Alba today produces more than 2 per cent of global output and 15 per cent of Bahrain’s GDP

Alba today produces more than 2 per cent of global output and 15 per cent of Bahrain’s GDP

Alba boosts Bahrain’s industrial growth

In a pandemic-struck year, it was the aluminium smelter which lifted the industrial progress of the kingdom as it increased the production volumes by 42.5 per cent in the first quarter of the year, writes PUMMY KAUL

January 2021

Just like other major sectors, Bahrain’s industrial and manufacturing, too, was weighed down by the challenges of the global coronavirus (Covid-19) pandemic in the year 2020.

Despite the challenges, the kingdom’s manufacturing sector, which has over the years grown to become the second largest contributor to Bahrain’s non-oil Gross Domestic Product (GDP), has survived and sustained, partly with the government intervention of a $11.3 billion stimulus, equivalent to almost 30 per cent of the kingdom's total GDP.

The sector, as per the target set by the Minister of Industry, Commerce and Tourism His Excellency Zayed bin Rashid Alzayani, was aiming to increase its contribution to Bahrain’s GDP from 14.1 per cent to 20 per cent by 2020.

However, according to Trading Economics, an online platform that provides economic forecasts, GDP from manufacturing in Bahrain decreased to BD429.42 million in the second quarter of 2020 from BD465.36 million in the first quarter of 2020 in the wake of the pandemic.

Quoting data from Bahrain’s Ministry of Finance, Trading Economics stated that GDP from manufacturing in Bahrain averaged BD429.33 million from 2012 until 2020, reaching an all-time high of BD483.60 million in the fourth quarter of 2019 and a record low of BD 361 million in the fourth quarter of 2012.


Banagas: production fell in Q2, 2020

Banagas: production fell in Q2, 2020

Industrial Goals

The industrial sector’s share in Bahrain’s economy is higher, and revolves around aluminium, petrochemicals and food processing. The sector has benefitted from rising foreign direct investment (FDI) inflows, one of the world’s leading global aluminium industries and increasing diversification into value-added production across several segments, most notably fast-moving consumer goods (FMCG).

Of these, aluminium production, by far, is the kingdom’s biggest industrial segment, which received a boost last year with the launch of a new potline from national aluminium producer Aluminium Bahrain (Alba), increasing the firm’s capacity by nearly half to 1.5 million tonnes per year. Today, with the launch of the $3-billion Line 6 Expansion Project, Alba is one of the largest in the world, producing more than 2 per cent of global output and 15 per cent of Bahrain's GDP, which was $38.57 billion in 2019, according to official data from the World Bank.

In 2020, too, it was Alba, the world’s largest single-site aluminium smelter outside China, which lifted the industrial progress of the kingdom as it increased the production volumes by 42.5 per cent in the first quarter of the year.

A fact corroborated by the Ministry of Finance and National Economy: the manufacturing sector achieved real growth of 4.8 per cent in Q1 2020, supported by the increase in the production volumes by Alba by 42.5 per cent.

In the second quarter (Q2), the manufacturing sector posted a mixed performance. On the one hand, Alba saw a 23.8 per cent year-on year (YoY) increase in its output to 378,558 metric tonnes, while a number of companies decreased their output during Q2 2020 including Bapco whose production fell by 14.9 per cent, Banagas with a drop of 4.3 per cent and GPIC with a drop of 0.9 per cent.


Alba’s Line 6 expansion project

Alba’s Line 6 expansion project

International Trade

Bahrain’s trade dynamics showed signs of a rebound with the relaxation of Covid-19 related restrictions on activity. Nonetheless, both import and export volumes remain below the levels of last year, the Bahrain Economic Quarterly report for Q2, 2020 said.

Total value non-oil imports of national origin during Q2 2020 was recorded at BD1.167 billion, a decline of 7.8 per cent. Total non-oil exports during Q2 2020 declined by an annual 11.9 per cent, within that the value of goods of national origin exported during the quarter totaled $539.8 million, a decline of 9.3 per cent. Despite this, the trade gap decreased during Q2 2020 by 1.4 per cent to BD485 million, down from BD492 million a year earlier.

