Iran currently produces about 350 thousand tons of primary aluminium and is in the process of increasing this with new Greenfield smelters and expansions with a target of 1.5 million tons by 2025 which needs USD 10 billion investments and Iran is planning to attract foreign investors and financers for this huge investment investment.
Today, the Middle East is producing about 9 percent (5.1 million tons in 2015) of the total 57 million tons of primary aluminium produced in the world in 2015. Considering the plants, which are presently under construction in the region it is expected that the Middle East’s contribution will grow to more than 10% of world primary production by 2020.
The growing demand for aluminium in Iran due to the expansion of markets as construction, transportation, food, pharmaceutical and electrical industries has increased per-capita consumption in the country. At present per capita consumption of aluminium (primary) is 4.3 kg which is far from world average of 7.6 kg and 27 kg of north amerce. Per capita consumption of aluminium semis is about 5.1 kg. There is very great potential for increasing domestic consumption.
Iran, with its enormous resources of oil and gas along with its geographic and strategic location, appreciable amounts of raw materials, well educated work force and market demand from Asia, makes Iran, with its population of 80 million, one of the most important and promising countries in the Middle East for foreign investment and joint ventures especially in the aluminium industry. Iran has the world’s largest natural gas reserves. Aluminium as one of the highest energy consuming industries has had many challenges over the past 30 years and is now experiencing an upturn in the country.
Following major developments in steel and copper industries during the past decade, Iran is now paying particular attention to the aluminium industry due to its high value added content and the needs of the country and region.
Primary aluminium
Iran’s current primary aluminum capacity is 470 thousand tons. Two main aluminium companies in Iran are Iralco (Iran Aluminium Co) with more than 40 years of aluminium smelting experience and Almahdi Aluminium Co in Bandar Abbas near the Persian Gulf. Iran’s total investment to achieve 470 thousand ton capacity in aluminum industry is USD 2.7 billion. Last year Iralco’s and Almahdi’s production were around 182 thousand tones and 171 thousand tons respectively (totally 352 thousand tones). These figures are below the 470 thousand tons of Iran’s primary aluminum capacity and it indicates 75 percent capacity utilization. Shortage of bauxite and insufficient electricity generation is the main reasons for low utilization rates. Lack of enough attention to sustainable electricity supply from government side is obvious. This means that aluminum plants should have power plants for providing sustainable electricity beside aluminum smelters. Inattention to sustainable power supply through exclusive power plants as an inseparable part of aluminum smelters in the past years has caused problems for the industry.
Alumina is the main raw material for aluminum production. Given that Jajarm is the only unit for production of alumina powder with a capacity of 270 thousand tons per year, it is not sufficient to meet demands of the industry and therefore provision of this important material through participation in the extraction of bauxite reserves of other countries owning such deposit is vital for the development of aluminum production capacity. Considering that the operation permit for 500 million tons of bauxite reserves in Guinea has been granted to Iran it has put the country in a highly proper and competitive position in the world for production of this metal at regional and global level. Investment in processing bauxite and transferring it into alumina powder will create a vital leap towards development primary aluminium production. Meanwhile, conclusion of long-term contracts with an aim of meeting alumina demands required in this industry can be a viable solution in the medium-term. However, using oil wastes to produce coke required for carbon anodes through establishment of relevant plants, construction of cryolite and aluminum fluoride will lead to the completion of the supply chain and create an advantage in aluminum production industry.
Although there are problems facing this industry but the country can boast of considerable advantages when it comes to aluminium. It was one of the pioneers of aluminum industry in the Middle East. Iran enjoys cheap energy resources and access to international waters to import alumina and export aluminium products.
Iran is planning big for its aluminum industry, as it intends to attract USD 10 billion of foreign investment to increase annual aluminum production to 1.5 million tons by 2025 as per the goals set in the 20-Year National Vision Plan (2005-25).
