Middle Eastern Aluminum Leads the World, Outside China, in Growth

Maybe because of Alcoa Inc.’s involvement in the Maadan smelter in Saudi Arabia, recent attention on the Middle East has centered on that production facility, but significant as its 750,000 metric tons is, it will be but part of a much larger Middle Eastern aluminum capacity built up in recent years.

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A report from the fourth edition of Aluminium Middle East 2015 states that last year the Gulf region produced 4.83 million metric tons of primary aluminum compared to the 53.06 mmt produced globally. Of that, the United Arab Emirates (UAE) produced 2.3 mmt making it globally the fourth-largest producer accounting for more than 50% of the region’s production.

United Aluminum Emirates

85% of the metal is exported around the world although tax breaks, local metal supply and a buoyant construction infrastructure market have encouraged fast rising local consumption. Consumption for downstream application is growing at 8.4% per year compared to a global average of 3.5% supposedly making the Middle East the fastest growing aluminum market in the world according to the report.

The Gulf has six smelters: Alba, Dubal, Emal, Qatalum, Sohar and EGA, in addition to a growing alumina refining capacity. Although the UAE is nearing production capacity — it produced 2.3 mmt of it’s 2.4 mmt theoretical capacity last year — the management are tight lipped about further expansion plans.

Expansion Beyond Current Capacity

Emirate Global Aluminium’s vice chairman is also CEO of Dubai Electricity and Water Authority, underlining the close interdependency of aluminum smelters to electricity costs and water supply. Although the UAE earns some $3.9 billion in export revenues from aluminum production, it comes at a price in the consumption of vast amounts of natural gas and fresh water.

Arguably, both could be better used in alternative applications and growing domestic demand is putting pressure on the prices at which both commodities are provided to the industry. The UAE will remain one of the lowest-cost producers in the world for years if not decades, but will the region raise production beyond 5 mmt in the medium term? That is not so certain.

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