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His Majesty King Hamad bin Isa Al Khalifa inaugurates Alba’s Line 6 Expansion Project

His Majesty King Hamad bin Isa Al Khalifa inaugurates Alba’s Line 6 Expansion Project



Aluminium leads new thrust

The inauguration of Alba’s $3-billion Line 6 Expansion Project reinforced the indus-trial sector’s dominance in the contribution of kingdom’s non-oil growth, writes PUMMY KAUL

January 2020

As the third largest contributor after hydrocarbons and financial services, the industrial sector in Bahrain has continued to remain a mainstay in the Kingdom’s diversified economy.

In fact, Bahrain is one of the most diversified economies in the GCC region, owing largely to a well-established manufacturing industry, which has led to transformative changes in the structure of its economy since the turn of the millennium.

Maintaining its steady growth, the contribution of manufacturing to Bahrain’s gross domestic product (GDP) has grown from 12.4 per cent in 2000 to 14.3 per cent in 2008 and 14.5 cent in 2018 even as the share of the oil sector has fallen from 43.6 per cent in 2000 to 22.7 per cent in 2008 and 17.8 per cent in 2018, according to figures from the Bahrain Economic Development Board (EDB).

Once again, the manufacturing sector served as a bright spot this year with Aluminium Bahrain’s (Alba) $3-billion Line 6 Expansion Project having been inaugurated by His Majesty King Hamad bin Isa Al Khalifa in late November, reinforcing the industrial sector’s dominance in the contribution of Kingdom’s non-oil growth.

The world-scale project, with a total capacity of 1.5 million tonnes per year, has put the nation on the global map as it hosts the world’s largest single-site aluminium smelter outside China.

Additionally, infrastructure projects in the non-oil economy are driving growth in the industrial sector as well. Among these, two crucial industrial projects – the $6-billion Bapco Modernisation Programme and the $1.5-billion second phase of the Al Dur 2 independent water and power project (IWPP) – are expected to contribute to the sector’s growth, this year.

While aluminium production, by far, dominates the output of the industrial sector, a range of other segments are also well established, including petrochemicals and plastics; food processing; pharmaceuticals; garments and small and medium industries (SMEs).

SMEs currently account for almost 30 per cent of the Kingdom’s GDP and provide employment to nearly 75 per cent of the private sector workforce. The government is aiming to boost their contribution to 40 per cent by the year 2022 by launching key initiatives such as the newly formed SME Development Board and Export Bahrain. More recently, a BD100 million liquidity fund was announced recently to support SMEs, enabling them to contribute more to Bahrain’s GDP.

 

PERFORMANCE

Even as manufacturing saw a decline of 0.48 per cent in the second quarter of this year compared to the same quarter in 2018, and contributed 14.1 per cent to overall GDP of BD3.2 billion ($8.49 billion), analysts say that with Alba Line 6 ramping up to full capacity, this drop is temporary.

The authorities are, however, optimistic. Despite the drop, the sector’s contribution is expected to reach 20 per cent of GDP by 2020, as reiterated by the Minister of Industry, Commerce and Tourism His Excellency Zayed bin Rashid
Alzayani. 

Mondelez International’s manufacturing facility in Bahrain

Mondelez International’s manufacturing facility in Bahrain

Going a step ahead, Alba, with its new status, is largely expected to achieve this for the Kingdom. The contribution of the firm to the country’s GDP is expected to rise from 12 per cent to 15 per cent with its capacity expanding by approximately 50 per cent.

Calling it a ‘game changer’ for the kingdom’s industrial growth, Alba Chairman Shaikh Daij bin Salman Al Khalifa says the project will lead to a tangible shift in the country with the company now contributing 15 per cent of the Kingdom’s GDP.

“From 12 per cent, Alba will now contribute 15 per cent to the country’s GDP. This is a powering and remarkable industrial achievement for the country,” Shaikh Daij said at the inauguration of Line 6, last month.

According to Trading Economics, an online platform that provides economic forecasts, GDP from manufacturing in Bahrain increased to BD456.98 million in the second quarter of 2019 from BD443.90 million in the first quarter of 2019. Giving its forecast based on its Trading Economics econometric models, it says GDP from manufacturing is expected in the longterm to trend around BD502.23 million in 2020.

