Russians to restart aluminium smelter: the mothballed Aluminium Smelter Company of Nigeria plant is due to reopen this month on the back of investment by Russia's United Company, the world's largest aluminium producer. Neil Ford reports.

Author:Ford, Neil
Position:NIGERIA
 
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The Aluminium Smelter Company of Nigeria (Alscon) was built in 1997 at a cost of $2.5bn but closed after just two years and has remained out of operation, until now. Abuja hopes that Russia's United Company (Rusal) management will provide a boost to Nigerian industrial capacity, by providing aluminium for both the domestic and export markets.

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Rusal bought a 77.5% stake in the plant in February 2007 for $250m, after a two-year privatisation process overseen by the government of President Olusegun Obasanjo. The government has retained a 15% share in the venture, while the remaining 7.5% equity has been bought by Ferrostaal AG of Germany.

Given the original construction costs of the formerly state owned project, this may seem a poor return on investment but the smelter generated no income and was gradually decaying as it lay idle. Apart from the smelter, the consortium also acquires a port on the Imo River and a power plant to provide reliable electricity to the energy hungry smelter.

In addition, the Russian firm is to spend $150m on rehabilitating the smelter between its purchase a year ago and the start of 2010. Rusal will begin production at a lower rate and gradually ramp output up over time. Speaking in November, Rusal's director of international special projects, Alexandr Livshits, said: "Right now, we are modernising the equipment. We will start the plant in January and increase production step by step until we reach full capacity."

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Rusal is already active in Guinea, where it mines bauxite and processes it into alumina. It managed the Alumina Company of Guinea (ACG) before buying it in April 2006 but it is not yet known whether Guinean alumina will be used at the Nigerian plant.

The Alscon plant has a production capacity of 193,000 tonnes a year but is understood to have produced just 40,000 tonnes under state control before it was closed down in 1999. The main reasons given for the company's failure were a lack of working capital, high production costs, poor gas supply and complicated sea access.

Cost-reducing experience

The new owners should be able to overcome the first two of these difficulties by having a far stronger economic base and more experience in reducing operating costs. In addition, the Nigerian gas sector has been transformed out of all recognition over the past nine years; new transmission pipelines are transporting gas from various associated and non-associated gas fields to...

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