Interview: Said Al Masoudi

Given the energy intensity of aluminium smelting, how can the industry enhance efficiency?

SAID AL MASOUDI: Technological innovation is essential to stay ahead in the aluminium industry. Aluminium smelting plants in Oman tend to use the AP37, which was the most productive smelting technology commercially available at the time that they were commissioned.

To stay competitive with regards to cost and efficiency, many players in the industry are currently conducting feasibility studies on the AP40. This would permit the production of greater quantities of aluminium while enhancing the use of available energy. Just as important as technology is implementing the best possible practices in plants. For instance, lean production aims to eliminate the use of resources for any reason other than the creation of value for the end customer. These types of practices bring about cost avoidance and ensure the maximum availability of plant equipment. Any human or technical failure could severely impact efficiency, so such initiatives can help us predict failures and take corrective action before they occur.

How have aluminium producers reacted to the slowdown in the Chinese market? Will growth in other regions adequately compensate for any shortfall?

AL MASOUDI: All commodity producers, including in aluminium, have been affected by the slowdown in China. However, for aluminium the impact has mostly been secondary. China has historically been a balanced market in terms of meeting its own raw aluminium needs without needing to import or export much primary aluminium. Therefore, the global impact has been felt more in aluminium pricing, reflecting the overall balance of supply and demand in the industry as a whole.

Although global demand for aluminium has increased in many regions – most notably in the Middle East, Latin America, South-east Asia and Africa – it is not yet large enough to compensate for the shortfall created by relatively flat markets in the US and Western Europe, as well as the reduced level of growth within China.

What kind of impact has recent market volatility had on price and expansion forecasting?

AL MASOUDI: Volatility in the aluminium market in 2012 and 2013 has led to large swings in pricing and therefore profitability. As a result, price forecasting has become extremely difficult, so predictions for the short and medium term by industry analysts have varied greatly. In this kind of environment, it is difficult to plan properly for any returns on investment in aluminium smelting capacity, or to judge the correct level and timing of any expansions. However, the raw material supply chain has not been adversely affected, as production levels have not been reduced significantly.

To what extent has growing demand affected the ability of local companies to build viable value chains and develop aluminium-driven manufacturing?

AL MASOUDI: Although construction, transportation and infrastructure projects have created consistent demand for aluminium products, many of these cannot yet be manufactured within Oman. There are a few examples of local downstream customers who are growing rapidly in the conductor and cable business, while another will begin manufacturing aluminium sheet in 2013. However, many of the gaps in the full value chain for products used in construction and transportation are currently being filled elsewhere. As the economy continues to mature, this will surely change.

What are the most significant obstacles to further development of associated downstream industries?

AL MASOUDI: The most significant obstacle to the further development of downstream industries is likely to be ensuring an adequate market for the product. While Oman’s economy has strong fundamentals and is undergoing rapid growth, it is still a small market.

Therefore, any company that is considering manufacturing in the sultanate will need to export and sell abroad as well as domestically. In this respect, the development of Sohar Industrial Port is very encouraging.