|Gulf Aluminium Council (GAC) is a coordinating body that represents promotes and protects the interests of the aluminium industry within the Gulf. In a conversation with AlCircle,|
“Our aim is to strengthen the relationship between GCC & EU,” Mahmood Daylami, Founder & General Secretary, GAC (Gulf Aluminium Council)
Interview26/Feb/2016AlCircle.comThe GAC (Gulf Aluminium Council) is an organization that represents, promotes and protects the interests of the aluminium industry within the Gulf region. One of the main objectives of the Council is to provide a forum for the aluminium industry, such as the recent Meeting in Brussels, which was held in February 2016 and attended by outstanding members of the EU parliament and the most relevant exponents of the European and Arab Aluminium industry. In his interview, Mahmood Daylami, Founder and General Secretary of GAC describes from his perspective, the possible strength of an interchange between the GCC and Europe.
Excerpts from the interview:
AlCircle: How would you describe, in general, the trade relationship between the GCC and the European Union?
MD: The trade relationship between EU and GCC has been growing steadily and positively over the years. In 2014, the EU exported goods and services worth more than 95 billion Euros to the GCC, while they imported around 50 billion Euros worth of goods.
Throughout the last ten years and the period before that, the trade balance has always been in favour of EU. Today GCC is the 5th largest trading partner for the EU and in turn, the EU is the 2nd largest trading partner for GCC.
AlCircle: And how is this balance of trade reflected in the aluminum industry?
MD: GCC exports aluminium to the EU along with other materials, but most of the equipment and machinery used for production of aluminium, environmental protection and for power generation are imported from Europe. Since 2008 the GCC has built four new smelters at a cost of over 25 billion Euros, 75% of the expenditure was for equipment and machinery imported from Europe. However, only 10% of our yearly 5 million ton aluminum production is exported to the EU where demand for Aluminium is around 6 million tons a year and growing.
AlCircle: So if only 10% of your exports are going to Europe, what about the other 90%?
MD: We find that about 40% is consumed within the GCC region and 50% is exported to the rest of the world. Aluminium demand is growing at the rate of 5% a year. On the other hand, the EU produces less than 30% of its Primary Aluminium requirement while importing the remaining 70% of its Primary Aluminium need from different parts of the world.
AlCircle: What industries do you think will drive future demand?
MD: One area of future demand for Aluminium in Europe will be its automotive industry, as reducing weight and making cars more fuel efficient is one of the important requirements of EU environmental policy targets.
AlCircle: As the founder secretary of GAC what do you think are the future needs for the Gulf aluminium industry?
MD: The objective of the GAC is to take advantage of the synergy that exists between the smelters in the Gulf and to address important issues like tariffs along with environment, human resources, development, safety, efficiency etc. There are also a lot of best practices that the industry needs to follow.
AlCircle: Do you have some common training programs among member states?
MD: Our purpose is not only to provide training but also to fill the gap, be it training or projects. For example, to solve the SPL [Spent Potliner] problem, we intend to build one SPL processor for the entire Gulf region, as it doesn't make commercial sense to build a separate one in each country. That's where the GAC comes in- in matters of coordination, technology, costs, physical issues etc. The role of the GAC is to bring together the interests of people from the entire aluminum business including suppliers, power generation, cast house equipment, carbon equipment, environmental facilities etc. It is a little different from a European Association as we are not lobbying for legislation; we let our members compete with each other.
AlCircle: We feel the GAC alliance is unique in its own entity. Do you feel that your responsibilities are only business-related or they have a larger, political scope?
MD: Much larger. We don’t involve ourselves in the market. We’re more of a coordinating body that brings together ideas and things shared by our members- problems or successes. We are focused on learning together how to save fuel and energy. We try to bring in people from the industry to develop things and find solutions to make things better for the Gulf aluminium industry.
AlCircle: Today we are gathered at the European community headquarters because of an issue not yet resolved by the EU. Do you think during your secretariat it can be resolved?
