Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Day (December 2011)
30 slides from Norsk Hydro Asa's investor day presentation, Dec 1, 2011
Slide 1: Market Outlook
Market Outlook Arvid Moss, Executive Vice President and Head of Energy and Corporate Business Development December 1, 2011 (1)
Slide 2: Healthy long-term growth projections
Healthy long-term growth projections Uncertain and weakening short-term outlook Demand for semis • Agenda Million mt World outside China China 120 • Price ~75% 100 • Macro development 49 • Demand 80 36 • Aluminium value chain 60 development 23 53 • Energy development 40 45 35 • Cost development 20 •
Slide 3: Alumina price increasing as percent of LME
Alumina price increasing as percent of LME Platts index in USD % of LME per mt alumina for USD per mt % of LME long-term contracts 450 18.0 15-16% Alumina price 13.5-15% 17.5 13-14.5% % of LME 17.0 12-13.5% 400 16.5 16.0 15.5 350 15.0 14.5 14.0 300 13.5 13.0 12.5 250 12.0 09.10 11.10 01.11 03.11 05.
Slide 4: Aluminium – fundamentals and financial asset
Aluminium – fundamentals and financial asset LME 3-month, USD per mt 3 600 3 200 2 800 2 400 2 000 1 600 1 200 2007 2008 2009 2010 2011 2012 2013 2014 Source: Reuters Ecowin/Hydro (4)
Slide 5: Tight physical market despite high inventories
Tight physical market despite high inventories Ingot premium, USD per mt 250 Europe: Duty paid US Mid-West Japan 200 150 100 50 0 2003 2004 2005 2006 2007 2008 2009 2010-Q1 2010-Q2 2010-Q3 2010-Q4 2011-Q1 2011-Q2 2011-Q3 2011-oct Source: Metal Bulletin/Platts (5)
Slide 6: Strong aluminium demand
Strong aluminium demand Stronger development than IP and GDP last 10 years CAGR last 10 years (%) North America Western Europe Asia ex China 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
Slide 7: 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-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 US car sales US architectura
Slide 8: IP-growth estimated to weaken
IP-growth estimated to weaken Especially in Eurozone Global IP IP selected EU countries Quarterly, %-change from a year earlier Quarterly, %-change from a year earlier 20 20 Estimate Estimate 15 15 10 10 5 5 0 0 -5 -5 -10 -10 -15 -15 2010-Q1 2011-Q1 2012-Q1 2010-Q1 2011-Q1 2012-Q1 World USA Eurozone
Slide 9: Rolled products consumption
Rolled products consumption Western Europe North America Asia Pacific Million mt Million mt Million mt 10 10 20% 20% 10 9 9 20% 15% 15% 9 8 8 15% 8 7 10% 7 10% 7 10% 6 5% 6 5% 6 5% 5 0% 5 0% 5 0% 4 4 4 -5% -5% -5% 3 3 3 -10% -10% -10% 2 2 2 1 -15% -15% 1 -15% 1 0 -20% 0 -20% 0 -20% 2002 2005 2008 20
Slide 10: Extruded products consumption
Extruded products consumption Europe United States China Million mt Million mt Million mt 14 50% 14 50% 14 50% 12 40% 12 40% 12 40% 30% 30% 30% 10 10 10 20% 20% 20% 8 8 8 10% 10% 10% 6 6 6 0% 0% 0% 4 4 4 -10% -10% -10% 2 -20% 2 2 -20% -20% 0 -30% 0 -30% 0 -30% 2002 2005 2008 2011* 2002 2005 2008 201
Slide 11: 2011 balance – our expectations
2011 balance – our expectations World outside China, thousand mt 28 000 Supply Demand 2009 imbalance handled by: 27 000 26 000 Net 25 000 curtailments 5-9% 24 000 Stock 23 000 increase 22 000 19% Primary 21 000 export 20 000 19 000 18 000 2006 2007 2008 2009 2010 2011 Source: CRU/Hydro (11)
Slide 12: Inventories at high level
Inventories at high level World reported primary aluminium inventories • High inventories well known in market Thousand mt • Different views on unreported inventories 7 000 IAI Other LME SHFE 6 000 • Estimated total reported and unreported inventories ~11 million tonnes 5 000 • Represents ~3 months
Slide 13: Healthy demand growth expected
Healthy demand growth expected Manageable supply/demand balance World excluding China, thousand mt 28 000 Supply Demand 27 000 26 000 25 000 Base case 24 000 3-5 % p.a. 23 000 Supply influences Demand influences 22 000 • New projects • Developing regions • Potential restarts • European debt crisis 2
Slide 14: Strong Chinese primary aluminium demand
Strong Chinese primary aluminium demand Balanced supply/demand China, thousand mt, annualized 20 000 Supply Demand 15 000 10 000 5 000 0 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Source: CRU (14)
Slide 15: Third party sales ~20% of global bauxite production
Third party sales ~20% of global bauxite production Bauxite production 2011: ~250 million mt China Rest of World Source: Antaike/Hydro (15)
Slide 16: China highly dependent on bauxite import
