Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Day (2017)
36 slides from Norsk Hydro Asa's investor day presentation, 2017
Slide 1: Market Outlook
Market Outlook Kathrine Fog, SVP Corporate Strategy & Analyses
Slide 2: Macro and downstream
Macro and downstream HYDRO
Slide 3: Improving macro environment evident in aluminium demand
Improving macro environment evident in aluminium demand Semis demand at or above GDP in key regions Manufacturing PMI’s Semis demand annual growth, key regions (%) 65 10% 60 8% Increasing production 55 6% 50 4% Contracting production 45 2% 40 0% China North America Western Europe World ex. China Sep
Slide 4: Substitution trend in automotive progressing
Substitution trend in automotive progressing US semis demand in automotive remains positive although car sales have overall moderated in 2017 US and European automotive indicators Semis demand in transport, annual growth (Index, Jan. 2008=100) (%) 130 10% 120 8% 110 100 6% 90 80 4% 70 2% 60 50 0% Ja
Slide 5: Automotive demand for aluminium supporting several semis products
Automotive demand for aluminium supporting several semis products Car makers utilizing aluminium to reduce weight and increase fuel-efficiency High-growth automotive segment with substantial further Global semis demand for transport sector by product form potential due to aluminium’s superior inhere
Slide 6: New segments and applications supporting aluminium demand
New segments and applications supporting aluminium demand Marine / Offshore applications Zero-emission electrical car ferries in B&C, ex. Supertall buildings Transportation, truck & trailer applications 100% aluminium for light-weighting Aluminium in solar panels Industrial applications, ex. furnitu
Slide 7: 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 main YoY-growth demand driver • Growth in packaging driven by can sto
Slide 8: Extrusion market supported by continued momentum in B&C market and improving demand in transport
Extrusion market supported by continued momentum in B&C market and improving demand in transport Global segment composition, extrusion Housing market indicators US truck and trailer market (2017) Index, Jan 2010=100 Monthly shipments, annual growth 240 90% 3% 4% 220 70% 5% 200 50% 12% 180 30% 160 10
Slide 9: Solid extrusion demand growth in several key regions
Solid extrusion demand growth in several key regions Gradual improvement expected in Europe, Chinese demand growth estimated to moderate Extrusion demand, selected regions YoY-growth 10% North America 10% Western Europe 10% China Expected market development 5% 5% 5% • US housing market still sustain
Slide 10: Largely stable Chinese semis exports last year
Largely stable Chinese semis exports last year Limited extrusion exports to Europe and North America, extrusion stocks transferred from Mexico to Vietnam Monthly Chinese net semis exports (12-month moving average) Annual Chinese extrusion exports, by region Thousand tonnes Thousand tonnes 350 12% 14
Slide 11: Trade flows partly impacted by trade measures
Trade flows partly impacted by trade measures Chinese semis exports by destination – Asia key region 3% (2016) 8% Europe 10% US • Import duties • Import duties 44% on semis on semis • Dumping cases 11% • Dumping cases • Signals on more protection 15% 9% Asia Africa North America Asia Europe • Some i
Slide 12: Primary metal market
Primary metal market HYDRO
Slide 13: Recap CMD 2016: Global primary market expected to be largely balanced also in 2017
Recap CMD 2016: Global primary market expected to be largely balanced also in 2017 Global (’000 mt) Global growth expectations 2017 Demand: 3-5 % Supply: 4-6 % 65 000 Supply Demand 60 000 Demand 55 000 influences 2017 Supply influences 2017 Momentum in 50 000 Chinese construction Chinese restarts an
Slide 14: Global primary market for 2017 in small deficit