MD: This situation has been same in last twenty years and it’s high time that we find a solution to this. It is a part of my job to start it somewhere in all fairness. We cannot find a solution for ourselves by creating a problem for others. I feel this is damaging European industry more than it’s affecting the Gulf. As I said earlier, only 500,000 tons, which is 10% of our Aluminium production, is exported to Europe every year. The rest is utilized locally or exported to other expanding market. The question is not about whom we sell our aluminum; it is about where the EU is going to get its Aluminium in five years’ time.
AlCircle: Do you think that if the problem is resolved it can also help scientific research and development in the field?
MD: I think the research and development can take place regardless, but if it’s resolved we will work like partners rather than one region working against the other. We would continue buying equipment from Europe despite the tariff, because it’s good, efficient & modern– not because it’s cheap. The EU should also consider what is good for Europe. We’re customers who need a voice, we need to talk. We can create the atmosphere but the EU needs to come forward too.
AlCircle: In your opinion, is FACE [Federation of Aluminium Consumers in Europe] functioning as this voice and what is the best future direction for FACE?
MD: I think that FACE is a good organization; they are active representing downstream businesses. But unfortunately, circumstances have changed and we need a different approach than before. The future direction should be decided between European downstream businesses and smelters. It’s for them to convince the policy makers that there’s another side to this story; that the downstream side is at a disadvantage. That should be the focus of FACE. At the moment the producers have the upper hand because they control all of the associations, boards, finance and appointments.
AlCircle: Do you think that the UK aluminium market is maintained by a handful of producers from Northern States and the downstream sector has very little say in the market?
MD: I’m very surprised that, with the financial disadvantage that downstream has, they do not have much influence and they do not voice out their opinion to change the situation. The producers do have a very strong lobby. However, if you put the number of the downstream people – be it the number of employees or companies – they are a bigger entity. The point is that they are scattered small businesses mostly private and family owned. They can’t afford to have dedicated people for PR and lobbying which big producers are capable off. The only way they can do it is by pulling all the players together.
AlCircle: Does your answer describe a possible new role for FACE?
MD: FACE should be working for the future. And yes, that should be the next step, for them to figure out how to unite their voice against the current. This tariff must be stopped. Downstream members on the board of EAA (European Aluminium Association) should voice their opinion and promote change.
If the role of the EAA is to support the aluminum industry, they should answer whether keeping the tariff would support the total industry or support a very small group within the industry.
AlCircle: Will this be considered a pro-Arab or pro-Asia stand? Do you think FACE can create a common platform for the two markets to share knowledge, the know-how, the experience and the best practices?
MD: People would say we are against the tariffs because the GCC wants to expand its market share. We do want to expand sales in the International market, but on fair ground. 80% of the Aluminum imported into EU is coming duty free from Africa and non-EU countries. Around 20% are duty paid from the GCC and Russia. So why keep the duty if EU cannot meet its demand for Aluminium and downstream is losing its competiveness? Unlike any other part in the world such as Japan and the USA, in the EU, the price of Aluminium is adjusted artificially by the producers so that all the Aluminium sold in the EU must be sold at equal to the duty paid price regardless of its origin.
It’s also true that FACE can be much more powerful & dynamic with support. It needs support from the industry, from Europe. And it’s not the money; it’s getting the people to contribute in the activity.
AlCircle: And what about a Free Trade Agreement?
MD: The general opinion is that all these issues will be solved when GCC signs the Free Trade Agreement. We have been hearing this for the last 20 years. Others say we keep it as bargaining point, which is an illusion. You bargain with an item that the other party is desperate to have. The GCC is selling its Aluminium product in advance, around the world and the world demand is growing. Our aim is to strengthen the relationship between GCC & EU. Removal of the unjust tariff will not only help maintain the positive relationship that currently exists between the two regions, but will enhance it.
(Interview covered by Prof. Alberto Cavicchiolo on behalf of AlCircle. Prof. Cavicchiolo is founder and director of Art Valley, a strategic advisory firm based in Milano and Dubai, dedicated to the integration between Culture, diplomacy, industry and finance.)
Disclaimer: “The information presented herein is neither intended nor implied to be a substitute for professional advice. The views and opinions shared in the interview section of www.alcircle.com are unique to the interviewees and do not necessarily reflect the viewpoint of www.alcircle.com.”
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