Abu Dhabi seeks investors for aluminum hub

Abu Dhabi wants to create a downstream aluminum hub in its new industrial complex as part of the UAE's efforts to diversify beyond oil and gas, a senior official in charge of the strategy told Reuters in a New York interview.

Talks with prospective investors are under way, with automotive parts manufacturers in the United States, India, Japan and Europe interested in setting up shop in the massive Khalifia Industrial Zone (Kizad) in Abu Dhabi, said Khaled Salmeen, executive vice president, industrial zones at Abu Dhabi Ports Company (ADPC). ADPC owns Kizad.

The government hopes to woo them with zero taxes and import/export duty exemptions, ample and low-cost power supplies and molten aluminum from the nearby Emirates Aluminum (Emal) smelter, he said.

Using liquid aluminum saves downstream players, such as die-cast aluminum alloy makers, the cost of remelting ingots. "The key element, especially for such a heavy-energy industry, is the natural gas and power and water, which are very competitive," he said.

The automotive industry has been pocket of strength for the otherwise lackluster aluminum industry since the global financial crisis.

Spanning an area of land equivalent to about half the size of New York City, Kizad is the largest industrial area in the UAE serving industries such as steel, plastics, food and beverages, logistics, glass and paper. Plans to create an aluminum "cluster" around Emal, its anchor tenant, are the most developed out of the whole complex.

The 750,000-tonne-per-year aluminum smelter supplies more than 200 customers from 36 countries around the world, with the United States its biggest market, he said.

"Given the fact that Emal's biggest market is in the US. ... it would be much more lucrative, financially, for a company to set up right next to Emal where the operating costs are much cheaper and the liquid metal is available," Salmeen said.

Emal, jointly owned by Dubai Aluminum and the Abu Dhabi government's investment arm Mubadala Development Co, is expected to ramp up annual capacity to nearly 1.3 million tonnes by the end of 2014. So far, Kizad has secured one downstream tenant.

Taweelah Extrusion Co (Talex), a joint venture between state-owned Abu Dhabi Basic Industries Corp and privately owned Gulf Extrusions, signed a long-term lease with Kizad last December, and is expected to start making extrusion products for the automotive markets in the fourth quarter 2013.

Salmeen said the company has signed agreements with five international banks, including Citi bank, HSBC, and Industrial & Commercial Bank of China.