Trump effect to hurt Gulf aluminium producers' margins rather badly

Primary aluminium producers in the Gulf region are looking at strategies to cut costs heavily as they find it difficult to cope with the rising global aluminium glut and protectionism under a new U.S. presidency, reported industry sources. All five Gulf aluminium producers namely, Emirates Global Aluminium, Aluminium Bahrain, Sohar Aluminium, Qatalum, Maaden- said they were planning cost cutting in order to deal with the oversupply of the metal exacerbated by the woes of low aluminium prices.

"The most important factor in our business is to protect our margin," said Abdulla Al Kalban, the chief executive of EGA, at the International Aluminium Conference in Dubai today. "We keep hammering our costs every day." EGA is the Gulf’s largest aluminium producer and produces 2.4 million  tonnes of aluminium per year.

Benchmark LME aluminium prices have risen by 16.9 per cent so far this year but volatility seems to be persisting in the medium term. Another major area of concern remains the new Trump presidency. The US being the biggest potential market for the Gulf aluminium producers, Trump’s election promises to protect the domestic aluminium industry from countries accused of dumping their commodities in the US, make them doubly worried about their growth plans.

"If all those promises are kept by him and if he is serious about it, definitely there will be a huge impact on aluminium," said Khalid Laram, the chief executive of Qatalum.

Gulf aluminium companies produce 5.27 million tonnes of the metal in a year, which constitutes about 10 per cent of the world’s total. The figure is expected to reach 6 million tonnes by 2020, once the expansion of the smelter in Bahrain is complete, noted secretary general of the non-profit Gulf Aluminium Council, Mahmoud Daylami.

Nearly 60 per cent of Gulf's aluminium production is exported to markets such as the US, Europe, Japan and Asia. Most Gulf producers are eyeing the automotive market in the US, which is replacing steel with aluminium; so, the US remains the main market for this segment though its production has been dwindling over the past one year.

"The most promising market today if president Trump leaves things as it, I think, is the US," said Mr Al Kalban. "The US is the biggest market globally and [it] can absorb as much as we, the five aluminium smelters here, supply into the US."

Notwithstanding the lower aluminium prices, some Gulf producers have a long-term view on production. They are boosting efficiency to maximise their production production, which will eventually help them reach 6 million tonnes by 2020, according to Mr Daylami.

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