THE ALUMINIUM INDUSTRY S CONTRIBUTION TO THE ECONOMY OF THE GULF STATES A REPORT BY THE GULF ALUMINIUM COUNCIL Aluminium ingots ready for shipment from the Alba plant in Bahrain. GULF ALUMINIUM COUNCIL JANUARY 2009
The Gulf States countries are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. The aluminium industry of the Gulf States has grown since the 1970s to become the most important non-oil industry sector in this rapidly expanding area of the world. This publication outlines the activities and products of the aluminium industry of the Gulf States and explains the important contribution that this industry is making to the economy of the Gulf States. The Rulers and Heads of Government of the Gulf States countries realised many years ago that their long-term future and well-being lay in developing sustainable non-oil industries, with a well-educated and trained local workforce, while at the same time protecting the unique environment of the area. The progress that they have made since the 1970 s in establishing the Gulf as a leading player in the global aluminium supply chain is testimony to that decision. The Gulf area has always been a major supplier of oil and petrochemicals and, in looking to diversify the industrial base, the primary production of aluminium and the fabrication of aluminium products such as extrusions, rolled products and castings, were wise choices. The reasons for choosing the siting of primary aluminium smelters are many and varied. Access to the raw materials required, availability of a local skilled workforce, a transport infrastructure that allows bulk materials to be brought in and taken out, economic and social stability of the area, are all factors to be taken into account when deciding on the large investment required in a primary smelter. Of paramount importance, though, is a reliable and affordable energy supply to generate the electricity required for the primary smelting process. Siting primary smelters in the Gulf ticked all of these boxes, realising that if the aluminium industry became established there, then the employment and development of the skills and prosperity of the local population would follow. A crucible is filled with pure molten aluminium in a potline at Dubal. - 2 -
Although primary aluminium smelting is energy intensive, aluminium products in use save energy and the act of recycling the aluminium at the end of the life of aluminium articles saves even more. The energy balance in a life cycle analysis is therefore very favourable for aluminium production, use and recycling. This makes aluminium a very attractive, sustainable material in demand in the industrialised countries of North America, Europe, Japan and the expanding economies of the other countries. But, increasingly, primary aluminium smelters in some of these industrialised countries are becoming uneconomic, particularly as labour and energy costs escalate. Producing primary aluminium in the Gulf for export to the rest of the world has then proved to be an effective and economic alternative way of exporting energy. At the same time, the established primary smelters have become excellent employment opportunities for the local population. The further advantage is that if the primary aluminium produced in the Gulf can be rolled, extruded and cast into final products for export, then the employment opportunities expand rapidly and the added value of the exports greatly assist the local economy. This thinking led to the establishment of two primary smelters, in Bahrain in 1968 with Aluminium Bahrain and in Dubai in 1979 with Dubai Aluminium. Over the last 40 years, these two smelters have prospered and reinvested in new plant capacity, while at the same time protecting the local environment. Both Alba and Dubal operate under ISO Standards 14001 for Environmental Management Systems and 9001 for Quality Management Systems. Their current production is 1.8 million tonnes, of which 55% is exported out of the Gulf, earning US$2.9 billion in 2007. The direct employment in these companies is 6000 people, of which 40% are Gulf nationals. There is a significant further number of the local population, working for other companies in support of the primary aluminium smelters. These companies are service providers, such as caterers, transport operators, engineering services, waste contractors, etc. It is estimated that a further 10,000 people are engaged in this way. Primary smelter safety executives. - 3 -
One of the reasons for optimism for the future within the primary aluminium industry, is the very clear linear relationship between the usage of aluminium products per head of the population in any country and the GDP per capita in that country. The more wealthy the population, then the more aluminium that is used, in building and construction, transport, packaging and general engineering. In the recent past, the expanding economies of countries, such as China and India, have fuelled the increasing demand for commodities such as aluminium. It is for this reason that predictions of primary aluminium production reaching 50 million tonnes by 2020 from the current 34 million can be made with confidence. This scenario relies on the aluminium industry having access to affordable and reliable, long-term energy sources and here the Gulf States have a major advantage, with both gas and oil readily available and affordable. As well as expansion in both Alba and Dubal, there are further primary aluminium smelters planned in the United Arab Emirates, Saudi Arabia, Qatar and Oman. When these plants come on line, they are expected to take the total primary production in the Gulf to 10 million tonnes by 2020, increasing local employment, prosperity, quality of life, and earnings from exports very significantly. A primary smelter potline under construction at Emirates Aluminium in Abu Dhabi. As outlined earlier, the development and expansion in primary smelting is only a part of the advantages anticipated from setting up the aluminium industry in the Gulf. Aluminium products used extensively in transport, building and construction, packaging and general engineering end uses are extruded, rolled and cast into the components required. In a global scenario, for every one person employed in a primary smelter, ten people are employed in the semi-fabrication and final fabrication of aluminium products. These products can be exported or, alternatively, used locally. Of the many end uses of aluminium, the building and construction industry in the Gulf is the most attractive market to the aluminium industry, with huge expansion taking place in the construction of public buildings, industrial premises, apartment blocks and houses. - 4 -
