Market development in primary and recycled aluminium. Christine Frogner Brath, Senior Analyst, Strategy & Industry Analysis November 19-21, 2012

Transcription

1 Market development in primary and recycled aluminium Christine Frogner Brath, Senior Analyst, Strategy & Industry Analysis November 19-21, 2012

2 Market development in primary and recycled aluminium 1. About Hydro 2. The long term demand growth of primary aluminium 3. The supply development of primary aluminium 4. China's growing importance in the aluminium industry: import and export development along the value chain 5. The aluminium industry's need for a sustainable primary aluminium and recycling activity Page: 2

3 1 About Hydro Page: 3

4 Hydro is resource rich and fully integrated Based in Norway with operations in 40 countries ~ employees* Hydro and Orkla to create world-leading aluminium solutions provider Operating revenues 2008: 10,8 billion 2009: 7,7 billion 2010: 9,4 billion 2011: 11,7 billion Current market capitalization NOK 6,7 billion * * Oct 23, 2012 Page: 4

5 Hydro and Orkla to create world-leading aluminium solutions provider 50/50 joint venture with two strong owners new company to be named Sapa No 1 positions in North America and Europe, strong foothold in emerging markets Strong management and organizational capabilities Significant synergy potential NOK 1 billion annually * Illustrative figures for the new company 2011, unaudited Key figures * Revenues NOK ~47 billion (6,3 bn ) EBITDA NOK ~2 billion (270 bn ) Employees ~ Page: 5

6 Hydro integrated throughout the value chain Recycling Rolling Bauxite Alumina Energy Primary Casting Products Extrusion Recycling Page: 6

7 2 Long term demand growth of primary aluminium Page: 7

8 The big challenges of our generation Growth must be sustainable Millions climb out of poverty Increasing energy demand Climate change Page: 8

9 Aluminium is the metal of the future Lightweight 1/3 density of steel Recyclability 5% of original energy consumption 75% of all aluminium produced still in use Corrosion resistant Oxide layer Formability Extrusion, rolling, casting Low melting point vs. steel Excellent conductivity Thermal electrical Alloying technology Gives wide range of physical properties Properties lead to increased market share Aluminium intensive urbanization and infrastructure Climate challenge aluminium as part of the solution Recyclability more important with high energy prices Page: 9

10 Worth its weight in aluminium Page: 10

11 Slim Bottles for slim ladies? Coca Cola Light Photo: C. Frogner Brath Page: 11

12 The world s aluminium semis demand has grown fast considerably influenced by China World ex. China China t Source: EEA, CRU, Hydro Page: 12

13 Macro economic situation: global uncertainty Europe Sovereign debt concern United States Demand issue China Reduced growth Page: 13

14 Aluminium is part of the solution Global trends Capabilities Demand for semis Million mt ~70% Share of semis consumption million mt Machinery & equipment 10% Electrical 12% Transport 25% Consumer durables 6% Packaging 9% Foil stock 8% Construction 24% Other 6% World outside C hina C hina Source: CRU Oct 2012 Page: 14

15 3 The supply development of primary aluminium Page: 15

16 Aluminium supply/demand balance has narrowed World supply World demand t Source: CRU Page: 16

17 First stocks were stable, whilst prices increased then stocks increased, and prices became volatile Stocks ( 000 tonnes) m LME Price USD/t jan. 02 jan. 03 jan. 04 jan. 05 jan. 06 jan. 07 jan. 08 jan. 09 jan. 10 jan. 11 jan IAI Japanese Port LME stock Chinese reported stocks 3m LME price Page: 17

18 The ingot premiums have increased but not fully compensating for low LME prices Stocks ( 000 tonnes) m LME price and Ingot premium USD/t jan. 02 jan. 03 jan. 04 jan. 05 jan. 06 jan. 07 jan. 08 jan. 09 jan. 10 jan. 11 jan IAI Japanese Port LME stock Chinese reported stocks 3m LME price Ingot premium Europe DP Page: 18

