Gulf oil producers are pushing ahead with mega aluminium projects which will boost their output to 10 million tonnes and allow them to control 18 per cent of the world’s total aluminium output, according to an official study.
The six Gulf Cooperation Council (GCC) countries, which sit atop 45 per cent of the global recoverable crude deposits, produced around 2.2 million tonnes of aluminum in 2009 and new smelters and expansions of existing units will push their combined output to nearly 3.7 million tonnes by the end of 2010, said they study by the government-controlled alunminium company, Dubal.
“By the end of this year, the GCC’s combined aluminium production will account for nearly nine per cent of the world’s total output…In 2015, production is expected to reach 10 million tonnes, accounting for about 18 per cent of the expected global smelters’ production,” it said.
It said the increase in the GCC’s aluminium output would be a result of expansions in the capacity of some smelters, mainly those in Dubai and Bahrain, and the completion of new plants in Abu Dhabi, Qatar and Oman.
According to the Doha-based Gulf Organization for Industrial Consulting (GOIC), which advises on the non-oil manufacturing sector in the GCC, most regional nations are carrying out costly projects to build new smelters or expand their existing aluminium plants to face growing demand.
GOIC referred a 350,000-tonne smelter which has just been completed in Sohar, Oman, and a 585,000-tonne plant in Qatar, whose capacity will rise later.
Another major venture in Abu Dhabi, Emal, began producing nearly 700,000 tonnes in before expanding it to 1.4 million tonnes when the smelter is fully completed at a cost of around $5.7 billion. Saudi Arabia is also in the process of building two smelters with a capacity of 1.4 million tonnes a year.
“These projects are part of the GCC’s long-term strategy to expand their manufacturing sector and diversify their sources of income,” GOIC said.
“The GCC nations have already gone a long way in such a strategy…they now have a total 886 plants producing aluminium and associated products, accounting for nearly 7.2 per cent of the total industrial units with an estimated capital of around $13.3 billion and a workforce of more than 63,000.”
In a recent study, the government-controlled Emirates Industrial Bank (EIB) said Dubai and Bahrain, which were the first to set up smelters in the region, are pursuing plans to further expand their output to nearly 2.5 million tonnes per year. It said the expansions and projects under way in other GCC members would lift their combined output to around seven million tonnes in 2015.
Experts expect the total investment in the GCC’s aluminum industry to exceed $40 billion by 2020 and said this would give a strong push to long-term programmes by member states to diversify their oil-reliant economies.
The UAE and Bahrain were the first Gulf countries to set up smelters 30 years ago. Dubal aluminum plant in Jebel Ali produced a record 935,000 tonnes last year while output from Bahrain’s Alba smelter stood at 830,000 tonnes.
But there are long-term programmes to expand the capacity of the two smelters to face growing demand from their customers in Japan, South Korea and other key Asian consumers, which rely heavily on the Gulf for their aluminum needs given the high costs of their domestic projects.
Besides its expansion, the latest in a series of development projects over the past decade, Dubal has teamed up with Mubadala Development Company to build the world’s largest aluminum complex in Taweela just outside the capital.
The plant will is initially producing 720,000 tonnes but capacity in the second phase of construction will surge to nearly 1.4 million tonnes per year to turn it into the largest single-site smelter in the world.
Preliminary capital was estimated at between $5.7 billion but investments could soar to $20 billion in the long term as the complex is expected to be expanded to involve associated industries and other facilities, according to the Abu Dhabi Chamber of Commerce and Industry.
Aluminum projects in the GCC countries are part of overall industrial plans aimed at diversifying their economies away from unpredictable crude oil sales, which still account for at least two thirds of their national income.
The six members have pumped in excess of $130 billion into the non-oil manufacturing sector to build light to medium industries, including petrochemicals, building materials, medical supplies, chemicals, foodstuffs, paper, furniture, home appliances and machinery.
From a negligible share two decades ago, the industrial sector has become the second largest component of the gross domestic product in most members while massive investments boosted the GCC’s combined non-oil industrial exports to more than $25 billion last year from less than $five billion a year during 1980s.
Aluminum projects in the Gulf are among the least expensive in the world given the region’s massive energy resources and relatively cheap labour.
“The abundance of energy resources in the GCC countries makes such industrial project among the most feasible in the world,” EIB said.
“ But they face challenges in their long term plans to develop their aluminum industry, mainly gas supplies…despite their massive gas resources, its extraction requires enormous investments…with the exception of Qatar, a large part of the produced gas in the GCC is associated with oil, making its separation a costly and complicated process.”