Global aluminium outlook and our focus on Tier 1 assets

Transcription

1 Global aluminium outlook and our focus on Tier 1 assets Gordon Hamilton, Vice president Metal Management Sales and Marketing, Rio Tinto Alcan Platts Aluminium Symposium Fort Lauderdale

2 Short term economic outlook Can the good momentum that has built up in the US economy be sustained through 2012 (i.e. US helps prop up global growth)? GDP growth expected to be 2.0% in 2012 versus 1.8% in 2011 (source: IHS Global Insight). However, the US does face some serious headwinds later in the year related to debt ceilings and the expiry of tax incentives. Will the politicians agree and implement a proper debt restructuring and economic stabilization plan in Europe? GDP expected to shrink by 0.1% versus +1.6% growth in 2011 (source Consensus Economics) Consensus is for a mild recession in Europe in A deepening of the sovereign debt crisis in the Eurozone remains key downside risk. Will Chinese policy makers successfully engineer a soft landing for their economy? Inflation has fallen to 4.1%, allowing for more accommodative monetary policy. GDP growth slows to 8.2% in 2012 from 9% in 2011, but industrial production growth remains strong at 12% growth (source JP Morgan) 2

3 U.S. Economy are we turning the corner? Industrial Production Consumer Confidence Index 3

4 European Economy Uncertainties remain Industrial Production- EU BIG 5 Industrial Production - GERMANY 4

5 New Orders PMI Index vs. Manufacturing PMI USA Eurozone Japan China 5

6 Regional PMI 6

7 Long-term fundamentals remain positive Long term drivers of the structurally driven commodities boom remain intact: Trends in urbanization and industrialization appear to be entrenched for the next few decades in China, India and other EMs. By 2050 another 2.8 billion people at the global level will urbanize. Most of this urbanization will take place in emerging market economies (UN population division). By 2025 another 350 million people would have urbanized in China (McKinsey Global Institute). By 2030 another 250 million people are likely to urbanize in India (McKinsey Global Institute). The infrastructure expenditure to accommodate global urbanization is significant. The quantity of minerals required to support this urbanization is significant. 7

8 Thousands of people World urbanized population to grow by 2.8 billion to 6.3 billion by ,000,000 World's urbanized population 1950 to ,000,000 5,000,000 4,000,000 3,000,000 2,000,000 Oceania Northern America Latin America and the Caribbean Europe India China Asia (less China and India) Africa 1,000,000 Source: UN Population Division 2009 update 8

9 Urbanized population (millions) China s urban population close to one billion China's urban population to reach nearly 1 billion by million mega 926 million mega Megacity (>10m) Big (5m-10m) Midsized (1.5m-5m) Small (0.5m-1.5m) Big town (<0.5 m) Source: McKinsey Global Institute 9

10 China is key to the aluminium industry. Currently it accounts for 42% of global aluminium demand This could rise to 52% by 2020 with urbanization / industrialization. In 2011, China accounted for about 63% of the growth in global aluminium production. The Chinese authorities appear to have successfully engineered a soft landing for their economy. Inflation is now under control and they appear to be shifting their focus back to growth and industrialization. 10

11 Demand driven by emerging economies CAGR % 4.7% 9.4% 11

12 Strong demand growth from consumption in emerging economies and OECD Consumption of aluminium continues to rise after an economy s development phase Expenditure per capita US$ (2011 terms) World average income per capita Aluminium Copper Iron ore Hard coking coal GDP per capita (in 2011 US$) Source: Rio Tinto estimates for commodity expenditure profiles. Note: Expenditure profiles are based on Rio Tinto estimates of global income and consumption relationships and average real terms prices between Iron ore and hard coking coal expenditure calculated based on crude steel demand projections, assuming all met by blast furnace production at historic average export prices. 12

13 Low-cost producers to benefit from steepening of the industry cost curve 2016 Business operating costs ($/t) 3, , Input costs 2. Energy 3. Appreciating RMB 1,000 Cumulative production Source: Rio Tinto Alcan analysis and CRU 13

14 Rio Tinto Alcan - Focused on Tier 1 projects Project timeline (1) Approved Current status Capex Production Under construction $487m 40+ ktpa Under construction $1.1bn 60 ktpa Feasibility study nearing completion $3.3bn Increase from 282 ktpa to 420+ ktpa Over 90 per cent completed $2.3bn 2 mtpa tbd Feasibility study <$2bn 22.5 mtpa 1 Represents timing of project completion and initial production 14

15 Lowest carbon footprint in the industry and best in class technology Positioned for higher margins as carbon pricing becomes more widely deployed Aluminium emissions intensity of major aluminium producers t CO2-e/ t production (Scope 1 and 2) Rio Tinto Alcan after divestments Competitors Technology provides first user advantages and makes us a partner of choice The AP Technology edge AP-Xe suite designed to retrofit previous AP series AP60 plant Phase One under construction (expandable) Lower full economic cost of production 40% higher output per pot 15% higher labour productivity 15

16 Conclusion Short-term regional variability in aluminium demand Long-term positive outlook due to urbanization in developing markets and substitution / penetration in developed markets. China is key to the aluminium industry. Cost containment key for primary producers We are committed to the aluminium business and managing our portfolio accordingly, across the value chain Robust growth pipeline, capital efficient with low operating expenditure and low carbon footprint 16