25 th September Presented by Mr. Venkatesan Subramanian VP & Global Leader- Metals & Minerals

Transcription

1 25 th September 2013 Presented by Mr. Venkatesan Subramanian VP & Global Leader- Metals & Minerals

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3 Story Board for Non-Oil Wealth Diversification- GCC Region KSA

4 Need for Non-Oil Wealth Diversification- GCC Region The Dependence on Oil The Need for Diversification Major Government based oil companies & investment bodies are venturing into the Aluminium industry in GCC to diversify and take advantage of the low cost utilities & further value additions it can offer which will boost the GDP and oftake the risk of diminishing oil reserves in the region. Real GDP Growth, Oil-Exporting Countries (Annual percent change) Non-oil vs Oil GDP contribution (%) Non- Oil Oil Bahrain UAE Oman GCC Overall Saudi Arabia Iran In Y2012, Real GDP Growth of Oil exporters (Especially GCCs) had witnessed improvements in non-oil sectors IMF, International Financial Statistics; and IMF Staff estimates. Qatar Source: Frost & Sullivan Mega Trends for GCC Industrialization.

5 Where KSA Economy is Heading? FDI Trend: KSA Market ($ Mn) In Y2012, IFCs Doing Business Ranked KSA on the following: 3 rd - Paying Tax 12th Getting Electricity 19th - Protecting Investors 22nd Ease of Doing Business 36th Trading Across Border * Rank KSA - GDP Growth (%) Forecast- Oil & Non-Oil With non-oil GDP easing at 6% growth in Y2013, FDIs focused on non-oil segments will continue to grow- especially metals, minerals and fabricated products Anticipated FDIs in non-oil segment, especially Metals & Mining sector to drive the GDP Source: IMF

6 The KSA Downstream Advantage : 3 Ps (Power/Primary Liquid Metal /Proximity) The MENA region is likely to be a powerhouse for aluminum production and downstream, driven largely by the following four factors: Power Advantage- 1/3 rd of Cost of Production Primary Metal - Feedstock Power Tariffs (US cent/kwh) KSA 3.2 Captive bauxite mine and alumina refinery in KSA GCC 3.8 World Avg. 8.5 Proximity to end user markets in major geographies like Europe, Americas & Asia 4 1 Key Advantages 3 2 Liquid aluminium from GCC smelters. Only about 25% smelter utilization rate whereas rest is exported ~ 3.5 million MT Aluminium downstream industry still under developed apart from extrusion which is also heavily focused only in construction industry Proximity - Strategic Location Downstream Potential Source: Frost & Sullivan.

7 GCC: Aluminium Industry Current Trends Aluminium industry in GCC is challenged by three interlocking crises: Pure Energy Being Exported Minimal Existence of Downstream Limited Economic Value-add Energy Exported Is GCC Exporting Pure Energy? 80 % of the Primary aluminium produced in GCC region is exported in the primary form % is percentage of aluminium estimated to be exported by % of Dubal's production is exported, Emal utilizes Dubal's marketing base and has high focus towards exports. Limited Economic Valueadd Limited Downstream % of Aluminium Bahrain s (ALBA) sales are for Bahrain downstream players the highest among GCC countries. UAE & Qatar produce 2/3 rd of total GCC Smelter production and cater to Rod & conductor & Extrusions products in GCC region. Reason for GCC smelters to focus on Downstream development by supporting potential investors for developing favorable projects

8 Aluminum Industry Value Chain Semi Finished Downstream End Users Bauxite Billets B&C Profiles Heat Sinks Engg Profiles ` Alumina Ingots Wheels Castings General Engg Liquid Metal Wire Rods Conductors Cables Weld Wires ` Rolling Slabs Plates Sheet Coils Foils Powder Paste Flakes Scrap Recycling Slugs & Circles Aerosol Cans Tubes Bottles Source: Frost & Sullivan.

