Bauxite & Alumina industry dynamics

Transcription

1 Bauxite & Alumina industry dynamics Executive Vice President Alberto Fabrini 24 September 2014 (1)

2 Hydro - an integrated aluminium company MRN Bauxite Mine Hydro Paragominas Bauxite Mine Aluminium smelters Recycling Rolling Bauxite Alumina Energy Primary Casting Products Extrusion Recycling Hydro Alunorte Alumina refinery CAP Project Alumina refinery (2)

3 Hydro s global reach North America Aluminium production in Canada Recycling Norway Aluminium production Hydropower production Continental Europe Leading position in aluminium and rolled aluminium products Recycling Aluminium profiles 50% ownership in Sapa, world leader in aluminium profiles and building systems Brazil World-class bauxite and alumina production Bauxite and alumina expansion projects Albras aluminium plant Middle East Qatalum 1 aluminium plant Possible expansion Australia Aluminium production (3)

4 High-quality bauxite and alumina asset portfolio MRN bauxite mine Paragominas bauxite mine Alunorte alumina refinery CAP alumina refinery project 5% ownership Volume off-take agreement for Vale s 40% stake Capacity 18 million mt 60% ownership, full financial exposure, increasing ownership to 100% by 2016 One of the world s largest bauxite mines Nameplate capacity of 9.9 million mt Possible expansion to 15 million mt Long-life resource 92% ownership World s largest alumina refinery Nameplate capacity of 6.3 million mt Bauxite supplied from Paragominas and MRN World-class conversion cost position 81% ownership Paragominas expansion to be developed in parallel Full utilization of the existing bauxite pipeline Bauxite licenses Refining and mining competencies External supply contracts Sales contract portfolio

5 China developing new bauxite import sources Indonesia ban translating to higher prices average CIF China Import volume by origin, million tons Standard bauxite price increasing more Mill tons 80 USD/t Delta 2014 vs 2011: Australia +8 Other Pacific +7 Atlantic Avr CIF China Standardized price est Indonesia Australia Other Pacific Atlantic 40 Source: China Custom, CMgroup, Hydro (5)

6 New bauxite sources translating to higher cost Import volume by origin, million tons Mill tons Avr price CIF China by origin, USD/t USD/t Avr CIF China Indonesia 100 Australia India Malaysia Fiji Brazil Guinea 90 DomRep Ghana est India Malaysia Fiji Brazil Guinea DomRep Ghana 40 Source: China Custom, (6)

7 Short term, new imports and inventory offer relief Enough volume, but higher cost Medium term Weipa is part of possible solution Mio tons Inventory and weeks of supply Weeks of supply 60 Inventory Weeks of supply No short/mid term bauxite squeeze China demand for imported bauxite is around 4 million tons per month Chinese bauxite import around 3 million tons per month could keep China with sufficient supply short term. Mid term, the proposed Weipa expansion(s) could support China s import needs Source: China Custom, CMGroup, (7)

8 A//S ratio Long term China could face bauxite issues Greenfield is needed, at what cost CIF China? Chinese domestic bauxite development 6 ~4bln t Many hurdles for greenfield outside China Resource nationalism growing Stronger environmental policies Best qualities will be depleted Much higher infrastructure cost expected 5 <3bln t 2012 Capital intensive Atlantic bauxite long term to China faced with huge shipping exposure AA% Source: CMgroup (8)

9 Refinery growth and bauxite potentials Few greenfields, creep representing main refinery growth All figures in billion t 41,0 3,0 4,1 India 1,1 MiddleEast 4,7 China Jamaica 8,7 Guinea Vietnam 9,5 2,0 Brazil Indonesia Australia Total bauxite potential, including undeveloped resources Source: Hydro, CRU (9)

10 RoW price lower RoW price higher Alumina price expected to be range bound as China swings import levels Monthly annualized import, mio tons Arbitrage USD/t China will continue to respond to ROW alumina price changes by adjusting imported volume. The pivot point will balance around Chinese price level. Over time, increased bauxite prices to Chinese refineries could move the pivot point upwards 0-30 Annualized import Arbitrage Source: China Custom, Hydro (10)

11 Alumina market is consolidating Net long equity alumina position, million tonnes Alcoa 4.3 Alcoa/AWAC 8 Vale 3.0 BHP Billiton 2.7 Glencore 2.4 Hydro 2.0 BHP Billiton 1.9 Nalco 1.4 Kaiser Alcan Sual Rio Tinto Pechiney VAW (0.5) Rio Tinto Alcan Vedanta (0.6) Press Metal (0.8) Aluar (0.9) Alba (1.8) EGA (4.5) 1.0 Hydro Alba Dubal (0.6) (0.9) (1.0) 2000 China import (5.0) 2014 Rusal (1.2) China (1.9) Source: CRU, Hydro (11)

12 CAP an attractive project when time is right Utilize large bauxite reserves in Paragominas Brazil alumina is competetive to Middle East with large shipments CAP project Competitive cost position Ready to go ahead as soon as there is a clear need in the market. Source: China Custom, Cmgroup, Hydro (12)

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