The challenges that face the aluminium industry

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Modar Mohamed Al Mekdad, general manager, Gulf Extrusions Company, discusses the main issues affecting the use of aluminium in the construction industry.

What do you feel the main issues affecting your industry are?

There are new extrusion plants to be set up, but these projects face a lot of difficulties.

The supply and demand means that all the investors have reacted to all the events of 2005. This was a transition year when the demand went up from 40,000 to 80,000 tonnes a year, while the supply in the UAE was not more than 56,000
a year.

In 2006, there became a surplus in supply. Now the surplus has become even bigger. Last year the supply was 182,000 tonnes while the demand was 130,000 tonnes and of course it is construction which is fuelling the demand.

What pushed up the demand in the market was the amount of money being pumped into the construction industry.

Today, only 12% of what is being released is really under construction, while 40% is still under tendering and the rest is still in the draw.

You never build up your business based on predictions. They want to build all these cities, but you have to see what the real demand is in the market.

How is the supply/demand imbalance affecting the construction industry?

When you have a price battle in the market, the big companies will not compromise with the quality.

But some of the smaller ones will compromise with the quality, especially as there is no national standard for aluminium. This doesn't mean you should stop people from producing low and medium-quality, but you have to declare what kind of quality you are making.

There should be a way of judging it, because the construction industry would greatly benefit from this.

Only a few landmark projects are tracing and sampling aluminum to international standards, and these tend to be with us.

In the UAE, there is generally a high standard of aluminium, but if you look at it in Saudi Arabia and other countries it is not as good.

What do you forecast will happen to the price of aluminum in 2008?

I think prices will go up next year to $25,000 (AED 91,830) per tonne and I think this is fair enough for the market. We are trying to stabilise the prices in the market so we try to control some of the hikes in the market, but sometimes it goes beyond our capacity to do this.

Then we have to pass this increase onto the selling price.

Oil reached more than $100 a barrel and our industry depends on energy so it is inevitable prices will go up.

At the moment it is $2,412 so there will be a rise of about $90, although of course there will be fluctuations.

Of course, all the materials used in the construction industry will probably face a rise in prices this year.

Do you think the new sustainable regulations in Dubai will work and is your company embracing the changes?

In the Middle East, 99% of the economy relies on the construction industry. So regardless of any new regulations from the government, the sustainability in this part of the world is directly linked to the construction boom.

That is why the industry itself has to implement these changes.

We are the only extrusion company in the region, which is certified with ISO 14001, and on top of that we have invested about $5.4 million in zero-waste recycling technology.

We make sure all our supplies come from environmentally friendly sources.

But the absence of a supervisory board means that some companies are not using such sustainable practices.

So we are leading the way in our industry and we hope others will follow.

Can you name some of the major projects in the region you have been involved in?

If you take from the Trade Centre roundabout to here, we are supplying 80% of the projects here. These include the Burj Dubai, Business Bay park, the Index Towers, the Dubai International Finance Centre, Discovery Gardens and Jumeirah Island.

What were the challenges about producing aluminum for such a high-profile project as the Burj?

The design specifics because of its height meant they needed extremely strong aluminium. Of course it was a privilege to be chosen to work on the tallest building in the world and it shows the quality of our product.

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