Gulf oil producers are expected to pump nearly $22 billion into new aluminium projects and expansion of their existing smelters in the next five years as part of an ongoing industrial drive to ease reliance on volatile oil exports.
Official figures showed the six Gulf Cooperation Council (GCC) countries, which control over 45 per cent of the world's oil and 25 per cent of the global gas wealth, have spent in excess of $15 billion on aluminium smelters, more than 10 per cent of their total non-oil industrial investments.
"The GCC countries are expected to invest nearly $22 billion until 2015 to set up new aluminum projects and expand their existing smelters," said the Doha-based Gulf Organization for Industrial Consulting (GOIC), which advises on non-hydrocarbon industrial plans in the 29-year-old Gulf group.
"The investments will boost the GCC's combined aluminium production from around 2.2 million tonnes in 2009 to more than six million tones and this will allow the GCC to become a major global aluminium producer."
GOIC said the investments include around $5.8 billion in Qatar's new smelter, which has just been established with a production capacity of around 585,000 tonnes per year. About $eight billion will also be pumped by Emal in Abu Dhabi to push up output to 1.4 million tones while more expansions are on the cards in Dubai and Bahrain, where the region's first smelters were set up.
Saudi Arabia, the world's dominant oil exporter, is also planning to set up a $3.8-billion smelter while Oman has completed its first aluminium plant in Sohar.
In a study on aluminium projects in the GCC, GOIC said regional states need to push ahead with such projects to face a rapid rise in domestic demand because of massive infrastructure projects. External demand for their products is also expected to surge as global consumption will likely pick up in the near future following a slowdown due to the 2008 global fiscal crisis.
Citing world estimates, it said global aluminium demand is forecast to soar to nearly 70 million tones by 2020 from around 37 million tones currently.
"The expansions and new projects in the GCC countries will enable them to offset any decline in other parts of the world as some smelters in Europe, south Asia and North America could be shut because of high costs," GOIC said.
"Such developments will depress global supply and this will boost demand for GCC aluminium as the region does not have any problems with costs given its enormous energy resources which make these projects more feasible."
In a recent study, the government-controlled Emirates Industrial Bank (EIB) said Dubai and Bahrain are pursuing plans to 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 6-7 million tonnes in 2015.
Experts expect the total investment in the GCC's aluminum industry to exceed $30 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.
Emal is now producing around 720,000 tonnes but capacity in the second phase of construction will surge to nearly 1.4 million tonnes per year.
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.