Raw Materials
Bauxite, an aluminum ore, is the world’s primary source of aluminum. It is usually strip mined because it is almost always found near the surface of the terrain, with little or no overburden. As of 2010, between 70 percent and 80 percent of the world’s dry bauxite production is processed first into alumina and then into aluminum by electrolysis. According to United States Geological Survey, global bauxite reserves are estimated to be around 75 billion tons, with Guinea, Australia, Brazil, Vietnam, Jamaica and Indonesia holding the world’s biggest reserves. Iran, however, possesses close to 20 million tons of bauxite or less than 0.1% of the world’s total reserves, and its limited deposits
Bauxite and alumina procurement have always been one of the industry’s primary challenges. The country’s only developed bauxite mine is the Jajarm Mine located in the city of Jajarm in North Khorasan Province, with reserves of less than 20 million tons which are barely capable of providing enough raw materials for the industry’s current 350,000 annual aluminum ingot output. Mineral explorations undertaken during the previous two years have sparked glimmers of hope for finding new reserves, but long-term sustainability of the industry requires cooperation with global suppliers of bauxite and alumina. The government made its first foray into a foreign country to exploit a bauxite mine 25 years ago but was held back for years due to lack of infrastructure and high transportation costs. The effort to develop a bauxite mine in the West African nation of Guinea has not yet concluded. The 50-50 partnership with the Guinea government was recently renewed for another 25 years. The mine, possessing more than 500 million tons of bauxite, is located in Guinea’s Dabola City about 370 kilometers from the coast. Iran expects to issue a tender by the end of 2016 to build a pipeline in the African country to transport the bauxite mined to a port for shipment. The tender would be issued after an economic feasibility study is received from German consultants DMT GmBH.
Alternative to Bauxit, it is possible to replace bauxite with nepheline syenite beneficiation to produce alumina. Fortunately, reserves of about 1.2 billion tons of this mineral have been discovered in Sarab city of East Azarbaijan Province and investments have been made to extract this mineral. This could be just what the industry needs and would also considerably reduce domestic reliance on alumina imports. The government has put the Sarab nepheline syenite mine out to tender and is seeking foreign investors to undertake the project. Russian RUSAL Aluminum Company expressed readiness to cooperate with Iran in the production of alumina powder from nepheline syenite.
Anode, primarily made from petroleum coke, is one of the main raw materials required for aluminum ingot production and usually accounts for nearly 30 percent of production costs. IMIDRO has signed an aluminum cooperation deal with the French Fives Group; the agreement entails the establishment of a joint anode production company through an engineering, procurement, construction and finance contract. The anode plant, with a production capacity of 450 thousand tons per year, requires close to USD 400 million.
Secondary aluminium
Aluminium is known for its excellent recycling characteristics and it is the most recyclable material in the word. Secondary aluminium producers use aluminium scrap as raw material to produce aluminium ingots or products. Secondary aluminium production 92 percent is more energy efficient than primary production.
In Iran, there are a lot of small scale secondary aluminium plants which are producing aluminium or aluminium alloy ingots from recycled scraps. Total capacity of these plants is about 170 thousand tons. It is estimated that total production of these plant is about 100 thousand tons per year aluminium ingot.
Aluminum fabrications
It has a developed downstream market for rolled, extruded and cast products to satisfy its domestic market of 80 million people. The most common uses of primary aluminium are extruding and rolling. Aluminium can be extruded and shaped into a variety of tubes and profiles (aluminum longs) or can be rolled in a cold and hot condition to plates, sheets or foils (aluminium flats). Aluminium is increasingly taking over from copper as the preferred metal for tubing in heat exchangers and air conditioners. There is no end to what shapes aluminium can take. Aluminium is ductile and it can be rolled from 60 cm to 2-6 mm. Final foil products can be as thin as 0.006 mm and still be completely impermeable to light, aroma or taste. The metal itself forms a protective oxide coating and is highly corrosion resistant. Various types of surface treatment can further improve these properties.
Aluminium casting is another common use of aluminum. The properties of aluminium change when small quantities of other metals are added to produce aluminium alloys. These can give greater strength, brilliance and ductility, all depending on what the metal is to be used for. And they can make aluminium easier to form into an endless variety of products. The most common alloy materials added to aluminium are copper, magnesium and silicon. To increase quality, the grain refining substances strontium, sodium, or titanium/titanium boride, are added in small quantities. The raw cast product generally requires machine finishing and is often coated.
Today the market for aluminium products in Iran is predominantly governed by domestic demand. In addition, some private manufacturers take pride in their success in exporting products to Europe. Iranian manufacturers mainly produce products for day-to-day use such as aluminium foil for packaging, building sections, radiators and automobile components. High-tech products such as those used in the automobile industry are at present also produced by domestic companies.
Total downstream capacity in Iran is more than 1.034 million tons per year. Aluminium longs including profiles, sections, rod and wire and tube and pipe, account for 60.5 percent (626 thousand tons), aluminium flats including sheet, plate, coil and foil account for 11.6 percent (120 thousand tons) and aluminium castings including conventional and die cast account for 27.5 percent (285 thousand tons).
