engineering News.

The Feed is expected to take nine months to complete and will provide firm cost estimates and a critical path for construction, with phase one construction expected to begin in mid-2008 and come on line in 2010.

"The Feed work will begin in Montreal and then be relocated to offices in Johannesburg and Port Elizabeth. This will enable us to be in a position to get full project go-ahead, or notice to proceed, by the middle of next year," Hegger explains, adding that construction should begin immediately thereafter.

During this period, orders for key long-lead items, such as the main substation equipment, paste-plant equipment for the production of anodes and also the gas-treatment systems for the scrubbing and purification of gases, will be placed. "We want to put those long-lead orders in as quickly as possible to give us time to meet our timeframes."


Also being given priority is the final assembly of the project team, which is said to be 90% complete. Most of the members will be based in Port Elizabeth, but the engineering, procurement and construction management hub will be in Johannesburg. "Our team will rise to around 60 people during construction, and at full operation it will be closer to 1 000, with 200 to 300 sub-contract positions."

The operations team is said to be interrogating start-up and commissioning scenarios, as well as possible outsourcing opportunities into the local community. A regional industrial development manager has been appointed to engage with the local business community on the prospects, as well as to debate downstream opportunities that could arise as a result of Alcan’s commitment to offer at least 40 000 t/y of primary aluminium to local industry at an export-parity price.

This commitment arose from the fact that the smelter was the first industrial facility to receive the so-called Developmental Electricity Pricing Programme, or DEPP, incentive from the Department of Trade and Industry (DTI) and power utility Eskom, which effectively guarantees power on a cost-plus pricing model.


There has been some disquiet that only 40 000 t/y out of a possible 720 000 t/y has been set aside for the special pricing dispensation, but Hegger insists that it is merely "a stated minimum" from Alcan. It does also not include the production attributable to the Industrial Development Corporation (IDC), nor to the project’s yet-to-be-named black economic-empowerment (BEE) partner.

At this stage, it is envisaged that Alcan will hold 80% of the venture, with the IDC taking 15% and the BEE partner 5%.

"The discussions on BEE are well advanced. We are in talks with the DTI on the optimal vehicle and we expect to announce it shortly," Hegger reports, adding that the model will probably be heavily weighted towards a "broad-based delivery system", with a strong Eastern Cape focus.

"With the BEE and IDC component, about 25%, or 180 000 t/y, of the production of the facility, including our DEPP commitment, will be either under South African control, or set aside for downstream beneficiation," he explains, arguing that the export-parity pricing system is viewed as a ‘win-win’ for Alcan, and South Africa.

At present, domestic aluminium consumers receive metal destined for re-export on an export-parity pricing basis from BHP Billiton’s Southern African smelters, but they pay a premium above that for metal destined for fabrication and sale in the domestic market.

"We are in talks with two to three aluminium users, which are looking reasonably positive, but we are still at a fairly early stage and no firm commitments can be announced," Hegger states.


Given the importance of stable and well-priced power to the facility, questions have also been raised about the appropriateness of another energy-hungry aluminium smelter investment, given South Africa’s current constraints in this area.

Once both phases have been developed, the plant will draw between 1 200 MW and 1 300 MW continuously, and, given a 24-month to 26-month construction programme, starting in the middle of 2008, Alcan expects to begin drawing its first power in the second or third quarter of 2010.

The start-up of a potline is sequential, so there is likely to be a progressive build-up of energy requirements over a five-month to six-month period thereafter, with the first line to draw 600 MW to 650 MW when at full power in early 2011.

But Hegger is sanguine, arguing that the current shortages are a short-term anomaly, rather than a structural constraint. "Firstly, the current electricity-supply constraint is a three- to five-year issue. But Alcan is not investing $2,7-billion for a three- to five-year horizon – we are looking at a 30- to 50-year relationship," Hegger avers, adding that Eskom’s R150-billion build programme will go a long way to ensuring the energy issues are overcome.

Further, global public affairs director Robert Valdmanis insists that the investment is also not inappropriate from an environmental perspective.

He points to Alcan’s impressive environmental record and argues that the investment could also be a key catalyst for the Eastern Cape economy and even for further foreign direct investment.

There is little question that demand for the metal is strong and growing. This is reflected in the price of aluminium, the most traded metal on the London Metal Exchange, which has doubled since 2001 on rising demand.