19 4 China s growing importance in the aluminium industry and growing dependency on imports Page: 19

20 Aluminium is part of the solution also in China Urbanisation/Economic growth World Demand for semis Million mt ~115% 48 Share of semis consumption: million mt Machinery & equipment 10% Electrical 12% China Consumer durables 6% Packaging 9% Foil stock 8% Other 6% Capabilities Transport 25% Construction 24% China Source: CRU Oct 2012 Page: 20

21 China depends on imports along its value chain Annualized aluminium equivalents*, million mt Import to China Bauxite and alumina Strong increase in bauxite imports in April/May, low levels June to August Bauxite import from Atlantic region 200% growth in alumina imports YTD 2012 vs 2011 Export from China Primary aluminium Expected to remain broadly balanced in 2012 Semis and fabricated Exports at 2011 levels Source: CRU/Antaike/Hydro Bauxite Alumina Scrap Primary aluminium * Bauxite/alumina to aluminium conversion factor: 5.4/1.925 Fabricated Semis Page: 21

22 5 The aluminium industry s need for a sustainable primary and recycling activity Page: 22

23 Old scrap recycling is increasing fast and scrap will be sorted and cleaned too be utilized even better World ex. China China Old scrap t Source: EEA, CRU, Hydro Page: 23

24 The industry has tools to identify old scrap metal flows Bauxite MATERIAL FLOW METAL FLOW Alumina* Primary Aluminium used 44.6 Remelted Aluminium 46.1 incl.recycled Aluminium 22.1 Traded New Scrap Ingots Fabricator Scrap Semi-fabricated and Finished Products (input) 89.3 Other Applications Traded New Scrap Finished Products (output) 54.1 Old Scrap 11.2 Total Products Stored in Use Since Building 34% Building 31% Other 11% Transport 27% Transport a.o.automotive16% 28% o.a.automotive16% Net Addition 2011: 33.9 Other 10% Packaging 1% Engineering Engineering and Cable 28% and Cable 29% Bauxite Residues and Water 47.8 Metal Losses 2.2 Recovery and Disposal Under Investigation Values in millions of metric tonnes. Values might not add up due to rounding. *Change in stocks not shown 1 Aluminium in skimmings; 2 Scrap generated by foundries, rolling mills and extruders. Most is internal scrap and not taken into account in statistics; 3 Such as deoxidation aluminium (metal property is lost ) 4 Area of current research to identify final aluminium destination (reuse, recycling, recovery or disposal); 5 Calculated based on IAI LCI report - update Includes, depending on the ore, between 30% and 50% alumina; 6 Calculated. Includes on a global average 52% aluminium; 7 Scrap generated during the production of finished products from semis; 8 Either incinerated with/without energy recovery, material recovery or disposal; 9 Estimated stock decrease 440,000 tonnes. Page: 24 Source: GARC draft for 2011, February 2012

25 In order for the aluminium industry to be sustainable, it must also be profitable Yearly consumption. Index. 2000= m LME price. Index. 2000= IP GDP Copper Tin Lead Aluminium Nickel Source: CRU/Global Insight Page: 25

26 Global primary aluminium cost curve shows that many smelters are suffering right now Business operating cost aluminium USD/tonne Accumulated world capacity, tonnes Assumption: LME 2044 USD/t, SHFE 2534 USD/T alumina 314 USD/t, Euro-USD: 0,79 Source: CRU Page: 26

27 The history points at interesting gross margins for scrap recycling compared to LME Secondary aluminium LME plus Ingot premium DP Old Rolled scrap( Taint Tabor) USD/t Source: MB, SIA Oct Page: 27

28 Recycling Release value of conserved energy in the material Improve carbon footprint and raise viability profile of aluminium Primary metal production is under threat in Europe, resulting in opportunities for restructuring and consolidation also of the recycling industry Collected aluminium scrap volumes will increase significantly Therefore Hydro has an ambition to do 1 mill t recycling in 2020 Page: 28

29 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, start-up 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 forwardlooking 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. Page: 29

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