9 Implications for KSA

10 Economic Triggers - KSA National Industry Strategy (NIS) goal to increase the contribution of the manufacturing sector to the GDP to 20% by the Y 2020 from the current 11% With the current progress of Ninth Five year plan ( ) to accelerate the pace of economic growth & attract FDI (currently slowed down) to diversify economic base FDI ($Bn) Economic 360 Perspective: Key Indicators for the Ninth Five Year Plan, KSA, Indicators Targeted Average Annual Growth Rate (%) To attract FDI into KSA Real Gross Domestic Product (GDP) 5.2 Gross Fixed Capital Formation (GFCF) 10.4 Merchandise and Services Exports 4.5 Non-oil Exports 10.0 Final Consumption 5.4 Rate of Saudization (%) (By end of plan) 53.6 Increased focus on diversification & investments Significant impact on Aluminum markets Unemployment Rate (%) (By end of plan) 5.5

11 Key Influencers & Participants- KSA Aluminum Industry Key Ministries & Organizations The key influencers refer to Government bodies responsible for development of Aluminum downstream clusters Top Aluminum Market Participants The Aluminum market participants indicated above represents only key players dominating the market; There are several traders, secondary recyclers dealing with Aluminum products; Other major players include Alinco, Dural, Wofoor etc

12 Role of Key Stakeholders influencing the KSA Aluminum Sector Critical Stake holder for KSA Aluminum Sector MOPM Ma aden (smelter) MODON SAGIA SIDF KSA Aluminium Industry NICDP RCJY MOCI Stakeholders (ministries & other organizations) Roles Source: Various Ministries & Organizations.

13 Ma aden Aluminium Project: Locations in KSA Downstream Area Primary Smelter Area The project's alumina refinery, aluminium smelter and rolling mill are under construction at Ras Al Khair also known as Ras Al Zawr, 90 km North of Jubail on the east coast of the KSA. Bauxite ore transported by rail to Ras Al Khair will be refined in the GCC's first alumina refinery which is envisaged to produce 1.8 million MTPA of alumina, which will in turn be processed in the smelter to produce 740,000 MTPA of aluminium. Ma aden will import bauxite & alumina for the initial 2 years of operation. The rolling mill with initial hotmill capacity of 380,000 MTPA will focus initially on the production of sheet, can end and body stock for the manufacture of cans and other products including auto, construction and foil applications. The rolling mill will be one of the world's most technically advanced and will also have a aluminium scrap recycling facility. Source: RCJY.

14 Ras Al-Khair Minerals Industrial City Ras Al-Khair (Also called Ras Al-Zawr, Ras Azzour) is a town and port currently under development on the eastern coast of the Arabian Gulf, 60 km north of Jubail Industrial City. Total Area 254 sq. km Nearest Port Ras Al-Khair RAKIC Aerial View In July 2011, King Abdullah has changed the name of Ras Al- Zawr to Ras Al-Khair. 60 km This upcoming Minerals Industrial City would be considered in near future as the biggest integrated mineral industrial complex of its kind in the world where it has all basic facilities for mineral industries in one site for export to world markets. According to the master plan, 90% would be complete by Y 2013 and 100% by Y KSA Map RAKIC (Ras Al-Khair Industrial Complex) is planned to exploit the mineral deposits of Phosphate and Bauxite found within the KSA. Hence, the following plants were planned within RAKIC: Di-Ammonium Phosphate (DAP) Aluminium Smelter Ammonia Alumina Refinery Phosphoric & Sulphuric Acid Industrial Minerals Steel Zinc & Copper Smelters Energy Goods & Services Facilities Water (SWCC Desalination Plant) Gas Networks Rail Networks Underground Sewerage Electricity (2,400 MW from SEC) Universities & Townships Land Lease for 25 years

15 Ras Al Khair Industrial Complex (RAKIC) Program Primary Industries Phosphate - Primary Aluminum - Primary Industrial Minerals Steel Plant Zinc / Copper Smelters Secondary & Downstream Industries Phosphate Downstream Aluminum Downstream Metals & Fabrication Copper/Zinc Downstream Energy, Goods & Services Offshore Cluster Support Cluster RAKIC Port Ras Al-Khair Connectivity Few example of RAKIC & Jubail Synergies: Ammonium Phosphate -downstream chemicals Aluminum Silicate rubber & plastics Aluminum fabrication & building products Steel -downstream industries Caustic Soda -Aluminum production Plastic / Polymers -building products, engineering plastics and automotive parts

