Aluminium shines again for UAE amid global glut

The UAE's total exports of aluminium and related products jumped by 102 per cent to US$1.5 billion during the first half of 2012 compared with the same period a year earlier.

Barclays estimated this month that global production will jump 7.4 per cent to 51.4 million tonnes next year, compared with a 3.4 per cent gain this year. Christopher Pike / The National

The UAE's total exports of aluminium and related products jumped by 102 per cent to US$1.5 billion (Dh5.51bn) during the first half of 2012 compared with the same period a year earlier, the Ministry of Foreign Trade said yesterday.

This follows similarly rapid growth rates of 56 per cent and 42 per cent in 2010 and 2011 respectively, it said in a study.

The UAE's aluminium industry leads the GCC region in terms of production, investment and number of workers employed and exports more than 90 per cent of what it produces domestically to 124 countries around the world including to the automotive and aviation sectors in Asia and Europe, the report said.

That put the Emirates in 34th position globally in terms of exports in 2011, up seven places from the previous year.

"India … was the biggest importer … in 2011, worth about US$$145 million, representing a 12.7 per cent share of the UAE's total exports … followed by Iran with $115m accounting for 10.1 per cent," the ministry said.

Barclays estimated this month that global production will jump 7.4 per cent to 51.4 million tonnes next year, compared with a 3.4 per cent gain this year. Stockpiles would expand for at least the next four quarters, reaching a record 8.67 million tonnes by the end of next year, or enough to make about 62 million cars, Barclays said. Production would exceed demand by the most since 2009 as output expands from China to Saudi Arabia, the bank added.

Investors should sell into any rallies, Barclays' analysts led by London-based Gayle Berry wrote in a report this month.

"Demand growth for aluminium has been stronger than any other base metal over the past decade, but it's done not a lot for prices because supply has grown so strongly," Ms Berry said. "That's going to be the picture for next year."

According to a Morgan Stanley report this month, the metal has the weakest outlook of 21 commodities it tracks. "The increase in premiums caused by financing deals is keeping most smelters profitable and limiting the output cuts needed to curb the glut," Bloomberg reported.

About 1.4 million tonnes of production capacity was shut over the past year, not enough to prevent a sixth consecutive annual surplus, Morgan Stanley estimates.

Aluminium rose 2.7 per cent to $2,075 on the London Metal Exchange this year. Prices will average $2,225 in the final three months of next year, or 10 per cent more than this quarter, Bloomberg reported last week.

"You have what I would call an artificial tightness in the market and that's created by financing," said Jeremy Baker, who manages about $850 million of assets at the Vontobel Belvista Commodity Fund in Zurich. "If you look at it from a purely fundamental aspect it is probably one of the metals that is the least attractive, primarily due to excessive supply."

The GCC produces about 3.6 million tonnes of aluminium a year to account for almost 10 per cent of the world's total aluminium output, according to Aluminium Middle East 2013. This is expected to rise to 9 million tons per year to account for between 15 and 17 per cent of global output as regional investments into the aluminium sector steadily climb to a projected Dh55bn in 2022, it said this month.

Leading the region is the UAE and its two major aluminium producers Dubal and Emal, which account for 47 per cent of the region's investments into the sector.

The Ministry of Foreign Trade has also revealed that trade between the UAE and Hong Kong saw a 75 per cent increase from 2011 to 2012, reaching over $1.99bn during the first half of this year.

The ministry said it had started helping small and medium enterprises to prepare for the UAE's trade mission to Hong Kong for a series of trade fairs next month, as parts of its efforts to help both the private and public sectors to open up new markets around the world.