The aluminium value chain - Upstream drivers and challenges

Transcription

1 The aluminium value chain - Upstream drivers and challenges Kathrine Fog, SVP Corporate Strategy & Analysis Hydro Metal Bulletin Conference, Singapore, October 2015 (1)

2 Cautionary note Certain statements included within this announcement contain forward-looking information, including, without limitation, those relating to (a) forecasts, projections and estimates, (b) statements of management s plans, objectives and strategies for Hydro, such as planned expansions, investments or other projects, (c) targeted production volumes and costs, capacities or rates, startup costs, cost reductions and profit objectives, (d) various expectations about future developments in Hydro s markets, particularly prices, supply and demand and competition, (e) results of operations, (f) margins, (g) growth rates, (h) risk management, as well as (i) statements preceded by expected, scheduled, targeted, planned, proposed, intended or similar statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, these forward-looking statements are based on a number of assumptions and forecasts that, by their nature, involve risk and uncertainty. Various factors could cause our actual results to differ materially from those projected in a forward-looking statement or affect the extent to which a particular projection is realized. Factors that could cause these differences include, but are not limited to: our continued ability to reposition and restructure our upstream and downstream aluminium business; changes in availability and cost of energy and raw materials; global supply and demand for aluminium and aluminium products; world economic growth, including rates of inflation and industrial production; changes in the relative value of currencies and the value of commodity contracts; trends in Hydro s key markets and competition; and legislative, regulatory and political factors. No assurance can be given that such expectations will prove to have been correct. Hydro disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. (2)

3 Hydro at a glance 01 (3)

4 Hydro: a resource rich global aluminium company Hydro underlying EBIT quarterly, NOK billion Based in Norway, involved in activities in more than 50 countries employees Operating revenues 2013: NOK 65 billion 2014: NOK 78 billion Current market capitalization NOK 66 billion/ USD 8 billion Extruded Products classified as discontinued operations, and thereby excluded from revenues and underlying EBIT for 2011, 2012 and Figures for 2012 are adjusted reflecting IAS 19R. Figures for 2013 are adjusted reflecting IFRS 11 (4)

5 Strong positions across aluminium value chain Raw materials processing and energy Primary aluminium production, marketing and recycling Aluminium in products Bauxite & Alumina Energy Primary Metal Rolled Metal Markets Sapa JV (50%) Products Bauxite capacity 10.8 million tonnes Alumina capacity 6.3 million tonnes Long-term power supply 2.1 million tonnes 10 TWh renewable energy primary capacity production in Norway Improving cost position Leading in technology 3.6 million tonnes (primary, remelt, recycling and cold metal) Expertise in materials 1 million tonnes Close to customers Innovation 0.7 million tonnes (50%) No. 1 position in North America and Europe Solid foothold in emerging markets 100% of volumes for assets that are fully consolidated and pro rata volumes for other assets. (5)

6 Attractively positioned, global reach North America Alouette aluminium smelter in Canada, expansion potential Remelting in the US Primary aluminium 2.1 million tonnes Europe s #1 aluminium company Norway 1,015,000 tpy hydro-powered aluminium production Technology and R&D centers Hydropower developments Rolled products, recycling and remelting Continental Europe Leading upstream and midstream positions Europe s largest rolled products producer Technology and R&D centers Recycling network Middle East Qatalum 1 in production Qatalum expansion opportunity Brazil World-class operations and resource base Bauxite and alumina growth projects Albras aluminium smelter World s largest alumina refinery Australia Primary aluminium production (6)

7 Aluminium the metal of the future 02 (7)

8 Infinite ideas in aluminium More and more sectors discover new areas for aluminium applications Lightweight, non-corrosive offshore applications Zero-emission electrical car ferry in 100% aluminium for light-weighting. In operation from 2015 Floating aluminium bridge with a submerged floating tunnel at mid span. Under planning Lightweight, non-corrosive subsea applications Electrical busbars in aluminium Middle and high voltage cables, wire and cables for electrical applications (8)

9 Healthy demand growth outlook for primary aluminium Strong demand drivers in key aluminium segments Transport Construction Growth in vehicle production Aluminium content in cars increasing Growth in other transport modes, e.g. railway Urbanization Housing market recovery in mature regions Energy neutral buildings Global primary demand estimates Million tonnes 4-5% annual growth % Electrical Urbanization Substitution from copper China 27 Machinery & equipment Packaging Improving industrial sentiment in mature regions Manufacturing activity and industrial growth in emerging countries Urbanization Environmental friendly solutions World ex-china % 2014 A 2019 E Source: CRU, Hydro Analysis (9)

10 Bauxite and alumina Outlook for Asia 03 (10)

11 Chinese oversupply exceeds world ex-china deficit World ex-china demand remains well above production Global production less demand* mt primary aluminium (1 000) (2 000) jan.09 mai.10 sep.11 jan.13 mai.14 sep.15 Production less demand, World ex China* mt primary aluminium (1 000) (2 000) jan.09 mai.10 sep.11 jan.13 mai.14 sep demand growth expected at ~4% 2015 production surplus ~1 million tonnes 2015 demand growth expected at ~2% 2015 production deficit ~1 million tonnes Source: CRU/Hydro * Yearly rolling average of quarterly annualized production less demand (11)

12 Alumina market increasing trade Total smelter grade alumina production million tonnes 51,0 North America 5,4-3,5 Europe 4,3-2,9 Africa, Middle East & Asia Russia & Eastern 4,4 Europe -3,2 7,1-5,3 China Net Export Net Import Total production Central & South America 13,5 10,5-12,3 20,4 16,4 Australasia Source: CRU

13 New bauxite suppliers have emerged Alumina development reflecting arbitrage opportunities 100 % Percentage share of Chinese alumina and bauxite imports USD/t CIF % Indonesia ban Malaysia emerging % % 20 % 50 0 % 45 Bauxite Alumina (in bauxite equivalent) Bauxite price (rhs) Source: CRU, Chinese customs, CM Group Note: alumina/bauxite conversion 2.67 (13)

14 Estimations of China s bauxite production indicate that domestic supply will fall short of demand China s bauxite import demand forecast million tons Imports for refineries currently using domestic bauxite Additional imports for Shandong refineries Imports for existing Shandong refineries Source: CM Group (14)

15 Bauxite resources: large and concentrated but with many challenges to overcome for future developments All figures in billion t 41,0 4,1 2,9 6,2 3,0 1,0 China 4,7 1,1 Jamaica 0,5 8,7 Guinea India 0,5 Vietnam 1,0 0,2 5.0 Malaysia 2.0 9,5 2,5 Indonesia 5,6 Brazil Atlantic Pacific Reserves plus resources likely to be converted to reserves associated with operating mines Total bauxite potential, including undeveloped resources Australia Source: Hydro analysis, CRU, CM Group (15)

16 Conclusions Aluminium demand growth driving alumina and bauxite demand China import requirement growth to continue Bauxite and alumina increasingly traded on own merits Access to bauxite resources are key Access, costs and quality Atlantic vs Pacific: shift of focus Robust positioning increasingly complex High uncertainty remains (16)

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