Spectro Alloys selling majority stake to Middle East aluminum producer

A longtime producer of recycled-content aluminum alloys has arranged for United Arab Emirates-based Emirates Global Aluminium (EGA) to buy an 80 percent share of the company.

The announcement by EGA and Spectro Alloys Corp. of Rosemount, Minnesota, says the transaction is subject to obtaining regulatory approvals; but, if the transaction is approved, it “will accelerate EGA’s global expansion into aluminum recycling and expand EGA’s business in the United States.”

Spectro Alloys is a leading secondary foundry alloy producer in the United States. Founded in 1973, the company has a production capacity of approximately 110,000 metric tons per year of aluminum ingots that EGA says have a carbon intensity of less than 1 ton of CO₂ equivalent per ton of aluminum produced.

Earlier this year, Spectro Alloys broke ground on an expansion project in Rosemount designed to add approximately 55,000 more metric tons per year of secondary billet production capacity in its first phase, which is expected to be completed next year.

EGA is one of the largest nonoil and gas industrial companies in the UAE and says it is the largest “premium aluminum” producer in the world.

While EGA intends to acquire an 80 percent of Spectro Alloys, the current owner-managers will retain a 20 percent holding. The two companies have signed an equity purchase agreement and expect the transaction to close during the third quarter.

In May, EGA acquired Germany-based recycled-content aluminum foundry operator Leichtmetall Aluminium Giesserei Hannover GmbH and, late last year, the firm began construction of what it calls the UAE’s largest aluminum recycling plant.

“Our goal is to grow further in both primary and recycled aluminum to meet the growing global demand for a metal which is essential for our world's sustainable future," says Abdulnasser Bin Kalban, CEO of EGA.

“In the U.S., which is already one of EGA’s largest global markets, this acquisition will significantly grow our business and expand our offering to customers with domestic production. Spectro Alloys has a strong and highly experienced team [that] is already implementing ambitious expansion plans and will be a strong platform for the further development of an EGA recycling business in the U.S. I look forward to working with Spectro Alloys’ team.”

The U.S. currently consumes some 4.9 million metric tons of recycled-content aluminum annually, accounting for half of all aluminum demand in the country and making the U.S. the second-largest recycled aluminum market in the world. EGA says it sold approximately 550,000 metric tons of primary aluminum in the U.S. last year.

The two firms say demand for recycled-content aluminum in the U.S. is expected to reach some 7.6 million metric tons per year by 2033, citing London-based commodities information firm CRU.

Global demand for recycled aluminum could double by 2040 and is expected to account for approximately 60 percent of the growth in global aluminum supply between now and 2030 and approximately 70 percent of supply growth between 2030 and 2040, says EGA.

Spectro Alloys supplies more than 125 customers, primarily in the Upper Midwest and Texas. Almost half of Spectro Alloys’ production is used in the automotive sector, with other sectors it serves including the small engine manufacturing, construction and recreational vehicle businesses.

The Minnesota-based firm sources aluminum scrap from more than 250 suppliers in the region and uses advanced sorting and analysis technology to produce the wide variety of alloys required by the company’s customers.

“We have grown Spectro Alloys over the last five decades into one of the U.S.’ top aluminum recycling companies," Spectro Alloys President Luke Palen says. "By becoming part of EGA, the largest ‘premium aluminum’ producer in the world, we will unlock the next stage of our development in the fast-growing aluminum recycling industry. In the near term, this will allow us to accelerate our ongoing expansion project. In the long term, this is a big win for the future of aluminum recycling in the United States.”

Kansas City, Missouri-based RJM & Co. served as exclusive financial advisor and Atlanta-based King & Spalding served as legal counsel to EGA.