Construction drives aluminium sector recovery

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The construction industry and transport sector must make a sustained recovery if the aluminium industry is to continue to thrive in the Gulf region, said aluminium experts at this week’s Middle East Aluminium 2010 conference.

As the two biggest consumers of aluminium in the region, the success of these industries has a direct impact on the industry.

Abdulla Kalban, chairman of the Gulf Aluminium Council, is optimistic about the prospects for the construction sector.

“There are positive signs coming from local regions, especially large economies such as Saudi Arabia, Qatar and the UAE,” said Kalban.

“The value of aluminium in the commodities sector of the global economy was clearly demonstrated in 2009, when the price of aluminium recovered remarkably quickly and strongly compared to market expectations and other commodities.”

“Moreover, the recovery in the aluminium price has been sustained, and, according to expert analysts, looks set to continue.”

Analyst Mark Georgiou predicts demand for aluminium in the Middle East will return to 2008 levels in 2010; a much quicker recovery than that expected for Europe and the US.

“Last year was a difficult year for the aluminium industry, but since September/October last year there has been a recovery led by China,” says Georgiou.

On a global level, Georgiou anticipates a continued increase in demand for aluminium in 2010, most significantly in emerging economies such as China, India, South-East Asia and the Middle East.

In response, global production rates of aluminium are expected to continue to rise, and Georgiou expects the Middle East to be one of the world’s key aluminium production hubs - along with China and India - in coming years.

Georgiou fears that if financial services players, such as hedge funds, sense lucrative yields from the growth of the market, there is potential for pricing to become volatile in the short term. Such instability will be short-lived, however, and pricing in the long-term will be determined by the primary market forces of supply and demand.