Rio Tinto to join Abu Dhabi in $5.4bn aluminium plant

DUBAI, OCT 10:  Rio Tinto Group, the world’s third-largest miner, will join Abu Dhabi in building a $5.4 billion aluminium plant in the United Arab Emirates, taking advantage of cheap Persian Gulf gas, the country’s news agency said.

The London-based company’s aluminium unit formed an alliance with the Abu Dhabi government-owned General Holding Corp to develop the smelter, to be called Abu Dhabi Aluminum Co, the official Emirates News Agency reported, citing government officials. ‘‘The alliance is of tremendous importance to Abu Dhabi bringing together the expertise and natural-gas resources from the UAE and raw materials, international systems and operational expertise of Rio Tinto,’’ Sheikh Hamed bin Zayed Al-Nahyan, a member of the emirate’s ruling council, said in the statement reported by the agency late on Monday.
 
Persian Gulf states including Saudi Arabia, the United Arab Emirates, Qatar and Oman are investing billions of dollars to build aluminium smelters in an effort to utilise abundant gas and low-cost labor. Power accounts for almost a third of the cost of producing aluminium, making plants in the US and Europe less profitable than those in the Middle East, a region with two of the world’s top three gas reserves.

The plant to be built in Ruwais in the emirate of Abu Dhabi could eventually produce as much as 4 million tonne a year of aluminium and include the region’s first alumina refinery, according to the news agency.

Smelters in regions with cheaper energy are replacing unprofitable plants in Europe. Last year Norway’s ASA Norsk Hydro and Montreal-based Alcan Inc said they planned to shut smelters in Germany and Switzerland. Hydro is considering building a 5.7lakh-tonne facility in Qatar.

By the end of 2006, about 3 lakh tonne of annual production capacity in Europe will have closed because of higher costs, Citigroup said in a February 7 report.