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$25 Billion Will be Injected into Aluminium Projects in the GCC

Middle East : 19 January 2011

The UAE will produce about 40 percent of aluminium in the Middle East.

Oil production firms in the Gulf will invest almost $25 billion into the expansion of smelters and creation of fresh aluminium projects over a 12 year period. This push is included in an industry drive that is attempting to decrease the region’s reliance of oil, which has historically unpredictable revenues.

The GCC nations (Gulf Cooperation Council) have almost 45 percent of the global oil supply in their control as well as about 25 percent of gas wealth worldwide. The group has pumped almost $30 billion in investments into aluminium smelting facilities, which accounts for nearly one sixth of the GCC’s $180 billion overall non-hydrocarbon industrial investment projects.

The GCC aluminium council’s secretary general Mahmoud Al Dailami stated that this sector has grown into a strong area of economic activity and continues to be a major contributor in the diversified economies of the six nations in the GCC.

Dailami noted that aluminium investments currently sit at $30 billion and are expected to rise to almost $55 billion by 2022. These funds will be used for smelter expansions and new industry projects.

The secretary general’s data indicates that the UAE is the leading producer of aluminium in the Gulf, producing about 1.8 million tonnes annually from Abu Dhabi and Dubai smelting facilities and making up almost 40 percent of the output in the Middle East.

The Gulf Organization for Industrial Consulting (or GCOI) is based in Doha and reported that about $5.8 billion was invested in a Qatar smelter that opened in 2010. That smelter produces around 585,000 tonnes annually. Emal is set to invest $8 billion into the Abu Dhabi area with an aim to increase the output there to 1.4 million tonnes. The area’s first smelting facilities were based in Bahrain and Dubai, where further expansions are also expected.

Leading global oil exporter Saudi Arabia has plans to open a smelter worth $3.8 billion and Oman recently saw the completion of the nation’s inaugural aluminium plant, located in Sohar.

The GOIC studied the GCC aluminium industry and stated that regional areas should move forward with the proposed projects in order to meet a quickly increasing domestic demand created by infrastructure megaprojects. Demand outside of the region is also set to boom with worldwide consumption on the rise after the global economic slowdown of 2008.

Referring to estimates covering the globe, the GOIC noted that worldwide demand for aluminium should grow from the current level of 37 million tonnes up to 70 million tonnes by the year 2020.

New industrial projects and planned expansions within the GCC should create the ability to offset any declines in global supply. According to the GOIC, certain smelters in southern Asia, North America and Europe are on the verge of shutting down due to high costs.

Those occurrences would result in a decline in global supplies and would create a higher demand for the GCC-produced supply of aluminium. The GCC area has better controlled costs due to the massive energy resources in the region that produce a more favorable climate for this industry.

The GCC is aiming for a more diversified economic climate and the aluminium investment projects play a role in that movement. Crude oil exports still account for around one third of the national incomes for GCC members, but the unpredictable nature of those figures is creating a drive towards diversification.

Collectively, the six GCC members have invested more than $180 billion into non-oil industries and manufacturing, including those from light to medium, petrochemicals, medical and building supplies, foods, paper, chemical products, furniture, machinery and equipment and home appliances.

After owning only an insignificant share only 20 years ago, the GCC industrial sectors have moved into second place in terms of the GDP for most member states. Substantial investments have increased the combined non-hydrocarbon export numbers for the GCC to over $30 billion for 2009. That is a massive improvement over the annual figures from the 1980’s, which hovered around $5 billion.

Andrew Reid, Staff Writer, Gulf Jobs Market News
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