Mena Aluminium 2009: The region's rise as a global producer

In 2008 it produced 2.6 million tonnes of primary aluminium, accounting for around 6.5% of world market share according to the new MEED Insight report Mena Aluminium 2009.

MEED Insight estimates that by 2010, assuming all planned projects are completed on time, aluminium production capacity in the Middle East and North Africa (Mena) region will be 4.3 million tonnes a year (t/y).

This figure rises to 10.8 million t/y provided all the expansion projects at existing smelters and greenfield projects planned beyond 2010 proceed. This will mean that the Mena region will have about 19% of world capacity by 2013-14.

GCC producers will continue to account for a major part of the Mena region's aluminium production. Of the 6.5 million tonnes of potential aluminium capacity planned beyond 2010, 4.4 million tonnes will be built in the GCC. In the longer term, MEED Insight estimates that by 2020 the GCC alone will produce some 10 million t/y of aluminium, accounting for 20% of global market share.

The region's downstream aluminium industry is under developed. The Middle East consumes only 16% of the domestically produced primary aluminium while exporting the remaining 84%.

The extrusion industry - manufacturing aluminium products from its primary form - accounts for almost 70% of the aluminium demand in the Middle East, of which 90% is allocated to the construction market.

Due to low demand for finished aluminium products, there is a limited number of rolling and casting producers in the region. More rolling and casting factories will need to be built for the aluminium industry to benefit from a sophisticated downstream market.

Although the Middle East is currently attracting investments in new aluminium plants due to its energy feedstock advantage, securing affordable long-term power and bauxite supplies are two issues that need to be addressed for the region to ensure success in the industry.

Competition for bauxite supplies is mainly expected to come from China, while securing sufficient gas to feed aluminium plants' power stations is becoming more difficult given the direct competition for gas from the Middle East's hydrocarbons, petrochemicals and utilities industries.

Globally, aluminium consumption growth averaged 6.1% between 2000 and 2007. However, with the world economy entering a deep recession, there is uncertainty as to the short-to-medium-term growth path for aluminium demand. Large supply curtailments have been announced by producers across the world, in an effort to revive both prices and demand for aluminium.

The slowdown in the global economy has led to a dramatic drop in aluminium prices. The determining factor in a price recovery will be how fast the consumer market can absorb the accumulated aluminium inventories once global demand returns.

This is particularly important for the Middle East region, as it exports the majority of its primary aluminium production to international markets.