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02. November 2009

Abu Dhabi bets on steel and aluminum projects

Financial Times reported that Abu Dhabi may be better known for its plans to build a carbon neutral city and local branches of the Louvre and Guggenheim but a hulking steel plant on the outskirts of the city may be a truer indication of the emirate's post oil future.

Entwined by a mass of green, purple and yellow pipes and surrounded by giant piles of raw iron ore, the Emirates Steel Industries plant produces 2 million tonnes of steel rebar, coils and plates a year. ESI is already halfway through an expansion plan that will increase annual production to 3 million tonnes and is in talks to acquire another steel company for about USD 400 million. Overall, ESI wants to be able to produce 6 million tonnes of steel a year by 2011. Mr Hussein Nowais chairman of ESI and Abu Dhabi Basic Industries Corporation said that "We are looking at the long term because this recession is not going to last forever. People do not invest in industry to get a return the next day."

Most of the steel produced is currently used in the UAE but Abu Dhabi hopes it will become an important export when hydrocarbon revenues dwindle or if crude oil loses its value. In addition to steel, the emirate has ambitious plans for vast, indigenous aluminum and petrochemical industries. Emirates Aluminum a USD 8 billion JV between Abu Dhabi's Mubadala Development Company and Dubai Aluminum is constructing a smelter to come online in December with an annual production target of 700,000 tonnes. Plans to expand to 1.4 million tonnes per year are already drawn up.

Mr Mohamed Abdulla Al Azdi head of Chemawe yaat said that "We are close to the right feedstock and we are close to the growing markets. There will be restructuring in the marketplace. Only the most competitive companies will survive and we fall into this category."

Still, Abu Dhabi's industrial strategy depends on cheap and easy access to vast amounts of hydrocarbons. Although it has oil in abundance, most of its factories and electricity generators are gas fuelled and most of the emirate's gas is either sour expensive, dangerous and difficult to refine or used in the production of oil and valuable natural gas liquids. The UAE is struggling to keep up with demand and has experienced black outs.

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