Tim Murray, CEO of Aluminium Bahrain (Alba)
Long-term potential of Bahraini aluminium production
In a Global Platform video, Tim Murray, CEO of Aluminium Bahrain (Alba), talks about the growing significance of aluminium not only to Bahrain’s economy but to the global economy at large. Increased usage of the metal in the automotive and aerospace industries, as well as in residential construction, is expected to continue driving global demand for aluminium in the future. Bahrain is hoping to capitalise on this with its Line 6 Expansion Project, which is set to make Alba the biggest smelter in the world.
We are in a cost business so whoever wins on the cost, that's the name of the game. So, we always have to focus on cost because we don't control the prices, we don't control our raw materials. And we control production, efficiencies, what we do around the plant, where we deliver, where we buy from. How does volatility in the aluminium market affect us, and how did alumina prices in particular affect us? The market is very volatile. If you look at the aluminium market, it's very much driven by the financial market, so we follow interest rates and stock markets. So our prices move a lot. This year we had an unprecedented spike in alumina, 70% of our raw material costs. There was a shutdown of a major refinery in Brazil called AluNorte, a 50% shutdown. So this cut supply to the market, so the market prices spiked. And if you look at the metal prices, they also dropped at the end of the year. So we kind of had a perfect storm in terms of the markets going the wrong way. So our price went down, and our cost went up. So if you look at the market situation now, it's tough. We are one of the lowest-cost producers. So with Line 6 we're very fortunate. We're actually ramping up a very large project because, again, volume, efficiencies, economy of scales, this is how you make money in our business. If you look at world growth, aluminium is growing 4-5% in terms of consumption. There's not a lot of new production. We are the first smelter outside of China since 2014. The market prices, over the long run, they will reflect supply and demand. If you look at aluminium, it's pretty much in everything. We're also seeing a very big substitution into automotive, so they're replacing steel with aluminium to increase the fuel efficiencies and meet the government standards. So this is a long-run trend which is very much to our benefit. Also in planes, aerospace ¬– very healthy backlog if you look at Boeing and Airbus, they're building a lot of planes. And if you look at general construction, construction around the world, you know the building of houses, and buildings, and homes, is relatively stable. Line 6 expansion project is a huge project for Bahrain. So it's a $3bn capex, state-of-the-art smelter that will produce 540,000 tonnes. This will make Alba the biggest smelter in the world. It is a single site. It also includes an 1800-MW power station using H-class technology. This is the first H-class, the biggest turbines that they offer being used in the Middle East. And so in terms of building it, it's the fastest build. It took us 24 months to build it. It's a very big pot line. It's 1.4 km long. We're adding a state-of-the-art cast house, a lot of value-added products, a lot of new technologies. So this is also a way for us to train the next generation of people. We're going to put our best of the best in Line 6, and they're going to learn all the new technologies from the equipment, from the vehicles, from the cranes. How does Bahrain benefit? So today Alba and the whole industry is about 12% of the GDP. With Line 6, forecast is that will go up to maybe 15% or 16% because you're adding 540,000 tonnes of production. In Alba, we created 500 jobs from that directly. And then we're hoping that half the metal will go downstream, which will also create another 2000 to 3000 jobs in the downstream. Today about 45% of our production goes to companies in Bahrain. Most of that is exported, but our direct customers are Bahraini customers. Training is a very big part of what we do, as well as educational development. We are in a commodity business, so how do we differentiate ourselves? We differentiate ourselves through people in terms of our service and how we deliver, how efficient we are. First and foremost is safety. The last few years we spent a lot of time on softer skills. The leadership skills. So we introduced an MBA sponsorship programme. So today we have over 50 MBAs that have been sponsored by Alba that are working in the management team. But we're trying to educate our general workforce, will typically be engineering or operational people that gives you the full set of tools, whether it's accounting, or finance, or marketing, or strategy. So we are a very big business. So we need people to run that business, and they need to be educated and trained. We have seen a big shift in the mindset, particularly on safety. If you look at safety, we've had very good improvement in the last six years. If your employees feel they are safe, and they feel that they're appreciated, and we're training them, we’re developing them, this leads to a lot of productivity benefits. Hard to quantify those, but again if you look at our production, you see in our production go up 120,000 tonnes in the last six years, which is a big, big increase.