The Middle East as an emerging hub

Transcription

1 Global and regional aluminium markets managing growth, competition and oversupply The Middle East as an emerging hub Walid Al Attar, Chief Marketing Officer Platts Aluminium Symposium to 14 January 2014

2 Agenda Middle East primary aluminium industry Introducing Primary aluminium core assets Product mix Global dynamics EGA sales strategy 1

3 Middle East primary aluminium industry (1) Centred in the Gulf Co-operation Council ( GCC ) region Six smelters in five GCC states Massive growth in 40 years 120,000 t in 1971 to 3.7 M t in 2012 Over 9% of total global primary aluminium production will come from the Middle East by 2020 Some 60% of Middle East primary aluminium capacity has been built since 2008 About 57% of new capacity represents regional investments by global majors Ma aden Alba Qatalum DUBAL EMAL Kuwait Sohar Bahrain Qatar UAE Oman Saudi Arabia 2

4 Middle East primary aluminium industry (2) Capacity to exceed 4.88 M t by 2014 (almost 32% up on 2012) Country Company Annual production capacity (t) Year commissioned Ownership Bahrain ALBA 880, Bahrain (67.5%) SABIC (21.5%) Public (11%) UAE DUBAL 1,056, Dubai Government (100%)* Oman Sohar 370, Oman Oil Co (40%) Abu Dhabi Water & Elec. Authority (40%) Rio Tinto Alcan (20%) Qatar Qatalum 585, Qatar Aluminium (50%) Hydro Aluminium (50%) UAE EMAL 1,255, DUBAL (50%)* Mubadala (50%)* Saudi Arabia Ma aden 740, Saudi Arabian Mining Company (Ma aden) (74.9%) Alcoa (25.1%) Source: Gulf Aluminium Council * Ownership structure changing, through formation of EGA 3

5 Middle East primary aluminium industry (3) Key factors behind the growth Energy is a readily available resource (more economical than elsewhere); industry adds value to energy to support social development initiatives Modern installations, featuring advanced, environmentally-friendly energy-efficient reduction cell technologies (focus on economic and environmental sustainability) Location, with excellent reach to all corners of the globe Strong export capacity, designed to exceed regional demand and fulfil commitments to global markets Continued growth in global demand identified unanimously by industry analysts National government support for investment in industry (ease of doing business) Many attractive features, conducive to primary aluminium production 4

6 Agenda Middle East primary aluminium industry Introducing Core primary aluminium assets Product mix Global dynamics EGA sales strategy 5

7 EGA Creating a new, UAE-based global aluminium champion Mubadala Development Company and Investment Corporation of Dubai (collectively the shareholders of DUBAL and EMAL) have combined their aluminium industry interests in a new jointly-owned, UAE-based entity called (EGA) Completion of the transaction achieved in Q1 2014, allowing integrated operations to commence January 2014 EGA represents the progression of the shareholders principles for cooperation agreed in 2006 that have underpinned their relationship in EMAL and continue in their activities in all parts of the aluminium value chain (aluminium industry in the UAE began 35 years ago) EGA has very strong financial backing both shareholders are sovereign wealth funds, with unwavering commitment to sustainable growth EGA s vision is to provide the global economy with sustainable material of the highest quality, building a legacy of excellence for the UAE and the world 6

8 World-class smelter operations on two sites (1) Commissioned end-1979 Sequential expansions, advancing technologies 1,573 reduction cells in seven potlines Smelter (>1 M tpa) Casthouses (>1 M tpa) 2,350 MW power station (30 C) 30 million gallon/day desalination plant Port facilities Warehouses & administration Residential area 7

9 World-class smelter operations on two sites (2) PHASE I 756 cells (DX Technology) Fully commissioned end kt sold in 2012 PHASE II 444 cells (DX+ Technology) Upgrade of Phase I cells First hot metal September 2013 Increase capacity to 1.35 M tpa by end

10 Total UAE smelter capacity DUBAL was world s 2 nd largest single-site producer in 2012 (1.025 M t) EMAL will be world s largest single-site smelter once fully commissioned in 2014 EGA (DUBAL + EMAL) accounts for 50% of Middle East production 3000 Smelting capacity ( 000 tonnes per annum) ktpa Initially DUBAL only, including EMAL from 2010 onwards 9

11 Product mix Product type cast by DUBAL and EMAL from 2014 (i.e. EMAL Phase II fully commissioned) Total 2,500,000 tpa 380, ,000 1,100, ,000 Unalloyed Foundry Billet Slab 10

