global and regional aluminium markets ‒ managing growth ... · global and regional aluminium...

Global and regional aluminium markets ‒ managing growth, competition and oversupply

The Middle East as an emerging hub

Walid Al Attar, Chief Marketing Officer

Platts Aluminium Symposium 2014 12 to 14 January 2014

1 Emirates Global Aluminium

Agenda

▪ Introducing Emirates Global Aluminium

▪ Primary aluminium core assets

▪ Product mix

▪ Global dynamics

▪ Middle East primary aluminium industry

▪ EGA sales strategy

2 Emirates Global Aluminium 2 Emirates Global Aluminium

Middle East primary aluminium industry (1) Centred in the Gulf Co-operation Council (“GCC”) region

Saudi Arabia Oman

Qatar UAE

Bahrain Kuwait

EMAL DUBAL

Alba Qatalum

Sohar

Ma’aden

• Six smelters in five GCC states • Massive growth in 40 years —

120,000 t in 1971 to 3.7 M t in 2012

• Over 9% of total global primary aluminium production will come from the Middle East by 2020

• Some 60% of Middle East primary aluminium capacity has been built since 2008

• About 57% of new capacity represents regional investments by global majors


Middle East primary aluminium industry (2) Capacity to exceed 4.88 M t by 2014 (almost 32% up on 2012)

Country Company Annual production capacity (t)

Year commissioned

Ownership

Bahrain ALBA 880,000 1971 Bahrain (67.5%) SABIC (21.5%) Public (11%)

UAE DUBAL 1,056,000 1979 Dubai Government (100%)*

Oman Sohar 370,000 2008 Oman Oil Co (40%) Abu Dhabi Water & Elec. Authority (40%) Rio Tinto Alcan (20%)

Qatar Qatalum 585,000 2010 Qatar Aluminium (50%) Hydro Aluminium (50%)

UAE EMAL 1,255,000 2010 DUBAL (50%)* Mubadala (50%)*

Saudi Arabia Ma’aden 740,000 2012 Saudi Arabian Mining Company (Ma’aden) (74.9%) Alcoa (25.1%)

Source: Gulf Aluminium Council * Ownership structure changing, through formation of EGA


Middle East primary aluminium industry (3) Key factors behind the growth

• Energy is a readily available resource (more economical than elsewhere); industry adds value to energy to support social development initiatives

• Modern installations, featuring advanced, environmentally-friendly energy-efficient reduction cell technologies (focus on economic and environmental sustainability)

• Location, with excellent reach to all corners of the globe

• Strong export capacity, designed to exceed regional demand and fulfil commitments to global markets

• Continued growth in global demand identified unanimously by industry analysts

• National government support for investment in industry (ease of doing business)

• Many attractive features, conducive to primary aluminium production


Agenda


▪ Core primary aluminium assets

▪ Product mix

▪ Global dynamics




• Mubadala Development Company and Investment Corporation of Dubai (collectively the shareholders of DUBAL and EMAL) have combined their aluminium industry interests in a new jointly-owned, UAE-based entity called Emirates Global Aluminium (EGA)

• Completion of the transaction achieved in Q1 2014, allowing integrated operations to commence January 2014

• EGA represents the progression of the shareholders’ principles for cooperation agreed in 2006 that have underpinned their relationship in EMAL and continue in their activities in all parts of the aluminium value chain (aluminium industry in the UAE began 35 years ago)

• EGA has very strong financial backing — both shareholders are sovereign wealth funds, with unwavering commitment to sustainable growth

• EGA’s vision is to provide the global economy with sustainable material of the highest quality, building a legacy of excellence for the UAE and the world

EGA Creating a new, UAE-based global aluminium champion


World-class smelter operations on two sites (1)

• Commissioned end-1979 • Sequential expansions, advancing

technologies • 1,573 reduction cells in seven

potlines • Smelter (>1 M tpa) • Casthouses (>1 M tpa) • 2,350 MW power station (30°C) • 30 million gallon/day desalination

plant • Port facilities • Warehouses & administration • Residential area


World-class smelter operations on two sites (2)

PHASE I • 756 cells (DX Technology) • Fully commissioned end-2010 • 787 kt sold in 2012

PHASE II • 444 cells (DX+ Technology) • Upgrade of Phase I cells • First hot metal September 2013 • Increase capacity to 1.35 M tpa by

end-2014


Total UAE smelter capacity DUBAL was world’s 2nd largest single-site producer in 2012 (1.025 M t) EMAL will be world’s largest single-site smelter once fully commissioned in 2014 EGA (DUBAL + EMAL) accounts for 50% of Middle East production

Initially DUBAL only, including EMAL from 2010 onwards

135 240

380 530

680 761

864 890 950 970

1304

1781 1839 1872

2315 2384 2395 2393

0

500

1000

1500

2000

2500

3000

1980 1990 1996 1999 2003 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

ktpa

Smelting capacity (‘000 tonnes per annum)


Product mix Product type cast by DUBAL and EMAL from 2014 (i.e. EMAL Phase II fully commissioned) Total 2,500,000 tpa

240,000

780,000

1,100,000

380,000

Unalloyed

Foundry

Billet

Slab


Dedicated to excellence and sustainability • Premium purity, high performance aluminium products

