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Gulf States Seek to Dominate Global Aluminum Industry
By Jamal Al Majaida

Gulf Arab oil producers are taking advantage of their mammoth energy wealth to intensify a drive to quadruple their aluminum output and lift their share of the global market to more than 10 percent in a few years.

The six Gulf Cooperation Council (GCC) countries, which supply a fifth of the global oil demand, have pumped in excess of $eight billion into aluminum industries and investments could nearly double by 2010 as new smelters are being constructed and the existing units are being expanded.

The expansions and new projects approved in 2005 and in the first half of 2006 will boost the region's aluminum production to 3.75 million tonnes, according to a report by the Doha-based Gulf Organisation for Industrial Consulting (GOIC), obtained from the UAE Ministry of Finance and Industry this week.

But with the approval of another major smelter in Abu Dhabi in late 2006, capacity will surpass four million tones and could reach five million tonnes in 2010 once the second phase of that smelter is implemented.

The GCC currently has two main aluminum plants in Dubai and Bahrain, with a combined production capacity of more than 1.5 million tonnes per year.

But both smelters have approved long term expansion programmes that could take their output to more than 2.5 million tonnes.

Another smelter will be built in Sohar, Oman, with an initial capacity of 330,000 tonnes per year, to be doubled to 660,000 tonnes in 2010.

In Saudi Arabia, Maaden company has plans to set up a 600,000-tonne smelter while the state-owned Qatar Petroleum has approved a project to build a smelter in Mesaieed industrial area as a joint venture with Hydro of Norway. It will have an initial output capacity of 570,000 tonnes and will be commissioned in 2009.

GCC states, which also include Kuwait, began setting up aluminum industries in early 1970s within a long-term industrialization drive designed to ease their heavy reliance on volatile oil export earnings.

The focus has been on export oriented and energy intensive projects given their massive oil and gas resources, which make aluminum and other industries among the most feasible projects in the world. Their location in the heart of a vast consumer market and the abundance of cheap labour is another advantage.

Heavy investments in manufacturing, exceeding $100 billion, have sharply boosted the sector's share of the gross domestic product but oil is still the dominant hard currency earner. From only 0.9 percent in 1975, the share of the GCC's aluminum production jumped to nearly five percent in 2005.

" A quantum leap is likely to take place during the next decade, raising the GCC's share to more than 10 per ce3nt by 2010 with the expansion of existing smelters and commissioning of new smelters, thus establishing the GCC region as a major player in global aluminum industry, " said GOIC, which was created in early 1990s to advise member states on non-oil manufacturing policies.

Its figures showed the GCC's total aluminum capital stood at $8.7 billion at the end of 2005, including nearly $5.7 billion in primary aluminum. The rest covered semi-finished products and finished products. The projects provided in excess of 71,000 jobs at the end of 2005, mostly expatriates.
It gave no figures for the costs of the new projects but industry sources put them at more than $six billion until 2010. The capital could sharply rise if Abu Dhabi carries out planned expansions in the long term with proposed total investment in the project standing at over $five billion.

Besides aluminum, GCC states have stepped up a drive to exploit their oil and gas reserves by expanding their petrochemical and refining facilities and building new units. More than $30 billion in public and private investments are expected to be pumped into the petrochemical sector in the next 10 years.

The petrochemicals sector is already by far the largest beneficiary of the GCC's industrialization programme, attracting investment of more than $61 billion out of the total manufacturing capital of nearly $103 billion at the end of 2005.




 

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