By: Reuters

Emirates Global Aluminium, the largest aluminium smelter in the Middle East, is in advanced talks to take a stake in Omani rival Sohar Aluminium as it expands its footprint outside the United Arab Emirates, six sources with knowledge of the matter said.

EGA, which was forced to shut down around 60% of its roughly 2.5 million metric ton per year smelting capacity in the UAE after an Iranian attack in late March, has recently been using the port of Sohar on the Gulf of Oman after the Iran war closed its usual shipping route via the Strait of Hormuz.

Its discussions over 400,000-ton-per-year producer Sohar Aluminium - in which Oman's state-run energy firm OQ and Abu Dhabi National Energy Co (TAQA) each own 40% alongside Rio Tinto RIO.L on 20% - predate the start of the conflict by several months, however, the sources said.

EGA is jointly owned by Abu Dhabi's Mubadala Investment Co and Investment Corporation of Dubai.

'Deep pockets'

Three of the sources said EGA would take over TAQA's stake in Sohar Aluminium, with the holding effectively being transferred from one UAE government entity to another, while a fourth source said EGA was seeking to acquire Rio's stake.

The two remaining sources said EGA was trying to acquire both the TAQA and Rio stakes. "They have deep pockets," one said of the UAE government, adding he did not think EGA would build another smelter at home because of potential environmental issues and the need to secure more electricity supply.

However, the Omani government would not accept the Emiratis having majority control over Sohar Aluminium and it was likely OQ's stake would increase as part of the deal to prevent that from happening, the source said.

All the sources declined to be identified because the discussions are private.

Spokespeople for EGA and Rio said their companies did not comment on market rumours, while Sohar Aluminium and TAQA did not immediately respond to requests for comment.

EGA, which exports 90% of its aluminium production, has been expanding overseas to build a bigger presence closer to its core customers.

The firm last month announced its intention to buy 80% of Italian aluminium recycling company Eco Green and later this year plans to start building the first primary aluminium smelter in the United States in almost 50 years, alongside Century Aluminum CENX.O.

Sohar Aluminium sells around 60% of its aluminium to local downstream customers, with the rest exported via Sohar port, which the company also uses to bring in raw material alumina.

Oman's biggest aluminium export markets in 2024 were Japan, Italy and India, according to Trade Data Monitor.

Sohar Aluminium is currently the only aluminium smelter in Oman, but further south, work is under way on a 530,000-tons-per-year green aluminium project in Duqm led by China's CMOC 603993.SS, the Duqm Economist, a quarterly magazine for special economic zones, reported last month.

A CMOC spokesperson said the company did not comment on rumours.

(Reporting by Tom Daly and Pratima Desai. Editing by Mark Potter)