12 Dedicated to excellence and sustainability Premium purity, high performance aluminium products Super high and high purity aluminium >99.952% metal purity Leading supplier of foundry alloys to automotive manufacturers One of the world s largest suppliers of billets for forging and extrusion Investment in value-added products casting facilities to meet customers requirements Advanced reduction-cell technologies, developed in-house DX Technology (385 ka) (796 cells) DX+ Technology (440 ka) (449 cells) Modernisation and retrofit of older potlines (DUBAL) Superb environmental performance * Focus on energy-efficiency (smelter specific energy: DC MWh/t Al) Stringent emission control (PFC 0.12 CO 2 eq t/t Al; HF 0.60 kg/t Al ) Safety first and always * DUBAL, 2012 figures 11

13 Agenda Middle East primary aluminium industry Introducing Primary aluminium core assets Product mix Global dynamics EGA sales strategy 12

14 Global dynamics influencing EGA Global growth of aluminium consumption Growth of Chinese aluminium consumption and production Increasing costs and decreasing availability of energy, driving closures of primary smelters Environmental pressures to reduce greenhouse gas emissions Influence of financial investment companies on aluminium pricing Protectionism 13

15 Growth in primary aluminium consumption Annual growth in primary aluminium consumption of 4% to 6% ROW versus China (ktpa) tonnes China Others Data: CRU 14

16 Protectionism Import tariff barriers: Protects interests of older smelters BUT undermines competitiveness of country s downstream industry Inappropriate warehousing strategies: Perverse financial incentives Manipulation to maximise warehouse returns Aggravating tight supply of products and depressing LME prices Chinese semi-fabricated exports to the GCC tpa X 10,000 tpa Production of extrusions in China China s tax incentives: Competitive edge in terms of pricing Extraordinary growth in Chinese production of aluminium extrusions Substantial growth in Chinese exports of aluminium products manufactured from extrusions. Sources: China NFMA, CRU 15

17 Aluminium is a commodity Primary aluminium is in demand globally Highly competitive and transparent markets creates interesting dynamics: EGA sells products globally, mainly into countries short on primary aluminium production EGA must thus compete on quality, service and price against international and national producers Primary aluminium is a globally traded product, with common commercial values (i.e. inherent energy value): Some countries export primary aluminium, others import it Aluminium semi-fabricated and finished products are imported and exported by some countries Aluminium scrap is imported and exported by some countries The major common denominator in these flows is the value of the aluminium content. Other variables (cost, quality and service) are the differentiators Protection vs. globalisation 16

18 Agenda Middle East primary aluminium industry Introducing Primary aluminium core assets Product mix Global dynamics EGA sales strategy 17

19 Global sales strategy: regional application Follow markets where demand exceeds internal production More than 88% of production is exported (largest market is Asia, followed by Middle East North Africa region, Europe and The Americas) 15% 20% 39% Asia MENA Europe Americas 26% 18

20 Regional deficits widening (especially in North America, Western Europe, China) Expected primary aluminium market deficits by region * (million tonnes) CHINA NORTH AMERICA WEST EUROPE JAPAN 2012 GLOBAL ASIA EXCL. CHINA AND JAPAN *IMPORTANT NOTES: A) Aluminum production forecasts assume all confirmed brownfield / greenfield projects hit the market as planned (no delays). B) Aluminum production forecasts assume no cuts in production beyond the ones that have been confirmed so far nor disruptions in operating capacity. C) Aluminum production forecasts include annual capacity creep of 0.5% per year for all smelters. Source: HARBOR Intelligence 19

21 GCC: only region with increasing surplus Expected primary aluminium market surpluses by region * (million tonnes) EAST EUROPE MIDDLE EAST GLOBAL DEFICIT LATIN AMERICA REGIONAL SURPLUS AFRICA OCEANIA *IMPORTANT NOTES: A) Aluminum production forecasts assume all confirmed brownfield / greenfield projects hit the market as planned (no delays). B) Aluminum production forecasts assume no cuts in production beyond the ones that have been confirmed so far nor disruptions in operating capacity. C) Aluminum production forecasts include annual capacity creep of 0.5% per year for all smelters. Source: HARBOR Intelligence 20

22 The Americas: Strengthening presence, penetrating markets North America: Strengthened DUBAL/EMAL presence through DUBAL America Inc. Proportion of sales into the USA increased from 8% in 2011 to 15% in South America: First foray in 2011 DUBAL sales in 2011 and 2012 totaled approximately 33,000 t 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1,001 1,015 1,032 1, Asia MENA Europe Americas 21

23 Closing thoughts Global aluminium industry: Challenged by warehousing dynamics and re-melt overhang. Constrained by depressed LME prices. Strong and continuous growth in demand for value-added products. Long-term outlook to rectify. Middle East aluminium industry: State-of-the-art smelters. Substantial investment in sustainable production (advanced technologies, emission reduction). Casthouse mix primarily value-added products to meet customer demands. EGA prospects: Additional 500,000 tonnes coming on stream (EMAL Phase II). Strong demand will ensure full capacity pre-sold. 22

24 Thank you 23