The Global Aluminium Market An Overview Trinidad, Dec 6, 2006 Colin Pratt LONDON | SEATTLE | PHILADELPHIA | BEIJING | SYDNEY | RIO DE JANEIRO 31 Mount Pleasant, London WC1X 0AD UK Tel +44 20 7278 7788 Fax +44 20 7278 0003 PO Box 1269, Langley, WA 98260 USA Tel +1 360 321 4707 Fax +1 360 321 4709 PO Box 656, Kennett Square, PA 19348 USA Tel +1 610 925 1860 Fax +1 610 925 1861

www.crustrategies.com

Aluminium Industry Overview

• Some Basic Facts • Why Trinidad • Why Now • Who’s Who in the Industry • What’s in it for Trinidad

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How Big is it? Aluminium is the largest of the non-ferrous metals in Global consumption, and second to copper in value

140

Tonnes (mn) Value ($bn)

120 100 80 60 40 20 0 Aluminium

Copper

Zinc

Nickel 3

But one tenth the size of the Steel industry in value (Logarithmic scale) 10000 Tonnes (mn) Value ($bn)

1000 100 10 1 Steel

Aluminium

Copper

Zinc

Nickel 4

Where is Aluminium Consumed? China - over one third of global consumption by 2030

2030

2005 China 22%

Other 5%

North America 23%

Other 6%

North America 14% EU/EEA 13%

China 35%

Japan 4% India 3% South & East Asia 8% Latin America 4%

CIS and Other Europe 5%

EU/EEA 22% CIS and Other Europe 5%

Japan 8%

Total = 31.9m tonnes

India 8%

South & East Latin Asia America 10% 5%

Total = 73.7m tonnes

5

What is aluminium used for? Global semis consumption by end-use, 2005 Machinery & equipment 9%

Other 7% Transport 31%

Consumer durables 6%

Construction is the next largest sector for aluminium – and is very important for extrusion demand.

Electrical 10%

Virtually all packaging demand is in the form of sheet, as is of course, foil stock.

Foil stock 8% Packaging 10%

Data: CRU

Transport sector is single largest market for aluminium semis – representing significant proportions of castings, frps and extrusions.

Total = 44.6m tonnes

Construction 19%

Most wire and cable goes to the electrical sector.

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World primary aluminium consumption: Historical Growth 32000 30000 4.2%/year

28000

China

26000

CIS & E.Europe

24000

Western world Consumption 0.8%/year

22000 '000 tonnes

20000

3.0%/year 2.4%/year

18000 16000 14000 12000

9.3%/year

10000 8000 6000 4000 2000 0 1950

1954

1958

1962

1966

1970

1974

1978

1982

1986

1990

1994

1998

2002 7

Long term smelter capacity requirement 85 Additional investment required

75

Projected capacity

Million tonnes

Required capacity

65 55 45 35 25 2000

2005

2010

2015

2020

2025

2030 8

The global aluminium loop New scrap

Old scrap

Direct use of scrap

Secondary aluminium

Bauxite

Metallurgical alumina

Non-metallurgical alumina

Primary aluminium 33m

Trinidad

Data: CRU, tonnes

Primary for secondary 0.8m

Recycled aluminium 13m

Semi-fabricated aluminium 46m 9

Aluminium Industry Overview

• Some Basic Facts • Why Trinidad • Why Now • Who’s Who in the Industry • What’s in it for Trinidad

10

Power use intensity by industry (kWh/tonne) Chlor-alkali Calcium carbide Ferrochrome Zinc Silicomanganese Refined nickel Sodium chlorate Silicon carbide Ferrosilicon Silicon metal Aluminium 0

2,000

4,000

6,000

8,000 10,000 12,000 14,000 16,000 11

Attractive locations for power-intensive industries

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4.5 5.5

4.9 4.6

6.8 6.7

0.5 0.6

14.2 12.0

1.9 3.2

2.1 2.5

1.4 1.9

2.6 3.6 2.3 2.3

World capacity 2006-2010 (million tonnes)

46 44 42 40 38 36 34 2010

2009

2008

2007

2006

2006 regional capacity mtpy 2010 regional capacity mtpy

World primary aluminium capacity 2006-2010

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Why Trinidad - Summary

• Availability of power supplies at competitive cost • Well placed to export to North America and Europe, both of which have increasing import requirements

• Well placed for alumina supplies from Jamaica or Venezuela • Stable business environment

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Aluminium Industry Overview

• Some Basic Facts • Why Trinidad • Why Now • Who’s Who in the Industry • What’s in it for Trinidad

15

Aluminium attractor price 1981-2030 (2006 $/t) 3,600

LRMC (2006$) LME 3M (2006$)

3,400 3,200 3,000 2,800

$/tonne

2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 1981

1988

1995

2002

2009

2016

2023

2030

Data: CRU 16

Aluminium Industry Overview

• Some Basic Facts • Why Trinidad • Why Now • Who’s Who in the Industry • What’s in it for Trinidad

17

The Industry has been consolidating, but also undergoing vertical de-integration “Old” World

“New” World

Diversified companies focused upstream Rio Tinto, BHP Billiton CVRD, CVG, Vedanta Alcan

Aluminium companies focused upstream Rusal-Sual, Chalco, Nalco Independent primary smelters Alba, Dubal, Chinese smelters

Integrated aluminium companies Alcoa, Hydro, AMAG Downstream aluminium companies Novelis, Orkla, Aleris Corus, Sumitomo, Kobe

Aluar, CBA Elval, Sural 18

Aluminium Industry Overview

• Some Basic Facts • Why Trinidad • Why Now • Who’s Who in the Industry • What’s in it for Trinidad

19

What’s in it for Trinidad?

• Positives

• Negatives

•

Monetising Energy for Development

•

•

Employment (primary and secondary)

– SPL

Potential spinoffs

– CO2

•

– Services

Environmental Impacts – Emissions to air – Land use

– Downstream industry

•

Economic Diversification

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The aluminum industry is really three different businesses, with different sources of competitive advantage Resource Driven

Process Driven

Customer Driven

Bauxite-Alumina Smelting Rolling Extruding Final Products

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Comparable Experiences – where aluminium smelters have been located • Mozambique – Minimizing environmental impacts and encouraging spinoff impacts – Sustainable development focus

• Bahrain – Based on low cost gas, but has maximised services and downstream spinoffs

• Dubai – Also gas based, industrial development co-exists with tourism in a small country. Not much downstream activity

• Qatar – massive gas reserves, primarily pursuing LNG expansion, but also industrial development (including proposed smelter)

• Norway – large gas reserves and small population – gas has highest value in European market. Norway has developed oil services expertise 22

Colin Pratt Managing Consultant Ph. +44 20 7903 2104 [email protected]

LONDON | SEATTLE | PHILADELPHIA | BEIJING | SYDNEY | RIO DE JANEIRO 31 Mount Pleasant, London WC1X 0AD UK Tel +44 20 7278 7788 Fax +44 20 7278 0003 PO Box 1269, Langley, WA 98260 USA Tel +1 360 321 4707 Fax +1 360 321 4709 PO Box 656, Kennett Square, PA 19348 USA Tel +1 610 925 1860 Fax +1 610 925 1861

www.crustrategies.com