Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Day (2016)
35 slides from Norsk Hydro Asa's investor day presentation, 2016
Slide 1: Market Outlook
Market Outlook Kathrine Fog Capital Markets Day 2016
Slide 2: Macro and downstream
Macro and downstream HYDRO
Slide 3: Global macro development improving, uncertainty persists
Global macro development improving, uncertainty persists Primary demand at or above GDP in key regions Real GDP, annual growth Primary demand annual growth, key regions (%) (%) Forecast 12% 10% 8% 10% 6% 8% 4% 6% 2% 0% 4% -2% 2% -4% -6% 0% 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 China
Slide 4: Global aluminium demand prospects remain encouraging
Global aluminium demand prospects remain encouraging Broad-based demand growth across segments, better growth outlook than other base metals Diversified consumption base Continued strong underlying drivers Global semis demand Cars per 1,000 persons of working age World population Consumption per per
Slide 5: Strong substitution trend for aluminium in automotive
Strong substitution trend for aluminium in automotive High demand within body-in-white driving rolled products demand Main module Aluminium potential Global semis demand for transport sector by product form (Mill t) Body 30 Rolled products Chassis 7% 25 Interior Extrusions 20 castings 4% 15 Chassis
Slide 6: Rolled products demand driven by transport segment
Rolled products demand driven by transport segment Transport share increasing in total rolled products demand General rolled products demand, Expected market development selected regions • Continued substitution trend in transport segment YoY-growth contributing to overall demand growth 10% • Packag
Slide 7: Continued growth in extrusion demand
Continued growth in extrusion demand Gradual improvement expected in Europe Extrusion demand, Expected market development selected regions • US housing market still sustaining positive momentum YoY-growth • Weakness in US truck and trailer segment 10% • Construction activity in Europe continues to i
Slide 8: Extrusion market supported by continued momentum in B&C market
Extrusion market supported by continued momentum in B&C market Trend towards Green buildings also shaping up Housing market indicators Index, Jan 2006=100 120 100 80 60 40 20 0 Jan-06 Jun-06 Sep-07 Jul-08 May-09 Mar-10 Oct-09 Aug-10 Jan-11 Jun-11 Sep-12 Jul-13 May-14 Mar-15 Oct-14 Aug-15 Jan-16 Jun-
Slide 9: China's consumption pattern changing, with transport emerging as a key engine of growth
China’s consumption pattern changing, with transport emerging as a key engine of growth Chinese semis demand per key segments Mill tonnes 2015 2025 49 5% 5% 5% 4% 10% 12% 28% 36 35% 14% 15% 20% 16% 16% 16% 9 Construction Transport Transport Construction Electrical Packaging Machinery & equipment Oth
Slide 10: Growth in Chinese semis exports largely stable
Growth in Chinese semis exports largely stable Periods of higher arbitrage leading to increased exports Chinese semis exports Net semis exports as share of total semis production Monthly exports Periods of elevated arbitrage Thousand tonnes Thousand tonnnes Share of semis in favour of China* product
Slide 11: Trade regulations and duties impacting trade flows
Trade regulations and duties impacting trade flows Chinese semis exports by destination 3% 7% (2015) Europe 10% US • 7.5 % import duties on semis 47% • 3 – 6 % import • Turkey 11% duties on semis introducing EU duties 13% Asia 10% Africa North America Europe Asia Middle East • In general low Latin A
Slide 12: Primary metal market
Primary metal market HYDRO
Slide 13: Recap CMD 2015: Global surplus expected to moderate in 2016
Recap CMD 2015: Global surplus expected to moderate in 2016 Surplus moderating from ~1 million tonnes to 0-1 million tonnes Global (’000 mt) Global growth expectations 2016 Demand: 4-5 % Supply: 2-4 % 60 000 Supply Demand 55 000 Demand influences 2016 50 000 Supply Chinese construction sector influe
Slide 14: Market balance progressing better than expected
Market balance progressing better than expected Surplus moderating from ~1 million tonnes to a small deficit Global (’000 mt) Global growth 2016 Happened to a limited extent Happened to a large extent Demand: ~5 % Supply: ~3 % 60 000 Supply Demand 55 000 Demand influences 2016 50 000 Supply Chinese
Slide 15: Global primary market expected to be largely balanced also in 2017
Global primary market expected to be largely balanced also in 2017 Supply growth in world ex. China driven by India, pace of Chinese restarts uncertain Global (’000 mt) Global growth expectations 2017 Demand: 3-5 % Supply: 4-6 % 65 000 Supply Demand 60 000 55 000 Demand Supply influences 2017 influe
Slide 16: Divergence in market balances continuing in 2017
Divergence in market balances continuing in 2017 Global demand growth largely stable, production increasing in China driven by new projects and restarts World ex. China 2-4 % Primary market balances 2016 (‘000t) 2000 China (mill t.) 2-3 % 1000 ROW Global 28 Production 0 2016 levels Demand 27 -1000 W
Slide 17: Market deficits increasing in key consumer regions
Market deficits increasing in key consumer regions Rising deficits in North America and Europe amid smelter curtailments and continued demand growth Primary metal balances, selected regions outside China Europe (ex. Russia Russia) 4000 0 3000 -1000 2000 North America -2000 1000 0 -3000 0 -1000 2000
Slide 18: Chinese primary stocks largely stable in 2016, while stocks outside China decreasing
Chinese primary stocks largely stable in 2016, while total stocks outside China are decreasing Chinese exports not fully filling up deficits outside China China World ex. China (‘000t) (‘000t) 12000 160 12000 160 140 140 10000 10000 120 120 8000 8000 100 100 6000 80 6000 80 60 60 4000 4000 40 40 200