Rolled and flat semi products
At present, the annual flat rolling capacity of Iran is about 120 thousand tons (based on government licenses). But the important part of annual production is achieved in four rolling mills and a new commenced one which totally have 95 thousand tons capacity (80% of total capacity).
Navard Aluminum MFG Group with annual capacity of 26 thousand tons is the largest one. The plant is located in Arak city and produces strip from rolling slab via conventional hot and cold-rolling route. Finished products include roof sections, corrugated sheet and building elements. The company also commissioned a new plant to produce aluminium composite panels.
Aluminium Pars is the second largest aluminium fabricator and uses direct strip casters followed by cold and foil rolling equipment to produce packaging foil. Coiled strips, foils and coated strips are the most common products from this company. The capacity of the plant is 21 thousand tons per year and is located in Kaveh Industrial City, Saveh.
Pars Aluman Kar Company (PAKC) with 10 thousand ton capacity is another supplier of rolled aluminium products. PAKC founded in 1995 by and its plant is located in Boin zahra region in the West of Tehran. PAKC specializes in the manufacturing of different series of aluminum sheets and coils in various sizes and thicknesses.
Hezar Aluminium Industries Co (HAIC) with annual capacity of 8 thousand is equipped with advanced rolling technology. HAIC is located in Kerman and produces aluminium foil and flexible packaging.
Razan Saaf is a new commissioned aluminium rolling mill. The plant capacity is 30 thousand tons of aluminium rolled product and is located in Razan city of Hamadan province.
MGF Group, PAKC and HAIC companies have produced with their 60 to 80 percent of capacity in recent years. It is estimated that about 50 thousand tons of rolled products have been produced in 2015.
Extruded and long semi products
Extrusion companies in Iran are mainly privately owned and total capacity of extrusion plants are about 480 thousand tons but the output is much less than the capacity.
Capacity of aluminium sections is 27 thousand tons, aluminium rod and wire is 108 thousand tons and aluminium pipe and tube is about 10 thousand tons. Based on these figures, total capacity of aluminium longs is 517 thousand tons.
Market overview
Iran’s primary aluminium production was 353 thousand tons in 2015. At the same time about 17 thousand tons of aluminium ingots imported and 82 thousand tons exported. Based on these figures primary aluminium apparent consumption was about 288 thousand tons. It is estimated that about 153 thousand tons of old aluminium scrap plus new scrap from finished products is also recycled and melted in 2015. This means that total net input of aluminium ingot (primary plus secondary) in downstream industries was about 441 thousand tons.
85,000 tons of aluminum products have been imported in 2015 which 61 thousand tons of it are aluminium semis including 48.4 thousand tons flats and 12.6 thousand tons longs. Total imports of 2015 are 13 percent less than 2014 imports which was 98 thousand tons.
Exports of aluminium products in 2015 were 318 tons. Iran’s aluminium longs exports started to increase from year 2005 and reached its maximum amount of 9 thousand tons, but its growth stopped in 2010.
It is estimated that total output of semi finished products was 325 thousand tons which 132 thousand tons of it was aluminium longs (40%), 54 thousand tons was aluminium flats (16.6%) and 98 thousand tons was aluminium castings (30%) and 41 thousand tons was aluminium rod (10%).
Based on production and import export data, apparent consumption of aluminium longs was 145 thousand tons, aluminium flats was 102 thousand tons, aluminium casting was 123 thousand tons and aluminium rod was 41 thousand tons.
Utilization rates in total aluminium downstream industries are very low which makes the plants face with high OPEX and uneconomical operation. Utilization rates in aluminium longs, flats, casting and rod are 25 percent, 45 percent, 34 percent and 37 percent respectively. Average uti
lization rate is 31.5 percent.
Conclusion
When it comes to aluminium smelting industry, Iran enjoys advantages of its cheap hydrocarbon energy resources and natural gas reserves. Iran has invested USD 2.7 billion on its primary aluminium smelting projects to increase its capacity to 470 thousand tons and currently is planning to increase its production to 1.5 million tons by 2025 and is seeking for USD 10 billion to invest in aluminium. Iran has well developed domestic market to produce aluminium fabrications with a capacity of one million tons per year and economic growth will boost domestic demand for aluminium products creating fantastic opportunities for international investors to invest in Iran’s aluminium projects.