Interview: Tim Murray
What are the most significant market challenges in the aluminium industry at present, and how is Alba addressing them?
TIM MURRAY: The main headlines for 2015 were the collapse of all-in prices – namely, those on the London Metal Exchange (LME) and regional premiums as well as the drop in oil prices. We recognise that the key challenge for the aluminium industry is low LME prices, which are expected to drop in 2016 to as low as $1300 per tonne – the lowest point in years. LME prices in 2015 had already fallen to the lowest levels since 2009. The appreciation of the US dollar will continue to weigh on all commodities, in particular aluminium prices. Concerns over Chinese aluminium growth and market overcapacity are likely to dominate LME price movements in 2016. Asian premiums will also remain under pressure from high levels of Chinese primary and semi-finished exports, as China continues to produce despite the sharp slowdown in its economy.
Given these challenging conditions, we are determined to remain cost-competitive by taking vigilant measures in order to sustain our competitive position and enhance the reliability of our operations, while at the same time streamlining our cost structure. Alba has adopted many pro-active measures to offset the drop in aluminium prices and rising prices of natural gas: two examples are the two-year Project Titan, which aims to reduce cash costs by $150 per tonne by early 2016, and the energy-saving project “Tesla”.
How mature is Bahrain in regard to environmental conservation and practices? Is there room for improvement?
MURRAY: Environmental preservation is extremely important to us, and Alba is known as an eco-friendly industrial company due to its pioneering environmental protection programmes. With this in mind, we aim to invest in environmental programmes that will preserve and protect Bahrain’s green footprint. We are also continuously seeking to reduce gas emissions through the optimisation of our processes. This is done with the support of a dedicated environmental monitoring team.
How is Alba preparing to embark on the Line 6 expansion project?
MURRAY: The Line 6 expansion project is a brownfield expansion. Looking back, you would notice that we have embarked on a major expansion every decade, the last one being in 2005 for Reduction Line 5. Over the past five years we have managed to increase our production by an average rate of 2.5% per annum with minimal investment and by capitalising on our existing resources. Expected to begin production by early 2019, Line 6 will boost Alba’s per annum production by 514,000 tonnes, bringing the company’s total production upon full ramp-up to around 1.45m tonnes, which will make Alba the largest single-site smelter in the world. Alba was also able to secure the gas supply for the Line 6 expansion project, which is vital to the development of local downstream industries and will be able to create job opportunities for Bahraini nationals. In terms of preparation, our Line 6 team is gearing up on all fronts.
How likely is it that the worldwide plummet in aluminium premiums continues?
MURRAY: I think that the plummet in aluminium prices and premiums will continue to have the same downward trend pattern as long as China continues to dump its inventory in the market. We also believe that as long as the market doesn’t correct its imbalances – specifically regarding Chinese exports and global inventories – LME prices are very likely to continue at the current bearish levels.
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