Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Presentation (September 2012)
43 slides from Norsk Hydro Asa's investor presentation, Sep 18, 2012
Slide 1: Aluminium industry and market
Aluminium industry and market Torkil Sletten, Head of Strategy and Industry Analysis 18 September, 2012 (1)
Slide 2: Agenda
Agenda • Hydro and the aluminium industry • Macro and end-use demand • Primary aluminium market • Bauxite and alumina market (2)
Slide 3: Hydro and the aluminium industry
Hydro and the 1 aluminium industry (3)
Slide 4: The big challenges of our generation
The big challenges of our generation Growth must be sustainable Millions climb out of Increasing energy Climate change poverty demand (4)
Slide 5: Aluminium is the metal of the future
Aluminium is the metal of the future • Lightweight • Formability • 1/3 density of steel • Extrusion, rolling, casting • Low melting point vs. steel • Recyclability • 5% of original energy consumption • Excellent conductivity • 75% of all aluminium produced still in use • Thermal – electrical • Corro
Slide 6: Aluminium is part of the solution
Aluminium is part of the solution Global trends Demand for semis Share of semis consumption Million mt 2011 – 62 million mt 120 Consumer 5-7% annual growth Electrical durables 100 12% 6% Packaging 49 9% Machinery 80 & equipment 10% 36 Foil stock 8% 60 Other 6% Capabilities 23 Transport 25% 40 53 45
Slide 7: "Worth its weight in aluminium"
”Worth its weight in aluminium” (7)
Slide 8: Strong positions across aluminium value chain
Strong positions across aluminium value chain Recycling Rolling Bauxite Alumina Energy Primary Casting Products Extrusion Recycling (8)
Slide 9: Strong positions across aluminium value chain
Strong positions across aluminium value chain Norway Continental Europe • 900 000 tonnes (capacity) hydro-powered aluminium production • Leading mid and downstream position • Technology centre, R&D for next-generation smelter • Hydropower developments • New recycling centre North America • Alouette
Slide 10: Strong positions across aluminium value chain
Strong positions across aluminium value chain Capital employed, as per June 30, 2012 • Bauxite & Alumina • Alumina priced globally • Brazilian production portfolio Downstream 23 % • Primary Metal • Aluminium is a global commodity (LME) Raw materials • Regional premiums 41 % • Global production portf
Slide 11: Global industry structure
Global industry structure Production in 2011 in aluminium equivalents excl. China, thousand mt 9,000 Alumina Aluminium 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 A lcoa Rio Tint o Alcan UC Rusal Norsk Hydro BHP Billiton Dubal Aluminium Bahrain Cent ury V edant a Source: CRU, Hydro (11)
Slide 12: Macro and end-use demand
Macro and end-use 2 demand (12)
Slide 13: Products
Recycling Rolling Bauxite Alumina Energy Primary Casting Products Extrusion Recycling (13)
Slide 14: Strong aluminium demand
Strong aluminium demand Stronger development than IP and GDP last 10 years CAGR last 10 years (%) North America Western Europe Asia China Global 19 15 11 7 6 6 5 2 2 3 1 2 1 0 -1 GDP IP Aluminium GDP IP Aluminium GDP IP Aluminium GDP IP Aluminium GDP IP Aluminium demand demand demand demand demand S
Slide 15: Synchronized global slowdown – central banks come to the rescue
Synchronized global slowdown – central banks come to the rescue Macro economic development Europe United States China • GDP-growth fell in Q2 and the • IP fell in August and PMI • GDP growth Q2 at 7,6%, Euro-zone is likely in recession indicates further lower growth the sixth consecutive in producti
Slide 16: Automotive indicators picking up - still weak construction activity
