THE BOOM IN NON-FERROUS METALS

The construction boom since the beginning of the new century, the commissioning of numerous enterprises in the non-oil sector and the favourable situation on foreign markets have created extremely good conditions for the resurgence of Azerbaijan's non-ferrous metallurgical enterprises. Despite the serious difficulties which have arisen in the industry due to the fall in world aluminium prices during the global economic crisis, new non-ferrous metal enterprises have been coming into operation in the country over the past three years and production volumes are increasing.

Difficult start

The severance of economic links during the post-Soviet space and the lack of proper funding during the first decade of Azerbaijan's state independence led to a whole number of non-ferrous metallurgical enterprises, such as the Ganca alumina refinery and the Sumqayit enterprise for the smelting and rolling of market-grade aluminium, going out of business. The first attempt to revive the country's aluminium industry was made in 2001. A contract signed with the Dutch company Fondel Metal Participations B.V. provided for an injection of over 1bn dollars of investments over 25 years to modernize the Ganca alumina refinery and the Sumqayit aluminium plant, as well as the construction of a new enterprise for the smelting of aluminium in Ganca. However, in 2006, five years after the handing over of the Azerbaijan Aluminium open joint-stock company to long-term management, it became clear that the Dutch investor was not able to fulfil its commitments to the full, which forced the State Committee for the Management of State Property to revoke its contract with it.

As a consequence, the government more than once reviewed the possibility of attracting other major investors abroad to the country's aluminium industry. In particular, talks were held with the Russian company Russkiy Aluminiy, which expressed its intention to invest about 1bn dollars in the construction of a plant with a capacity of 300,000 tonnes of aluminium annually, a power station, and also in broadening the infrastructure. However, these plans never came to fruition: the talks ended in failure because of RusAl's wish to acquire unfounded long-term preferential tariffs for gas and electricity, as well as demands to guarantee 100-per cent provision of raw material from the Ganca alumina refinery.

And yet the efforts to regenerate the country's aluminium industry bore fruit when in 2006-2007 a new strategic investor emerged in Azerbaijan - the Det.Al Limited company - which had privatized the open joint-stock Daskasan Filizsaflasdirma  ore-treatment plant and planned to re-establish a complete metallurgical cycle in the country. But, more importantly, this country's plans included the construction of a new aluminium smelting plant in Ganca, doubling production volume at the Sumqayit aluminium plant and raising productivity at the Ganca alumina refinery.

Det.Al concluded an exclusive agreement with Azerbaijan Aluminium for agency and commercial services which provided for consulting and other assistance in raising production standards, the qualification of staff potential, management standards and assistance in marketing and sales. And in 2008, with the participation of Azerbaijani President Ilham Aliyev, a ceremony for laying the foundation stone of the most state-of-the-art plant in the region for the smelting of aluminium was held in Ganca.

However, the global economic crisis which began in October 2008 again led to amendments to the plans to rebuild the industry. The crisis was felt by all the leading enterprises in the country's metallurgical industry, and, of course, the Gil-torpaq production association, a structural unit of Azerbaijan Aluminium, which was located in Ganca.

The activities of this association were brought to a complete halt in April 2009 because of the fall in world demand and prices for aluminium and the raw-material for its production. As a comparison, about two years before the crisis, one tonne of aluminium on the world exchanges went for a price of 3,300 dollars, but by spring 2009 its price had more than halved - to 1,500 dollars. In these conditions Gil-torpaq was losing 600 dollars for each tonne, because the development of the raw-material required for the production of one tonne of aluminium, cost the enterprise over 2,000 dollars.

Second wind

Investment in the modernization of outdated technologies could be the only way to reduce production costs. And in this question, it would seem, as before there is no alternative to the state donor assistance that has been given by the Central Bank of Azerbaijan, which has offered two credits for the overall sum of about 245m manats to the Azeralyuminiy open joint-stock company for investment projects. Thanks to this assistance Azeralyuminiy has been able to modernize part of its production sectors, particularly at Gil-torpaq.

At the same time, despite some delay in the projected time-frames, the Azerbaijani Det.AL Aluminium company has been continuing the construction of a new aluminium plant in Ganca. And January of this year saw the launching of the first section of the enterprise which is designed to produce 50,000 tonnes of top-quality aluminium annually. "Construction of the Ganca aluminium plant began back in 2008 but was delayed because of the global economic crisis. However, thanks to the support of the government, which offered assistance both in the form of loans and in the creation of the associated infrastructure, in particular the construction of a powerful substation, today we are marking the commissioning of this state-of-the-art enterprise," Azerbaijani President Ilham Aliyev noted in his speech at a ceremony on the commissioning of the plant.

