Magazine article The Middle East

Gulf Aluminium Poised for Take-Off: A Number of Factors Have Come Together to Ensure a Prosperous Future for Aluminium Production and Myriad Secondary 'Spin-Offs' within the Countries of the Gulf Cooperation Council

Magazine article The Middle East

Gulf Aluminium Poised for Take-Off: A Number of Factors Have Come Together to Ensure a Prosperous Future for Aluminium Production and Myriad Secondary 'Spin-Offs' within the Countries of the Gulf Cooperation Council

Article excerpt

THE GULF REGION HAS BEEN IN THE PROCESS of diversifying from hydrocarbons as an economic driver for many years now. A number of industries in the area have benefited from this policy, chief among them, metals. The Gulf's aluminium production, for example, even by the standards of the region, is growing rapidly.

Aluminium is a remarkable substance. It is the third most abundant element in the Earth's crust. Strong, light and resistant to corrosion, making it ideal for use in the aerospace industry, packaging, construction and vehicle construction; its applications are myriad.

Another useful property of aluminium is that it is 100% recyclable with no loss of quality. Moreover, recycling aluminium uses only 5% of the energy used in smelting it in the first place making it incredibly sustainable.

Primary aluminium production is energy intensive and the rising cost of oil has made the process prohibitively expensive in Europe and the US, the traditional aluminium centres of the world. The Gulf however, with its plentiful supplies of cheap oil, has a competitive advantage, which allows local producers to keep costs down. Moreover, the oil producing states of the Gulf have a great deal of liquid capital to invest and an eagerness at all levels of government to invest that capital in industry.

Aluminium production in Europe and the US dropped in 2009 as the global financial crisis saw industries, such as construction and automotive, that involve the prolific use of aluminium, shrink dramatically. Consequently, there is now an over-supply of aluminium on the world market which is driving prices down, placing older, less efficient plants under yet more pressure, playing further into the hands of the more efficient, cheaper Gulf producers.

Analysts believe it is only a matter of time before the Gulf's lower cost production of the highly sought after soft metal will replace the less efficient northern plants.

The prized market of China is largely closed to Gulf suppliers, for now. It is one of the world's major consumers of aluminium, but is, to date, able to supply its own demand. However, it too is having to rely on older, more costly plants. The expense of replacing these plants often makes less sense than importing from the Gulf, which is already set up for low cost production, making the long-term prospects for the Gulf's smelters even more promising.

The Gulf has increased its production of aluminium at a rate of about 15% a year for the last few years and now supplies approximately 10% of world markets. That, however, is only the beginning. By 2020, it is estimated the Gulf will produce 7m tonnes of the metal annually. By that time, investment in the industry is expected to have risen from $30bn to $55bn.

Such is the expected increase in demand globally, there is no concern in the Gulf that rapid expansion will lead to over capacity. It estimated that in the coming few years the world will be using almost double the amount of aluminium currently consumed. …

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