SUSTAINABILITY OF THE GULF STATES ALUMINIUM INDUSTRY (Economic, Environmental and Social Indicators) A REPORT BY THE GULF ALUMINIUM COUNCIL

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1 SUSTAINABILITY OF THE GULF STATES ALUMINIUM INDUSTRY (Economic, Environmental and Social Indicators) A REPORT BY THE GULF ALUMINIUM COUNCIL GULF ALUMINIUM COUNCIL JANUARY 2009

2 SUSTAINABILITY The Gulf States countries are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. The aluminium industry of the Gulf States has grown since the 1970 s to become the most important, non-oil industrial sector in this rapidly expanding area of the world. This brief publication outlines the activities and products of the aluminium industry of the Gulf States and shows how that industry has worked, and continues to work, to achieve sustainability. The concept of sustainability is now commonly used for an organisation, a company, an industry sector or a product. It is necessary, therefore, to define what is understood by sustainability. The most widely used definition, from the Brundtland Commission, is meeting the needs of the present without compromising the ability of future generations to meet their own needs. A recent UK Government publication, Foundations for our Future, defined sustainability as a better quality of life for everyone now and for future generations to come. That publication went on to list four objectives that need to be achieved simultaneously:- Social progress that recognises the needs of everyone; Effective protection of the environment; Prudent use of natural resources; Maintenance of high and stable levels of economic growth and employment. Accepting these objectives, this publication from the Gulf Aluminium Council examines the Gulf region s aluminium industry s progress towards sustainability. The progress towards achieving sustainability requires constant vigilance, since society continually moves the targets towards high standards in the social, economic and environmental aspects. Furthermore the achievement of sustainability is of crucial interest to all of the stakeholders in the industry sector, the employees of the companies, the shareholders, investors, raw material suppliers, the customers, the neighbourhood communities, local and national governments and academia in the countries concerned. The further challenge is that an industry sector, such as the Gulf States aluminium industry, can only be sustainable if the product that they manufacture, in this case primary, wrought and cast aluminium, is itself sustainable. That aluminium as a material for building and construction, transport applications, packaging and general engineering, is sustainable is almost a given. Globally, in the past 70 years, since the 1940s, primary aluminium production has grown from almost nothing up to more than 35 million tonnes per year, with a prediction of it reaching 50 million tonnes by The Gulf States aluminium industry has played a full part in that expansion, beginning in the early 1970,s and now reaching nearly 2 million tonnes of primary metal, with huge expansion envisaged over the next ten years and beyond, predicted to be 10 million tonnes by Certainly the raw material, aluminium oxide produced from the ore bauxite, is not going to run out - 2 -

3 since aluminium is the third most common element in the earth s crust. The known reserves of bauxite will cover current global production of aluminium for the next 300 years. The constraint is the energy required to convert aluminium oxide into metallic aluminium, and this factor weighs heavily in favour of primary production in the Gulf States, with abundant and affordable energy in the form of gas and oil, available locally. The mechanical and physical properties of aluminium alloys and its versatility in casting and fabrication by all of the commonly-used processes, make it the ideal material in the major markets mentioned above. These, combined with light weight, good corrosion resistance and ease of joining, will ensure the expanding use of aluminium in every part of the world. In our energy conscious era, the energy savings in use, and the recyclability of aluminium, saving significant further amounts of energy, make it doubly attractive. Recycling rates of over 90% in transport and building and construction markets, and 50% in packaging make aluminium a first choice material. The aluminium industry in the Gulf States has developed from more than just very large primary smelters. Across the Gulf, there is a flourishing fabrication industry of aluminium hot, cold and foil rolling, many extrusion presses and finishing capacity and aluminium foundries, and aluminium powder production. With building and construction in the area expanding rapidly, this means that extruded, rolled and cast aluminium products are available locally. Much of the nearly 2 million tonnes of primary metal is exported, earning valuable revenues, but the downstream industry gives added value, as well as employment opportunities to the local population. The indicators, by which the progress towards sustainability of the Gulf States aluminium industry are judged, cover the Economic, Social and Environmental aspects. Aluminium ingots ready for shipment from the Alba plant in Bahrain

