Mubadala inks first China deal

Buildings Brics: Mubadala has made its first investment in China by forming a joint venture to create a $150 million plant that will supply material for the UAE's aluminium smelting industry.

Aluminium ingots are stocked at Qingdao port in China's Shandong province. Mubadala has invested in a plant producing calcined petroleum coke, which is used in aluminium smelting. Reuters

ZHENJIANG, CHINA // Mubadala has made its first investment in China by forming a joint venture to create a US$150 million plant that will supply material for the UAE's aluminium smelting industry.

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In a ceremony yesterday in Zhenjiang, a city by the Yangtze River in Jiangsu province, Mubadala Industry, part of Mubadala Development, a strategic investment company owned by the Abu Dhabi Government, signed an agreement to develop the facility with Jiangsu Surun High Carbon Company.

Mubadala said the project was likely to be the first of a series of investments it makes in the world's second-largest economy.

The joint venture has been named Jiangsu Suyadi Tancai Company and is 51 per cent owned by the Chinese partner and 49 per cent owned by Mubadala. It will produce hundreds of thousands of tonnes a year of a substance called calcined petroleum coke (CPC), used in the aluminium smelting industry, which is expanding rapidly in the UAE.

It is also part of a wave of investment in China by companies based in the UAE. They include Borouge, the plastics company in Abu Dhabi, which opened a factory near Shanghai 18 months ago, and Jumeirah Group, which has opened a hotel in Shanghai. One of the UAE's biggest investors in China has been Dubai's DP World, which has stakes in ports in locations including Hong Kong, Tianjin and Qingdao. Just as UAE investments in China are growing, so trade between the two nations remains very strong. Non-oil bilateral trade jumped 9 per cent last year to reach $12.5 billion (Dh45.9bn), according to the UAE's Ministry of Foreign Trade.

Mubadala is a key player in aluminium smelting through Emirates Aluminium (Emal), its joint venture with Dubai Aluminium (Dubal).

Construction of the plant in Zhenjiang is due to begin by the end of this year and CPC production is set to start in the first quarter of 2013.

Output at the facility in the first year is expected to be about 200,000 tonnes of CPC, increasing the following year to the full capacity of 500,000 tonnes.

Mubadala has committed to buying at least 45 per cent of the total amount produced by the plant, and has the right to procure all of the output.

"Given the size of Emirates Aluminium, it's important we have secure sources of supply with trusted partners like Surun," said Waleed Al Muhairi, the chief operating officer of Mubadala.

Through Emal, Mubadala owns what is described as the largest single-site aluminium smelter in the world, with a production capacity of 740,000 tonnes of aluminium, a figure Emal plans to double. Together, Dubal and Emal produce about 1.8 million tonnes of aluminium annually.

Mr Al Muhairi said it was "entirely fitting" that Mubadala's first industrial project in China was taking place in one of the country's "most dynamic industrial regions".

Jiangsu Surun High Carbon Company is a subsidiary of Zhenjiang Coking And Gas Group (ZCGG) and exports more than 400,000 tonnes of carbon products a year. The company already has strong links with Mubadala as it has been supplying CPC to the UAE's aluminium smelting industry for more than four years.

China supplies more than half of the world's CPC, which is used to make the anodes that are necessary for aluminium smelting.

Ahmed Al Idrissi, the executive director of Mubadala Industry, said it was "critical" that Emal secured reliable supplies of CPC as shortages of the material were likely to develop as global demand increased. He said the joint venture in Zhenjiang would act as "an important hedge from a pricing perspective".

Mr Al Muhairi described this week's agreement as "the strongest evidence of the growing economic relationship between China and the UAE", adding Mubadala was likely to make further investments in the world's second-largest economy.

"It's inevitable you will see more and more projects in China," he said.