16 Ras Al-Khair Role of RCJY The Royal Commission for Jubail and Yanbu (RCJY) was established in 1975 for developing the infrastructure facilities necessary to transform these two cities into planned industrial complexes and associated urban communities. In 2009 this was extended to include Ras Al Khair. Considering the great success of RCJY in the construction, management & operation of Jubail & Yanbu Industrial Cities, the Council of Ministers of KSA has agreed to assign the RCJY with the management of Ras Al-Khair Industrial City (RAKIC) for mineral industries and the provision of the services for mining & other industries, on the style of Jubail & Yanbu industrial cities. This is done via the application of the best practices relating to expertise, procedures, knowledge & administrative experiences over more than 30 years in the implementation of industrial cities according to the highest world standards.

17 Reasons to Invest in RAKIC Feedstock Availability Advanced Comm. Network Training Support Infrastructur e Labor Stability & Flexibility Market Accessibility Growth Potential Land Availability Quality of Life Utilities Support Program Quality Public Service Incentives Local Govt. Support

18 Ma aden s Aluminium Downstream Policy Downstream projects are selected / approved by Ma aden if it fulfills following critieria. High Value Added Tier 2/3 products Brand Value for the KSA Downstream Projects Selection Policy Large Employment Opportunity KSA Competitiveness and advantages for downstream projects Smelter with own captive bauxite mines and refinery facility ensuring supply quality & assurance Liquid / Metal from world class smelter operated by Alcoa, global leader Savings on energy due to liquid, less inventory & oxidation loss, higher productivity Import Substitution No Local Supply or Less competition Environment Friendly Well developed infrastructure and land availability from RAKIC Quality power supply and natural gas at competitive rates vis a vis global Few aluminium downstream products which fit above criteria Foils Rod Operating Aluminum Smelter at RAKIC Composite Panels Castings (GDC / HPDC) Wheels (LPDC) Project Timelines Q Q Q Commissioning of Rolling mill for production of can sheet & other sheet coils at RAKIC Starting of Bauxite mining operations at Al-Baitha mine KSA-largest market for aluminium products in Middle East region Strategic location provides access to exports market through sea & air routes Commissioning of Alumina refinery at RAKIC

19 Market Snapshot- KSA Aluminum Industry Primary Aluminium Production Nil (2012) Share of Production in GCC : Nil % Downstream Demand: 618,450 MT (Y 2012) Share of Demand in GCC : 45% Downstream Production: 225,600 MT Share of Production in GCC: 21.8 % Ma aden in JV with Alcoa has commissioned smelter in the Y 2013 with production capacity if 740,000 MTPA. Ma aden to expand capacity to 960,000 by the Y Products planned include Billets, ingot, Slab and T-Bars. 380,000 MTPA Rolling Mill also planned as part of the project scheduled by the Y Downstream : Production & Demand : MTPA: Y 2012 Extrusion Rod Conductor FRP Powder Total Production 139, , ,600 Demand 208,510 90, , ,579 8, ,450 ALUPCO 62,000 MT TALCO 42,000 MT Top 5 Downstream Producers Riyadh Cables 65,000 MT Saudi Cable company 50,000 MT Jeddah Cables 40,000 MT Demand Supply Extrusion Major market for extrusion products; Alupco and Talco are key suppliers; Net importer of extrusion Rod & Conductor Major conductors players present; No local rods supplier; Net importer of Rods. Foils Currently no foils production; Imports cater to local demand; Largest foil customer in GCC- Tetra pak in KSA Cans Currently there are two major players in KSA Olayan & Salumco cater to other GCC countries. Coated Sheet Coil Major market in GCC region, Construction & Industrial segments major driver. Net importer of sheet coils Powder Major powder market; No local supplier; Imports mainly from China, Bahrain Source: Frost & Sullivan.

