NEW YORK Middle East countries in the Gulf Cooperation Council (GCC) should see dramatic aluminum production growth through 2015 as the region looks to become a top supplier to the rest of the world, according to one executive at AMMs Aluminum Summit in New York.
GCC countries are able to serve both the East and the West, and the region is developing into a global logistics center, according to Walid al Attar, executive vice president of marketing and sales for Emirates Aluminium Co. Ltd. (Emal) and Dubai Aluminium Co. Ltd. (Dubal), both based in the United Arab Emirates. The two companies announced a merger earlier this month to create Emirates Global Aluminium (amm.com, June 4).
Primary aluminum production capacity in the GCC is expected to grow about 36 percent to around 5 million tonnes annually by 2015 from 3.7 million tonnes last year, of which 740,000 tonnes were consumed in the GCC region and the balance exported, al Attar said. On the downstream side, production should grow about 88 percent to around 2.3 million tonnes annually in 2015 from 1.2 million tonnes last year.
"These figures confirm that the GCC is an important hub in the global aluminum industry," he said, noting that the regions smelters are some of the worlds newest and most technologically sophisticated.
The GCC and the Middle East are expected to account for 32 percent of the worlds primary aluminum expansions between now and 2015, second only to China, al Attar said. But the greatest growth over the next eight years will likely be in rolled products as the GCC looks to displace imports and compete on the export front, especially to markets in the Middle East, Africa and South Asia.
The recession of the past four years has seen a buildup of aluminum inventories in North America, Europe and, to a lesser extent, China, al Attar said. "But when the global recovery kicks in and accumulated inventories are drawn down, aluminum demand will continue to exceed production capacity, with predictable consequences."
Despite those rosy forecasts, GCC primary aluminum producers face several challenges, including establishing a long-term customer base and securing the raw materials necessary to fuel growth in the region. Import tariffs are perhaps the biggest hurdle to clear, he said, and the GCC needs to ensure that its smelters have access to global markets.
Al Attar focused on tariffs in the European Union, which he said "unfairly benefit" some producers exporting to the E.U. and "disadvantage" others while adding costs to all European fabricators. E.U. import tariffs on primary aluminum "are out of line with both the U.S. and developed Asian countries," he said.
Assuming Chinese production is "essentially neutral," the only regions that can supply material to meet metal deficits in other parts of the world are Russia and the GCC, keeping regional fabricators competitive, al Attar said. "The E.U. tariff structures basically restrict market supplies and distort market pricing and ultimately global flows," he said, arguing that a solution to "the discrimination against GCC smelters" needs to be found before "E.U. customer relationships are damaged any further."
The GCCs push into the aluminum industry, including high-quality casthouses, comes as the region look to move beyond its traditional dependence on the oil and gas markets, al Attar said.