4 ECONOMIC FACTORS One of the reasons for optimism for the future within the primary aluminium industry is the very clear linear relationship between the usage of aluminium products per head of the population in any country and the GDP per capita in that country. The more wealthy the population, then the more aluminium that is used, in building and construction, transport, packaging and general engineering. In the recent past, the expanding economies of countries, such as China and India, have fuelled the increasing demand for commodities such as aluminium. It is for this reason that predictions of primary aluminium production reaching 50 million tonnes by 2020 can be made with confidence. This scenario relies on the aluminium industry having access to affordable and reliable, long-term energy sources and here the Gulf States have a major advantage, with both gas and oil readily available and affordable. Relationship between aluminium usage and GDP per head. At the moment, the primary production in the Gulf is 1.8 million tonnes per year, of which 55% is exported out of the Gulf, earning $US2.9 billion in Geographically the Gulf region scores highly since the major markets for aluminium in USA, Europe, Japan and the Far East are easily reached by shipping from the Gulf. Additionally, the export of fabricated aluminium products from the Gulf to all of the countries of the world, makes a very significant contribution to the Gulf States economies. Bahrain, Saudi Arabia and United Arab Emirates all realise significant earnings, particularly for extruded, drawn and rolled aluminium products. The earnings from these exports from the Gulf States in 2007 totalling US$1.7 billion. In the near future, primary aluminium production in the Gulf will expand rapidly with smelter projects planned in Oman, Qatar, Abu Dhabi and Saudi Arabia and expansion plans at the existing plants in Dubai and Bahrain. In all of the projected plants, environmental protection and social progress are key objectives

5 Aerial view of the Dubai Aluminium primary smelter. The existing Gulf primary smelters total employment is 6000, of which 40% are Gulf nationals. There is, however, a significant further number of the local population working for other companies in support of the primary aluminium smelters. These companies are service providers, such as caterers, transport operators, engineering services and waste contractors. It is estimated that a further 10,000 people are engaged in this way. In addition to production using existing technology, the industry is investing significant sums in research and development to produce aluminium more efficiently, reducing energy consumption, reducing emissions and improving productivity. The current expenditure on R&D by GAC companies has increased by some four times, compared to the year 2002 value. Is this investment in primary aluminium production a justifiable one? Aluminium is sold on the world markets in US dollars and by mid-2008 it was selling at prices approaching $3000 per tonne, giving an excellent return on the investment in plant, staffing, infrastructure and R&D. It is important that aluminium does not price itself out of the markets that it has established, where steel and polymers can be competing materials. In the fourth quarter of 2008, as the world s major economies were in recession, commodity prices fell sharply, with aluminium finishing the year at about $1600 per tonne. Nevertheless, where the energy sources are reliable and affordable, as is the case in the Gulf States, even at this price level the investments made in the past, and to be made in the future, will prove to be sound. Admittedly, the Gulf States economies are predicted to grow at their slowest pace in 2009 since the oil boom began six years ago. Economic growth in Saudi Arabia, UEA and Kuwait may be below 3% in 2009 but compared to the situation in USA, Japan and Western Europe, these are buoyant numbers. Qatar, the world s largest exporter of liquefied natural gas, is expected to see GDP growth in 2009 of 9.5%

6 Once produced and used, aluminium, which is readily and repeatedly recyclable, requires only 5% of the original energy needed to produce it by the primary smelter route, to turn recovered scrap back into extrusion billet, rolling slab or foundry ingot. In this respect, aluminium can be regarded as a strategic material and as stored energy, so that the export of primary aluminium is effectively a very economic way of exporting energy, with the added advantage that aluminium is easily and safely transported. Shipment of alumina destined for the Alba smelter in Bahrain. SOCIAL FACTORS Turning to the Social Indicators, the countries of the Gulf States, in all industry sectors, have long realised that their future lies in an educated and skilled national workforce. All of the primary aluminium companies in the region have invested heavily in pre-employment education and training of national school leavers and newly graduated students. Additionally, there are extensive in-work training schemes for both workers and management and the time spent per employee increases year by year. Given the rapidly growing demand for skilled and trained employees, it is estimated that 15,000 to 20,000 will be required by the Gulf s aluminium industry in the next ten years. Member companies of the GAC see the need to train and educate the workforce of the future as their number one priority. The GAC Human Resources and Recruitment Sub-Committee has been charged with developing a strategy to address this need. The ideal goal is to reduce the dependency on an expatriate workforce in the aluminium industry, and currently Gulf States nationals account for more than 20% of the total workforce and 70% of senior management, a significant advance on the position at year

7 The industry strives hard to achieve a healthy and safe workplace. The employees have access to full on-site medical facilities. Alba s Performance Indicators, set in 2002, demanded a 20% reduction in Lost Time Accidents (LTA) every year over a five year period. Dubal has similar objectives. As member of the International Aluminium Institute (IAI), the primary aluminium smelters of the Gulf subscribe to the IAI initiative Aluminium For Future Generations. This sustainable development programme, launched in 2003, sets member companies a series of objectives and targets, one of which is a 50% reduction in lost time accident rate and recordable accident rate by 2010 compared to The Gulf smelters at the moment are showing a ten-fold improvement in 2007 compared to 2002, with a lost time accident rate below 0.25 per million man hours worked. The data now established will help the primary aluminium plants now on the drawing board in the Gulf to benchmark their own performances against this base. Expatriate workers have modern housing facilities available, with full recreation facilities, local transport and cafeterias. The well-being of the surrounding community is as important as that of the workforce and the member companies liaise with the local authorities to maximise the benefits and minimise the impact of their activities. Very significant sums of money and man-hours of time are given to local communities and to overseas organisations to improve health and education facilities. Typical of such activities are the Dubal Educational Award and their sponsorship of Ideas Arabia to encourage best practice in technical production, customer service, the environment, finances, health and security. Additionally, companies freely give employee time to local community projects. A marketing presentation

