Having invested some $13bn in building three world-class aluminium smelters in the past five years, the UAE, Qatar and Oman must now focus on integrating primary metal production with processing industries. Currently, more than 80 per cent of the region’s primary aluminium output is exported as billets and ingots to be converted into finished products elsewhere.
Yet it is this downstream processesing that adds most value to aluminium. By allowing it to take place in other countries, the Gulf states are not maximising the revenue generating potential of their smelters.
Aluminum production is not just a capital-intensive investment, it is also an energy-intensive industry. It takes 15MW hours of power to produce one tonne of aluminium.
To justify this amount of electricity and the gas used to make it – at a time when gas allocations are becoming more difficult to secure – the Gulf states must be sure to add as much value as possible to their aluminium sectors by encouraging investment in downstream industries, such as extruded, casted and rolled products and cables manufacturing.
As the early pioneer of aluminium production in the region, Bahrain has had many years to foster the growth of ancillary industries. Today, about 50 per cent of the output from smelter is sold locally to a well-developed downstream sector.
Oman and the UAE have initiated plans to establish metals clusters close to their smelters and Qatar has voiced similar intentions. The key will be identifying products that are in high demand and do not directly compete with businesses being set up elsewhere in the Gulf.