Lower energy costs are prompting Norsk Hydro to expand into the Middle East, its chief executive Eivind Reiten says.

Norsk Hydro, the world’s third largest integrated aluminium producer, is concentrating on primary aluminium, with plans for a $4.5 billion investment in a 585,000-tonne smelter in Qatar.
Reiten said the plan was to expand the smelter further and double production in Qatar to 1.2 million tonnes per year by 2012. He added that the expansion plan for phase two had still to be agreed with its Qatari partner.
Hydro has a 50 per cent share in the Qatalum smelter, expected to start producing in 2009/10, and the rest is held by state-run Qatar Petroleum, which will supply the smelter with natural gas. The availability of cheap energy would determine future aluminium capacity over the next 20 to 30 years, Reiten said.
Energy accounts for some 40 per cent of aluminium’s total production cost.
The firm was also looking at Australia and a hydro-powered smelter in Angola with an annual capacity of 600,000 tonnes.
High energy costs increased the value of recycled metal, Reiten said, adding that the firm’s remelting capacity was expected to grow.
Aluminium made from scrap uses 95 per cent less energy than metal produced from bauxite ore.
A recent Citigroup report suggested Europe’s only listed pure aluminium player could be a potential take-over target, but Reiten said the firm was not for sale. “Instead we ourselves are looking at future targets,he said, without giving any details.
Reiten said growth in Norsk Hydro’s products division was driven by strong demand, particularly from Europe, for rolled and extruded aluminium, with expected production in 2007 of 1 million tonnes and 600,000 tonnes respectively.
Hydro aims to produce 1.1-1.2 million tonnes of aluminium from scrap in 2007 and 1.7 million tonnes of primary aluminium, which would rise to 2 million in 2010.
Alumina output was set at 2.1 million tonnes this year.
Growth in demand for aluminium was seen sluggish in the US, but Chinese consumption was seen rising at around 7-8 per cent annually. Reiten said world aluminium demand would grow by around 4-5 per cent this year and expected aluminium futures prices to hold around $2,200-2,800 a tonne over the next six to 12 months.
Until recently, aluminium smelting in the Arabian Gulf was restricted to Bahrain and Dubai. But insatiable thirst for the metal globally and the varied applications it can lend itself to has prompted several other Gulf states to diversify into smelting. The availability of cheap energy in the region means that smelting will be a growth industry there.