ALUMINIUM MIDDLE EAST-2015 to highlight industry's mega trends

Demographic changes, acquisitions and recycling redrawing the industry
Middle East’s aluminium exports to rise to $1226 billion by 2030
GCC countries emerging as winners of the new business paradigm

Dubai, September 23, 2014: Globalization, market dynamics, environment and energy prices are redrawing the world aluminium industry map, with the Middle East in general and the Arabian Gulf countries in particular emerging as the potential winners of the new business paradigm.

These mega trends, along with the opportunities for the Gulf Cooperation Council (GCC) to benefit from them, will be highlighted at the 2015 edition of ALUMINIUM MIDDLE EAST, the biggest specialized aluminium industry exhibition of its kind in the region that brings together manufacturers, producers, investors and services providers under one roof.

“The exhibition will put the aluminium markets’ mega trends under the spot light and define the best ways for the Middle East in general and GCC in particular can benefit from these trends,” said Daniyal Qureshi, Group Exhibition Director at Reed Exhibitions Middle East, organizers of the event.

Held under the theme, Forging Connections…Building Possibilities, the exhibition will help the aluminium industry reach a new level of extraordinary growth and cement its position as a powerhouse of the world aluminium industry, he added.

Aluminium industry experts say that the world will go through a fundamental transformation in all walks of life during the next 50 years, including where we live, what we consume, how we travel, and what we eat.

These changes will fuel the demand for aluminium and aluminium products worldwide and open the doors for those who are able to innovate and come up with what the world needs.

According to the UN Population Fund, the world’s population will rise from nine billion in 2014 to more than 10 billion in 2050, half of which will be living in just four countries -China, India, Indonesia and Brazil.

A study by Brookings Institute estimates that by the year 2020 more than three billion people will join the middle class, inclined to spend more on food and beverages, housing, electronics and travel, all of which are aluminium-guzzling industries.

The Aluminium Manufacturers and Producers Association expects the aluminium world demand to grow 6.5 per cent annually which will see doubling of the production and consumption from 35 million tonnes in 2010 to more than 70 million tonnes by 2020.

Aluminium is among the industries that are greatly affected by globalization forces, which geographically redistributes production and consumption centers to benefit from cheap labour, energy and shipping costs, in addition to proximity to bauxite mines and less stringent environmental roles. There is a shift towards lighter and stronger materials in many industries, but aluminium has remained stronger in demand.

Swedish ME Steel, a leading provider of specialized steels in the Middle East and exhibitor at Aluminium Middle East, expects the resurgence of construction projects to dominate the production of aluminium in 2015, with no slowdown in the foreseeable future.

“The GCC countries can capitalize on this shift by increasing capacity, especially in the production of specialized aluminium grades. What makes the GCC interesting is the dual role it plays as a key producer and consumer of aluminium products,” said Cheyenne Kamran, Business Development Manager at Swedish ME Steel.

He added: “As the Middle East distributor of SSAB Sweden’s Toolox, we are looking to grow in several sub segments of the aluminium industry. Whether it be the furnace, to make an aluminum die casting component, or extrude various profiles, our steel products have played and will continue to play a major factor in all things aluminium.”

Global aluminium companies are vying to move their operations from countries of origin to emerging economies to exploit the relative advantages.

On an average, out of every dollar earned by these companies, 50 cents come from overseas operations.

Faced with globalization challenges and a shift in international trade patterns, the aluminium industry is trying hard to reorganize and regroup themselves through mergers and acquisitions to accommodate the new paradigm.

RUSAL, the Russian aluminium giant became the world’s biggest producer after merging with SUAL and the alumina assets of Glencore. CHINALCO, the formidable Chinese aluminium producer, is sparing no time in forging with smaller partners and ALCOA, global aluminium leader, is teaming up with the Saudi Arabian mining company (Ma’aden) to form a giant joint venture.

