Gulf countries, which account for 10% of global aluminium production, are determinedly shifting to green aluminium production since past few years amidst looming EU Carbon Tax scheme. Nearly a third of the GCC’s aluminium production is exported to the US and EU. 

 

As of 2020, Aluminium Stewardship Initiative (ASI) reported that the GCC country smelters are close to ASI’s benchmark carbon emission target of 8 tonnes of CO2e emission per tonne of aluminium production.

 

"Several Middle Eastern aluminium producers have made clear efforts to offer low-carbon emissions aluminium products to the wider market, including products with higher recycled content, as part of a response to the growing demand for this material as well as preparation for the implementation of Carbon Border Adjustment Mechanism (CBAM) in the European Union in 2026," Khaula Bhatti from S&P Global Commodity Insights disclosed to a regional media.

 

The current transitional stage of the scheme lasts between 2023 and 2025.

 

"Middle Eastern producers are in a favourable position in the European market when considering both Scope 1 and Scope 2 emissions, meaning they are more competitive in terms of overall emissions compared to other global competitors," she added.

 

The CBAM will initially focus on the direct emissions (Scope 1) for all covered products, but will also include indirect emissions (Scope 2) for imported fertiliser, cement and electricity.

 

The UAE is responsible for 44% of GCC’s aluminium production led by its main player - Emirates Global Aluminium.

 

In 2021, EGA became the first company in the world to make aluminium commercially using solar power, producing almost 39,000 tonnes that year. Its output soared to hit 66,000 tonnes last year.

 

In January, Saudi Arabia Mining Company (Ma'aden) and US-based solar start-up GlassPoint announced the first phase of project development for the world’s largest industrial solar thermal project to decarbonise the miner’s aluminium supply chain.

 

The initial phase will integrate direct heat generation and storage to deliver a continuous supply of nine tonnes per hour of steam to Ma'aden’s alumina refinery in Ras Al Khair, in Saudi Arabia’s Eastern Province.

 

“New policies such as the EU’s CBAM will tax high-carbon imports and make low-carbon aluminium, enabled by solar thermal solutions, even more appealing,” stated Ma'aden.

 

Recently, the Saudi mining giant had entered into a deal to acquire Sabic’s 21% stake in Aluminium Bahrain (Alba), the world's largest aluminium smelter outside of China.

 

The two companies last month also signed a non-binding agreement to begin due diligence on a potential business combination involving segments of Ma'aden’s aluminium strategic business unit.

 

This combination could reshape the global aluminium industry, positioning the merged entity as “one of the largest aluminium producers worldwide, stated Alba.

 

"The potential partnership accelerates Alba’s growth strategy, creating a global champion and cementing our position as the largest regional aluminium producer," remarked its Chairman Khalid Al Rumaihi.

 

According to experts, the lightweight metal has gained importance in recent years, particularly for its use in battery casings and other components for electric vehicles.

 

However, aluminium production is energy-intensive and emits about 3 per cent of the world’s direct industrial carbon-dioxide emissions, according to the International Energy Agency.

 

This could become a challenge as the EU gets set to fully implement in 2026 the CBAM, which seeks to protect European companies that pay for their emissions under the EU's trading system from unfair competition, and will impose a carbon price on certain goods imported into the bloc.

 

The regulation currently focuses on carbon-intensive goods like cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen products.

 

Despite being a dominant force in the global metals market, Chinese exports are often viewed negatively in the West. The US and the EU have repeatedly accused China of unfairly subsidising its aluminium and steel sectors, claiming that the resulting overproduction is saturating global markets, according to experts.

 

While the Middle East is not a big player in steel, the move by some regional companies to specialise in green or low-carbon steel could potentially give them an advantage over exports from China and India in certain markets, they added.