GCC reinforcing itself as major Aluminium powerhouse

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GCC’s aluminium industry is all set to become a major global powerhouse after ramping up new production records.?According to the latest Deloitte Middle East report titled ?GCC: Tomorrow?s aluminum powerhouse?, future prospects for the region are ever promising.

GCC is home to some of the largest smelters in the world and its total global production in 2010 was estimated at 7%.

With Saudi Arabia’s Ma?aden set to become operational by 2013 and UAE’s Emal’s expansion expected to be completed by 2014, GCC is all set to contribute over 13% of the world’s aluminium production in the upcoming years.

Mahmood Daylami, Secretary General of the Gulf Aluminum Council(GAC), said several factors like affordability of power and labour in the GCC region are all conducive to investment.

“Gulf countries have become one of the main centres not only for production of primary aluminium for the world, but also poised for growth in downstream?aluminium products to meet the regional and international market,” he said in an interview.

GCC governments’ support has proved vital in helping the industry establish and expand.

?Increasing costs is becoming critical for more and more primary producers around the globe, and therefore Gulf presents a viable and attractive venue?for investment in aluminium production across the entire industry?s value chain.

“Furthermore, GCC smelters are evaluating and studying future expansion?plans to increase their global production contribution to a cumulative capacity estimated at 7 million tons per annum by 2020.?

The report identifies another investment opportunity in the downstream aluminium industry within the GCC, since only an estimated 10% of local primary aluminium produced in the region is being utilised by regional downstream players.

Saudi Arabia in particular is touted as an ideal venue that is conducive for investment in the aluminium industry, both up and downstream, given its low cost of energy, large bauxite reserves, good infrastructure, encouragement of foreign investment, government effort to diversify the economy away from oil-dependent industries, and proximity to aluminium consuming end-user markets, the report stated.

Another significant opportunity lies to develop the aluminium recycling activity in the region, it added.

STRONG CHALLENGES

Firas Eid, consulting partner at Deloitte Middle East, described in the report: “Although the regional aluminium industry is not without its challenges. Its close proximity to end-user markets both throughout the Middle East and Europe is a strong advantage. Additionally, strong economic growth across the GCC, particularly in aluminum-intensive industries, the most notable of which is construction, will further fuel the region?s growth in aluminium production and solidify the region as a global leader and pioneer in the industry.?

Hazardous waste generated from aluminium production is a concern, as currently GCC has no means to treat it. However, GAC is actively looking to secure third party services to cater to the region?s six smelters and effectively treat this waste in the coming years.

Political instability in the region?especially?in Bahrain and Oman have served as a cause for reluctance in new investments especially in downstream production.

DEMAND DRIVEN GROWTH

Visiongain, an independent business information provider, believes global value of aluminium industry will reach US$99.9bn in 2011 and will shortly break the US$100bn barrier within the next five years.?Their report titled ‘The Aluminium Market Analysis, Financials and Forecasting 2011-2016’ praised the performance of GCC countries but also underlined concerns on recycling.

Demand for Aluminium has been skyrocketing from the BRIC countries, especially China – world’s biggest producer and consumer of aluminium. China’s consumption was estimated to go up to 36% world?s aluminium production in 2010.

Aluminum is about three times lighter than steel. With EU’s stricter CO2 emission requirements, there is a huge demand for aluminium from the?automotive?industry to make cars much more efficient. A kilogram of aluminium, used as a substitute for heavier metals in car industry, reduces gas consumption by 8.5 litres and produces 20 kg less CO2 emissions. A 10% reduction of car weight results in a 9% increase of fuel consumption efficiency.

Rising prices for substitute metals such as zinc and copper also help drive demand for aluminium.

ALUMINIUM ADVANTAGES

Aluminium is part of the solution for a sustainable future.

Aluminium is a unique metal which is strong, durable, flexible, impermeable and light-weight. It does not rust and is 100 percent recyclable. It comes in a variety of surface finishes and can take many forms, allowing its use in a vast array of products.

Aluminium has become the second most-used metal in the world after iron. Nearly three-quarters of all aluminium ever made remains in use today, representing a growing ?energy and resource bank?, and the metal can be reused endlessly.

Examples of areas where aluminium helps people and the economy to operate effectively and efficiently include air, road, rail and sea transport; food and medicine; packaging; construction; electronics and electricity transmission.

Sources: Deloitte, BI-ME, International Aluminium Institute, VisionGain, Alcoa, Bloomberg

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