‒ Super high and high purity aluminium >99.952% metal purity ‒ Leading supplier of foundry alloys to automotive manufacturers ‒ One of the world’s largest suppliers of billets for forging and

extrusion ‒ Investment in value-added products casting facilities to meet

customers’ requirements

• Advanced reduction-cell technologies, developed in-house ‒ DX Technology (385 kA) (796 cells) ‒ DX+ Technology (440 kA) (449 cells) ‒ Modernisation and retrofit of older potlines (DUBAL)

• Superb environmental performance * ‒ Focus on energy-efficiency (smelter specific energy:

14.73 DC MWh/t Al) ‒ Stringent emission control (PFC 0.12 CO2eq t/t Al;

HF 0.60 kg/t Al )

• Safety first and always * DUBAL, 2012 figures


Agenda



▪ Product mix

▪ Global dynamics




Global dynamics influencing EGA

Global growth of aluminium consumption

Growth of Chinese aluminium consumption and production

Increasing costs and decreasing availability of energy, driving closures of primary smelters

Environmental pressures to reduce greenhouse gas emissions

Influence of financial investment companies on aluminium pricing

Protectionism


Growth in primary aluminium consumption Annual growth in primary aluminium consumption of 4% to 6% ROW versus China (ktpa)

1727

36 4024

29

3439

0

10

20

30

40

50

60

70

80

90

2010 2015 2020 2025

China Others

‘000

tonn

es

Data: CRU


Protectionism

China’s tax incentives: • Competitive edge in terms of

pricing • Extraordinary growth in

Chinese production of aluminium extrusions

• Substantial growth in Chinese exports of aluminium products manufactured from extrusions.

Production of extrusions in China

X 10

,000

tpa

Sources: China NFMA, CRU

Chinese semi-fabricated exports to the GCC

tpa

Import tariff barriers: • Protects interests of older smelters • BUT undermines competitiveness of country’s

downstream industry Inappropriate warehousing strategies: • Perverse financial incentives • Manipulation to maximise warehouse returns • Aggravating tight supply of products and

depressing LME prices


Aluminium is a commodity • Primary aluminium is in demand globally – Highly competitive and transparent markets creates

interesting dynamics: — EGA sells products globally, mainly into countries short on primary aluminium production — EGA must thus compete on quality, service and price against international and national

producers • Primary aluminium is a globally traded product, with common commercial values (i.e. inherent

energy value): — Some countries export primary aluminium, others import it — Aluminium semi-fabricated and finished products are imported and exported by some

countries — Aluminium scrap is imported and exported by some countries

The major common denominator in these flows is the value of the aluminium content. Other variables (cost, quality and service) are the differentiators

Protection vs. globalisation


Agenda



▪ Product mix



▪ Global dynamics


Global sales strategy: regional application Follow markets where demand exceeds internal production More than 88% of production is exported (largest market is Asia, followed by Middle East

North Africa region, Europe and The Americas)

39%

26%

20%

15%

Asia

MENA

Europe

Americas


*IMPORTANT NOTES: A) Aluminum production forecasts assume all confirmed brownfield / greenfield projects hit the market as planned (no delays). B) Aluminum production forecasts assume no cuts in production beyond the ones that have been confirmed so far nor disruptions in operating capacity. C) Aluminum production forecasts include annual capacity creep of 0.5% per year for all smelters.

Regional deficits widening (especially in North America, Western Europe, China) Expected primary aluminium market deficits by region 2012-2015* (million tonnes)

Source: HARBOR Intelligence

NORTH AMERICA

1.05 1.50

WEST EUROPE

2.80 2.86

2.11 2.17

JAPAN

ASIA EXCL. CHINA AND

JAPAN

5.62 5.01

2012

GLOBAL

2015 1.00 1.08

0.50 1.65

CHINA


*IMPORTANT NOTES: A) Aluminum production forecasts assume all confirmed brownfield / greenfield projects hit the market as planned (no delays). B) Aluminum production forecasts assume no cuts in production beyond the ones that have been confirmed so far nor disruptions in operating capacity. C) Aluminum production forecasts include annual capacity creep of 0.5% per year for all smelters.

GCC: only region with increasing surplus Expected primary aluminium market surpluses by region 2012-2015* (million tonnes)

Source: HARBOR Intelligence

MIDDLE EAST

REGIONAL SURPLUS LATIN AMERICA

0.40 0.19

AFRICA

1.23 1.24

OCEANIA

1.81 1.47

2.58 2.53

EAST EUROPE 3.04 4.51

2012

GLOBAL DEFICIT

2015 1.00 1.08


The Americas: Strengthening presence, penetrating markets

• North America: Strengthened DUBAL/EMAL presence through DUBAL America Inc. Proportion of sales into the USA increased from 8% in 2011 to 15% in 2012.

• South America: First foray in 2011 DUBAL sales in 2011 and 2012 totaled approximately 33,000 t

0%10%20%30%40%50%60%70%80%90%

100%

1,001 1,015 1,032 1,052

2009 2010 2011 2012

Asia

MENA

Europe

Americas


Closing thoughts

• Global aluminium industry: Challenged by warehousing dynamics and re-melt overhang. Constrained by depressed LME prices. Strong and continuous growth in demand for value-added products. Long-term outlook to rectify.

• Middle East aluminium industry: State-of-the-art smelters. Substantial investment in sustainable production (advanced technologies, emission

reduction). Casthouse mix primarily value-added products to meet customer demands.

• EGA prospects: Additional 500,000 tonnes coming on stream (EMAL Phase II). Strong demand will ensure full capacity pre-sold.


Thank you

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