20 Market Opportunity - KSA compared to Rest of GCC UAE KSA Kuwait Qatar Bahrain Oman Rod & Conductor Extrusion Foils Powder Coated Coils Foundry Alloys High Medium Low Demand Share in Total GCC Region 32% 45% 6.5% 4.3% 5% 7.2%

21 MEGA Trend on Aluminum Demand - KSA Vs Japan 2012 Product Key End-user KSA Japan , ,000 Extrusion Building & Construction 375, ,000 Key Products & Segments Castings Rods / Cables / Wires Automobile & Transportation Power / T&D < 1000 * 1,376,000 50,000 1,670, ,350 18, ,000 25, ,800 1,160, ,000 1,450,000 FRP Packaging 619,000 3,890,000 1,000,000 4,600,000 The market size indicated above are ballpark estimates for comparison. Demand supply varies across product & market segments. Forecasted figures are based on macro economic factors, existing customer base, future projects (approx); * Due to no major presence of Auto OEMs consuming Castings (Die cast parts) ; KSA is expected to host major OEMs by 2020 Total aluminum demand includes powder, forgings, imports etc Source: Frost & Sullivan Analysis and JAA All figures in MT

22 Opportunity for Japan Investors in KSA Aluminum Industry

23 KSA Aluminum Industry Potential Summary Strong Foothold in High Growth Easy Availability of Feedstock Market Market Easy and leader abundant in India. availability Huge future of market feedstock potential and for energy. ECL to Ma aden leverage aluminium as Government smelter is increasing and major fund power allocation projects for are improving underway. water & sewerage infrastructure Export Potential KSA is strategically located & has a proximity advantage to cater high potential markets like MENA countries, Turkey, & Europe. KSA having FTA tariff advantages to GCC, Europe & Western countries. High Growth Potential Region Long term significant downstream opportunity in the region with development in automotive and other industrial sectors. Low Energy & Utilitity costs KSA enjoys lowest utility costs across the globe, as a result it is an attractive destination for Energy intensive Aluminium Industry. KSA Aluminium Industry Potential Potential for Downstream Industry Development Aluminium downstream is still in the developing stage apart from extrusion & conductor. New investments are observed in Mine, Smelter & Rolling mill facilities. China Imports in Aluminum Downstream Industry Cheaper imports from China especially in Flat rolled industry (Foils, & coated sheet Coils) which hampers local downstream players to expand or new commissioning becomes a challenge Wide Demand Supply Gap Gap exists in Foil, Rod; Opportunity to tier 2 aluminium products from Extrusion & Sheet coil like ACP, Heat sinks, composite panels, building access equipment, slugs, cans, aluminium checkered, embossed sheets, auto / ship body sheets, automobile & industrial castings, metal foams. Emerging Economy KSA is one of the major economies in GCC countries with tremendous growth potential due to construction & Industrialization boom. KSA will be a future powerhouse in aluminium production with the advent of Ma aden. Saudi government s friendly industrial policies like industrial cluster development and kingdom s mission to move & diversify and create non-oil wealth will carve the future for KSA aluminium industry through downstream products value addition

24 Key Project Development Index * (PDI) CAPEX ($ Mn) Job Creation (Nos) IRR% 15-22% Foils 17-24% Rods & Conductors 14 21% Extrusions 15-22% Composite Panels 15-22% Castings Max Min Max Min 12-18% Foundry Alloys 0 $ Not to scale There are other potential downstream products to be developed in KSA market; However, Frost & Sullivan recommends these top attractive projects based on current market conditions The above estimates are ballpark indication of parameters represented for listed capacity per year (MTPA) Detailed Feasibility engagement has to be commissioned to get indepth information of market, financial model & engineering aspects

