Global expansion in the world recovery

Transcription

1 Global expansion in the world recovery Asian Bauxite & Alumina Conference Simon Storesund October 26, 2011 (1)

2 3 keys take-aways No.1: China major importer of bauxite and alumina long-term No.2: Industry wide cost increase and fight for resources No.3: Index pricing becoming widely accepted (2)

3 1 Hydro s position after Vale (3)

4 Hydro A resource rich and integrated aluminium company Raw materials processing and energy Primary aluminium production, marketing and recycling Aluminium in products Bauxite & Alumina Energy Primary Metal Metal Markets Rolled Products Extruded Products High LME sensitivity Ramp-up to capacity Production and market prices strongly linked to hydrological conditions Stable annual result contribution Stable cost base High LME and USD sensitivity Improving cost position Leading in technology Margin business Expertise in materials Flexible system Margin business Volume sensitive high share of fixed costs Margin business Volume sensitive but flexible production system Pro forma capacity for end-2010 after Vale transaction. 100% of volumes for assets that are fully consolidated and pro rata volumes for other assets. (4)

5 Hydro: A very solid fundament Based in Norway since 1905, operations in 40 countries employees Operating revenues 2007: NOK 94 billion 2008: NOK 89 billion 2009: NOK 67 billion 2010: NOK 76 billion Current market capitalization NOK 60 billion/usd 10 billion (5)

6 New shareholding structure USA 7.3% United Kingdom 5.1% Other 6.1% The Norwegian State 34.3% million shares million shares after Vale transaction shareholders Norway other 23.9% Main listing on Oslo Stock Exchange Secondary listing on London Stock Exchange Hydro 1.6% Vale 21.6% (6)

7 High-quality asset portfolio - B&A MRN bauxite mine Paragominas bauxite mine Alunorte alumina refinery CAP alumina refinery project Alpart alumina refinery 5% ownership Volume off-take agreement for Vale s 40% stake Capacity 18 million tonnes 60% ownership, 100% by 2015 One of the world s largest bauxite mines 2010 production 7.5 million tonnes Nameplate capacity of 9.9 million tonnes Possible expansion to 15 million tonnes 91% ownership World s largest alumina refinery 2010 production 5.8 million tonnes Nameplate capacity of 6.3 million tonnes Bauxite supplied from Paragominas and MRN World-class conversion cost position 81% ownership CAP refinery (Phase I) is planned to be in operation in 2015 Paragominas expansion to be developed in parallel Investment estimates and expansion concepts under evaluation Full utilization of the existing bauxite pipeline 35% ownership Capacity 1.65 million tonnes of alumina Fully integrated with bauxite 100% curtailed since mid-2009 Bauxite licenses Refining and mining competencies External supply contracts Sales contract portfolio (7)

8 Operational momentum will give results Production growth - Capital discipline - Continuous improvement Paragominas mt Alunorte mt Overall ambition 15 mt & 8,1 mt Paragominas mt (8) CAP 2015 start-up

9 Attractive alumina position tonnes Sourcing contracts CAP equity Alunorte equity Smelter demand * (9)

10 2 Industry structure (10)

11 (11) It s all about China

12 China s import of bauxite and alumina Accumulated annualized tonnage in million tons % Accumulated annualized tonnage in million tons % Bauxite Alumina Source: Hydro analysis, Antaike (12)

13 Chinese domestic bauxite mining not sustainable in the long-term ( 000 tonnes) mt import Bauxite production Bauxite import Bauxite demand Quality deteriorating significantly in the coming 5 years (13) Driving costs higher Peak production Chinese bauxite mines

14 Most of the World s over-capacity situated in China. ( 000 tonnes) ROW capacity C hina capacity New projects ROW New China capacity Primary aluminium demand, basecase Source: CRU, Hydro Analysis (14)

15 Significant new alumina capacity needed in the ROW after 2017, driven by demand growth and export to China. ( 000 tonnes) million tons RoW New projects ROW 100% closed down refineries Primary aluminium demand+china import Source: CRU, Hydro Analysis (15)

16 Upside potential and downside risk China demand growth Demand growth outside China Long-term industry Restriction on Indonesian bauxite export Indian alumina capacity growth S-T Guinea development M-T/ L-T (16)

17 Competition to secure bauxite reserves Billion tonnes 14.9 Guinea Mali China Jamaica Venezuela India 0.4 Vietnam Brazil 2.0 Cameroon Indonesia Australia Big-league (Top- 3) Mid-league (Top- 11; each > 2% of world total) Total bauxite, billion tonnes: reserves, mine site resources *, and undeveloped resources ** Potential reserves, billion tonnes: associated with currently operating mines *** *) Mine site resources are known bauxite resources that do not currently qualify as reserves for various reasons **) Undeveloped resources might or might not became feasible for new mines (quality, size, access, etc) ***) Potential reserves = current reserves (economically extractible) + 70% of mine site resources. Undeveloped resources are excluded. Source: (17) Roskill and Hydro analysis

18 Capital investment for alumina refineries has increased In USD/t +33% +18% +20% % % Australia Africa Brazil India China Source: CRU (18)

19 Trend: Increasing prices for long-term (4-6 years) alumina contracts Price Alumina % of LME % Development contract prices % % % Index pricing becoming accepted Alumina price in % of LME and USD/t $/ton % of LME (19)

20 Alumina pricing shifting from LME-link to alumina market fundamentals Future pricing should reflect the fundamentals of the bauxite and alumina value chain Spot market activity - important The new norm for the industry: Index pricing and shorter term (3-4 years) contracts (20)

21 Pricing models moving away from % of LME link Incentive to act upon market fundamentals Low High Fixed % of LME Put/Call 2-3% range, annual negotiation Index combined w.floor/ceiling 3-4% range Pure Index pricing Trend (21)

22 3 Hydro s strategic direction in B&A (22)

23 Expansion projects - CAP and Paragominas III Capacity CAP alumina refinery I 1.9 million tonnes Paragominas bauxite mine expansion III Up to 15 million tonnes Time schedule CAP refinery I planned to produce in 2015 Paragominas expansion developed in parallel Investment estimates and expansion concepts under evaluation Competitive cost position Full utilization of existing bauxite pipeline Technology and project execution for CAP built on Alunorte experience (23)

24 Hydro s commercial strategy Move towards index pricing Actively promoting index pricing Providing spot market liquidity Reporting trades Focus on contracts with 2-5 year duration Focus on selling to end-users based on a global portfolio Establish a premium for Alunorte quality (24)

25 Diversified customer portfolio Fully owned smelters Part owned smelters Alumina equity Long term alumina contract (25)

26 Waiting time Vila do Conde has decreased Days in line % (26)

27 Alunorte - a premium quality alumina Introducing a quality premium Why? Proven higher performance in cells High-quality bauxite as basis Low content of fines Low content of non-organic materials Iron, silica, gallium, phosphor and titanium High degree of consistency Low variability on high quality alumina Large shipment sizes 50 kt (27)

28 3 keys take-aways No.1: China major importer of bauxite and alumina long-term No.2: Industry wide cost increase and fight for resources No.3: Index pricing becoming widely accepted (28)

29