Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — CRU conference, London 2013
23 slides from Norsk Hydro Asa's conference presentation, May 15, 2013
Slide 1: Depleting bauxite resources - the Chinese challenge
Depleting bauxite resources - the Chinese challenge Simon Storesund CRU conference, London May 15, 2013
Slide 2: Cautionary note in relation to certain forward-looking statements
Cautionary note in relation to certain forward-looking statements Certain statements included within this announcement contain forward-looking information, including, without limitation, those relating to (a) forecasts, projections and estimates, (b) statements of management’s plans, objectives and
Slide 3: Hydro: a resource rich global aluminium company
Hydro: a resource rich global aluminium company • Based in Norway with operations Hydro underlying EBIT quarterly, NOK million* in 40 countries (2 555) 3 551 5 982 1 297 1 077 • 22 000 employees 2200 • Operating revenues* 1700 − 2011: NOK 72 billion 1200 − 2012: NOK 64 billion 700 • Current market c
Slide 4: Hydro's B&A positions
Hydro’s B&A positions Alunorte refinery: - Ownership: 92% - Capacity: 6.3million tons CAP refinery project: - Ownership: 81% - Capacity: 1st phase: 1.86 m.t., MRN can be expanded to 7.6 m.t. Alunorte - Postponed due to weak CAP market. Ready as soon as conditions improve Paragominas - One of the bes
Slide 5: Bauxite – Industry Structure
Bauxite – Industry Structure
Slide 6: Production of bauxite 2000 and 2012
Production of bauxite 2000 and 2012 67 All figures in million tons bauxite 17 6 Russia 17 79 7 6 18 11 10 16 India China 49 37 Jamaica Guinea 34 13 2 Indonesia Australia Brazil Atlantic Pacific 2012 production 2000 production Source: CRU, Hydro
Slide 7: Biggest bauxite producers – equity based 2012
Biggest bauxite producers – equity based 2012 Mt bx Equity production 60 50 40 30 20 10 - Alcoa/AWAC RTA Rusal BHP Billiton Hydro Indonesia Source: CRU, Hydro Analysis Hydro: Based on 100% Paragominas and 5% MRN
Slide 8: China's bauxite position going forward
China's bauxite position going forward
Slide 9: China's bauxite production 2000 – 2012
Chinas bauxite production 2000 – 2012 Increasing annually by 8 mtpy since 2006 million tons 70 60 50 40 30 20 10 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: CRU
Slide 10: China's estimated share of 3rd party traded bauxite
China’s estimated share of 3rd party traded bauxite Non-integrated refinery capacity World imported bauxite, 80 mton ROW 28% ROW China China 50% 50% 72% Chinese bauxite imports 50,000 40,000 30,000 20,000 10,000 - 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: CRU, China Custom
Slide 11: 80% of bauxite imports consumed by three main players
80% of bauxite imports consumed by three main players Chinese bauxite import per player Figures in million tons, 2004 - 2011 Comments: Other Coalmine Xinwang Bosai • Three largest importers Lubei accounting for ~ 80% of Nanshan imported bauxite Chalco • Chalco with ~ 10 million tons of bauxite impor
Slide 12: Chinese bauxite production is concentrated in four regions, mainly with poor quality
China Chinese bauxite production is concentrated in four regions, mainly with poor bauxite quality Bauxite production per region Low A/S-ratios among largest producing regions Prod. 2012: ~67 Mt Shanxi: Reserves 0.8bt Avg A/S ratio: 5-6 6% Henan 9% Reserves 0.4bt 37% Avg A/S ratio: 4.5-5.5 25% Guizh
Slide 13: The bauxite quality in China is gradually decreasing, pushing up refinery costs
China The bauxite quality in China is gradually decreasing, pushing up refinery costs Domestic bauxite - estimated reserves • Bx quality dropping faster than expected 900 • Driving up refining cost 800 • Above 20% of total bauxite production 700 600 goes to the refractory business 500 400 2012 - Att
Slide 14: Currently 30-40% of Chinese refineries are cash negative
Currently 30-40% of Chinese refineries are cash negative. And costs will increase Cash cost curve, Chinese alumina refineries 2012 Ex. VAT, Ex-works Guangxi Shanxi Guizhou Yunnan Henan Chongqing Shandong 400 Alumina price ex VAT 350 Current price 300 Other 250 Energy Caustic 200 Bauxite 150 100 50 0
Slide 15: China dependant on bauxite import also in the future
China dependant on bauxite import also in the future Bauxite equivalents Mt bx 200 180 • High degree of uncertainty related to 160 future bx prod levels in China 140 120 52 • 2020 production: Different analysts 100 ranging between 85 – 110 million tons 80 89 • China still relying upon bauxite import
Slide 16: Indonesia: Most important bauxite supplier to China restricts export
Indonesia: Most important bauxite supplier to China restricts export short term, not sustainable at current levels long term Indonesia largest supplier of gibbsite ..but future production in Indonesia is bauxite to China by far.. expected to decrease significantly • Short term: Government will restr
Slide 17: Increased Chinese bauxite demand could lead to a supply gap
Increased Chinese bauxite demand could lead to a supply gap! 2012 2022 Alumina prod. using imported bauxite Indonesia Gap can be Alumina prod. Australia using imported filled either by bauxite domestic bauxite or ? Other Pacific /Atlantic increased Indonesia bauxite or alumina imports Alumina Austra
Slide 18: Bauxite CIF China
Bauxite CIF China USD/t Avr CIF China Indonesia Australia 60 55 50 45 40 35 30 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 95 85 75 65 55 45 35 jan. 12 feb. 12 apr. 12 mai. 12 jul. 12 sep. 12 okt. 12 des. 12 feb. 13 mar. 13 Indonesia Austr
Slide 19: Bauxite CIF China – value for the customer after quality adjustment
Bauxite CIF China – value for the customer after quality adjustment Indonesia CBG (Guinea) Weipa • Bauxite price from Indonesia A/S ratio 8 25 8 likely to increase FOB Price 38 42 41 • Due to quality effects, Guinean bauxite could be CIF China* 50 77 54 competetive to China Quality adj 0 -17 0 Net C
Slide 20: Increased Chinese refinery cost could drive alumina imports higher
Increased Chinese refinery cost could drive alumina imports higher USD per mt Percent Chinese arbitrage (-) k tons/month USD/t 500 18% 800 150.00 Alumina price (left axis) Alumina import % of LME 700 Import price (incl freight, VAT, port) - China exWorks 17% 450 100.00 600 16% 400 500 50.00 15% 400
Slide 21: Concluding remarks
Concluding remarks Bauxite development • China to be increasingly dependent on bauxite import over the next 10 years • Domestic refining cost to increase • Indonesia likely to have 1-3 smaller refineries the next 2-4 years and reduce their bx export • Weipa expansion to 36/ 50 million tons? • Uncert
Slide 22: Infinite Aluminium Hydro
INFINITE ALUMINIUM HYDRO
Slide 23: Strong positions across aluminium value chain
Strong positions across aluminium value chain Raw materials processing Primary aluminium production, Aluminium in products and energy marketing and recycling Bauxite Rolled Extruded Energy Primary Metal Metal Markets & Alumina Products Products • Bauxite capacity • Long-term power supply • 2.5 milli