As a result of the ceaseless mergers and acquisitions, the market has become more concentrated and divided among a small number of big players. Currently, five companies control nearly 50 per cent of the world’s aluminium production.

Moving from horizontal to vertical expansion was another tactic by the industry to accommodate the changes through specialization in manufacturing high-value products like hard alloys and treated composites for the aerospace industry. In other words, the industry moved from dealing with aluminium as a commodity to dealing with it as a product.

JAZA, a Jordanian provider of aluminium smelters’ components and consumables and an outstanding participant at ALUMINIUM MIDDLE EAST, expects the Middle East aluminium market to keep growing due to new smelters opening and downstream industry developments that are taking place.

“ME aluminium extruders are poised to change their product mix from construction to industrial and open new markets for their product outside the Middle East,” Pierre Sanbar, JAZA General Manager said.

“Technology advancement is allowing the extrusion sectors to move ahead because of the low cost billet and energy. Extruders in the area are very competitive in terms of quality and price,” he added.

Parallel to these changes, recycling was another mega trend shaping the industry, not only because it is an integral part of the industry’s environmental policy, but also due to huge economic savings that recycling brings.

The global recycling industry is estimated to be in excess of $200 billion in annual revenues, of which $75 billion is generated by the United States.

Primary source of end-of-life (EOL) scrap includes demolished building and construction works, End-of-life vehicles (ELV), electric wires and cables, electronics and used Beverage Cans (UBC).

According to Aluminium International Institute, producing one kilogram of aluminium from bauxite requires 45 KWH of electricity, compared with only 2.8 KWH using recycled aluminium, almost a 90 per cent saving in energy costs.

It is easy to understand why recycling is going mainstream; taking into consideration that the investment cost to set up a recycling factory is only one tenth of the investment needed for setting up a factory to produce aluminium from bauxite. Currently, more than 400 million tonnes of aluminium are in use all over the world, which can be a tremendous source of aluminium production growth during the coming years.

Industry analysts agree that Middle East in general and GCC in particular are strong candidates to emerge as winners of the new market dynamics.

A study by Frost &Sullivan that looked into the future of Middle East aluminium industry until 2020, suggests the region’s share of aluminium world production to rise from to more than 15 per cent by 2015, up from 6.2 per cent in 2007.

Despite the increase in Middle East’s strategic importance in the aluminium production matrix, the biggest chunk of the region’s production remains unmanufactured exported aluminium.

The region has a long way to go in moving away from exporting pure aluminium to products, similarly to what happened when it moved from exporting crude oil to exporting petrochemicals.

According to the study, Middle East’s aluminium exports will increase from 76 per cent of all the production in 2013 to 85 per cent by 2020, totaling more than $1,226 billion.

If the Middle East has to benefit from the new paradigm, experts say companies need to enter into partnerships with bauxite mines’ owners to hedge themselves against price fluctuations in the free market and the disruption of deliveries due to political instability in bauxite-exporting countries.

Aluminium companies should also realize the urgency of increasing their R&D budgets to develop more effective production techniques, reduce costs, extending longevity of the bauxite mines lifespan and innovating new high-value products, especially in the aerospace and consumer electronic sectors.

Gulf investments in the aluminium sector are expected to reach $55 billion by 2020, compared with $30 billion in 2011, thanks to smelters’ expansions and new projects in the region.

The volume of aluminium production in the Gulf region is expected to increase to five million tonnes by 2015, which accounts for 17.5 per cent of the total global output, compared with 3.7 million tonnes in 2012 or 11 per cent of the total world production.

ALUMINIUM MIDDLE EAST-2015, which will be held from 14 to 16 April, at Dubai International Convention and Exhibition Centre (DICEC), is expected to bring the industry to common terms as what needs to be done to navigate smoothly through the high waters of the aluminium industry.

The exhibition is expected to attract over 200 exhibitors from 25 countries. The number of unique visitors at the 2015 edition is also expected to reach 4,000, a 14 per cent increase over the last edition, which attracted 3,523 visitors.