Sohar Aluminium, jointly owned by OQ SAOC, TAQA, and Rio Tinto, was established in September 2004, as part of a landmark greenfield aluminium smelter project in the Sultanate of Oman. It has won global acclaim for its superior, environmentally friendly technology. The smelter has an annual production capacity of more than 390,000 tonnes of high-quality aluminium, a 1,000 MW Power Plant and Port facilities in Oman.

In many ways, Sohar Aluminium’s development mirrors the Sultanate of Oman’s own emergence onto the world stage - driving forward at a formidable pace, but all the while mindful and respectful of its cultural heritage and values. Sohar Aluminium intends to become a benchmark smelter while contributing to the sustainable development of Oman.

 

Let us meet the CEO of Sohar Aluminium, Eng. Said bin Mohamed Al Masoudi and talk about what is happening in the global economic and industrial system of our light metal which last year exceeded the threshold of 100 million tonnes, almost 70 million tonnes of primary use, the rest as secondary recycling.

 

“I think that global aluminium demand will continue to grow in the coming years, probably with growth rates between 2% and 3% as has been the trend in recent years. In Europe and North America, the per capita use of metal is very high, in some cases exceeding 40 kg, in other continents we are still an order of magnitude lower. There is a long way to go, therefore many opportunities for growth.

 

What is happening now in Europe is a tricky situation to interpret. Although demand from the end-use market is stably good, the production of primary metal has been disappearing, mainly due to high energy costs. Due to the conflict in Ukraine the level of premiums in Europe has reached record highs, creating a lot of disorientation in the market. It is difficult to predict how long this situation will last and it is hoped that the situation can stabilize quickly. Though there are uncertain cyclical phases, it is certain that the aluminium sector will continue to grow despite the inevitable difficulties along the way.

 

Aluminium has many wide-ranging uses, from construction to cars, packaging and electrical engineering and there is no reason to see the supply chain in crisis. We have abundant upstream mineral raw material resources and currently adequate primary metal, while the use of secondary metal is continuously growing, particularly in Europe. If we look back about thirty years, we see that the price of aluminium was around 1,500 dollars and that of copper was around 2,000. Today, copper has reached prices between 7,000 and 9,000 dollars, while aluminium is still in the 2,000-2,300 range, and this favours its use in many sectors.

 

At a global level attention must be paid to the significant role of China, they have set themselves a capacity limit of 45 million tonnes of annual production of primary metal out of a global total of around 70 million last year. Today there is a situation of balance between production and internal demand, they have also recently set up a solid development plan for recovery and recycling aiming at 14 million tonnes/year. These are particularly prominent figures that will shape the metal market in the coming years. Looking at the per capita consumption of Aluminium in different countries, if China's numbers align with those of many other developed countries in terms of demand, aluminium prices may rise accordingly.

 

 

Let us look at Europe, where smelter production has been shrinking over the last few years, we have reached just over 1.2 million tonnes of primary metal produced in the EU which covers less than 15% of the requirement. The introduction of the regulations related to the Carbon Border Adjustment Mechanism (CBAM), which should come into definitive force in 2026, are creating perplexity and questions from all metal users in Europe. The model of interventions of the recently introduced US Inflation Reduction Act seems much more effective for an effective environmental transition, a simple, direct, and immediately effective measure to reward across the board those who focus on sustainable solutions. What can you tell us about it?

 

Most of the primary aluminium produced in the Gulf uses natural gas as energy in the smelters, which from a CO2 emissions perspective, sit in the second quartile of global CO2 emissions from all smelters. We have been studying and attempting to unravel CBAM, a burdensome and bureaucratic tax layer, the cost of which we may have to bear, an additional cost that will be required to administer it, for which someone will have to pay.

 

We see many uncertainties about the development of CBAM, and we note the large amount of criticism of this measure which has now been introduced on an experimental basis by almost all aluminium operators in Europe. It seems to us that we are trying to establish two classes of materials, those classified as green and others, and thus discriminate against many of our productions. We guarantee the quality of the primary aluminium we produce and how we produce it, our controls are certified with demonstrable and verifiable data.

 

The Middle East and the Gulf area have represented for decades a fundamental source of supply for high quality raw aluminium. In Europe, we believe that something will have to be changed by European legislators, because there are other tools to help the climate transition as an alternative to a mechanism like the CBAM.

 

The proposal formulated by the United States known as IRA, Inflation Reduction Act, seems to be more reasonable to incentivise the reduction of emissions without penalising consumers. The IRA focuses on reducing inflation, which benefits both consumers and businesses, and promotes innovation and technological development, offering incentives to businesses that invest in sustainable solutions.

 

The Middle East and the Gulf area have and continue to represent a fundamental source of supply for the European aluminium industry, a large and historic industrial system which however could have some competitiveness problems in the future, in particular due to the cost of duties.

 

In any case, we hope that Europe will remain one of our main markets for aluminium, it has an extraordinary downstream industry of transformation, processing, and manufacturing. Just think of the automotive sector which is very solid in Italy, Germany and France and constitutes an example and a model which we look at with great interest.

 

Speaking of green aluminium, perhaps making a virtue of necessity in the face of eco-sustainability objectives, green aluminium is on the crest of the wave, as has been happening for some time, and fortunately, for secondary aluminium obtained from recycling. do you have any innovation projects on production processes?

 

The Gulf smelters are modern, efficient, and state-of-the-art plants. However, the world is moving, and we must always look ahead. From the point of view of the quality of our energy, unfortunately in this part of the world we are in the desert, and we do not have hydroelectric power. We have natural gas, and Solar energy which has limitations. For example, we cannot use the Sun at night.

 

We must think of a sustainable energy mix, it is not a simple operation either on a technological or economic level, but it is a path that we must face on all possible routes. There is also nuclear power which is certainly a clean energy source, but it is a new issue and one that needs to be discussed both for us as a company and for the Omani government.

 

However, ours is an ambitious and enterprising country. We are concretely working on new projects in the energy sector. In the Eastern part of Oman huge areas are being set up where wind, solar and hydrogen transformation plants will be installed. We also have projects on track for green ammonia which are still at a preliminary stage, and we have not yet moved on to an execution phase. These give an idea of the importance given to energy strategies in Oman.

 

We are working on possible innovations at the heart of the primary aluminium production process, which is the electrolysis cycle, the phase which, as we know, requires a high amount of electricity. Despite the notable progress made in recent decades we are today on an average of approximately 13,500 kilowatt hours required to produce one tonne of aluminium. Now, to give you an idea of what 13,500 kilowatt hours are, let us compare this to the average annual US resident household consumption which was 10,600 KWH in 2021.

 

The entire upstream aluminium industry is looking with interest towards new technologies that make the production process less energy intensive. We note that the inert anode process is an important innovation, a technology on which Alcoa started working on research and experimentation for over 20 years, developing a process by which oxygen is produced and greenhouse gas emissions are removed. We are following this project from afar with great interest, which could represent a decisive stage for an even more sustainable future for our light metal. Finally, regarding the recovery and recycling of aluminium, we at Sohar Aluminium have also been active on this front for some time. We currently completely recycle our internal scrap and have the aim of implementing the use of quality scrap by selecting optimal external sources of supply.

 

In conclusion, we will increase our share of metal recycling, and do our part to optimise scrap collection, in Oman and the Gulf.