Strategy

The UAE is one of the more industrially diverse countries in the Gulf, supplementing its vast oil revenues with significant aluminium and steel production, along with downstream industries.

The country’s industrial strategy is enshrined in its Vision 2021 document, which sets out plans to develop a highly skilled and diversified knowledge economy. The federal government is also keen to create jobs for Emirati nationals outside state departments and public entities and the oil and gas sector.

The UAE’s hydrocarbons industry offers relatively low employment opportunities for every dollar invested, compared with most non-oil sectors.

Manufacturing currently represents about 9 per cent of the UAE’s GDP, with oil and gas accounting for 31 per cent of the total, according to the National Bank of Abu Dhabi.

Out of the UAE’s seven Emirates, Dubai has taken the lead in diversification and has established itself as a service economy and a regional centre for finance, real estate, tourism and logistics.

The development of the Jebel Ali port and free zone significantly boosted Dubai’s position as a manufacturer, exporter and re-exporter of non-oil products.

The emirate established the Dubai Aluminium (Dubal) aluminium smelter at the free zone more than 30 years ago – a key milestone in the development of the non-oil industry in the UAE.

Dubai’s industrial production alone is valued at $54.4bn, contributing about 13 per cent of the emirate’s overall GDP, and growing by an average of 8 per cent a year since 2007.

In Abu Dhabi, the manufacturing sector has recorded disappointing growth since the UAE capital set out its ambitious Economic Vision 2030 plan more than four years ago, with the global financial crisis affecting the flow of investment into the Middle East.

The aim was to boost manufacturing’s share of the emirate’s GDP to 19 per cent by 2020 and 24 per cent by 2030 in order to reduce the economy’s reliance on crude exports. But the proportion has only increased marginally since the plan was drawn up, reaching 5.9 per cent in 2012.

The contribution of manufacturing to Abu Dhabi’s GDP was $9bn in 2010, growing by an average of 3 per cent a year in the second half of the past decade, which is the slowest of any of the emirate’s main sectors.

Most of its recent non-oil manufacturing GDP growth has come from energy-intensive, government-owned plastics and metals operations. Over the past 15 years, Abu Dhabi has established major anchor companies to drive industrial growth, with Abu Dhabi Polymers Company (Borouge), Emirates Steel Industries and Emirates Aluminium (Emal) leading development in their respective sectors.

In 2013, Abu Dhabi set up the Industrial Development Bureau, under the auspices of the Department of Economic Development, with specific targets to accelerate growth, diversification and balanced development.

The UAE has several major industrial projects in the pipeline, but these face strong competition for gas allocations at a time when the country has become a net gas importer.

Sub-sectors

In June 2013, a $15bn merger was announced between Dubal and Emal, creating a united upstream aluminium industry in the UAE and forging the world’s fifth-largest aluminium producer. The new company is called Emirates Global Aluminium (EGA).

Dubal is the second-oldest aluminium producer in the GCC. It was set up in 1979 with an original capacity of 136,000 tonnes a year (t/y). It has since undergone a series of major expansions, boosting capacity at least seven-fold to more than 1 million t/y. Dubal produced 1,025,266 tonnes in 2012.

The company is the largest single non-oil industrial contributor to Dubai’s economy and accounts for almost 4 per cent of the emirate’s GDP every year.

Another key company in Dubai’s aluminium industry is Gulf Extrusions, a subsidiary of Al-Ghurair Group. Founded in 1978, the firm has six presses, capable of producing 60,000 t/y of aluminium extrusions using raw material from the nearby smelter.

Abu Dhabi started up its Emal smelter in 2009, with a capacity of 750,000 t/y of primary aluminium. Emal is currently carrying out the phase two expansion of its smelter, which is due to increase capacity to 1.3 million t/y by the end of 2014.

However, in early June South Korea’s Samsung C&T indicated that its contracted work on the expansion’s combined-cycle power plant had overrun.

Abu Dhabi also appears to be pushing ahead with a delayed metals park planned at Khalifa Industrial Zone Abu Dhabi (Kizad) as progress is made on an aluminium extrusions plant and an aluminium rod mill.

Taweelah Aluminium Extrusion Company (Talex) is building a $160m aluminium extrusions plant, while government-owned Senaat has set up a new joint venture with UAE cables maker Ducab, called Ducab Aluminium, to build a $60m aluminium rod mill at Kizad.

The UAE has witnessed some of the largest investments in the regional steel industry as companies look to supply the Middle East’s biggest projects markets. Molten steel and direct-reduced iron (DRI) manufacturing capacity was added for the first time over the past decade, and there have been expansions in reinforced steel bar (rebar) and finished product capacity.

The UAE’s largest steel producer is Emirates Steel, a subsidiary of Senaat. Its first expansion transformed the company from a rebar producer into the UAE’s first integrated steel producer with a DRI plant, and expanded its rolling mill’s capacity to 2 million t/y. The second phase involved the construction of a 1 million-t/y heavy and jumbo-sections rolling mill.

Other steel companies include Abu Dhabi-based Gulf Steel Industries, which runs a steel rolling mill, and Al-Ghurair Iron & Steel, which operates a cold-steel rolling and galvanising complex, both in Mussafah.

Outlook

As Emal moves towards completing the $8bn expansion of its aluminium smelter in Abu Dhabi, the UAE industrial sector has no other mega-projects in the construction phase.

The main barrier to the development of further large, energy-intensive projects is the lack of available low-cost gas, which fuelled the original expansion of the country’s metals industry. The UAE became a net gas importer in 2007, when demand overtook its domestic capacity and the Dolphin pipeline importing gas from Qatar started operations.

The UAE is looking to expand its imports of more expensive liquefied natural gas, with a new terminal planned for the eastern port of Fujairah. This will help support a large pipeline of projects in the study phase.

The largest projects on the horizon include an alumina refinery in Abu Dhabi, which is being planned by EGA. In September 2013, EGA awarded three contracts for a feasibility study for the estimated $1.5bn refinery. A team of US-based Bechtel and Petrofac Emirates – a joint venture of UK-based Petrofac and the local Mubadala Petroleum Services – was appointed to carry out the study.

In addition, two agreements were signed to secure technologies to support the study. A joint venture of Canada’s Hatch Associates and Finnish minerals processing group Outotec was awarded one contract, while Canadian aluminium firm Rio Tinto Alcan was selected for its refinery technology.

The proposed refinery will process bauxite to extract alumina (aluminium oxide), which will then be used as a raw material to produce primary aluminium in the smelters.

Another major metals project in the pipeline is Talex’s aluminium rolling mill, also planned for Kizad. However, since the details of the scheme originally emerged in 2010, no timeframe has been given for the tendering of the engineering, procurement and construction contract and no details of capacity or budget have been released.

Emirates Steel is expected to continue to lead the upstream development of the UAE steel industry. However, plans for a third expansion phase of its operations at Mussafah, including a new DRI plant, melt shop and continuous rolling mill, have been delayed at the tender stage.

The project was reported to have been tendered in early 2012, but still remains at the pre-construction phase, awaiting final approval from the government.

Also in the steel industry, United Iron & Steel Company plans to build a new steel rolling mill at Mussafah, with an initial capacity of 300,000 t/y. Construction was due to start in the second quarter of 2014, with commercial production scheduled for 2016.

Other projects at early stages in the pipeline include a silicon metal smelter, a fluid catalytic cracking catalyst plant and a ferro-alloys complex, all in Abu Dhabi.