Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Presentation (January 2019)
30 slides from Norsk Hydro Asa's investor presentation, January 2019
Slide 1: Market Outlook
Market Outlook Kathrine Fog, SVP Corporate Strategy & Analyses Oslo, January 2019
Slide 2: Macro and trade
01 Macro and trade
Slide 3: Macro sentiment worsening amid trade tensions
Macro sentiment worsening amid trade tensions Increasing uncertainty on GDP-effects from trade disputes Manufacturing PMI’s Annual GDP-growth, key regions 65 8% USA ISM Eurozone China NBS China Caixin 7% 60 6% Increasing production 55 5% 4% 50 3% Contracting 2% production 45 1% 40 0% Jan-13 Jan-15 J
Slide 4: Trade sanctions and tariffs impacting global aluminium flows
Trade sanctions and tariffs impacting global aluminium flows Russia Europe • Rusal sanctions • Monitoring of aluminium imports • Potential safeguards China US • Limitations on scrap imports • Section 232: aluminium India • Section 232: auto (potential) • Duties on primary • Section 301 and scrap imp
Slide 5: Section 232 impacting US metal premiums
Section 232 impacting US metal premiums Premiums reflecting high underlying metal deficit US primary demand and production Ingot premiums (‘000t) USD/t Section 232 7000 500 • 10% duty on aluminium imports • The US has a large underlying metal 6000 deficit and needs to attract large metal 400 volumes
Slide 6: Rusal sanctions leading to price volatility
Rusal sanctions leading to price volatility Large producer of value added products, impacting regional product premiums LME 3m Rusal primary production per product (USD/t) (total 2017: 3.8 million tonnes) Rusal sanctions 2 700 750 • On 19th December, U.S. Department of Rusal sanctions the Treasury’s
Slide 7: Chinese semis exports increasing in 2018, less volumes going to the US
Chinese semis exports increasing in 2018, less volumes going to the US US imports of sheet and plate from China Semis exports 000s tonnes (monthly, kmt) Chinese semis exports 80 600 • Increasing volumes in 2018 amid higher export arbitrage 70 • + 21% gross exports 2019 vs 2018 500 • Export arbitrage
Slide 8: Downstream
02 Downstream
Slide 9: Aluminium continues to be the fastest growing base metal
Aluminium continues to be the fastest growing base metal Gaining market share from other metals in key segments Global metal demand New segments and applications supporting aluminium demand Index 2000=100 300 250 200 150 Offshore / Marine applications, e.g. Railway, including new technologies HVAC&R
Slide 10: Substitution trend in automotive progressing
Substitution trend in automotive progressing Positive US demand despite moderate auto sales, Europe gaining ground Aluminium vehicle penetration* Rolled products demand in transport Extrusions demand in transport Demand per vehicle, kg/car (annual growth) (annual growth) 300 Estimate 15% 15% 280 260
Slide 11: E-mobility trend favourable for aluminium demand
E-mobility trend favourable for aluminium demand High aluminium content in BEVs, increasing share of total car sales Electric vehicle* share of new car sales (%) Net increase in aluminium content in electric vehicle’s Average kg aluminium per vehicle type in 2018 30% ~200 Rolled Castings Extrusions
Slide 12: 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, selected regions Global segment composition, rolled products YoY-growth (2017) 8% 4% 2% Packaging 5% Transport 8% Construction 6% Machinery & Equipment 14% 50
Slide 13: Moderating extrusion demand growth in Western Europe and North America, improving in Asia
Moderating extrusion demand growth in Western Europe and North America, improving in Asia Extrusion demand, selected regions European segment composition, extrusion YoY-growth (2017) 10% North America 10% Western Europe 10% China 5% 5% 5% 5% 5% 5% 0% 0% 0% 2017 2018E 2019E 2017 2018E 2019E 2017 2018
Slide 14: Primary metal market
03 Primary metal market 15
Slide 15: Global primary market expected to be in deficit also in 2019