China highly dependent on bauxite import China Rest of World Annualized aluminium equivalents*, million mt 15 2006 2007 2008 2009 2010 2011 • Share of imported bauxite in China in 2011: ~43% Import 10 to China • Quality of domestic bauxite resources is deteriorating 5 • Indonesia supplies 80% of imp
Slide 17: Third party sales ~35% of global alumina production
Third party sales ~35% of global alumina production Alumina production 2011: ~90 million mt China Rest of World Source: Antaike/Hydro (17)
Slide 18: Chinese domestic alumina capacity increasing
Chinese domestic alumina capacity increasing China Rest of World Annualized aluminium equivalents*, million mt 15 2006 2007 2008 2009 2010 2011 Import 10 • ~65 % of smelter production in China is not to China integrated with alumina 5 • China has capacity to be balanced in alumina Export 0 from Chin
Slide 19: Chinese trade barriers for primary aluminium
Chinese trade barriers for primary aluminium LME VAT Tolling Export duties Transport SHFE Premiums Annualized aluminium equivalents, million mt 15 2006 2007 2008 2009 2010 2011 • Declared goal of self-sufficiency in primary Import 10 aluminium to China 5 • Arbitrage opportunities between LME and 0 S
Slide 20: China increasing exports of fabricated and semis
China increasing exports of fabricated and semis Rest of World China Annualized aluminium equivalents, million mt 15 2006 2007 2008 2009 2010 2011 • Majority of exports to Asian markets Import 10 • Challenged by antidumping measures in the to China US and Europe 5 • Declared goal of exporting higher
Slide 21: China – significant net importer of aluminium
China – significant net importer of aluminium Annualized aluminium equivalents*, million mt 15 2006 2007 2008 2009 2010 2011 Import 10 • Size of bauxite, alumina and scrap import to China reduces the influence of other products along 5 the value chain Export 0 from China -5 Source: Antaike/Hydro Alu
Slide 22: Demand will increase substantially…
Demand will increase substantially… Demand for semis, China, million mt 60 50 40 49 China’s demand for semis expected to 30 36 increase substantially going forward… 20 23 10 0 2010 2015 2020 Source: CRU/Antaike/Hydro (22)
Slide 23: …as a consequence, China will be increasingly short upstream
…as a consequence, China will be increasingly short upstream Demand for semis, China, million mt 60 50 40 49 China’s demand for semis expected to 30 36 increase substantially going forward… 20 23 10 0 2010 2015 2020 Annualized aluminium equivalents*, million mt 15 2006 2007 2008 2009 2010 2011 Illus
Slide 24: Regional differences in smelter power sourcing
Regional differences in smelter power sourcing 12% Europe Canada 57% • Growing surplus in 97% • Industrial power the Nordic 10% China regimes 16% • CO2 compensation for industry • Energy deficit and 3% 15% 90% high power prices • Focus on renewable energy 24% USA 10% • Rich in coal and shale gas 65%
Slide 25: Volatile European electricity market
Volatile European electricity market €/MWh German spot prices (monthly average) Nordic spot prices (monthly average) 100 Forward market Germany (EEX) Forward market Nordic (Nord Pool) 80 60 40 20 0 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-
Slide 26: Alumina cost curve lifted by cost pressure
Alumina cost curve lifted by cost pressure Business operating cost alumina USD per mt Production 2006: 73 million mt 500 2011: 97 million mt 450 2016: 145 million mt 2006 2011 2016 400 350 300 250 200 150 100 50 Accumulated world capacity, % 0 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Source: CRU,
Slide 27: Aluminium cost curve lifted by cost pressure
Aluminium cost curve lifted by cost pressure Business operating cost aluminium USD per mt Production 2006: 34 million mt 3 500 2011: 47 million mt 2016: 64 million mt 2006 2011 2016 3 000 2 500 2 000 1 500 1 000 Accumulated world capacity, % 500 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Source: CR
Slide 28: Aluminium cost curve lifted by cost pressure
Aluminium cost curve lifted by cost pressure 2011 Business operating cost aluminium USD per mt ~40% of Chinese smelter capacity in 4th quartile 3 500 2006 2011 2016 ~70% of capacity 3 000 in 4th quartile is Chinese 2 500 2 000 1 500 1 000 Accumulated world capacity, % 500 0% 10% 20% 30% 40% 50% 60%
Slide 29: Market outlook summary
Market outlook summary Demand for semis World outside China China Lower growth expected in 2012 • European debt crisis Million mt • Positive impact from US recovery 120 • Continued growth in China and developing regions ~75% 100 Still strong long term projections 49 • Emerging markets 80 • Urbanizat
Slide 30: www.hydro.com
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