Gulf to control 13% of global aluminium output by 2020

Gulf oil producers are pushing ahead with mega aluminium projects that will more than triple their output in 2020 and allow them to control about 13 per cent of the world's total aluminium production, according to official figures.

The six Gulf Co-operation Council (GCC) countries, which sit atop 45 per cent of the global recoverable crude deposits, currently produce around 2.2 million tonnes of aluminium and new smelters and expansions of existing units will boost their combined output to four million tonnes in 2010.

In 2020, such projects in the UAE and other member states will push production of their smelters to a record nine million tonnes.

"The GCC countries currently produce about 5.4 per cent of the world's aluminium output and the new projects will raise that share to nearly 13 per cent in 2020," said Lulwa Al Misnad, Acting Secretary General of the Doha-based Gulf Organisation for Industrial Consulting (GOIC).

Writing in a study about the GCC aluminium industry to be published shortly, Misnad said most member states are carrying out costly projects to build new smelters or expand their existing aluminium plants to face growing demand.

The study cited a 350,000-tonne smelter that has just been completed in Sohar, Oman, and a 585,000-tonne plant in Qatar.

Another major venture is being constructed in Abu Dhabi and will start producing 700,000 tonnes in 2010 before expanding it to 1.4 million tonnes when the smelter is fully completed at a cost of about $5.7 billion (Dh20.9bn).

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 strategy to expand their manufacturing sector and diversify their sources of income," said Misnad.

"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 about 7.2 per cent of the total industrial units with an estimated capital of about $13.3bn 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.

"Dubai and Bahrain are pressing ahead with expansion plans that will boost their combined production to 2.5 million tonnes, this will push the GCC's combined aluminium output capacity to about seven million tonnes in 2015 and nine million tonnes in the following years, when global output could peak at 70 million tonnes. The increase will more than double the GCC market share and turn member states into dominant aluminium producers and exporters in the world."

Experts expect the total investment in the GCC's aluminium industry to exceed $40bn 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 aluminium 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 aluminium 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 aluminium complex in Taweela just outside the capital.

The plant will initially produce about 720,000 tonnes when it is launched in 2010 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 $5.7bn but investments could soar to $20bn 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

Aluminium 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 $130bn 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 $25bn last year from less than $5bn a year during 1980s.

Aluminium projects in the Gulf are among the least expensive in the world given the region's massive energy resources and cheap labour.

Keep up with the latest business news from the region with the daily Emirates Business 24|7 newsletter. To subscribe to the newsletter, please click here.

Follow Emirates 24|7 on Google News.