During the year, it has traded at an average of above $2 700/t and Alcan believes that global aluminium consumption will rise 10% this year, the fastest rate of increase since at least 1980.

But Valdmanis also contends that aluminium, while energy-intensive in the first instance, is a "progressive" metal and part of the solution in mitigating climate change. "There is an energy premium to pay when aluminium is first produced, but only about 5% of that energy is required to recycle the metal," Valdmanis asserts, describing the metal as "stored energy".

He stresses, too, that many of the future transport solutions that could have a bearing on decreasing carbon dioxide flows could lean heavily on aluminium’s lightweight, high-strength properties.

The project itself will also incorporate the most energy-efficient technologies currently available commercially in the aluminium industry and has embedded within it energy efficiency and greenhouse-gas controls.


But also adding impetus to Coega and its prospects is recent corporate activity, which has seen diversified mining giant Rio Tinto making a $38,1-billion ‘friendly’ bid for the Canadian firm, made while Alcan was defending itself from the hostile advances of US rival Alcoa.


Tom Albanese is already on record as saying that the group’s established presence in South Africa will be supportive of the Coega investment. In addition, Rio has stressed that Alcan’s "good project pipeline – including Coega" has been part of its attraction.

For Hegger and his project team, the new Rio Tinto Alcan corporate structure, to be domiciled in Montreal, has increased the urgency around the project. It has also improved its fundamentals, given that the new entity is no longer short on alumina, given the fact that Rio’s aluminium unit, Camalco, was slightly long on the key feedstock.

The precise supply line to Coega has not been finalised, but the project team is in talks with Transnet National Ports Authority around the finalisation of the commercial terms for port access and material-handling and storage facilities.

"The clear message we are receiving is that it is business as usual and that we should proceed full-speed ahead," Hegger tells Engineering News.

He is also of the view that the enlarged Rio Tinto Alcan balance sheet should allow the group to participate in more projects and advance its pipelines more quickly. Primary metal and bauxite refining projects are also better placed, given the strategic decision to dispose of the packaging unit – it has been reported that Sealed Air, a maker of Bubble Wrap, is close to an agreement to buy the Alcan packaging unit for as much as $5-billion.

"The Coega project is, right now, the most forward developed project in that pipeline and the one most ready to launch. So, in fact, if anything, the impetus and support for the project [are] even more positive and constructive than previously," Hegger concludes.

Edited by: Martin Zhuwakinyu

Bankers' war erupts over Rusal aluminium IPO

Mineweb, South Africa - Thursday , 30 Aug 2007

LSE regulators and US government investigations trigger strategy differences on getting Rusal to market.

Author: John Helmer


US and European banks are fighting among themselves over the terms of the proposed initial placement offering (IPO) of shares of United Company Rusal, the Russian owned bauxite miner and world's no.2 aluminium producer.

The conflict between the bankers, and between shareholders in Rusal, is so intense, the Financial Services Authority (FSA), regulator of the UK market and the London Stock Exchange (LSE), has already appointed a team of specialists to analyse the disclosures, litigation, and lobbying documents that have been presented by advocates for and against Rusal, and its controlling shareholder, Oleg Deripaska.

A source with access to recent meetings in London between Rusal advisors and UK regulators told Mineweb that this month there was a discussion of a multi-billion dollar set-aside to assure investors that the legal contingencies Rusal is facing can be met, if the company and its shareholders lose out in court.

The set-aside or contingency reserve is proposed to be reported in its IPO prospectus by Rusal, and booked in its financial accounts, to cover the company's liability for a multi-billion asset claim by Michael Cherney. Last November, in the UK High Court, Cherney lodged an initial claim that he owns 20% of the older Russian Aluminium company, which merged with others to form UC Rusal in March of this year.

With a target market cap of $30 billion, the proposed Rusal IPO is one of the London market's largest; no date has been announced yet, and a November target date appears to be slipping.

Wholly owned by Deripaska (66%), Victor Vekselberg and his partners (22%), and Glencore, a share placement of about 25% is the target. Deripaska is not selling any of his shares, according to one of the IPO planners; but no decision has been reached yet on whether the full 25% placement will be through issue of new Rusal shares (which would dilute Deripaska to just above 50%); or whether Vekselberg and Glencore will sell part of their shareholding.

