Aluminium shift helps Mideast

Dubai: The Middle East is benefiting from a global shift in aluminium production and consumption, and the metal could become the second most-important export commodity for the region's oil-producing states.

At present the Middle East accounts for 10 per cent of global production of 34 million tonnes of primary aluminium, according to industry sources.

There are four operating smelters in the UAE, Bahrain and Iran, and another 11 are either under construction or in the planning stage in the Gulf.

When these plants come into operation, the Middle East will become a major exporter of the metal.

With energy prices at record levels, Gulf oil producers are at an advantageous position to benefit from the relatively cheap energy supplies in the region. Energy accounts for about 25 per cent of a smelter's operating cost.

High operating cost is one of the reasons why some smelters will be phased out in North America and Europe. On the other hand, production of primary aluminium in developing countries is rising.

"This shift will likely persist in the years to come," Sandeep Biswas, a senior vice-president for business development at mining and metals group Rio Tinto Alcan, said in a presentation at a recent MEED aluminum industry conference.

The shift was visible between 1980 and 2007, when the global aluminium production increased from 16 million tonnes to 34 million tonnes.

During this period, the Middle East and Africa's share in output increased from four per cent to 10 per cent, while China's share soared to 33 per cent from just two per cent.

The drop was significant for the US, which produced seven per cent of the world's aluminum last year compared with 30 per cent in 1980. Western Europe's production was halved to 11 per cent.

With rapid economic growth led by intense construction activity, the Middle East is also consuming more aluminium. The Middle East and Africa accounted for five per cent of the world's consumption in 2006 compared with just two per cent quarter of a century ago.

The world will need another 35 million tonnes of annual aluminium production capacity in 2020 if demand for the metal, used in industries from beverage cans to aircraft, grows at 5.2 per cent annually. This equals setting up five new smelters of 500,000 tonnes capacity each year till 2020, according to Biswas.

Dubai, Abu Dhabi, Qatar, Oman, Saudi Arabia and Iran are already working on several projects to offer additional supplies.

China, however, is the giant of both production and consumption. Russia, Southeast Asia and India will also play a significant role in the industry's growth.

Boom time

Truls Gautesen, chief executive officer of Qatalum, a joint venture between Qatar Petroleum and Norwegian group Norsk Hydro, believes that with so many people building smelters "the market has to be booming."

Qatalum expects to start production in the fourth quarter of 2009 and will have a capacity in the first phase of 585,000 tonnes.

The Gulf's two operating smelters are Dubai Aluminum (Dubal), which can produce about 900,000 tonnes a year, and Aluminium Bahrain (Alba), with a capacity of 860,000 tonnes.

Emirates Aluminium, or Emal, a joint venture between Dubal and Abu Dhabi's Mubadala Development Company, is building a 1.4-million-tonne capacity smelter in Abu Dhabi.

Emal International has launched a similar capacity project in Saudi Arabia, while Saudi mining firm Ma'aden has its own smelter project.

In Oman the first metal production at the 350,000-tonne Sohar Aluminium plant is expected in the middle of this year.

With so many projects under way, companies behind them are vying for resources needed to operate them. Apart from securing energy supplies, getting skilled technical people and supplies of alumina are other key challenges. Heavy industries are particularly faced with a shortage of qualified staff.

"We have to go to the same market as others are going to. This is a challenge," said Gautesen, whose company expects to employ 1,100 people.