EGA plans shift to nuclear and solar for aluminium production as demand soars

Emirates Global Aluminium (EGA), the UAE’s biggest industrial company outside the oil and gas sector, will soon make a complete shift to nuclear and solar energy to produce aluminium, as demand soars globally for sustainably developed raw materials.

Last year, EGA became the first company to produce aluminium commercially using solar power. It currently produces approximately 40,000 tonnes of the green aluminium, called CelestiAL, which is being supplied to car maker BMW.

The entity is currently in the process of connecting to the Barakah nuclear power plant, said Ahmad bin Fahad, chief executive of Dubal Holding, which owns 50 per cent of EGA.

"It's a work in process, to do the connection [to the nuclear plant], and ensure the conversion from conventional gas power engines into nuclear power. It's an infrastructure project with a big cost involvement. There are a lot of things that need to be done in order to do the connection [since it also needs to link] to the two smelters in Jebel Ali and Al Taweelah," he told The National.

While he did not disclose the exact timeline or other details, Mr bin Fahad confirmed the plan is to switch completely to nuclear and solar within the next few years.

Aluminium production is energy intensive and generating electricity accounts for about 60 per cent of the global aluminium industry’s greenhouse gas emissions. Globally, roughly 55 per cent of the power consumed by the industry is self-generated rather than purchased from the grid, according to the International Energy Agency (IEA).

Considering the average power mix supplying the global aluminium industry, hydropower accounts for about 25 per cent, down from 40 per cent in 2010, "largely due to expanding aluminium production in China powered by coal-based electricity, where coal supplies close to 90 per cent of production", IEA said in a report in November.

In Europe, North America and South America, hydro still supplies 75 per cent or more of production.

Using nuclear energy will slash carbon emissions by about 50 per cent, from roughly 8 tonnes of emissions to produce one tonne of aluminium at present, Mr bin Fahad said.

EGA, which produces about 2.7 million tonnes of aluminium every year and ships its products to more than 50 countries, is also developing its own technology to decarbonise operations and reduce emissions.

"We are increasing production ... the demand [especially for green aluminium] far supercedes the supply," he said.

Overall global aluminium demand is expected to increase almost 40 per cent to 119.5 million tonnes in 2030, driven by key industrial sectors such as transportation, construction, packaging and electrical sectors, according to a study by CRU International on behalf of the International Aluminium Institute (IAI).

The aluminium sector will need to produce an additional 33.3 million tonnes to meet demand growth, the report said. Two-thirds of the demand growth is expected to come from China, followed by the rest of Asia, North America and Europe.

Meanwhile, aluminium prices have been soaring as the fallout from the Russia-Ukraine war weighed on global supply. Prices averaged $3,498 per metric tonne in March, up almost 8 per cent from February’s price and nearly 60 per cent on an annual basis, FocusEconomics said in a report this week.

Western sanctions, including Australia’s ban of alumina and aluminium ores exports to Russia, is "likely driving a decline in Russian aluminium supply to the rest of the world", it said.

"This, coupled with short-covering by traders in the LME [London Metal Exchange] and fears of further sanctions — potentially including those on Russia’s Rusal, one of the world’s main producers — sent prices soaring to record highs in March," the report said.

The LME might go even higher driven by the conflict, the lingering effects of the pandemic and the soaring prices of raw materials, fuel and logistics, according to Mr bin Fahad.

If prices continue to rise, they might "reach an inflationary rate that will be so expensive, that it will impact the rest of the industry that rely relies on aluminium ... like the auto industry", he said. And with sectors such as the auto industry shifting the costs to customers, "the end-user will be penalised", he said.

He stressed that it is, however, a short-term issue. "Things will be corrected. EGA will keep expanding the production line to keep up with the demand but this is just one player. Other players also need to look into their operations and optimise efficiency and production."

Prices are expected to fall from their current highs by year-end, the Focus Economics report said, although supply tightness and lingering fears of further disruptions ahead should keep them elevated. Aluminium prices are anticipated to average $3,087 per metric tonne in the fourth quarter of this year and drop to $2,746 per metric tonne by the fourth quarter of 2023.

EGA, which is also owned 50 per cent by the Mubadala Investment Company, currently forms the biggest part of Dubal Holding's portfolio. The company, the investment arm of Dubai government in the commodities and mining, power and energy, and industrial sectors, is also looking for opportunities to expand the midstream and downstream aluminium industry, such as auto-spare parts, according to Mr bin Fahad.

It is also proceeding on track with its Dh4 billion ($1bn) waste-to-energy project, which will convert 1.9 million tonnes of waste per year into renewable energy. The approximate 200 megawatts of electricity generated will be fed into the local grid as clean energy.

The facility is expected to start operations by 2024, and more such plants are planned for the rest of the country, Mr bin Fahad said.

Dubal Holding's project pipeline includes plans for a plastics-to-chemicals-and-fuel facility as well as new ventures in biogas and titanium.

The company announced a record profit of Dh2.7bn for 2021 compared with Dh217 million in 2020, driven by EGA's strong performance. "I hope it [financial results this year] will be better than last year," Mr bin Fahad said.