Advantages of the Middle East Aluminum Industry and its Attractiveness to Chinese Enterprises
The aluminum and metallurgical industry in the Middle East is a leading sector in the region and one of the major aluminum production hubs worldwide. China’s aluminum industry has the potential to integrate into the Middle East aluminum value chain fully.
The UAE, Bahrain, Saudi Arabia, Oman, and Qatar are the main aluminum-producing countries in the region, accounting for a significant 9.1% share of global aluminum production in 2022.
In the same year, the top three aluminum-producing countries in the Gulf were the UAE with 2.7 million tons, Bahrain with 1.6 million tons, and Saudi Arabia with 1.1 million tons.
Despite their developed oil, gas, and petrochemical industries, the aluminum metallurgy sector holds a considerable share in the domestic GDP of these countries. The aluminum metallurgy sector’s contribution to GDP in Saudi Arabia is 0.8%, the UAE 1.7%, Qatar 2.9%, Bahrain 3.3%, and Oman 1.0%.
1. Overview of the Middle East Aluminum Industry
Why is the aluminum industry in the Middle East so developed? The region benefits from several factors:
(1) Low-cost Energy
The Gulf countries have abundant natural gas resources, which serve as the primary energy source for aluminum production. This low-cost energy gives the Gulf countries a significant cost advantage in the global aluminum industry.
(2) Raw Material Supply
Middle Eastern countries have easy access to bauxite, the primary ore for aluminum extraction, as the region possesses substantial bauxite reserves.
(3) Favorable Geographical Location
The Gulf countries are strategically located close to major aluminum markets, including Europe and Asia. This advantageous location enables them to export aluminum products conveniently to their target markets.
The aluminum industry in the Middle East has experienced rapid growth in recent years. According to statistics from the International Aluminum Institute (IAI), total primary aluminum production in the Gulf countries reached 6.072 million tons in 2022, a 3.11% increase from 5.889 million tons in 2021.
2. Aluminum Industry in Various Middle Eastern Countries
(1) UAE
The UAE is the largest aluminum-producing country in the Middle East. It houses the world’s largest integrated aluminum producer, Emirates Global Aluminum (EGA). EGA ranks fourth globally in aluminum production, with 2022 output reaching 2.7 million tons, accounting for approximately 4% of the global total. The highest aluminum-producing country globally is China with 33.8 million tons in 2022. EGA operates two primary aluminum smelters in Abu Dhabi and Dubai, as well as an alumina refinery in Abu Dhabi, which is supplied with bauxite from Guinea.
(2) Bahrain
Bahrain is home to Aluminium Bahrain (B.S.C. Alba), the largest aluminum smelter in the Middle East and the second-largest globally. The annual production capacity of Alba’s sole plant reaches 1.5 million tons. Alba was founded in 1971 as a joint venture between the Bahraini government and private investors and has undergone several expansions over the years to significantly increase its capacity.
(3) Saudi Arabia
Saudi Arabia’s aluminum industry is relatively new but has witnessed rapid growth in recent years. The Saudi government supports the sector through subsidies and other incentives. In 2022, Saudi Arabia’s aluminum production reached 1.1 million tons, ranking it as the 12th largest aluminum-producing country globally. The main aluminum industry player in Saudi Arabia is Ma’aden Aluminium, a joint venture between Saudi Arabian Mining Company (Ma’aden) and Alcoa.
(4) Qatar
Qatar Aluminum Company (Qatalum) is a major player in the country’s aluminum industry. It is a joint venture between Qatar Petroleum and Norsk Hydro, a Norwegian aluminum company. Qatalum operates a primary aluminum plant located in Mesaieed Industrial City, producing primary aluminum products for export.
(5) Oman
Oman has been actively developing its aluminum industry, with Sohar Aluminium being its main player. Sohar Aluminium is a joint venture between Oman Oil Company, Abu Dhabi National Energy Company, and Rio Tinto Group. The company operates an aluminum smelter in Sohar Industrial Port.
3. Chinese Investment in the Middle East Aluminum Industry
(1) Shandong Innovation Metal Group’s Project in Saudi Arabia
In December 2022, during a visit to Saudi Arabia by Chinese leaders, China and Saudi Arabia signed 35 investment agreements worth approximately $30 billion. Among them was a project for the construction of an aluminum plant in partnership with the Saudi Arabian Investment Department (MISA) and Shandong Innovation Metal Group. On February 6, 2023, MISA and Shandong Innovation Metal Group officially signed a Memorandum of Understanding (MOU) to establish plans for the aluminum plant in Ras Al Khair Industrial City. The total investment for the project is $5 billion, and the designed annual production capacity is 1 million tons of aluminum. The plant is expected to be completed in 2025.
(2) Sunstone’s Project in the UAE
On June 1, 2023, Sunstone Development announced that it had signed an Investment MOU with Emirates Global Aluminum (EGA) to establish a joint venture in the UAE to build a pre-baked anode production base. This project aims to meet the demand for pre-baked anode products from EGA and other aluminum companies in the Middle East. Sunstone Development’s core product is pre-baked anode, an upstream product in the aluminum electrolysis industry.
4. Conclusion
Due to the availability of low-cost energy, the Middle Eastern countries have vigorously developed their aluminum industry and actively invested in aluminum industry infrastructure and technology research and development to increase aluminum production capacity and maintain high-quality standards. The Middle East’s aluminum industry benefits both upstream and downstream activities in the aluminum sector. Chinese aluminum processing companies can invest in downstream activities such as aluminum extrusion, rolling, manufacturing, and value-added product manufacturing in the Middle East, leveraging the region’s low-cost aluminum products for processing and manufacturing.