Morgan Stanley is advising Deripaska to list Rusal as a general depositary receipt (GDR); legally, this requires a relatively low level of disclosure, and limits the bank's liability to new shareholders if asset problems are proved in court. Other banks engaged favour a mainboard LSE listing. Mineweb has already reported a bitter conflict over this issue; it is one of the clues to conflicting ambitions over whether Rusal will be preserved as the Russian national aluminium champion; or pass out of Russian control, allowing Deripaska and Vekselberg to become minority stakeholders of internationals like Xstrata, in a fresh round of global aluminium consolidation.

In addition to Morgan Stanley, banks participating include Goldman Sachs, JP Morgan-Cazenove, Deutsche Bank, and Credit Suisse. Goldman Sachs is quietly claiming credit for lobbying in Washington for the US government to lift the revocation order on Deripaska's visa to enter the US. After a decade in which Deripaska was barred, the visa was issued in 2005, and then revoked in 2006. Goldman Sachs has told US officials that Deripaska plans to invest billions of dollars in North America, notably through a tie-up with Magna, a Canadian auto parts supplier to US car companies. Goldman Sachs boosters in the Deripaska camp claim the visa ban was the result of an FBI investigation, and this will be lifted shortly. There will be special conditions, Mineweb was told, including a multi-billion dollar investment commitment. "What's so strange about that?", commented a source close to the situation. "US visas cost money -- everyone has to pay for them. Oleg Deripaska is promising to pay more."

The US Government investigations of Deripaska to date have helped confirm allegations in the Cherney case that he was the initial owner of the aluminium smelters which have been consolidated in several stages into the new Rusal. The evidence of an ongoing business relationship between the two, Deripaska's indebtedness to Cherney, and UK legal jurisdiction for disputes arising out of shareholding and loan agreements the two men have signed has been reviewed by US law enforcement officials. They are also being considered by the UK Listing Authority (UKLA) at the FSA.

Deripaska denies a business relationship with Cherney, and claims he owes nothing to him. This person," Deripaska told the Financial Times recently, "had no relation to my business." Rusal claims that, whatever the position may be between Deripaska and Cherney, the company is not liable. Cherney's lawyers contend that Rusal chief executive Alexander Bulygin is as tied to Cherney as Deripaska, and that Rusal is liable in Deripaska's schemes of arrangement.

New court filings in the London High Court are expected, extending Cherney's claim against Deripaska and the Rusal group of companies. Altogether, counting Cherney's 20% stake of Deripaska's holding in Rusal, plus past-due dividends, his share of the proceeds of a Rusal plant sale to Alcoa (2005), and repayment of a $150 million loan, Cherney is owed more than $5.1 billion. Bank advisors to Deripaska, led by Morgan Stanley, have reportedly proposed to ease the complications of the Rusal listing by establishing a reserve fund of between $3 billion and $4 billion to cover the legal contingencies facing Rusal. A source privy to the discussions said the reserve figure was originally set at about $1 billion, and it may be raised again to $6 billion.

Rusal said this week it expects to boost aluminium output 65% over the next five years through capacity expansion. Alumina output by Rusal will grow 66%, a company executive added. The firm currently turns out 4 million tonnes of primary aluminium per year and 11 million tonnes of alumina.

Analysts have told Mineweb that at the current spot price of $2,458, the aluminium should fetch about $10 billion, while the alumina should contribute another $3 billion to annual revenues; the estimated total for revenues in 2007 is between $12 and $14 billion. In a presentation to investors in London in June, Rusal provided limited financial data. It claimed sales in 2006 amounted to $13 billion, and Ebitda $5 billion. In 2005 Deripaska's wholly owned Rusal, the company claimed, revenues were $6.5 billion, Ebitda $2.2 billion.

As purely private companies, however, the old and the new Rusal are black boxes. The old Rusal, according to evidence gathered in Swiss, US, and other litigations against it, was a shell controlling mines, refineries, smelters, and the shipment of metal through dozens of companies, controlled by Deripaska, but legally separated from him and from Rusal itself. A banker to the IPO has told Mineweb that when the prospectus is issued, the financial reports will show consolidation of all these production, transport, and trading companies.

