Aluminium producers from the GCC are expected to boost exports to the US and European markets after the US and UK banned trading of Russian aluminium, copper and nickel on global metal exchanges and prohibited their imports into the US, analysts and company executives said.
The GCC region is an important producer of primary aluminium with a total production of 6.08 million tonnes representing about 9 per cent of the total global production in 2023, with 44 per cent of the total GCC production coming from the UAE.
The UAE is the fifth biggest producer of aluminium in the world after China, India, Russia and Canada, with Bahrain in sixth position, according to the London-based commodities research firm CRU Group.
“There are more opportunities for GCC producers to gain market share with the diversion of metal away from Western Europe and the US amid new sanctions,” Zaid Aljanabi, a principal analyst covering primary and secondary aluminium at CRU told The National.
Earlier this month, the US Treasury Department, in co-ordination with the UK, introduced two new prohibitions to curtail the revenue that Russia earns from aluminium, copper and nickel exports amid its continuing invasion of Ukraine.
As part of the measures, the US banned the import of Russian aluminium, copper and nickel produced on or after April 13.
It also decided to limit the trade of the metals on global exchanges such as the London Metal Exchange and the Chicago Mercantile Exchange.
Russian aluminium exports were falling even before the imposition of sanctions by the US and the UK "amid self-sanctioning behaviour of consumers” to avoid risks, according to Mr Aljanabi.
Russian exports fell by 45 per cent in 2023 compared to 2021, while UAE and Bahrain exports during the same period increased by 26 per cent and 15 per cent respectively.
“Sanctions on Russian metals, imposed by the US and the UK .... are likely to impact current global trade flows,” Olga Savina, a commodities analyst at BMI, a unit of Fitch Group, said.
“We expect that GCC producers could potentially see an increase in demand for their products, however, it is important to note that the ability of GCC producers to capitalise on this opportunity will depend on their production capacity as well as logistical challenges.”
Aluminium producers including the UAE based Ducab Metals Business and Bahrain-listed Aluminium Bahrain are bullish about the increased demand after the latest move by the global powers.
“Russian aluminium is a very important factor and when [it] is being pulled from the market, that will definitely boost our supply to the global market,” Mohamed Al Ahmedi, the chief executive of Ducab Metals Business, told The National in an interview last week.
“The overall global market which we are expecting will stay for a while, in a deficit, when it comes to copper and aluminium because of the current situation and other elements.”
He did not say, however, to what extent the company’s exports are likely to increase amid the US ban.
Ducab Metals Business, a unit of Ducab Group produces aluminium and copper rods used in the construction and power sectors, and exports to more than 75 countries.
The US and Europe are its biggest markets for aluminium products while India, the GCC and southern Africa account for the bulk of its copper product sales.
Acquisition of GIC Magnet
This week, the company announced the acquisition of GIC Magnet, a Dubai-based manufacturer of copper and aluminium strips as it aims to boost supply in the global markets.
Ducab Metals did not announce the total value of the deal but said its annual revenue would surge by $40.5 million with the acquisition of GIC. Ducab Metals records average annual revenue of about Dh6 billion ($1.63 billion).
“With the GIC acquisition our exports will definitely go up in the US. The majority of sales of GIC will be for transformers manufacturers in the US,” Mr Al Ahmedi said.
Ducab Metals has an annual production capacity of 235,000 tonnes, with copper accounting for 180,000 tonnes and aluminium for the remainder, at its manufacturing units in Abu Dhabi.
Aluminium Bahrain is also optimistic about growth prospects and aims to boost the supply of aluminium products in the world’s largest economy and other markets.
“The recent US sanctions on Russian aluminium have undoubtedly created a dynamic shift in the global aluminium landscape,” Ali Al Baqali, chief executive of Aluminium Bahrain said, while adding the current situation presents a “potential opportunity” to further strengthen its role in the global aluminium supply chain.
"With our existing robust capacity, we are confident in our ability to potentially increase supply to meet the growing demand in the US and beyond.”
The US market represented 14.3 per cent of its total sales in 2023.
Capitalising on economic partnerships
Ducab Metals also aims to capitalise on the new opportunities arising in the global markets as the UAE, the Arab world’s second-largest economy, continues to boost trade ties with countries around the globe on the back of comprehensive economic partnership agreements.
The Emirates has already concluded Cepas with a number of countries, including India, Israel, Indonesia, Turkey, Georgia and Costa Rica, and is holding talks with other countries to finalise new deals.
“The UAE signed a Cepa agreement with India and this will allow us to increase our sales to Indian markets,” Mr Al Ahmedi said.
“India … is growing year after year. We are seeing a lot of developments in different sectors, different areas.”
The Indian economy remains strong and is projected to grow at 6.5 per cent in 2024 and 2025, underpinned by resilience in domestic demand, according to the International Monetary Fund.
Last week, Ducab Metals also launched green aluminium and signed an agreement with European cable manufacturer Tele-Fonika Kable to supply the environmentally friendly metal.
“Green aluminium is being produced from clean energy, mixed with high-quality recycled material, which reduces energy consumption by 90 per cent and carbon emissions by 97 per cent,” Mr Al Ahmedi said.
The demand for green aluminium “is much higher than the available material”, he added.