Global primary market for 2017 in small deficit Both supply and demand higher than expected Global (’000 mt) Global growth 2017 Happened to a limited extent Happened to a large extent Demand: ~6.0 % Supply: ~7.0 % 65 000 Supply Demand 60 000 Demand 55 000 influences 2017 Supply influences 2017 Momen
Slide 15: Global primary market expected to be largely balanced in 2018
Global primary market expected to be largely balanced in 2018 Primary supply and demand growth expected to be largely similar Global (’000 mt) Global growth expectations 2018 Supply and demand: 4-5 % 70 000 Supply Demand 65 000 60 000 Supply Demand influences 2018 influences 2018 55 000 Gradual slow
Slide 16: Supply-side reform and environmental shutdowns moderating Chinese primary supply growth
Supply-side reform and environmental shutdowns moderating Chinese primary supply growth 1 800 Annual production effect (‘000t) 1 000 Supply side reform Environmental shutdowns Weiqiao 1 300 East Hope 800 ~500 Shandong 300 Xinfa 500 Henan Xinjiang Jiarun 200 Inner Mongolia Jinlian Shanxi 2+26 affecte
Slide 17: Key drivers for China's aluminium expansion losing momentum
Key drivers for China’s aluminium expansion losing momentum Drivers for aluminium capacity Past Present • Continued strong growth short-term, but expected to slow longer term Demand growth • Export market impacted by trade restrictions • From softer to harder constraints: strong enforcement of envir
Slide 18: Chinese energy market reforms impacting aluminium smelter cost
Chinese energy market reforms impacting aluminium smelter cost Reforms expected to even out power prices across the specter of Chinese aluminium producers Chinese Power Market Reform: Chinese Steam Coal Price Band Key objectives RMB/t 800 700 Implement power Standardize and 600 pricing mechanisms st
Slide 19: Higher and steeper cost curve in 2017 compared to 2016
Higher and steeper cost curve in 2017 compared to 2016 Higher end of the cost curve dominated by Chinese smelters Index: Jan 2016 = 100 Business operating cost (BOC) 250 USD/t 2 500 200 2 250 2 000 150 1 750 1 500 100 1 250 Cost pressure in 2017 50 1 000 Higher coal prices Higher alumina prices 750
Slide 20: Primary aluminium market to be largely balanced in 2018
Primary aluminium market to be largely balanced in 2018 Market balances largely similar compared to 2017 World ex. China 2018 3-4 % Primary market balance 2018 (mill t.) (‘000t) 3-4 % 2 000 ~30.1 – 30.4 Production ~28.0 – 28.3 Demand 1 000 0 -1 000 China 2018 4-6 % (mill t.) -2 000 4-6 % ~37.5 – 38.
Slide 21: Stocks outside China continue to decrease, while Chinese stocks have moved higher
Stocks outside China continue to decrease, while Chinese stocks have moved higher Chinese exports not fully filling up deficits outside China China World ex. China (‘000t) (‘000t) 12000 180 12000 180 160 160 10000 10000 140 140 8000 120 8000 120 100 100 6000 6000 80 80 4000 60 4000 60 40 40 2000 200
Slide 22: Inventory days approaching historically tight levels in world outside China in 2018
Inventory days approaching historically tight levels in world outside China in 2018 Chinese inventory days expected to increase, but not substantially China World ex. China (‘000t) (‘000t) 12000 180 12000 180 160 160 10000 10000 140 140 8000 120 8000 120 100 100 6000 6000 80 80 4000 60 4000 60 40 40
Slide 23: All-in price level supported by higher LME and premiums in 2017, prices in NOK
All-in price level supported by higher LME and premiums in 2017, prices in NOK supported by continued weak NOK vs USD USD/mt NOK/mt USD/mt 3 000 20 000 900 800 18 000 700 2 600 600 16 000 500 2 200 400 14 000 300 1 800 200 12 000 100 1 400 10 000 0 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Ja
Slide 24: Bauxite and alumina market
Bauxite and alumina market 89
Slide 25: Chinese primary production dependent on imported resources
