Cable Markets: Key Drivers

Economic Indicators: GDP


Total GDP for the MENA region in 2004 was US$ 1.4 billion, 3.4% of the world total. The largest economy in the whole MENA region is Turkey, with GDP of US$ 302 billion in 2004. Turkey’s nearest rival is Saudi Arabia (US$ 251 billion), followed by Iran (US$ 141 billion), Israel (US$ 118 billion), the UAE (US$ 104 billion) and then, some way behind, Egypt (US$ 70 billion).

 

  Middle East & North Africa Economic Indicators 2004

Huge Range in Average Incomes


The range of income in the MENA region, assessed in terms of GDP per head of population, is very wide, ranging from US$ 500 in the Sudan and Yemen to US$ 34,9 in Qatar. The GDP per head for Turkey (US$ 4,2) is higher than the average for the MENA region, and the comparison would be more favourable to Turkey if the oil-rich countries were excluded, as these substantially boost the average.

 

Oil Production Boosts GDP per Head


Of course GDP per head is high in all the oil-rich states of the Gulf with small populations: Qatar, the UAE, Bahrain and Kuwait. The average GDP per head is lower in Saudi Arabia than in the smaller Gulf states, despite the kingdom being the world’s largest oil producer, because its population (25 million) is relatively high. The average GDP per head for these oil-producing countries is likely to be even higher in 2005 and 2006 as they gain from the continuing high prices of oil and gas. The economies of some of the North African countries, notably Libya and Algeria, also benefit from oil and gas production.

 

Oil and Gas Production


In 2004 the MENA region accounted for 34% of the world’s oil production and 15% of the world’s natural gas production. The average daily production of oil in 2004 from MENA was 29.2 million barrels/day, of which Saudi Arabia produced 10.6 million barrels/day, over one third of the MENA output, followed by Iran, UAE, Kuwait, Iraq and Algeria. Total MENA production of natural gas was 396 billion m3, of which the largest producers were Algeria and Iran, both with 21% of the MENA total. The other major gas producing countries in MENA are the Saudi Arabia, UAE, Qatar and Egypt. The region will maintain its crucial position in oil and gas production as 67% of the world’s proved oil reserves and 45% of proved gas reserves lie in MENA.

 

Infrastructure Development: Telecoms


Only some of the richer Gulf countries, Turkey and Israel have a high penetration of main telephone lines. Average main line density for MENA is only 15 lines per 100 people, below the world average of 19 lines per 100. Total main lines are highest for Turkey (19 million) but also high for Iran (17 million) where there has been an extensive programme of fixed lines installation over the last few years. This has stimulated demand for copper telecom cables in Iran. In many parts of the region development of mobile communication networks has been a strong priority, so that in most countries mobile density is substantially higher than fixed line density. In addition to the cable used within base stations, this development has supported demand for fibre optic cable used in construction of trunk networks.

Infrastructure Development: Electricity


The usage of electricity, measured in terms of consumption per person, closely follows the general economic trend. Usage is particularly high in the richer Gulf states. In these countries there are some large electricity intensive industries (e.g. aluminium production in Bahrain) that have been established to exploit the low cost of energy. In the oil-rich Gulf states there has been a strong boom in construction activity that has been sustained for a number of years. Thus there has been increasing demand for energy cables used in residential, commercial and industrial construction, as well as in expansion of utility networks.


OEM Markets


In most countries of the region equipment manufacture has not been a high priority in economic development. Consequently, demand for products such as magnet wire is relatively low in the MENA region. The main exception is Turkey, where there is a substantial OEM industrial base producing domestic appliances, vehicles, etc. There is also some production of air conditioners in Saudi Arabia. Countries in North Africa are also likely to grow low cost operations to supply OEMs in Europe. We discuss the automotive harness business in more detail later.

 

Weaker Markets in Turkey and Egypt

 

The drivers of the Turkish economy differ in some ways from those that apply to the other economies of the MENA region. The Turkish economy has not moved in step with its neighbours, but went through a marked recession after 2000. Unlike many other markets in the MENA region that have enjoyed quite strong, sustained growth in recent years, cable demand in the Turkish market declined for a time. Egypt also has been through a difficult period.

Robust Markets in North Africa


Cable demand in North Africa, with the exception of Egypt, has been growing quite strongly. This is demonstrated by the trend in cable imports into the region. Cable imports into Tunisia and Morocco have grown substantially, even allowing for the higher average selling prices of cables in 2004 and 2005. Even imports to Libya have grown, as that country has become less isolated in economic terms. The growth trend is not so evident for Algeria, but this is likely to be due to growth in local production.

 

Cable Production


We estimate that total cable production in the MENA region was 837,000 conductor tonnes in 2005, 6.5% of world total production. This estimate includes all insulated wire & cable, both copper and aluminium, but excludes production of bare overhead conductors. In value terms we estimate total production to be US$5 billion. Over half the total MENA cable production (437,000 conductor tonnes) was in the countries of the Gulf / Arabian Peninsula, including Iran. Production in the countries of the Near East was nearly one third of the total for MENA (276,000 conductor tonnes), though this area is dominated by Turkish production. North Africa accounted for the balance, with cable production of 160,000 conductor tonnes.