Aditya Birla Group : Africa strategy

Abstract

In Africa, aluminium primarily originates in Guinea, South Africa (Africa’s biggest producer of primary aluminium), Mozambique, Ghana, Cameroon and Nigeria. The decision to build an alumina refinery is independent of and very different to the one to build an aluminium smelter (as it doesn’t depend excessively on power) and hence the refinery could be located at or near the bauxite deposits. Off late, there is an increase in the aluminium prices (despite the recent collapse in commodity prices) owing to huge demand from the developing economies such as India & China. Hence, it is forecast that there will be a shortage of global aluminium smelting capacity within five years which is a positive to the smelters in west & central Africa. These two regions possess large untapped hydro energy, particularly along the Inga rapids on the Congo River in DRC, Cameroon & Guiena (high potential area for large hydro power expansion). Also, the presence of bauxite reserves results in a cost advantage for local alumina refining (especially in Guinea and undeveloped bauxite deposits in Cameroon). Alumina has been produced and exported in Guinea where as aluminium has been smelted in Cameroon and Ghana and to a minor extent in Nigeria, all based on imported alumina. Downstream processing of aluminium occurs with semis produced in Cameroon/Ghana and finished products in Nigeria, Cameroon and Ghana. A large plant for refining bauxite into alumina—which is then smelted into aluminium is nearing completion in Guinea. Large aluminium smelters have also been commissioned along the south?eastern coast of Africa owing to low power costs supplied by public?owned electric utilities. There is also a strong political & economic reason to continue smelters operate in the 3 regions. With a forecast that there could be a shortage of aluminium smelting capacity within 5 years, the high?cost producers could take advantage of the rise in aluminium prices. Investors are expected to show a keen interest in exploring new possibilities even in the untapped regions. Any prospective area with long?term base load electric power would prove to be of a comparative advantage to places which already have smelters deployed. There is a strong possibility of integrated aluminium industry being developed, including the mining and refining of bauxite into alumina and the smelting of alumina into aluminium. As mentioned above, alumina refining is not power intensive, as it uses a chemical process to precipitate aluminium oxide from bauxite. Added to this, low freight costs don’t limit aluminium smelting to areas endowed with abundant bauxite reserves.