Chinese primary production dependent on imported resources Around 37% based on imported raw material (average 2013-2017) % of Primary Production 100 6.3 % Imported 90 80 2017f 30.4 % 40% Imported 70 60 50 100 % 93.7 % Domestic 40 63.3 % Domestic 30 20 10 0 Primary production Alumina Bauxite Source:
Slide 26: Bauxite production in China to decline, triggering more imports
Bauxite production in China to decline, triggering more imports Chinese bauxite imports set to increase Chinese bauxite production and imports Mtpy 250 • Depleting resources not sufficient to sustain operations in key provinces: 200 − inland refineries may convert to imported bauxite or relocate to
Slide 27: Guinea's bauxite production is rising
Guinea’s bauxite production is rising Projects to add 25-30 Mtpa of bauxite export capacity, resource base could support additional volumes • Committed capacity increasing to ~70 Mtpy by 2020 Guinea bauxite production (million mt) • Substantial bauxite resources available 80 − 20+ billion mt within
Slide 28: Chinese bauxite imports increasingly exposed to freight
Chinese bauxite imports increasingly exposed to freight Freight represents ~20 to 60% of the CIF price, freight rates increasing from low levels CIF China, USD/t Origin of Chinese bauxite imports 90 2013 2017 80 Altantic Pacific 70 60 50 Baltic Dry Index 40 3000 2000 30 1000 20 0 Jun-13 Jun-14 Jun-1
Slide 29: Higher alumina cost curve in 2017 compared to 2016
Higher alumina cost curve in 2017 compared to 2016 Higher end of the cost curve dominated by Chinese refineries Index: Jan 2016 = 100 USD/t Shandong 300 400 average $302 250 350 200 300 150 250 100 200 Cost pressure in 2017 Higher caustic prices 50 150 Higher Chinese bauxite prices Higher freight co
Slide 30: Chinese winter shutdowns affecting alumina supply
Chinese winter shutdowns affecting alumina supply Overall alumina impact likely to exceed smelter winter shutdowns Current Extended Scope of 2+26 Alumina production lost to winter cuts City Policy (annualized production effect) (’000kt) 2500 Inner Mongolia Liaoning Hebei 2000 Shanxi Shandong 1500 2+
Slide 31: Alumina market balancing, Chinese additions also outside China
Alumina market balancing, Chinese additions also outside China Limited capacity increases outside China Ras Al Khair (1.8) Chinese additions Point Comfort (2.3) Al Taweelah (2.0) 2018: ~4.0 Mt Corpus Christi (1.63) India (1.0) Being dismantled Alpart (1.65) Friguia (0.65) Nhan Co (0.65) Paranam (2.2
Slide 32: Alumina prices rise amid policy implementation uncertainty
Alumina prices rise amid policy implementation uncertainty Market tightness, high metal prices, and increasing costs support prices Recent alumina price drivers Platts alumina index (PAX, to 22 Nov 2017)) USD/t Percent Market balances 550 • New smelter projects ramping up in China 24% 500 • Re-stock
Slide 33: Long-term outlook and summary
Long-term outlook and summary 98
Slide 34: Strong growth drivers across segments providing solid demand outlook
Strong growth drivers across segments providing solid demand outlook Still encouraging demand outlook from strong base – converging demand China and outside China Strong demand drivers in key aluminium segments Global semis demand per segment, CAGR 2000-17 2017-27 Growth in automotive vehicle produc
Slide 35: Growth in global semis demand creates opportunities for both primary and recycled material
Growth in global semis demand creates opportunities for both primary and recycled material Solid growth for semis, primary and recycling CAGR 2017 – 2027 Semis Primary Recycling* ~3 % 2-3 % 3-4 % Source: CRU, Hydro Analysis * Post-consumer and fabrication scrap ** Unallocated creep estimated at same
Slide 36: Summary: solid long-term demand outlook
• Solid long-term demand outlook supported by strong growth drivers across segments • Chinese primary supply moderating due to policy reform • Global primary market largely balanced this year and next • Cost curve pressured upwards by rising alumina and coal prices, with regional differences • Recyc