JEDDAH: The absence of a ban or any type of curb on export of aluminum scrap is hurting the growth of aluminum recycling industry in the Kingdom, said Abdullatif A. Al-Amoudi, CEO and general manager of Saudi Aluminum Recycling Co. (SARCO).
Talking to Arab News, Al-Amoudi said that there was huge potential in the business but because of the lack of availability of raw material, his factory, Saudi Arabia’s only facility to recycle aluminum, was under-utilized. “We have a capacity to process 1,200 tons of scrap per month but our production hardly reaches 400 tons per month because of the presence of foreign buyers in the market,” he said.
SARCO is a joint venture company formed in partnership with Aluminum Processing (ALPRO) of Germany in 1995. Based in Jeddah Industrial City-Phase 5, SARCO’s factory processes scrap aluminum to produce alloy ingots, sows and pyramids. Ninety percent of the products in the form of semi-finished aluminum are exported while the remaining 10 percent is consumed in Saudi Arabia.
Japan is the main buyer of Saudi Arabia’s recycled aluminum. According to Al-Amoudi, 40 percent of SARCO products are bought by Japan, 25 percent each by India and Pakistan and 10 percent goes to local Saudi market. In the past, Al-Amoudi said, SARCO used to export its products to the United States, Europe and Hong Kong. But longer shipping time and higher freight charges made these destinations economically unviable. “Now we are concentrating on Asian markets. It takes 15 days to reach Japan, seven days to India and five days to Pakistan, whereas Western destinations take at least one month to reach.”
The ongoing global recession had a direct impact on the demand for Saudi aluminum. Japan, where the aluminum is used to produce automobile components, cut down its import of Saudi aluminum in the late 2008. According to Al-Amoudi, the situation has improved during the last three months. “Our buyers, specially Japan, have gone back to their usual demand since October,” he said.
The aluminum scrap is gathered from various sources. Used beverage cans (UBC) are the main source of scrap, almost 50 percent. ‘Profiles’ collected from old buildings (30 percent), Vehicle engine blocks (TENSE) (20 percent) and utensils and electric cables are the other sources.
All these scraps are purchased locally. Jeddah is the main collection center for aluminum scraps in the Kingdom. SARCO deals mainly with four major scrap dealers namely, Al-Bahiji Group, Al-Fayha International, Norco Co. and Budal Co.
The additives or alloying materials (like silicon metal, manganese, magnesium and zinc) used in the recycling process is fully imported from outside the country.
In the beginning, SARCO used to procure aluminum scraps from foreign markets like Russia, Bahrain and Egypt as well but slowly most of the sources have dried up as counties after countries are banning export of aluminum scraps.
Russia, the biggest supplier, has imposed a total ban on its export. Other countries have either banned it or put heavy taxes so that foreign buyers are discouraged.
“Perhaps, Saudi Arabia is the only country which allows its aluminum scrap to freely export without any tax or levy. We as a company are suffering because of this. At the same time, our country is missing the opportunity to develop its own aluminum industry,” Al-Amoudi said.
He said because of the presence of foreign buyers scraps become expensive, thus denying the only Saudi company of its kind the required amount of raw material. “It is also discouraging others to invest in the recycling business,” he said.
Al-Amoudi referred to the ban on export of steel, iron and lead scraps. As per the Saudi regulation, now only finished products can be exported. He said this policy has produced the desired result. At least four steel recycling factories have come up in Jeddah alone. “Otherwise, for the last 20 years, SABIC’s Hadeed was the only steel recycling plant in Saudi Arabia,” he added.
Al-Amoudi said if a ban is imposed on the export of aluminum scraps it would be available at the right price and in enough quantity. It would also encourage others to open more such facilities, which would be a welcome development. “So far we have restricted ourselves to semi-finished products. Our goal is to offer finished products. But it is not possible in the prevailing circumstances,” he maintained.
