Emal CEO Expects to Close $4.5 Billion Financing

Emirates Aluminium Co. expects to close financing for a $4.5 billion expansion as it builds the world’s biggest smelter of the lightweight metal.

“We are looking at the end of this year to wrap it up,” Chief Executive Officer Saeed al-Mazrooei said in an interview in his office. “We’ll see what terms and conditions the market is offering, and based on that we can sit down with our shareholders and say these are the best options we have.”

The company, known as Emal, plans to boost annual output to 1.3 million metric tons by 2014 from 800,000 tons as countries in the oil-rich region use access to cheap fuel to diversify away from crude. Aluminium Bahrain BSC last week said it would spend $2.5 billion to raise capacity about 30 percent by 2015.

Oil royalties and taxes in the United Arab Emirates made up about half of economic output in 2010, according to data from its Statistics Centre. Energy accounts for 30 percent to 40 percent of aluminum smelting costs, according to Brook Hunt, a London-based unit of Wood Mackenzie Consultants Ltd. Saudi Arabian Mining Co.’s $10.8 billion venture with Alcoa Inc. includes building a 740,000 ton-a-year smelter by 2013.

Mubadala Development Co. and Dubai Aluminium Co., Emal’s joint owners, may seek $3 billion for its Abu Dhabi project, two people with knowledge of the matter said December. Funding would be split between export credit agencies and commercial banks, they said, declining to be identified as the deals are private.

“It won’t come all at one time, we don’t need it all at one time,” Mazrooei said June 5. “The request for cash flow, we can ask for it at the right time and the right place.”

Europe Shrinking

Gulf aluminum companies are expanding even as European and U.S. rivals shutter plants amid a price slump as economic growth weakens. Prices slid 25 percent in the past year to $1,974 a ton in London. Norsk Hydro ASA, Europe’s third-largest producer, said last week it would close a smelter in Australia, Alcoa plans to shut older sites, and United Co. Rusal, the biggest producer, is studying curbs on smelting in the second half.

“There are many drivers for closures,” said Mazrooei, who would like to see prices near $2,300. “The cost element, old technology, the impact of environmental regulations for Europe. Today you have almost five smelters in the Gulf using new technology, which drives the cost of aluminum to be very competitive. The Gulf region will capture some market share.”

Mubadala and Dubal are considering building a refinery to produce alumina, used to make aluminum, adding to the U.A.E.’s competitiveness. Mazrooei says this is “good news” because it would ensure security of supply for the companies’ smelters.

Asian Rising

Emal sells half its production to Asian countries including Japan, Korea and South Asia, about a fifth to Europe, 15 percent to the U.S., and 10 percent in the Middle East.

The company recently doubled sales to an unnamed European business to 120,000 tons a year, Mazrooei said. U.S. sales will also rise, as Emal produces billets to meet construction growth of about 2.3 percent a year, he said. The CEO also expects growth in billet demand, meeting the infrastructure needs of the new democracies of Egypt, Libya, Iraq and Tunisia.

“We will sell almost 750,000 tons this year, same as last year,” he said. “We are trying to improve the volumes. At the end of this year we will be able to produce near 800,000.”

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