Slide 19: Energy source for primary production varies between regions
Energy source for primary production varies between regions Chinese and Indian smelters largely dependent on coal North America Europe China Middle East India South America Coal Hydro Power source used in Gas Nuclear aluminium smelters in 2016 Other renewables Source: CRU, Hydro analysis 86
Slide 20: Chinese smelters buying coal from market and impacted by rising coal prices
Chinese smelters buying coal from market and on-grid smelters impacted by rising coal prices Coal prices rising… …but with varying impact on smelter cost RMB/t USD/t 700 100 650 On-grid power Directly impacted, 90 rates impacted by must buy coal from 600 80 higher coal prices the market 550 30 – 35%
Slide 21: Global cost curve pressured by higher coal and alumina prices
Global cost curve pressured by higher coal and alumina prices USD/t 2 400 Key development from 2014 to 2016… Lower energy prices Lower alumina prices 2 000 Lower premiums Stronger USD 1 600 1 200 Cost pressure going into 2017 800 Higher coal prices Higher alumina prices 400 2014 2016 (‘000t) 0 0 10
Slide 22: Regional standard ingot premiums falling back to historical levels
Regional standard ingot premiums falling back to historical levels, all-in price level supported by currency effect USD/mt NOK/mt USD/mt 3 000 18 000 900 800 700 2 600 16 000 600 500 2 200 14 000 400 300 1 800 12 000 200 100 1 400 10 000 0 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-11 Nov-11 Sep-
Slide 23: Recycling is becoming more important as post-consumed scrap gains momentum
Recycling is becoming more important as the generation of post consumed scrap material gains momentum Estimatede recovery from post-consumed scrap collected Primary demand versus recycled material, global Million tonnes Million tonnes 140 35 Forecast Forecast 30 120 25 100 20 80 15 60 10 40 5 20 0 0
Slide 24: Bauxite and alumina market
Bauxite and alumina market 91
Slide 25: Chinese primary production dependent on imported resources
Chinese primary production dependent on imported resources Around 36% based on imported raw material (average 2013-2016) % of Primary Production 100 7% Imported 90 80 29 % Imported 70 60 50 100 % 93 % Domestic 40 64 % Domestic 30 20 10 0 Primary production Alumina Bauxite Source: CRU, China customs,
Slide 26: Bauxite production in China to level off, triggering more imports
Bauxite production in China to level off, triggering more imports Chinese bauxite imports influencing price development Chinese bauxite production and imports • Depleting resources and deteriorating Mtpy quality, not sufficient to sustain operations in key provinces, triggering: 200 - increasing ref
Slide 27: Chinese bauxite imports – a dynamic landscape
Chinese bauxite imports – a dynamic landscape Malaysia ban continues, Guinea emerges as major supplier, increased exposure to freight, prices decreasing and converging China bauxite imports, volume and price by country Bauxite price CIF China USD/tonne CIF USD/tonne 90 65 Malaysia entrance 80 60 70
Slide 28: Chinese bauxite imports increasingly exposed to freight
Chinese bauxite imports increasingly exposed to freight Freight represents ~10 to 50% of the CIF price, freight rates at current low levels Chinese bauxite imports origin 2013 2016 Guinea Indonesia Mill. tonnes Mill. tonnes 40 40 20 20 Altantic Pacific 0 0 2013 2014 2015 2016 2013 2014 2015 2016 Bal
Slide 29: Higher cost Chinese refineries impacted by imported bauxite prices
Higher cost Chinese refineries impacted by imported bauxite prices 20 Mtpy of high cost alumina capacity in Shandong, still growing USD/t 350 Other Caustic Energy Bauxite 300 • Shandong refineries exposed to bauxite import prices Hebei 250 − but necessary capacity, as domestic Shanxi Shandong bauxit
Slide 30: Alumina curtailments reduce oversupply outside China
Alumina curtailments reduce oversupply outside China Capacity curtailments in the Atlantic basin, offset by growth in Pacific World ex-China alumina supply/demand balance Mill. tonnes 60 40 Point Comfort 20 Corpus Christi Ras Al Khair 0 2015 2016e Paranam Atlantic Pacific Demand Kendawangan China al
Slide 31: Alumina prices rising amid smelter restarts and cost inflation
Alumina prices rising amid smelter restarts and cost inflation Recent alumina price drivers Platts alumina index (PAX) Percent USD/t 450 20% Market balances • Smelter restarts and new projects ramping up in China 19% 400 • Tight markets ex. China amid curtailments 18% 350 17% Cost inflation • Rising
Slide 32: Long-term outlook and summary
Long-term outlook and summary 99
Slide 33: Strong growth drivers across segments providing solid demand outlook
Strong growth drivers across segments providing solid demand outlook Short-term macroeconomic volatility, long-term fundamentals still in place Strong demand drivers in key aluminium segments Semis demand CAGR 2016 – 2025 Growth in automotive vehicle production Transport Aluminium content in cars in
Slide 34: Growth in global semis demand creates opportunities for primary and recycled material
Growth in global semis demand creates opportunities for both primary and recycled material World outside China semis demand growth exceeding Chinese growth rates into next decade CAGR 2016 – 2025 Estimated semis demand growth, 2025 vs 2016 + 14-15 millon tonnes + 11-12 millon tonnes Semis Primary Re
Slide 35: Summary of market outlook
• Macro drivers and substitution effects supporting underlying aluminium demand growth • Limited primary supply growth outside China and India • Global primary market largely balanced this year and next • Cost curve pressured upwards by rising alumina and coal prices, with regional differences • Rec