Aluminium market outlook

Transcription

1 Aluminium market outlook Arvid Moss, Executive Vice President and Head of Energy and Corporate Business Development January 13, 2011 (1)

2 Agenda Market situation 2010 Status development from 2009 Restocking effect Downstream development Mid-term development Possible scenarios China Cost curve (2)

3 24% 20% 16% 12% 8% 4% 0% Strong recovery in 2010 from crisis Change year-on-year world outside China Gross domestic product Aluminium demand Industrial production -4% -8% -12% -16% -20% Source: Global Insight/CRU/Hydro (3)

4 2010 balance our expectations World outside China, tonnes Supply Demand 2009 imbalance handled by: Net curtailments 2010 imbalance handling options: Consumption upside (GDP, pipeline) Stock increase Increased primary demand due to increased scrap exports to China New curtailments Stock increase Primary export 8% 8% Source: CRU/Hydro (4)

5 2010 balance - outcome World outside China, tonnes Supply Demand 2009 imbalance handled by: Net curtailments Stock increase Primary export 2010 imbalance: Higher consumption increase (GDP, pipeline) Stock increase Increased primary demand due to increased scrap exports to China 19% Source: CRU/Hydro (5)

6 Commodity as asset class affects aluminium LME 3-month, USD/tonne LME USD/tonne Jan-07 Jan-08 Jan-09 Jan Source: Reuters Ecowin/Hydro (6)

7 High inventories well known in market World reported primary aluminium inventories tonnes IAI Other LME SHFE Different views on unreported inventories Estimated total reported and unreported inventories ~11 million tonnes Represents ~3 months of consumption Financial deals locking up metal Q1 07 Q3 07 Q1 08 Q3 08 Q1 09 Q3 09 Q1 10 Q3 10 Source: CRU (7)

8 2010-Q4 Tight physical market despite high inventories Ingot premium, USD/tonne 200 Europe: Duty paid US Mid-West Japan Q Q Q Q Q Q Q Q Q Q Q1 '2009 '2008 '2007 '2006 '2005 '2004 '2003 Source: Metal Bulletin/Platts (8)

9 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Production cuts in China due to energy issues China (annualized) tonnes Supply Demand Source: CRU (9)

10 China remains balanced in aluminium tonnes 600 Net import Net export Source: Antaike/Hydro Primary / alloyed Scrap metal Semis Fabricated Total net (10)

11 Significant rise in Chinese power prices Average power prices for aluminium industry USD/MWh Short-term actions to meet 2010 target of 20% reduction in energy consumption/gdp vs 2005 Average power costs continues to increase Industry restructuring taking place Aluminium s share of power has increased From ~2% in 2000 to >5% in 2010 Power price not expected to decrease Middle East US Europe China World average Source: CRU (11)

12 China is dependent on bauxite imports Alumina coverage aluminium production Import Domestic source Bauxite coverage alumina production Import Domestic source Share of imported bauxite in China in 2010: ~35% Quality of domestic bauxite resources is deteriorating New capacity mainly based on domestic bauxite Indonesia supplies 75% of imported bauxite Source: Antaike / Hydro (12)

13 China expected to remain balanced medium term Potential long-term importer Primary aluminium exports continue to be discouraged through export taxes Potential long-term imports partly based on Chinese companies investing abroad Continued exports of value-added products expected China focus more on domestic markets Continued imports of scrap Semis demand China million tonnes Other Machinery & equipment Consumer durables Electrical Foil Packaging Construction Transport Source: CRU (13)

14 Downstream development indicates return to underlying growth Demand, million tonnes 12 Western Europe North America & Mexico Other Machinery & equipment 10 Consumer durables Electrical 8 Foil 6 Packaging Construction 4 Transport 2 0 Source: CRU (14)

15 Mid-term development scenario thinking World outside China tonnes Demand % 9% 3% 6% Demand influences GDP growth Further restocking Emerging markets Source: CRU/Hydro (15)

16 Mid-term development scenario thinking World outside China tonnes Supply Demand Supply influences New projects Potential restart Supply disruptions Source: CRU/Hydro (16)

17 Relative improvement in cost position Cash cost indexed 100 Hydro Alcoa Century Rusal Rio Tinto Q Q Q Estimated primary aluminium production cash costs including casthouse margin based on company reports. Assumptions: Hydro cash costs increased by USD 50/tonne for relining cost in order to compare with Alcoa. Pricing: Century 1 month LME cash lag, Hydro 3 months and 20 days LME forward lag, Alcoa, Rio Tinto and Rusal 15 days LME cash lag. (17)

18 Strong focus to further improve cost position Estimated primary aluminium production cash costs First half 2010, USD/tonne Business operating cost 2014 USD/tonne Hydro Rio Tinto Rusal Hydro Alcoa Century Accumulated world capacity, tonnes Source: see previous slide Source: CRU, BOC 2014: LME USD/tonne (real 2010) (18)

19 Firm long-term demand for aluminium Primary aluminium consumption tonnes % Change in % per decade + 54% % + 39% Source: CRU E 2020E (19)

20 Points to watch Manageable supply/demand balance Demand development Macro development Further filling of pipeline Supply development Restarts outside China dependant on market fundamentals New capacity Investor influence on LME Financial deals/stocks China balance (20)

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