The engineering design of the new enterprise was carried out by a leading global company, GAMI. Construction work was handled by a Chinese contractor - SMEC: their CV includes over 45 plants in different parts of the world in the past 35 years. The new enterprise spreads over 74 hectares and comprises sections for primary phase electrolysis, anodic processes, continuous casting and hot rolling. In particular, as part of the first stage, 84 240-kiloamp electrolysis grabs with an overall productivity of 50,000 tonnes of primary aluminium annually have been installed. Top-grade, technically pure A-8, A-7E, A-7 and A-6 primary aluminium will be produced here. After the electrolysis process, the liquid metal is fed to the continuous casting and hot rolling sections where two highly-automated 60-metre rolling mills with a productivity of 20 tonnes an hour have been installed. 22.5-kg ingots with the DET.AL AZE logo are produced on these assembly lines. The raw-material and expendable materials of 15 brand names, which are necessary for smelting the aluminium, will be dispatched from Holland, Indonesia, China, Russia, Mongolia, Latvia, Venezuela and Tajikistan. Some of the alumina processed at Ganca will be sent to Tajikistan. For its part, this Central Asian republic will supply synthetic cryolite, fluoric salts, anodes, and also carbon-bearing output for a new enterprise in our country.

Thanks to the application of new technology electricity expenditure on the production of one tonne of aluminium is no more than 13,500 kWh, which is 6,000 kWh less than similar plants in the former Soviet states. The application of state-of-the-art technology ensures more effective use of raw material. That said, of course, questions of ecology must not be forgotten: a state-of-the-art dry gas purification system provides for 98.5-per cent purification of gases emitted into the atmosphere.

The first section of the plant, which was opened recently, is due to produce 50,000 tonnes of top-quality aluminium. The second stage provides for the construction of a block to house another 84 electrolysis baths for the production of an additional 50,000 tonnes of aluminium, as well as an alumina reception depot. As part of the project it is planned to build hot- and cold-rolling shops and also a painting line which will enable 35,000 tonnes of ordinary aluminium coils and sheets of different measurements to be produced and 15,000 tonnes of output to be painted. Here, among other things, it is planned to produce aluminium coils of different colours with a thickness of 0.2 - 0.6mm to be used in the construction industry. The construction of a hot-rolling mill has already been completed, equipment will soon be assembled here and construction of the cold-rolling mill will be completed in April. All in all, the commissioning of the second section of the enterprise is due to be completed by April 2013, after which the plant's production capacity will reach 100,000 tonnes. Subsequently, through the injection of additional funds, the production volume of ready-made output will increase to 200,000 tonnes annually.

In the more distant perspective, DET.AL Aluminium plans to use not only imported bauxites in its production of alumina, but also to utilize a local raw-material - alunite - which is extracted at the Zeylik field in Daskasan. At the moment alunite cannot be used due to outdated technology, because in the production of each tonne of alumina (aluminium oxide) two tonnes of sulphuric acid are released. It is toxic and difficult to store and transport. Meanwhile, equipment and methods based on acid-free technology are being developed. Instead of sulphuric acid they enable ordinary sulphur to be obtained, which is easy to stockpile, transport and sell abroad. Similar research into the safe processing of anulite into alumina is also being carried out in our country, and this means that in the future the industrial development of the rich Zeylik field will be possible.

It is significant that since the second half of last year there has been a tendency in the world for an increase in the price of aluminium: the average price of aluminium on the leading world exchange - the London Metal Exchange (LME) - in January this year was 2,110 dollars a tonne, and according to forecasts it could rise to 2,300 dollars based on the results of the first quarter. This not only increases the commercial viability of the project but also helps create new jobs. Today, at the new aluminium smelting enterprise jobs have been provided for over 600 people and another 300 will be provided when the second stage is commissioned. At the same time, the Ganca alumina refinery, where 1,200 are employed today, has resumed operations after closing down in 2009.

All in all, the opening of the DET.AL Aluminium plant in Ganca may be seen as a big step towards creating a modern aluminium industry in Azerbaijan, geared primarily towards exports.