Automotive indicators picking up - still weak construction activity Automotive Construction January 2008=100 January 2008=100 120 120 100 100 80 80 60 60 40 40 Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul-11 Jan- Jul- 08 08 09 09 10 10 11 11 12 12 08 08 09
Slide 17: Primary aluminium
Primary aluminium 3 (17)
Slide 18: Products
Recycling Rolling Bauxite Alumina Energy Primary Casting Products Extrusion Recycling (18)
Slide 19: Two markets for primary metal
Two markets for primary metal VAT Tolling Export duties Transport Premiums LME LME 3m: 2175 USD/t SHFE 3m: 2490 USD/t LME LME (19)
Slide 20: Market deficit in world ex. China in Q2, expected to narrow in Q3
Market deficit in world ex. China in Q2, expected to narrow in Q3 Global ex China (annualized) 28 000 27 000 26 000 25 000 24 000 KTonnes 23 000 22 000 21 000 20 000 19 000 18 000 mar. 08 mar. 09 mar. 10 mar. 11 mar. 12 jan. 08 mai. 08 sep. 08 nov. 08 jan. 09 mai. 09 sep. 09 nov. 09 jan. 10 mai. 10
Slide 21: Strong pick-up latest weeks
Strong pick-up latest weeks USD per tonne 3 400 • Volatile aluminium price • Reflecting uncertain macro-economic 3 000 outlook • High inventories from long period 2 600 of oversupply 2 200 • Industry profitability challenge 1 800 1 400 1 000 2001 2003 2005 2007 2009 2011 2013 2015 2017 LME (3-month
Slide 22: Despite strong demand, aluminium is the price laggard
Despite strong demand, aluminium is the price laggard Yearly consumption. 3m LME price. Index. 2000=100 Index. 2000=100 185 800 700 170 600 155 500 140 400 300 125 200 110 100 95 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Slide 23: Products
Recycling Rolling Bauxite Alumina Energy Primary Casting Products Extrusion Recycling (23)
Slide 24: Standard ingot – a product that has to be remelted
Standard ingot – a product that has to be remelted World ex. China composition Extrusion 21% Standard • 42 % of casthouse production is standard ingot 42% Foundry 9% Sheet Other 17% 6% Wire 5% Value added products Standard ingot Extrusion ingot Foundry alloy Sheet ingot Wire rod Source: CRU (24)
Slide 25: Ingot premiums continue to rise
Ingot premiums continue to rise Inventories remain tied up in financial deals World reported primary aluminium inventories* Regional ingot premiums, monthly averages 1 000 mt Days USD per mt 8 000 80 275 250 7 000 70 225 6 000 60 200 5 000 50 175 150 4 000 40 125 3 000 30 100 75 2 000 20 50 1 000 10
Slide 26: Why are financial deals attractive?
Why are financial deals attractive? The attractiveness of financial deals is dependant on the following equation; Interest rate for Warehouse rents + locking up metal (US LIBOR+) < LME contango The current situation Low interest rates 8% • The equation above currently gives 7% holders of metal a ris
Slide 27: Production and consumption growth in China remains strong
KTonnes (27) 9 000 11 000 13 000 15 000 17 000 19 000 21 000 23 000 25 000 Source: CRU jan. 08 mar. 08 mai. 08 China (annualized) jul. 08 sep. 08 nov. 08 jan. 09 mar. 09 remains strong mai. 09 Consumption China jul. 09 sep. 09 nov. 09 jan. 10 mar. 10 mai. 10 jul. 10 sep. 10 nov. 10 jan. 11 mar. 11 m
Slide 28: New capacity in North-Western provinces
New capacity in North-Western provinces Primary aluminium capacity development 2011-2015 NORTH 0 % of new capacity WEST 83 % of new capacity CENTRAL 3 % of new capacity EAST 14 % of new capacity Source: CRU, Hydro Analysis (28)
Slide 29: Present LME/SHFE difference
USD/tonne (29) -800 -600 -400 -200 0 200 400 600 jan. 08 apr. 08 jul. 08 Source: Reuters Ecowin / Hydro okt. 08 jan. 09 apr. 09 jul. 09 okt. 09 jan. 10 apr. 10 jul. 10 Present LME/SHFE difference okt. 10 Difference LME / SHFE jan. 11 apr. 11 jul. 11 okt. 11 jan. 12 apr. 12 jul. 12
Slide 30: China exporter of downstream products and balanced in primary