 

ALUMINIUM DOWNSTREAM

Alba’s dominant position as the primary aluminium producer has offered the potential for the development of downstream industries like flat rolled products, extrusion, foil and wire rods in the country. Since its establishment about four decades ago, a cluster of downstream metal manufacturing businesses have been built around the smelter which use Alba’s output as feedstock. The downstream industry, however, has been ailing of late, affected by the fluctuation in alumina price.

Garmco, which filed a voluntary petition for reorganisation early this year is now returning to stability as it is trying to start its restructuring programme, according to Basim AlSaie, chairman, Garmco.

Calling on the Kingdom’s aluminium industry to capitalise on the growing market for aluminium by focusing on the growth of the downstream industry, he said: “Bahrain should quadruple its aluminium exports in the next 10 years by investing in the downstream industry.”

“The industry wants to work collectively with Alba, which is the main supplier. We want to utilise the benefit of having Alba in Bahrain and maximise the opportunities,” he added.

Alba’s Shaikh Daij said, currently 40 per cent of Alba’s total primary aluminium production is used by the domestic downstream aluminium industries and about 60 per cent is exported across the world. “We are willing to offer the half of 540,000 metric tonnes to the local downstream industry provided they are willing to use it,” he said.

 

CHEMICALS

The chemicals and petrochemcials industries in Bahrain contribute about 2.5 per cent to the country’s GDP, according to the latest GPCA Pulse of the Chemical Industry Report. Bahrain’s Gulf Petrochemcial Industries Company (GPIC), which produces urea, ammonia and methanol, plays a leading role in the sector.

Despite being the smallest chemicals producer in the GCC, Bahrain has benefited the most from a strong performance in key products groups, such as fertilizers and polymers largely due to the current product price trend, said the report.

“Bahrain and Oman took opportunities to generate higher revenue from fertilizer products. As a result, their revenue has increased by 39 per cent and 17.2 per cent, respectively. As small producers, they were able to adapt to shifting customer needs quickly and efficiently,” it said.

 

TRADE & EXPORTS

According to data from the Information & eGovernment Authority (iGA), unwrought aluminium alloys emerged as the top products exported during October 2019 with a value of BD17 million; unwrought aluminium (not alloyed) was second with a value of BD15 million; and aluminium wire third with BD12 million.

Alumnium exports from Bahrain, a significant unwrought aluminium (both alloyed and non-alloyed) exporter among the GCC countries, have been growing year on year, according to AlCircle’s latest report Aluminium Middle East Focus 2020. “From 654,384 tonnes in 2017, the country’s exports grew to 801,053 tonnes in 2018, up 22.41 per cent. This year, it’s likely to see further growth of 12.6 per cent to 893,930 tonnes,” it said.

Meanwhile, Alba is looking at expanding its products portfolio and push its export sales further to boost the sector’s growth and national exports, Shaikh Daij says. The biggest export market for the company will continue to be the fast-growing US market, he added.

As per Ministry of Finance and National Economy data, during the second quarter of 2019, Bahrain’s overall non-oil exports reached over BD774.9 million, representing a robust 14.8 per cent increase over the same period in 2018.

Exports of national origin saw a 6.1 per cent annual increase to an aggregate total of BD595.3 million over the same period. There has been a particularly pronounced jump in re-exports, which have risen by 57.2 per cent YoY to nearly BD179.6 million.

Conversely, the tally of non-oil merchandise imports reached around BD1.3 billion, a drop of 10.8 per cent compared to the same period of 2018. The YoY decline on the import side represented an unusual trend reversal from recent years. This was partly a reflection of weaker domestic demand growth at a time of fiscal consolidation.

Meanwhile, Export Bahrain, which has just completed one year of operation, registered exports valued at over $15.5 million, with more than 30 exporters having expanded into 25 markets around the world, including the GCC countries, the US, Russia, Germany, Japan, the UK, Morocco, Brazil, Canada, South Korea and many more.




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