Emirates Steel has sharpened its focus on value-added products

Emirates Steel has sharpened its focus on value-added products

Manufacturing key element in growth

Initiatives including Kizad have put manufacturing in the forefront of industrialisation as Abu Dhabi emirate diversifies its economy, reports Mridula Bhattacharya

October 2014

Manufacturing along with property and finance have become the biggest drivers of Abu Dhabi’s economic growth. According to Statistics Centre Abu Dhabi (Scad) figures, the emirate’s non-oil exports rose 11.5 per cent in the second quarter this year. At Dh27.6 billion ($7.51 billion), the quarter’s non-oil imports were up 7.5 per cent from a year earlier and represented about three times the value of non-oil exports, which stood at Dh9.53 billion.

Manufactured goods were the quarter’s largest category of non-oil exports, increasing by Dhs245 million or 10.8 per cent from a year earlier. Exports of non-ferrous metals increased by Dh84 million, offsetting a decrease in iron and steel exports, which fell by Dh83 million.

Chemicals and related products were the No 2 export category, increasing 17 per cent or Dh 211 million in the quarter, led mostly by plastics in primary forms, which grew by 15.9 per cent to Dh181 million.

Almost 86 per cent of Abu Dhabi’s non-oil exports went to Asia in the second quarter, with Saudi Arabia the leading destination with Dh1.5 billion worth of exports, followed by India. Exports to Africa stood at 6.3 per cent and Europe 5.8 per cent. Asia was also the top destination for Abu Dhabi’s re-exports in the second quarter, taking in 83.5 per cent of total re-exports.

In imports, machinery and transport equipment was the largest contributor, representing 48.4 per cent of the Dh13.4 billion total.

Asia represented the leading source of imports through Abu Dhabi’s ports in the second quarter with a share of 47.2 per cent. Imports from Europe stood at 29.7 per cent and North America at 12 per cent.

In 2013, Abu Dhabi’s non-oil GDP grew by 7.4 per cent, up from 5.9 per cent the previous year. The growth figure falls in line with Abu Dhabi’s 2030 vision, which aims to reduce reliance on hydrocarbons.

The oil sector grew by 3.2 per cent during the year, down from 3.8 per cent the year before.

In real GDP terms, the data showed the contribution of the non-oil sector to the economy rose to 48.6 per cent last year, up from 47.6 per cent the year before.

Borouge, one of the Gulf’s leading companies creating plastic solutions

Borouge, one of the Gulf’s leading companies creating plastic solutions

According to another report by Oxford Business Group, Abu Dhabi is progressing well, both in terms of economic performance and progress towards a more diversified economy – the principle goal of the Abu Dhabi Economic Vision 2030 formulated five years ago.

“On the macroeconomic level, the emirate’s GDP growth is expected to come in at around 4.5 per cent for the year, with ratings agencies such as Standard & Poor’s granting it a stable outlook thanks to its strong fiscal and external positions,” it said.

According to an earlier report by Scad, in 2013, the manufacturing, finance and property  sectors accounted for about a third of the emirate’s overall GDP growth of 5.18 per cent.

The report said non-oil growth was mainly driven by manufacturing and then the financial and real estate sectors with the Khalifa Industrial Zone Abu Dhabi (Kizad), even though not fully operational, having an impact.

Manufacturing is also expanding, led by Emirates Global Aluminium, Emirates Steel and Borouge, the emirate’s industrial heavyweights.

Emirates Global Aluminium, the world’s fourth biggest aluminium producer, announced that it was building a $3 billion alumina refinery as a boom in regional infrastructure projects has spurred demand.

The company was formed by merging Emirates Aluminium (Emal) and Dubai Aluminium (Dubal).

EGA, which accounts for almost half of the region’s production capacity at 2.4 million tonnes, is now in the final stages of the feasibility study for the alumina refinery, which began about a year-and-a- half ago. The refinery is expected to be operational by 2017 and will be done in two phases, each with a capacity to produce 2 million tonnes of alumina, he added.

The alumina will be used almost exclusively to feed into the smelters at EGA, which in turn exports about 90 per cent of its final product to more than 350 customers around the world.

Another industrial heavyweight, Emirates Steel, the UAE’s largest steelmaker, has announced that it would further expand its global presence with more value-added steel to its product basket.

With better demand prospects and mega expansion plans in the pipeline within the Middle East region, Emirates Steel, in a press statement, said it was sharpening its focus on high-margin, high-strength value-added products (VAPs).

VAPs are mainly finished steel and are termed so depending on their treatment or their end use. The products vary from sheet piles to high silica wire rod to long steel bars to alloy steel. The end users are primarily the construction and fabrication sectors.

Meanwhile, Saif Al Khaili Group, an Abu Dhabi-based diversified conglomerate, signed a Dh280 million deal to set up two factories in Khalifa Industrial Zone Abu Dhabi (Kizad).

The first plant will be the UAE’s first to produce caustic soda and other chlorine derivatives to be used in industries including aluminium, oil, steel and chemicals. Known as the Emirates Chemical Factory, it will have a production capacity of 400,000 tonnes per year.

The second plant, to be based in Kizad’s food cluster on a 284,435 sq ft plot of land, will produce ready-made meals for industrial catering. It will be capable of producing 70,000 meals per day.

“As caustic soda is currently 100 per cent imported, the Emirates Chemical Factory, as the first producer in the UAE, will contribute significantly to the local market and further reduce our import dependability, in line with Abu Dhabi’s economic vision 2030,” said Khaled Salmeen, chief executive of Kizad, the capital’s industrial free zone.

Kizad was launched by the Abu Dhabi Government in 2010 with a mandate to help spearhead the emirate’s diversification goal and attract new technology and jobs across several sectors including food processing, logistics, chemicals and mixed-use manufacturing. Kizad has managed to bring in foreign companies from countries such as Germany and India, but it has also made progress in enticing local firms. Emirates Global Aluminium is an anchor tenant within Kizad, while Emirates Steel, another industrial heavyweight, also has a presence.

According to another report by Oxford Business Group, Abu Dhabi is expanding sour gas production in a bid to reduce its imports and at the same time meet growing energy demands. The emirate is seeking to develop its sour gas reserves, both on and off-shore.

The non-oil sector is likely to continue to grow on the back of a series of large construction projects, such as the ongoing expansion of Abu Dhabi International Airport and the development of the 1,500-km Etihad Railway, along with its future links to other GCC countries.

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