8 ENVIRONMENTAL FACTORS Dealing with the environmental factors, it is significant that the primary aluminium companies within the Gulf States have achieved the ISO Standard for Environmental Management Systems. Similarly, the companies also have ISO Standard 9001 on Quality Management Systems, thus complying with another of the sustainability criteria set by IAI in the Aluminium For Future Generations programme. These companies have expanded to be among the world s largest, modern primary smelters without compromising on quality, the average metal purity being 99.90% or better. The Dubai Strategic Plan for 2015, recently developed by His Highness Sheik Mohammed Bin Rashid Al Maktoum, demands that companies within the country should update and align to environmental regulations with the best practice that is achieved globally. Similarly in Bahrain, the Performance Indicators for the Alba primary smelter set itself comparable environmental targets, requiring, for example, that the plant should reduce the amount of waste generated each year by 10% over a five-year period. Fume extraction plant at a Gulf primary smelter. Although the energy supply in the Gulf is reliable on a long-term basis, it must still be used prudently. The energy source for the production of electricity for the primary smelters is natural gas, the cleanest of all of the carbon-based fuels in terms of transport, storage and emissions on combustion. The IAI initiative, Aluminium For Future Generations, requires member companies to show a 10% reduction in energy consumption per tonne of aluminium produced in primary smelters in 2010 compared to The Gulf aluminium companies are on line to achieve this. Similarly, water is a very valuable raw material and water consumption over the five-year period per tonne of aluminium was reduced by over 20%. A very valuable by-product of a primary aluminium smelter, particularly in the Gulf region, can be desalination of water, the Dubal plant producing 30 million gallons per day

9 Water desalinisation plant at the Dubal primary smelter. The gaseous emissions from the plant, particularly those that are greenhouse gases such as carbon dioxide and PFC (perfluorocarbons), and ozone depleters, are strictly controlled and match best practice of any of the world s primary smelters. For good economic and environmental reasons, primary smelters minimise their emission of fluorides in the stack gases, usually by capturing fluorides in a dry scrubber using alumina and feeding this material back into the pot line. The IAI Aluminium For Future Generations programme requires that members reduce fluoride emissions by at least 33% by 2010, compared to The Gulf smelters achieved more than this level over the period 2002 to 2007, now operating at less than 0.7kg per tonne of aluminium produced, comparable with world s best practice. An increasing concern globally is the disposal of solid wastes, particularly those wastes that are defined as hazardous, such as spent pot lining (SPL). As the Gulf primary aluminium production is expanding, so more waste will be generated and the Gulf States aluminium industry is now involved in looking at the feasibility of processing SPL locally to recover and use materials that would otherwise go to landfill, and to ensure that material that is landfilled is not an environmental hazard

10 To demonstrate the effectiveness of these environmental safeguards, primary smelters round the world will often operate a farm, gardens or similar enterprise on the periphery of the smelter to prove that flora and fauna are not adversely affected by the plant and any emissions. This is true in the Gulf primary smelters. SUMMARY By all of the Economic, Social and Environmental Indicators that can be applied, the Gulf States aluminium industry stands the test of sustainability. The product, primary aluminium, is in demand and that demand is predicted to continue strongly. The energy supply to the plants is stable and affordable, long term. The companies strive to have a well-educated, well trained workforce in plants that are safe and healthy. The local environment is protected by the use of the best technology available and by sound operating practices to international standards. The companies work with local communities to promote educational and social projects. In a global scenario, the Gulf States play an increasingly important part in the aluminium supply chain in ways that are fully sustainable. Abdulla Kalban Chairman Gulf Aluminium Council Ahmed S Al-Noaimi Vice-Chair Gulf Aluminium Council

11 GULF ALUMINIUM COUNCIL MEMBER COMPANIES ALBA - Aluminium Bahrain B.S.C. DUBAL - Dubai Aluminium Company Ltd EMAL - Emirates Aluminium MA'ADEN Saudi Arabian Mining Company QATALUM Qatar Aluminium Ltd SOHAR Aluminium Kingdom of Bahrain United Arab Emirates United Arab Emirates Saudi Arabia Qatar Sultanate of Oman Members of the Gulf Aluminium Council in session