Whether you’re reading this at gasworld’s conference in Abu Dhabi, at your desk in your office, or at 30,000 feet above the ground on board a business flight, if you’re in the industrial gases business then the chances are you’re interested in the Middle East.

Without eulogising too much, it’s easy to see why. After all, the Middle East is a gases market with vast resources, an attractive business climate, and huge potential.

Such potential is spread across a wide range of sectors and applications, from the oil & gas industry to the water treatment market.

Antiquated waste water treatment infrastructure in the GCC for example, is thought to be largely incapable of meeting today’s sewage treatment demands, with new replacement capacity soon required.

It’s estimated that capacity will need to more than double over the next six years and despite the onset of the deepening economic quagmire, the outlook for the GCC waste water sector remains bright.

Almost $10bn of investment in new treatment capacity is planned up to 2015, with this likely to spike industrial gas demand one way or another – whether this be oxygen consumption for water treatment processes, or the gases involved in the actual infrastructure development.

Another rapidly emerging application is that of solar cells and photovoltaics (PV). Capitalising on the wave of growth in the PV industry, Masdar PV is signalling the way forward in the UAE with its investment in the solar cells sector.

As well as planned subsidiaries around the world, Masdar hopes to establish a large-scale PV production site in Abu Dhabi, initially expected to begin its first output of solar cells by Q2 2010.

Traditional growth drivers
Aside from the often much-discussed emerging applications, there are other well established growth drivers which are currently catching the eye in the Middle East.

The oil and petrochemicals industry is naturally the most notable growth driver when thinking of this region. Yet a spirited steel sector is also shimmering at present and posing the question, can the Middle East be a major metals market in the future?

In short, the answer to that would probably be yes. The Middle East’s steel market outlook appears to be ebullient, according to a respected MEED report.

Demand for steel is expected to rise again over the next five years, prompting renewed oxygen consumption. Although steel prices were expected to remain subdued for 2009, the longer-term outlook seems more optimistic if oil prices rebound as expected in 2010 and economic growth & capital investment is fuelled.

So positive is the outlook for steel in the region, that the Middle East was reportedly the only region to register a positive growth of 2.2% in the first eight months of 2009, compared to the same period last year.

The region produced around 11 million metric tonnes (mmt) of steel between January and August, while Saudi Arabia alone produced almost 32% more steel in August as it increased production to 458 metric tonnes from 347 metric tonnes in July.

While Iran’s production levels declined 2.2% in August compared to July, Qatar’s steel production remained steady at 85 metric tonnes and the United Arab Emirates (UAE) is thought to have seen an increase in production in recent months.

With demand and widespread infrastructure development in something of a high growth mode, steel consumption is buoyant. The Abu Dhabi-based steel mill of Emirates Steel saw production peak in August this year, registering its highest figures so far in 2009.

But what does this mean for the Turkish steel market, a strong exporter to the Gulf region?

While construction material exporters remain optimistic that demand from the Gulf will continue, a decline in demand for Turkish exports had been expected for 2009 at the very least.

Turkey is a major exporter of steel, ceramics, glass and other construction materials to the UAE and other Middle Eastern countries, while the country also exports plastics, chemicals and metal products around the world. Indeed, Turkish exports grew by 25% in 2007 and were estimated to be worth $107.2bn that year.

The UAE and Egypt import a large amount of their steel from Turkey, Ukraine and Russia. The UAE in particular has been especially reliant on Turkish steel, as its only steel producer, Emirates Steel Industries, provides enough to cover only 20% (approx.) of the local market’s needs.

However, the onset of recession has sent shockwaves through industry the world over and caused major project delays – even in the Middle East. This has seen demand weaken and Turkey, among others, left with excess capacity. Coupled with emerging production in the Gulf, there’s signs of worry for the Turkish metals market.

Demand from new markets such as Iraq and Iran is likely to be a bit of a boost for steel producers, as one supplier in particular is believed to have received a major order from Iraq for 50,000 tonnes. But will it be enough?

According to figures released by the World Steel Association, production across 66 countries fell by 5.5% in August 2009, compared to the same period in 2008. Among those 66 countries, Turkey saw its August production decline by 9.1% against August 2008 to 2.3 mmt.

Going forward then, why is the Middle East likely to grow into this major metals market?

Put simply, due to low-cost fuel and energy costs. Metals production and smelting are high-energy processes and among the first industries to suffer at the hands of the recession. In the Middle East however, the advantages of low-cost feedstock are set to propel the region forward as a metals producer.

Aside from the optimism for steel, the Gulf has a solid outlook for aluminium production, despite the slowdown in global demand.

The Middle East’s aluminium producers are poised to take advantage of the tough climate by capitalising on their resources and investing in both new smelters and expansion of existing capacity. The Gulf region has three smelters in operation, in Bahrain, Dubai and Oman. An additional two smelters are expected online by the end of 2010, in Qatar and Abu Dhabi.

Furthermore, Saudi Arabi apparently harbours ambitious plans for the aluminium industry, which would break the mould in the Middle East.

The numbers
There’s clearly a lot of reasons to be interested in the Middle East. But let’s get to the crunch of it all – the figures so far.

At the heart of all the hyperbole and allure, lies a regional gases market valued at around $1.34bn in 2008.

Saudi Arabia leads the way as the largest gas market in the region, with a dominant 31% share of revenues – totaling around $411m. Turkey actually comprises the second largest share of revenues at 16% or $211m, while Iran accounts for 12% of the Middle East market at a gas business worth $164m.

Israel and the UAE meanwhile, boast industrial gas industries valued at $135m and $120m respectively, or 10% and 9% of the regional market.

On the eve of the gasworld conference, it’s interesting to note that the Middle East market is still dominated by the independents – with independent producers holding a commanding 76% share of the market and independent distributors actively operating a 10% share.

Linde (at 7%) and Air Liquide (at 4%) are the most notable major gas players to have penetrated the region’s industrial gas business, but there’s clearly still plenty of scope for the global gas community to enter the market and develop it even further.

This, and much more, is something the gas professionals are likely to be discussing in Abu Dhabi as they gather for the gasworld conference. What may also be up for debate is the region’s growth drivers, both now and in the future.

At present, the biggest growth driver appears to be the manufacturing industry, covering everything from the cutting & welding sectors to other conventional manufacturing output, ceramics and demand from the construction industry.

Manufacturing accounts for approximately 38% of gas revenues or just over $510m. Chemicals and petrochemicals, including the downstream plastics and by-product sectors, drives up to 29% of industrial gas revenues at $391m and the typically non-cyclical healthcare sector drives gas demand to the tune of $125m of revenues – or 9% of the market.

In terms of revenues by supply mode, packaged gases still make-up the lion’s share of the gas supply in the Middle East, at 49% or the equivalent of $653m worth of gas revenues. Up to $382m of industrial gas revenues are delivered by onsite supply, compared to bulk delivery of 19% or $255m of gas revenues.