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Gulf oil producers are expected to pump nearly $25 billion into new aluminium projects and expansion of their existing smelters in the next 12 years as part of an industrial drive intended to reduce reliance on unpredictable oil sales.
Official figures showed the six Gulf Cooperation Council (GCC) countries, which control nearly 45 per cent of the world’s oil and 25 per cent of the global gas wealth, has invested nearly $30 billion in aluminium smelters, almost a sixth of their total non-oil industrial investments of about $180 billion.
“The aluminium sector has largely developed to become one of the main pillars of economic activity in the region and contribute actively to economic diversification programmes,” said Mahmoud Al Dailami, secretary general of the aluminium council in the six-nation Gulf Cooperation Council (GCC).
“Investments in the aluminium sector in the GCC are expected to climb to nearly $55 billion in 2022 from around $30 billion at present…the investments will cover new projects and expansion of existing smelters.”
His figures showed the UAE has become the dominant aluminium producer in the Middle East, pumping around 1.8 million tonnes per year from its smelters in Dubai and Abu Dhabi, accounting for nearly 40 per cent of the region’s output.
According to the Doha-based Gulf Organization for Industrial Consulting (GCOI), new investments include around $5.8 billion in Qatar’s smelter, which was inaugurated last year with a production capacity of 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.”
Aluminum projects in the GCC countries are part of overall industrial plans aimed at diversifying their economies away from unpredictable crude oil exports, which still account for at least two thirds of their national income.
The six members have pumped in excess of $180 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 GDP in most members while massive investments boosted the GCC’s combined non-oil industrial exports to more than $30 billion in 2009 from less than $five billion a year during 1980s.
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