TBY talks to Abdulla J.M. Kalban, President & CEO of Dubai Aluminium (DUBAL), on the dynamics of the global aluminum market and his impressions on the UAE’s growing role as an major aluminum producer.
TBY DUBAL celebrated its 30th anniversary in 2009 and is one of the flagship industrial powerhouses in the UAE. What developments has DUBAL witnessed in the industrial sector over the last three decades, and what factors have been instrumental to its success?
ABDULLA J.M. KALBAN The industrial sector in Dubai in particular has become very attractive and extremely solid. The aluminum industry is the biggest non-oil industry in the UAE today. Aluminum is a commodity, and banks are using metals as a reserve, even as an investment. We currently sell to almost 300 customers worldwide in about 45 countries on six continents. We manufacture products in three main forms: extrusion billets, foundry alloys, and high-purity aluminum. We are focusing on four different sectors: construction, packaging, transportation, and also now aerospace. A decade ago, we accounted for 7% to 9% of the industrial sector. This has changed slightly with a lot of new companies now contributing to Dubai’s GDP. Today we are producing 1.03 million tons. Currently, 10% of our production is used locally, while 90% is exported. When 90% of your production is exported, you need good facilities, good transportation, and a good port to handle 900,000 tons of metal exports. We are very fortunate to have DP World, which has contributed to DUBAL’s success because of the technology and services that it provides. We, in turn, contribute to its income—about 25% of DP World’s income comes from DUBAL, through transportation and handling, plus storage, because we store our products at its facilities. From there we also supply five to six downstream destinations in the UAE. We work closely with downstream businesses in the UAE and have been doing so successfully for the last 33 years.
Which are the key markets for you, and where are you witnessing increased growth and international demand?
In the 1980s, we used to sell 80% of our products to Asia. However, after the Asian financial crisis in the late 1990s, we shifted our focus to other parts of the world. Asia and Southeast Asia nevertheless remain important markets for us. The Moroccan, Tunisian, and Egyptian markets are important also, as well as Syria, Jordan, and Lebanon. About 17% of our total production is sold to Europe, and that is a major market; not so much from a revenue perspective, but from a strategic one. In the EU, a 6% tariff is applied to all of our products, and this duty has been imposed for almost 15 years. When this tariff is reduced, the market will become far more lucrative for us. The newest market for us today is South America. We started selling there last year, with 10,000 tons being shipped to that market. We aim to sell 25,000 tons there in 2012. By 2015, we expect to sell more than 50,000 tons to South America, mainly in Brazil, Chile, and Venezuela.
How was the price of aluminum affected by the global crisis?
Before the crisis, aluminum prices were close to record highs. During the crisis, prices dropped to close on $1,300 per ton. Despite this, 2009 was a good year for DUBAL as we adopted a different strategy to the other players. While many companies cut production, made staffing cutbacks, froze salaries, halted projects, and stopped supplying certain customers, we did the opposite. The company actually increased its production, and continued its capex projects. The most important thing to DUBAL is our people, and we ensured that no one would be laid off. Throughout the crisis period we invested in our people, and we invested in our companies. We have people from over 45 nationalities working for us, and we pride ourselves on our international and highly skilled workforce.
In 2007 you entered into a joint venture with Mubadalla to create Emirates Aluminium Company, and together you launched the EMAL Project. What were the strategic motivations behind that move, and can you tell us a little bit more about the project and other projects you have ongoing at the moment?
In 2005 we saw the potential to utilize our business model. After 25 years of growth DUBAL had a great deal of potential in terms of people, labor experience, and technology. In 2006, Abu Dhabi officials expressed an interest in aluminum production, because its government had the energy, the site, and the desire to diversify the economy from oil into industry. Also, they wanted to build a downstream industry plus sub-downstream businesses. Being a large manufacturer of aircraft maintenance items, aluminum production made sense. We teamed our interests and by 2020 are planning to produce close to 2.5 million tons from both companies. Synergies are now being studied between DUBAL and EMAL in terms of sales purchasing, training, and equipment, and we are trying to optimize as much as we can. EMAL Phase I was completed at the end of 2010, and it produced 724,000 tons in 2011, which DUBAL has successfully sold. EMAL now has 200 customers in 30 countries. EMAL Phase II has just started. This will take the total production capacity of EMAL to 1.3 million tons, using technology that was developed by DUBAL here in the UAE.
Turkey is one of your target destinations. What makes Turkey so attractive to you?
Turkey is a very big market, it is close to us, and we believe that the aluminum industry in Turkey is booming. It is a very encouraging market as we don’t face restrictive trade tariffs. We have started selling more products to Turkey, and once we are fully comfortable with the Turkish market we may invest in additional technologies. We sell only one product to Turkey: foundry alloys. Our Turkish customers used to buy 25,000 tons per year, but are now taking up to 75,000 tons. We sell our products to larger car manufacturers and are able to provide the quality of backup support that such companies require. We are also looking into extrusions in Turkey. As the extrusion plants are scattered around the country, the logistics are difficult, so we are working with an agent to find the best way to reach these extruders. We would like to sell through Turkey to other countries close by, using it as a hub.
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