The same banker also told Mineweb that after consolidation, Rusal will be marketed to investors unencumbered. If there were to be a claim, such as Cherney's, the source argues, then it will be against Deripaska, not against Rusal. No matter what Deripaska's financial liability may be, the argument is that Rusal has no exposure or risk of liability. The banker told Mineweb he knows of no discussions, proposals, or agreements with UK regulators over a legal contingency set-aside. Lawyers in London familiar with Cherney's case say the averred evidence indicates that consolidation of Rusal was financed by Cherney, and Rusal's current and future shareholders are liable.

Putting distance between Rusal and Deripaska is also politically problematic for Deripaska at home. For Kremlin support of the merger between Deripaska's Rusal and Vekselberg's SUAL last year was contingent on preservation of the new Rusal as a Russian aluminium company, paying taxes to Moscow, even if it is registered in Jersey. Financial advisors to Vekselberg have told Mineweb that he, and his US-based partner Len Blavatnik, may sell out entirely.

That would leave Cherney, who is as Russian as Deripaska; sources have reported President Vladimir Putin as commenting that he can't see the difference between the two. Deripaska himself said recently about his shareholding: "If the state says we need to give it up, we'll give it up." If Deripaska thinks he has negotiated a concession deal with Putin to retain a 50%-plus stake in Rusal, after the IPO, and that will suffice to ward off Cherney, as well as a change of Kremlin-favoured proprietor, his bankers' strategy for reassuring foreign sharebuyers should have set off alarm bells in the Kremlin, where there are suspicions of the promises that have offered the US in exchange for Deripaska's visa. In the past, Deripaska has managed to beat or buy off government or parliamentary attempts to end the use of Rusal as an empty Russian shell, while its profits were transferred offshore. An LSE listing, along the lines advocated by JP Morgan, or the GDR strategy favoured by Morgan Stanley, lead offshore in the same direction.

Mineweb has already reported on efforts the IPO advisors and lawyers are making in Moscow to secure a written undertaking from the Kremlin, assuring investors that Deripaska will not be displaced. An assurance like that is unlikely. But if it is granted, and then circulated in the market, it would confirm the very link bankers are trying to deny between Deripaska and Rusal. A link as solid as the bankers are asking the Kremlin to confirm makes the liability of Rusal and Deripaska to Cherney jindissolubly joint.

If the Rusal listing materialises, it will generate fees for the participating banks of at least 40 million pounds. The inducements are blindingly large for the investment bankers involved. For Morgan Stanley, however, the risks of being judged at fault by the market are growing. According to a joke circulating among bankers in the City of London, "when I say no, Morgan Stanley says no problem.""

Two well-known Russian IPOs in the City - the Evraz steel company's listing in June 2005, and the PIK real estate company listing in June 2007 - have exposed the fact that Morgan Stanley either did not know, or omitted to disclose, that key assets, on which the two companies were valued and shares sold, were problematic. Mineweb reported in detail on the problems at Evraz, where shares were sold by the controlling shareholder, Alexander Abramov, although as High Court filings alleged, these were held in trust for someone else. Bankers involved, including sources within Morgan Stanley, have told Mineweb that the bank quietly withdrew from the Evraz share sale. Abramov settled the claim out of court.

More recently, Morgan Stanley helped draft the prospectus for PIK, in which the most valuable asset in the company's real estate portfolio turns out to be the subject of criminal prosecution, initiated by the Mayor of Moscow, with action suspended subject to a range of covenants that do not permit PIK to develop the site. Morgan Stanley's London office was asked this week: what did the bank know of the transaction history, prosecution files, and city covenants relating to the land and development assets of the Krasnopresnensky Sugar Refining Factory (KSRZ), the single most valuable asset in the PIK portfolio issued with the circular and included in the accompanying asset valuation report by CB Richard Ellis (page 33 -- No. 7, Matulinskaya Street). How does Morgan Stanley explain non-disclosure of this information material to investor assessment of PIK?" The bank refused to answer.

Morgan Stanley was also asked about its role in promoting the Rusal sell-off and its assessment of the Cherney claim on Rusal's assets. Michael Wang, executive director for Morgan Stanley's corporate communications, was asked: "Will you confirm that Morgan Stanley has now accepted the requirement for a set-aside in relation to the ongoing litigation, and what value Morgan Stanley believes is appropriate?" He said the institution will make no comment.