Global primary market expected to be in deficit also in 2019 Supply growth picking up, demand growth slowing Global (’000 mt) Global growth 2019 Supply: 3 – 4 % 70 000 Supply Demand Demand: 2 – 3 % 65 000 60 000 Demand 55 000 influences 2019 Supply influences 2019 Continued growth in transport 50 00
Slide 16: High input costs challenging smelter profitability
High input costs challenging smelter profitability Higher end of the cost curve dominated by Chinese smelters Input costs aluminium production Business operating cost (BOC) Index: Q1 2016 = 100 USD/t 300 2 800 2 400 250 2 000 Current LME 200 1 600 150 1 200 100 800 Cost pressure in 2018 1) Continued
Slide 17: Aluminium & copper drifting south in 2018 along with Chinese equities
Aluminium & copper drifting south in 2018 along with Chinese equities Index. 2018 YTD 140 130 120 110 100 90 80 70 60 jan. 18 feb. 18mar. 18apr. 18 mai. 18 jun. 18 jul. 18 aug. 18sep. 18 okt. 18 nov. 18des. 18 jan. 19 Dow Jones Shanghai Brent Copper Aluminium 18
Slide 18: Primary supply in China impacted by policy and cost
Primary supply in China impacted by policy and cost, captive power market reform influencing power cost Chinese market-driven primary curtailments in 2018 Chinese primary supply forecasts Mill tonnes Million tons 2,5 42 40 2 38 36 34 1,5 32 30 1 2015 2016 2017 2018E 2019E 2020E CRU Oct 2017 CRU Apri
Slide 19: China expected to be largely balanced in 2019, global market in deficit
China expected to be largely balanced in 2019, global market in deficit World ex. China 2019 Estimated primary market balance 2019 (mill t.) 1-3 % (‘000t) 1 000 3-4 % ~30.2 – 30.8 Production ~28.6 – 28.8 Demand 0 China 2019 (mill t.) 2-4 % 2-4 % -1 000 ~36.9 – 37.6 ~36.9 – 37.6 Production Demand -2
Slide 20: Stocks outside China continue to decrease
Stocks outside China continue to decrease Inventory days approaching pre-crisis levels world 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 2000 20 20 0 0 0 0 Reported Unreported
Slide 21: LME moderating towards the end of 2018 and into 2019
LME moderating towards the end of 2018 and into 2019, but holding up in NOK terms amid weaker NOK 22
Slide 22: Premiums also moderating lately, US premium reflecting section 232 duty
Premiums also moderating lately, US premium reflecting section 232 duty USD/t 600 500 400 300 200 100 0 US Mid West Japan Europe (duty-paid) 23
Slide 23: Bauxite and alumina market
04 Bauxite and alumina market 24
Slide 24: Volatile alumina market due to supply disruptions
Volatile alumina market due to supply disruptions Alunorte embargo and Rusal sanctions lead to increased volatility Alumina price (PAX) and share of LME USD/t Supply tightness, Alunorte 100% 750 Alcoa strike curtailment Rusal sanctions 32% 650 Alunorte 550 disruption 27% PAX % of LME 3m 450 22% 350
Slide 25: PAX increase triggers Chinese exports
PAX increase triggers Chinese exports Chinese alumina required to balance the global market Chinese alumina trade balance by month China alumina export arbitrage 2017-2018 (kt) (USD/t) 2017 2018 250 421 200 2018 to Nov 285287275278 266 235 253 1.28 Mt 211 alumina exports 150 140 143 99 100 74 70 79
Slide 26: China increasingly reliant on bauxite imports
China increasingly reliant on bauxite imports Guinea bauxite increasingly filling Chinese demand Growing need for bauxite imports amid domestic depletion Guinea bauxite production increasing, but still need for other sources Mt Mt 300 80% 100 Chinese imports Domestic prod Forecast ROW China 90 split
Slide 27: More imported bauxite going to inland refineries
More imported bauxite going to inland refineries Delivered bauxite prices 1) 2018 refinery production forecast: total ~73 Mt Other • Extremely tight domestic bauxite 180 Guizhou 4% Shandong market leading to price escalations 7% 33% for poor quality (high silica) 4 160 Guangxi 4 • Not economic for s
Slide 28: Long-term outlook
05 Long-term outlook 31
Slide 29: 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 2000-18 2018-28 Growth in automotive vehicle produc
Slide 30: Slide 30