Slide 1: Market Outlook
Market Outlook Investor presentation Kathrine Fog Corporate Strategy & analysis June 16th 2016
Slide 2: Agenda
Agenda 1 About Hydro 2 Market Outlook 3 Hydro strategy 2
Slide 3: A resource-rich, global aluminium company
A resource-rich, global aluminium company With robust positions across the value chain • Global provider of alumina, aluminium and aluminium products Bauxite & Alumina • Leading businesses along the value chain; raw materials, energy, primary metal production, Energy aluminium products and recycling
Slide 4: Downstream
Downstream HYDRO
Slide 5: Global aluminium demand first in class
Global aluminium demand first in class Chinese primary consumption Semis demand CAGR 2015 – 2025 (consensus forecast) Million tonnes Transport 5–6% Global semis demand: Construction 3 – 4 % 4–5% Electrical 5–6% Machinery & 4–5% equipment Packaging 3–4% Source: CRU 5
Slide 6: Global aluminium demand first in class
Global aluminium demand first in class Steel substitution in automotive Ford Doubles Profits for the Best Quarter in Its History Leading the way for Ford was the recently 13% redesigned, aluminum-bodied F-150 pickup, which had strong sales, like those of other trucks and BiW 2016-2023 CAGR sport uti
Slide 7: Global aluminium demand first in class
Global aluminium demand first in class Copper substituion in HVAC&R, Energy-efficiency legislation supports aluminium cabling and transmission lines Buildings account for ~ 40% of energy consumption worldwide, triggering response from the legislators 6x European Union US HVAC&R* 2012 Energy Efficien
Slide 8: Recycling gaining importance
Recycling gaining importance Growth in recycling will contribute to making Hydro carbon-neutral Market − Substantial growth in post-consumed scrap − Recycling driven by product markets and customer demand − Both recycling and primary aluminium will be needed to satisfy demand growth Hydro’s recyclin
Slide 9: Primary
Primary 02 9
Slide 10: Declining global oversupply of primary aluminium
Declining global oversupply of primary aluminium Driven by curtailments and stronger demand Demand and production (quarterly annualized) Production less demand1) 1 000 mt primary aluminium 1 000 mt primary aluminium 65 000 5 000 4 000 60 000 3 000 55 000 2 000 50 000 1 000 45 000 0 (1 000) 40 000 (2
Slide 11: Aluminium market expected to be largely balanced in 2016
Aluminium market expected to be largely balanced in 2016 Higher risk of capacity restarts in China amid recent price rally Supply development 2016 Market balance 2016 Mill tonnes Mill tonnes Estimated cash negative in 20161) 15 % 20 % 1.5 – 2.0 mill tonnes World ex-China China Oversupply ~2.4 (0.5)
Slide 12: Concentrated Chinese primary capacity expansions
Concentrated Chinese primary capacity expansions Limited restarts (‘000t) 35000 30000 • Smelter expansions largely taken place in 25000 20000 Shandong, Xinjiang and Inner Mongolia 15000 10000 • Traditionally high cost; new smelters added 5000 further down on the global cost curve 0 2010 2011 2012 20
Slide 13: SHFE prices increase on tighter market, stable all-in LME prices
SHFE prices increase on tighter market, stable all-in LME prices USD/mt USD/mt USD/mt NOK/mt 2 100 2 100 3 000 18 000 1 900 1 900 2 600 16 000 1 700 1 700 2 200 14 000 1 500 1 500 1 800 12 000 1 300 1 300 1 400 10 000 Feb-14 Jul-14 Dec-14 May-15 Oct-15 Mar-16 jan 12 jun 13 nov 14 apr 16 LME 3m USD L
Slide 14: Semis exports moderating slightly amid decreased arbitrage
Semis exports moderating slightly amid decreased arbitrage Semis exports largely stable as share of Chinese semis production Net semis exports as share of Semis exports Comp. adv. (monthly, kmt) (USD/mt) total semis production Preliminary export data for May indicate a Million tonnes 500 slight incr
Slide 15: B&A
B&A 03 15
Slide 16: Large and concentrated bauxite resources
Bauxite market Large and concentrated bauxite resources But many challenges for future developments Billion mt Bauxite suppliers short/medium term Big-league (Top- 3) Guinea 41.0 Mid-league (Top- 10; each > 2% of world total) China 1) Total bauxite, billion tonnes: 4.0 reserves, mine site resources*
Slide 17: Monthly Chinese Bauxite imports decrease in the first quarter
Monthly Chinese Bauxite imports decrease in the first quarter Driven by lower shipments from Malaysia offset by higher shipments from Guinea Monthly Chinese bauxite imports Bauxite prices Million mt USD/mt 9 65 8 7 60 6 55 5 4 50 3 2 45 1 40 0 jul. 12 jul. 13 jul. 14 jul. 15 jan. 12 apr. 12 jan. 13
Slide 18: Alumina prices weaken on looser Chinese market balance
Alumina prices weaken on looser Chinese market balance Driven by ~5 million tonnes of Chinese alumina capacity re-starts Platts alumina index (PAX) • Year to date average 236.5 USD/t, 15.3% of LME USD/mt Percent 450 20% • Average May price of 259.1 USD/mt 19% − Currently trading at 246 USD/mt FOB (J
Slide 19: An inside look on China
An inside look on China HYDRO
Slide 20: General take aways from latest China visits
General take aways from latest China visits China • Demand growth led by rebound in construction market, supported by stimulus measures • Restarts of primary smelters are so far limited and slow • Somewhat increasing hurdles for aluminum entrants in general: mainly financing, captive power opportuni
Slide 21: Hydro's response
Hydro’s response
Slide 22: Aspiration = inspiration
Aspiration = inspiration Better Bigger Greener ee HYDRO
Slide 23: Better: proven track-record of productivity gains continues
Better: proven track-record of productivity gains continues Hydro’s improvement drive until 2015 Hydro’s new improvement ambition Tailor-made ambitions across Total improvements 2011-2015: Total improvements of the value chain BNOK 4.5¹ BNOK 2.9 from 2016-20192 Better ‘Energy Primary Better Metal As
Slide 24: Bigger: a solid platform for building an even stronger Hydro
Bigger: a solid platform for building an even stronger Hydro 24
Slide 25: Greener: Carbon-neutral from a life-cycle perspective by 2020
Greener: Carbon-neutral from a life-cycle perspective by 2020 Integrated into business strategy in all business areas • Increasing energy-efficiency and reducing emissions in production processes in aluminium plants, rolling mills, and alumina refinery • Increasing production of renewable hydropower
Slide 26: Aspiration = inspiration
Aspiration = inspiration Better Bigger Greener 2 HYDRO
Slide 27: Infinite Aluminium
INFINITE ALUMINIUM HYDRO