25 Opportunity for Japanese Companies in Aluminium Downstream Industry GCC/KSA Growth Potential for Downstream Opportunities Vs. Local Competition Note: The size of the bubble represent market sizes of the aluminum downstream product categories. Japanese firms are world renowned for their technology & technical expertise. KSA looks to Japan to bring in the necessary technology for the aluminium downstream projects. Their role can be similar to Alcoa support in the tie up with Ma aden. Japanese Aluminium firms / technology providers can explore opportunities in the KSA aluminium downstream industry by investing 100% or as a JV with the KSA investors / existing aluminium companies with various equity options (50 / 50, 80 / 20 etc.) along with utilizing industrial friendly policies & incentives offered by the KSA government. Aluminum downstream products like rod, conductor, wheels, castings, composites, panels, castings, foils, drill pipes, forging, laminates, foams, paste etc., where Japanese companies operating in these areas can utilize the opportunities to have a manufacturing presence in the kingdom by utilizing the benefits offered by the KSA government. Japanese companies can also leverage to nurture their domestic demand as well as look at export opportunities in proximity geographies of KSA like Europe & African countries.

26 Opportunity for Japanese Firms Technical Support Equity Support Downstream player selection Partner selection Process Government Support KSA firms technical expertise in shortage to Global standards Financial Investment in project as 100% or as JV MOPM and NICDP to play key role in JV partner identification Matching Value offered with KSA strategy for Aluminium sector Downstream projects development to made more effective Japanese firms are world renowned for technology; KSA looks to Japan to bring in the necessary technology for the downstream projects; Role can be similar to Alcoa support in the tie up with Ma aden. Japanese Aluminium firms shall make investments as 100% owned project or as a JV with KSA firms with various equity options (50 / 50, 80 / 20 etc.) NICDP & MOPM are the major decision maker for the JV partner. Out of 3-5 identified technology partners, NICDP selects that most suitable one considering their capability related to the highly technical products to be produced. Downstream products manufacturers are selected based on the value they will bring in the project which match with the strategy of NICDP; MOPM is the final authority to take decision related to Aluminium. A new plan termed Saudi Industrial Development Program by combining National Industrial Strategy (NIS) & Saudi Industrial Development Fund (SIDF) to mange the Aluminium program more effectively. Japanese companies have a brand recognition world wide w.r.t. technology, quality systems, reliability & reputation. so it is a great advantage for the Japanese investors/companies to partner and carve a niche for themselves in the KSA Aluminium industry. they can also have the opportunity to be machinery suppliers / EPC contractors / technology & equity partners by supplying critical high value machinery to extrusion, rolling & foil mills, casting technology and other aluminium down stream manufacturing areas.

27 Ma aden Aluminium Downstream Policy (1/2) Ma aden primarily focus on the upstream activity of Aluminium. Their major focus will be on the primary aluminium and semis. Ma aden would not develop aluminium downstream product neither they would partner with any other companies in downstream projects. Ma aden would acts as a facilitator to interested parties like investors, companies etc., who are enthusiastic to develop the downstream project in the Ras Al Khair Industrial Complex (RAKIC) or anywhere across the kingdom. Ma aden has framed certain policies to select downstream projects of third parties so that it satisfies the following criteria: Emphasize on tier 2 & 3 aluminium products like foils, conductor, composite panels, castings, wheels, etc., which are high value added products yielding higher price premiums on LME Large employment opportunities for citizens of the KSA Manufacturing products that would serve as Import Substitution Creates higher brand value and prominent position for KSA on the world aluminium downstream map Products which have lower domestic competition and is not currently not manufactured in KSA Environmentally friendly and Non-hazardous aluminium downstream products

