Reported by HPMM Group according to FINANCIAL TRIBUNE ;   The construction of South Aluminum Corporation’s smelter, set to produce 300,000 tons per year in the first phase, is underway

The Salco plant is due to increase output to one million tons by 2025

Iran is on track to launch a new aluminum smelter early next year that would boost the country’s output by 70%, making it self-sufficient in the metal by taking advantage of its rich natural gas reserves.

“Construction is underway at the South Aluminum Corp [Salco] smelter  to produce 300,000 tons per year in the first phase,” Mehdi Karbasian, deputy minister of industries, mining and trade, told the CRU Aluminium Conference in London on Tuesday.

Karbasian is also chairman of IMIDRO, the state-owned Iranian Mines and Mining, Industries, Development and Renovation Organization, which owns 49% of Salco. Iran’s Ghadir Investment Company owns 51%, Reuters reported.

“While Iran currently produces about 400,000 tons per year of aluminum, consumption is around 600,000 to 700,000 tons,” said Amir Mirchi, managing director of Canadian consultancy Auryce, which is advising Salco.

Salco is being built in the Lamerd Special Economic Zone in southern Iran near the Persian Gulf where a deepwater port is also being constructed.

The $1.2 billion Salco facility is being built by China Nonferrous Metal Industry’s Foreign Engineering & Construction Company, or NFC.

“The Salco smelter was originally due to be a joint venture with Canada’s Alcan, now owned by Rio Tinto, which left the country after US sanctions were imposed,” said Mirchi, a former Rio executive.

Karbasian said the smelter will use energy from a gas-fired power plant and Iran has high hopes of further expanding its metals industry by making use of Iran’s huge gas reserves, which along with Russia’s are the biggest in the world.

“The Salco plant is expected to increase output to 1 million tons by 2025 while the Iranian steel sector plans to boost production to 55 million tons by the same year from 31 million currently,” he said.

“Steel output grew from 20 million tons in 2013, when exports were only 1 million tons. Last year, steel exports soared to about 9 million.”

Mirchi said having gas power will also help reduce costs at Salco.

“I see Salco production costs way below $1,200 (per ton),” he said.

The benchmark aluminum price on the London Metal Exchange on Tuesday was about $2,230 per ton.

According to IMIDRO’s latest report, Iran’s three major aluminum producers produced an aggregate of 337,608 tons of aluminum ingots in the last Iranian year to March 20, 2018, to register a 1% decline compared to the year before.

Iran Aluminum Company produced 170,292 tons, Almahdi Aluminum Company 61,669 tons and Hormozal Aluminum Company 105,647 tons.

Iran Alumina Company produced 240,167 tons of alumina powder, up 2% year-on-year.