China exporter of downstream products and balanced in primary Annualized aluminium equivalents*, million mt 20 2006 2007 2008 2009 2010 2011 2012 • Primary aluminium to China 15 Import • Expected to remain broadly balanced short term 10 • Fabricated and semis • Exports at 2011 levels 5 from China 0
Slide 31: Bauxite and alumina
Bauxite and 4 alumina (31)
Slide 32: Products
Recycling Rolling Bauxite Alumina Energy Primary Casting Products Extrusion Recycling (32)
Slide 33: Absolute alumina prices remain low
Absolute alumina prices remain low Platts index in USD USD per mt Percent 500 18,0 • Alumina market outside China in balance, Alumina price % of LME supported by imports to China 450 17,0 • Significant increase in Chinese alumina imports 400 16,0 • Supported by uncertainty around bauxite exports fro
Slide 34: Concentrated global bauxite reserves - options for China highly uncertain
Concentrated global bauxite reserves - options for China highly uncertain Billion mt Guinea 41.0 China1) 3.8 0.9 Jamaica Mali Vietnam 1.1 4.0 1.2 4.7 0.5 Venezuela 0.0 India 1.8 1.6 0.3 0.4 0.4 Indonesia Cameroon 1.0 1.2 0.5 0.0 Australia Brazil 9.5 8.2 5.9 2.0 Atlantic Pacific Big-league (Top- 3) T
Slide 35: Around 1/3 of Chinese alumina capacity is based on imported bauxite
Around 1/3 of Chinese alumina capacity is based on imported bauxite Existing capacity Alumina capacity based on imported In mt bauxite Expansions 5 27 0 5 1 1 1 21 0 0 1 17 4 Shandong Henan Chongqing Inner Total Mongolia • Refineries constructed to import of bauxite is not able to use Chinese bauxit
Slide 36: Import Export
Annualized aluminium equivalents*, million mt 20 2006 2007 2008 2009 2010 2011 2012 15 to China Import 10 5 0 from China Export -5 Bauxite Alumina Scrap Primary aluminium Fabricated Semis Source: CRU/Antaike/Hydro * Bauxite/alumina to aluminium conversion factor: 5.4/1.925 (36)
Slide 37: Chinese imports of bauxite over last months affected by Indonesian export ban
Chinese imports of bauxite over last months affected by Indonesian export ban Annualized aluminium equivalents*, million mt 20 2006 2007 2008 2009 2010 2011 2012 • Bauxite and alumina 15 to China • Strong increase in imports Import in April and May, but low levels of import in June and 10 July • Sig
Slide 38: Chinese imports of bauxite over last months affected by Indonesian export ban
Chinese imports of bauxite over last months affected by Indonesian export ban Aluminium equivalents* for each month in 2012, million mt 2 • Bauxite and alumina to China 1,5 • Strong increase in imports Import in April and May, but low levels of import in June and 1 July • Significant growth in alumi
Slide 39: Indonesia - major bauxite supplier to China
Indonesia - major bauxite supplier to China Exports restricted short term, not sustainable long term Indonesia largest supplier of ..but future production is expected gibbsite bauxite to China by far.. to decrease significantly • Short term: Government will restrict export • Licenses to be given to
Slide 40: Increased Chinese dependency on import
Increased Chinese dependency on import Demand for semis, China, million mt 60 50 40 China’s demand for semis expected to 49 30 increase substantially going forward… 36 20 23 10 0 2010 2015 2020 Annualized aluminium equivalents*, million mt Illustrative development 2006 2007 2008 2009 2010 2011 2012
Slide 41: Summary
Summary (41)
Slide 42: Strategy for further value creation
Strategy for further value creation Bauxite & Alumina Primary Metal Energy Mid- and downstream • Improvement efforts • Reposition • Increase value of • Adjust capacity and and cost reduction • Keep solid cash flow in energy business cost base to market • Commercialize current assets • Develop curren
Slide 43: www.hydro.com
www.hydro.com (43) yp HYDRO