28 Ma aden Aluminium Downstream Policy (2/2) Ma aden s aluminium strategy currently is to focus only on the upstream activities (mine and smelter) rather than getting into manufacturing of downstream value added products. For aluminium downstream companies, Ma aden intends to support and act as a facilitator with RCJY, SWCC, MOPM and NICDP for land and utility requirements like power, water, natural gas etc., if any aluminium downstream company/investor would come forward to set up a production facility in the RAKIC. Interested companies (Aluminium downstream company/investor) who would like to set up a downstream facility in the RAKIC need to go through the approval and permit process for acquiring the land and feedstock. An indicative flowchart is given in the next slide. Aluminium Downstream Company / Investor Ma aden Aluminium Company (MAC) Act as a facilitator for Permits & Approvals for Feedstock & Utilities like Land, Water & Energy Requirements like Power & Natural Gas. RCJY (Land) SWCC (Water) MOPM (Natural Gas) Power (SEC NEG) Key Takeaways Land, feedstock & other utilities (natural gas/power) will be allocated to the interested companies in aluminium downstream on the basis of internal discussion/agreement between Ma aden & RCJY, SWCC, SEC etc. Commercial Registration (CR) is not a pre-requisite for the allocation of land, feedstock & other utilities, however RCJY will allocate after Ma aden s approval which is done based on project feasibility & merits. According to Ma aden sources some companies have already shown interest to have presence in RAKIC by approaching them with project overviews & feasibility studies..

29 Cluster benefits of RAKIC KSA has signed more than 20 Double Tax Agreements (DTAs) with countries viz; Japan (signed in Y 2011), Russia, China, India, Italy, Austria, France, Malaysia, Ireland, Greece. South Africa, South Korea, Spain, Turkey, UK, Syria, Belarus Key Conclusions Favourable Factors Kingdom of Saudi Arabia + Secured feedstock liquid from Ma aden smelter major driving force to downstream + Attractive savings on production cost ( Low inventory, higher productivity, other cost savings) due to use of Liquid. Healthy project financial to the investor (IRR / Payback ) + Utility ( power, gas, land) advantages are the key for aluminium business + Demand supply gap most of the demand met through imports in large volume markets such as Wire rods, Foils, ACP, Coated & Sheet Coils, Industrial Extrusion & Powder + Investor friendly Nation striving to diversify the economy by supporting non-oil downstream activities by investors

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33 Metals and Minerals Specialization Iron & Steel Copper, Aluminum, Zinc, Lead, Tin & Nickel Ferrous Flat Products Steel Wires /Ropes, Cables, Chains and Slings Channels & Sections Rolled, Formed, Hollow (Light, Medium,Heavy) Tubes & Pipes Cast Iron, Ductile Iron, SAW, ERW, Welded, Seamless, Plastic Lined, Pre- Insulated Stainless Steel Precision Tubes Flanges, Fittings, Joints, Couplings Reinforced Steel Bars Rails, Wheels & Springs Castings, Forgings & Stampings Non- Ferrous Wire Rods, Conductors & Cables Billet & Extrusions Architectural Products (ACPs) Flat Rolled Products- Plates, Sheet Coils & Can stock & Foils Channels & Sections Rolled, Formed, Hollow Castings, Forgings & Stampings Alloy Wheels Pipes & Tubes Seamless, Insulated, Coiled, Rolled Specialty Products Tools: Tungsten carbide, high speed steel, grinding Structural Metal Fabrications (Building Work, Civil, Marine Applications) Non-structural Metal Fabrications for Building Work Prefabricated Metal Buildings Pre-Engineered Building Systems Household Metal Products Minerals Ferro Alloys Tantalum Niobium Rare Earth Elements Silica Quartz Iron Ore Bauxite Coal Inorganic Minerals silicates, carbonates, sulphates, halides, oxides, sulphides, phosphates

34 PFS and DFS Components Competition & Customer Assessment Plant (3D) Model Plant Layouts Marketing & Distribution Strategies (concept notes) Metals & Minerals Partner Prospecting & Due Diligence Prefeasibility Studies (PFS) Detailed feasibility Studies (DFS) Business Model Financial Model Market Coverage (End-to-End) Mining Primary/Liquid Metal Semi-finished Products Downstream (Value added products)

35 State your need, we would be happy to serve you Contacts: Y. S. Shashidhar Venkatesan Subramanian Managing Director Vice President & Global Leader Frost & Sullivan International Inc Metals & Minerals South Asia, Middle East & North Africa Frost & Sullivan International Inc UAE Mobile: Mobile: KSA Mobile: Phone: Metals & Minerals Thank you