Oman's Sohar Aluminium expansion plans on hold

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SOHAR ALUMINIUM: Expansion plans on hold as company assesses prospects for aluminium price. (Getty Images)

Oman's Sohar Aluminium, part-owned by a unit of global miner Rio Tinto, has put the second phase of its plant on hold for now as the company assesses prospects for the metal, its chief executive said on Sunday.

Sohar Aluminium, a $2.4 billion joint venture located in Oman's Sohar industrial port, completed the first phase of the project in February and is operating at full production capacity of 360,000 tonnes per year.

"However with regards to our phase two expansion plans, which will add another 360,000 tonnes to our capacity, we still don't have a set timeline for that," Sohar Aluminium Chief Executive Bruce Hall told Reuters in a telephone interview. "We just started operating at full capacity a few months back so we will wait and see how the market reacts," he added.

Sohar Aluminium is a joint venture between the Oman Oil Company, the Abu Dhabi Water and Electricity Authority (ADWEA) and Rio Tinto Alcan, a unit of Rio Tinto.

Like many commodities, the price of aluminium has fallen sharply in the global downturn. Since last year prices have dropped more than 50 percent to around $1450 per tonne from $3300, Hall said.

"Let's just say we are not going to be making the amount of revenue that we would have hoped for, but we have no plans to cut our production," he added.

He said individual shareholders had told him they wanted to go ahead with phase two.

Around 60 percent of the existing plant's production is used for downstream industries, while the remaining 40 percent will be sold by Rio Tinto Alcan to markets in the Far East, Hall added.

"So we don't really have a direct relationship with the consumers. All the production is sold as part of the Rio Tinto marketing monster," he said.

Asked how the company aims to deal with new supply from within the region, Hall said: "At this point it's just going to be the survival of the fittest, and I do expect a number of companies not only in the region but on a global level to cut production."

The UAE's Emal plans to have the one of largest single plants in the world that produces close to a 1 million tonnes a year. (Reuters)

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