The A380 Airbus, the world s biggest passenger plane, used by Emirates Airlines. Burj Al Arab Hotel, Dubai Aluminium drinks can Dealing firstly with aluminium rolled products, the largest downstream aluminium company in the Gulf is the Gulf Aluminium Rolling Company, Garmco, established in Bahrain in 1981. The Kingdom of Bahrain holds the largest share of ownership, with other Gulf States participating. It is situated adjacent to the Alba smelter, so that the cast aluminium rolling slabs produced in the primary smelter cast house are easily moved to GARMCO s hot and cold rolling mills and foil mill. The current production is 165,000 tonnes, of which 35,000 tonnes are aluminium foil products. The company has sales offices around the world and has had the foresight to invest in production centres in USA, producing both extruded and rolled products. The company now has 14 international subsidiaries and has now signed an MOU to build a plant in Oman for 165,000 tpa. Both Saudi Arabia and UAE also have aluminium rolling facilities, producing diverse products such as signage, foil and rolled products, particularly for building and construction. An aluminium hot rolling mill. The aluminium extrusion industry is also very well-established in the Gulf with 5 extrusion presses in Bahrain, 4 in Kuwait, 2 in Oman, 18 in Saudi Arabia and 22 in United Arab Emirates. They have a total production capacity for extrusions, rod, wire and cable of - 5 -
about 500,000 tonnes, much of this used locally but with extensive export business as well. Facilities for painting and anodising the extruded sections are readily available. Extrusion run-out table. Taking the Bahrain extruders as a good example, the two companies, Balexco and Midal Cables Ltd, were set up in 1977, when the primary smelter, Alba, had become established. Here is another good example of the synergy between a primary smelter and a downstream fabricator, because Midal Cables takes molten metal deliveries from the neighbouring Alba smelter for the production of conductors, rod and wire. This intercompany co-operation saves considerable energy by avoiding the remelting of primary ingot. The aluminium foundry industry in the Gulf is also well established. Again, Midal Cables Ltd features, having set up Aluwheel in 1992, producing aluminium cast road wheels, of which 500,000 are now exported each year to Europe and USA. Cast aluminium road wheels. - 6 -
In terms of the financial value of aluminium exports from the Gulf States, the export of wrought and cast aluminium and aluminium alloys dominates, the total value in 2007 being US$2.9 billion. This export can be in the form of extrusion billet, rolling slab, pure aluminium ingot and alloyed foundry ingot for remelting. Additionally, the export of fabricated products from the Gulf to all of the countries of the world makes a very significant contribution to the Gulf States economies. Bahrain, Saudi Arabia and United Arab Emirates all make large contributions particularly with extruded, drawn and rolled products, and aluminium powders. The figure for the Gulf States in 2007 totalling US$1.7 billion. There are also the social advantages of full employment for Gulf nationals who, having taken advantage of secondary and tertiary education and industrial training, can plan a career path in the Gulf States aluminium industry with confidence. By the second and third quarters of 2008, it became clear that the global economies were in recession, particularly in USA and Europe. Globally, the predictions for 2009 and even into 2010 are bleak. The Middle East, however, while undoubtedly facing economic problems, is more optimistic and positive growth is expected in 2009. According to the McKinsey Global Institute, the Gulf Co-operation Council (GCC) countries have posted an average annual growth of 7.2% over the last five years. The GCC economies will be challenged by the fall in oil prices, from $147 to below $60 per barrel, during the fourth quarter of 2008. This was accompanied by rapid falls in commodity prices, such as for aluminium and copper. However, in the long term, it is estimated that even if oil prices stayed at $70 per barrel, the oil export revenues will earn the countries of GCC revenues of $6.2 trillion by 2020. The economic growth in the Gulf States may average 3%, but compared to the situation in USA, Japan and Western Europe, these are buoyant numbers. Qatar, the world s largest exporter of liquefied natural gas, is expected to see GDP growth in 2009 of 9.5%. Consequently, the long-term predictions for the expansion in the Gulf States aluminium industry are still regarded as valid. In global terms, the Gulf primary aluminium smelters are at the lower production cost end of the equation, and high cost smelters in North America, Europe, and even China are under pressure. CONCLUSIONS The success of the Gulf States aluminium industry has had a considerable impact on the economic and social structure of the various Gulf States. The companies have been profitable and have had the foresight to invest in new capacity. Alongside primary smelters have grown downstream fabrication and casting facilities, so that exports of aluminium products have considerable added value. Employment opportunities for Gulf nationals have expanded greatly. The success of the whole aluminium industry in the GCC countries has led to prosperity and career and educational opportunities for many thousands of people in the region. Aluminium products are readily available from local suppliers for Gulf projects. Indirect employment in service providers to the aluminium industry effectively doubles the total employment in aluminium companies. The companies are playing a full role in education and training, in secondary and tertiary - 7 -
education, as well as training within the companies. All this is being done while, at the same time, environmental measures to the highest international standards are in place. The Gulf aluminium industry remains very confident for the future. Abdulla Kalban Chairman Gulf Aluminium Council Ahmed Al Noaimi Vice Chairman Gulf Aluminium Council - 8 -
GULF ALUMINIUM COUNCIL ALBA - Aluminium Bahrain B.S.C. Kingdom of Bahrain DUBAL - Dubai Aluminium Company Ltd United Arab Emirates EMAL - Emirates Aluminium United Arab Emirates MA'ADEN Saudi Arabian Mining Company Saudi Arabia QATALUM Qatar Aluminium Ltd Qatar SOHAR Aluminium Sultanate of Oman Meeting of the Gulf Aluminium Council. - 9 -