Dubai Comes of Age as a Regional Commodity Trading Hub

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Source: ZE
Source: ZE

It is no coincidence that Platts held its Commodity Week in Dubai, earlier this month. Located centrally between Europe, Asia, and Africa, and next door to some of the world’s largest energy reserves, Dubai’s liberal business environment and excellent infrastructure make it a natural trading hub. (If you missed it, read our focus on Dubai before the conference in Platts Commodity Week To Descend On Dubai.)

What is surprising is the speed at which the composition of the business has shifted from primarily oil and gas to a diversified set of downstream industries, such as ferrous and non-ferrous metals, petrochemicals, and dry bulk shipping. This was certainly reflected by the number of attendees at Commodity Week from non-oil-and–gas-related companies and the strong interest in the non-energy related outlooks at the event. It was also not surprising that that the big commodity related news that week surrounded the merger between Dubai and Abu Dhabi aluminum producers to create Emirates Global Aluminium, the world’s fifth-largest aluminum producer.

The continued growth of the petrochemical business in the region, particularly in the face of the recession in Europe, is also a testament to the success of diversification plans laid down years ago. Saudi Arabia continues to dominate in terms of production, but Qatar, Oman, and the UAE are also embarking upon significant expansions to output.

On the Metals front, local traders are anticipating construction to pick up in the oil exporting countries at the same time as it gets dragged down due to instability in the oil importing countries. This political unrest has had a dramatic impact on Dubai in particular, as it has become a safe haven for money and businesses from elsewhere in the region. My feeling is that much, if not all, of this business will remain in Dubai even as things settle down across the region, bolstering Dubai’s position as an international business capital. Many companies I spoke with also anticipated growth stemming from large projects linked to the  FIFA World Cup coming to Qatar in 2022.

All of this activity has gone hand-in-hand with a growth in demand for data management services as companies realize that they must have access to timely and accurate market data from both the Gulf region and beyond. ZE is well positioned to meet the needs of these companies with ZEMA 4 and is sure to bolster its presence in the region to satisfy this demand.

In the end, what will likely seal the city’s position as the region’s commodity trading hub is the tendency for the large multinational trading companies to center their operations around common hubs for both logistical and pricing purposes. Hence, along with Houston, Chicago, New York/Stamford, London, Geneva, and Singapore, you can now likely add Dubai.

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