According to the Q2 2020 Balance of Payment statistics published by the CBB, total exports increased by 37.7 per cent YoY in Q2 2020, totaling around BD1 billion. The increase was led by a 2.7 per cent YoY increase in non-oil exports, which totaled BD 0.7 billion. On the other hand, oil and gas exports decreased 63.6 per cent YoY, with a total value of BD0.3 billion. Direct investments grew by 43.8 per cent to reach BD137.5 million, while the financial account registered a large increase of 94 per cent to reach BD 695.7 million.


Alba’s capacity expansion is expected to boost Bahrain’s non-oil revenues

Alba’s capacity expansion is expected to boost Bahrain’s non-oil revenues

Q3 Turnaround

Bahrain’s economy recovered somewhat in Q3, after contracting sharply in the second quarter due to restrictions imposed at home and abroad to contain the spread of the pandemic, noted the November 2020 edition of FocusEconomics Consensus Forecast Middle East & North Africa in its analysis of the country’s economy.

In early September, Bahrain reopened its borders, boding well for trade. As such, non-oil trade with Saudi Arabia, and likely the region at large, increased strongly in Q3, noted FocusEconomics.

Non-oil trade between Saudi Arabia and Bahrain increased by 43 per cent to $688.4 million during Q3 compared to $481 million during Q3 of 2019. The surge in trade between both countries follows the easing of restrictions on cargo transit over the King Fahd Causeway back in August.

Bilateral commerce between the two nations increased by 12 per cent past the $2 billion mark during the first three quarters of 2020 to record a substantial year-on-year increase from the 2019 figure of $1.9 billion. Saudi Arabia is one of Bahrain’s key trading partners, with majority of imports and exports flowing via the King Fahd Causeway – a 25-km bridge connecting both kingdoms by road.

Additionally, trade between the UAE and Bahrain also returned to near pre-Covid levels, with the latest figures showing $936 million in bilateral commerce during the first half of the year.

According to the new statistics, Bahrain’s overall trade for the year-half reached $10.4 billion globally, including $2.9 billion to other GCC nations. The Kingdom’s overall global trade figures during the first half were reduced by just two per cent despite the Covid-19 pandemic.

Meanwhile, Export Bahrain, a key initiative of the Kingdom’s national SME Development Board, in its second year running since its inception in November 2018, registered exports valued at over $46 million. From January 2020 to November 2020 alone, exports valued at over $30 million were reported targeting various international markets.


GPIC: adding to the kingdom’s manufacturing might

GPIC: adding to the kingdom’s manufacturing might

Outlook improves

Giving its forecast, Trading Economics said GDP from manufacturing is expected to be BD478.26 million by the end of this quarter. “Looking forward, we estimate GDP from manufacturing in Bahrain to stand at BD495.21 in 12 months’ time. In the long-term, the Bahrain GDP from manufacturing is projected to trend around BD506.08 million in 2021 and BD518.73 million in 2022,” it said as per its econometric models.

Going forward, the expansion of Alba capacity is expected to boost the kingdom’s non-oil revenues as global demand recovers. Towards this, Alba, signed a MoU with Hangzhou Jinjiang Group Company, a leading alumina producer with an annual nameplate capacity of 10 million tonnes in China. The MoU serves as a framework to form a strategic potential collaboration between both entities in terms of securing Alba’s alumina requirements.

According to Alba chairman Shaikh Daij bin Salman Al Khalifa this deal translates Alba’s strategy to have a vertically integrated business model as well as partially hedge against alumina price volatility and supply constraints.


Manufacturing hub

Clearly, the numbers reveal that Bahrain is emerging as a regional distribution hub for the logistics industry, with exports to the GCC in the first half of the year representing 66 per cent of the total figure. Imports to the Kingdom from the rest of the GCC represented 34 per cent of the Kingdom’s bilateral trade.

This year has also seen Bahrain extend technology further into its supply chain, including the launch of the ‘SmartHub’ logistics warehouse for pharmaceuticals and food. This state-of-the-art logistics warehouse utilises emerging technologies to ensure the speedy and efficient distribution of foods and medicines across the entire GCC. It integrates a track and trace system on a blockchain platform with smart contracts for customs clearances and fee payments.

With low manufacturing costs, Bahrain is fast emerging as a regional manufacturing and logistics hub, attracting global manufacturers including Arla, Reckitt Benckiser, Mondelez and Olayan Kimberley-Clark.  

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