Alcoa s Perspective on Global Aluminum Platts Aluminium Symposium January Greg Wittbecker, Vice President, Alcoa Materials Management

Transcription

1 Alcoa s Perspective on Global Aluminum Platts Aluminium Symposium January 2012 Greg Wittbecker, Vice President, Alcoa Materials Management

2 Cautionary Statement Forward-Looking Statements This presentation contains statements that relate to future events and expectations and as such constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Forward-looking statements include those containing such words as anticipates, estimates, expects, forecasts, intends, outlook, plans, projects, should, targets, will, or other words of similar meaning. All statements that reflect Alcoa s expectations, assumptions, or projections about the future other than statements of historical fact are forward-looking statements, including, without limitation, forecasts concerning global demand for aluminum, aluminum end-market growth, aluminum consumption rates, or other trend projections, targeted financial results or operating performance, and statements about Alcoa s strategies, objectives, goals, targets, outlook, and business and financial prospects. Forward-looking statements are subject to a number of known and unknown risks, uncertainties, and other factors and are not guarantees of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include: (a) material adverse changes in aluminum industry conditions, including global supply and demand conditions and fluctuations in London Metal Exchange-based prices for primary aluminum, alumina, and other products, and fluctuations in indexed-based and spot prices for alumina; (b) unfavorable changes in general business and economic conditions, in the global financial markets, or in the markets served by Alcoa, including automotive and commercial transportation, aerospace, building and construction, distribution, packaging, consumer electronics, oil and gas, defense, and industrial gas turbines; (c) the impact of changes in foreign currency exchange rates on costs and results, particularly the Australian dollar, Brazilian real, Canadian dollar, and Euro; (d) increases in energy costs, including electricity, natural gas, and fuel oil, or the unavailability or interruption of energy supplies; (e) increases in the costs of other raw materials, including caustic soda or carbon products; (f) Alcoa s inability to achieve the level of revenue growth, cash generation, cost savings, improvement in profitability and margins, fiscal discipline, or strengthening of operations (including moving its alumina refining and aluminum smelting businesses down on the industry cost curve and increasing revenues in its Flat-Rolled Products and Engineered Products and Solutions segments), anticipated from its restructuring programs, productivity improvement, cash sustainability and other initiatives; (g) Alcoa's inability to realize expected benefits from newly constructed, expanded or acquired facilities or from international joint ventures as planned and by targeted completion dates, including the joint venture in Saudi Arabia or the upstream operations in Brazil; (h) political, economic, and regulatory risks in the countries in which Alcoa operates or sells products, including unfavorable changes in laws and governmental policies, civil unrest, or other events beyond Alcoa s control; (i) the outcome of contingencies, including legal proceedings, government investigations, and environmental remediation; (j) the business or financial condition of key customers, suppliers, and business partners; (k) changes in tax rates or benefits; and (l) the other risk factors summarized in Alcoa's Form 10-K for the year ended December 31, 2010 and other reports filed with the Securities and Exchange Commission. Alcoa disclaims any obligation to update publicly any forwardlooking statements, whether in response to new information, future events or otherwise, except as required by applicable law. Platts Aluminum 2 Symposium 2012

3 Alcoa January 2011 demand guidance Russia Brazil India *Other Asia w/o China Projected Primary Aluminum Consumption by Region (in mmt) 16% 14% 7% 6% 15% 15% 15% 17% North America Europe % 4% 4% 6% 2010 Global Demand Growth Rate: 13% 2011 Global Demand Growth Rate 12% vs (2011 ex China: ) 21% 15% China Forecast Estimated Consumption 2010 vs Source: Alcoa analysis Platts Aluminum Symposium 2012 *Other consists of: Latin America ex Brazil, Middle East/Africa, Oceania and Rest of World 2011 Forecast 3

4 Alcoa January 2011 metal balance : 245,000 tons surplus Deficit Surplus Production Demand Production Demand China Annualized Production (Nov 2010) 14,575 Restarted and Expanded Capacity 3,700 Total Supply 18,275 Consumption (18,975) (Deficit) Surplus (700) Rest of World Annualized Production (Nov 2010) 25,225 Restarts and Expanded Capacity 1,260 Total Supply 26,485 Western World Consumption (25,540) (Deficit) Surplus 945 Source: Alcoa analysis Platts Aluminum Symposium

5 January 2012 outlook for 2011, slower 2H growth Asia ex. China North America 2011 Projected Primary Aluminum Consumption Growth Rates (%) by Region (in mmt) Russia Brazil India Other Europe % 6% 4% 15% 2010 Global Demand Growth Rate: 13 % 2011 Global Demand Growth Rate vs (2011 ex China: 7%) China % 2011 Forecast Estimated Consumption *Other consists of: Latin America ex Brazil, Middle East/Africa, Oceania and Rest of World Source: Alcoa analysis Platts Aluminum Symposium

6 Sequential Change in 2011 Estimates: Jan 2011 vs. Jan , , ,000 ton shortfall in demand: Sovereign debt crisis in the Euro Zone Earthquake in Japan Inflation in emerging markets Energy and infrastructure shortages (India) Weaker energy export revenue(russia) Transportation growth in North America Total China Europe Source: Alcoa analysis, Brook Hunt, CRU, Harbor North America Asia ex China Other India Brazil Russia Total Platts Aluminum Symposium

7 Overall 2011 Supply/Demand Balance Met Projections 2011 Supply/Demand Balance (in kmt) Primary Aluminum Alumina Surplus 150 Balanced Supply Demand Supply Demand (000 mt) China Rest of World Supply 17,800 26,000 Demand (19,000) (24,650) Net Balance (1,200) 1,350 (000 mt) China Rest of World Supply 34,100 52,200 Demand (34,100) (52,200) Net Balance 0 0 Source: Alcoa estimates, Brook Hunt, CRU, CNIA, IAI Platts Aluminum Symposium

8 2012 Demand Growth Continues, But At A Slower Pace Russia Brazil India Other Asia ex. China North America Europe 2012 Projected Primary Aluminum Consumption Growth Rates (%) by Region (in mmt) % 4% 4% 3% 5% 6% 3% 0% 1% 5% 9% 2011 Global Demand Growth Rate: 10 % 2012 Global Demand Growth Rate 7% vs (2011 ex China: 4 %) China % 12% 2011 Forecast 2012 Forecast Estimated Consumption Source: Alcoa analysis *Other consists of: Middle East, Latin America ex Brazil and ROW Platts Aluminum Symposium

9 Estimate More Than 1/3 of Chinese Smelters Operating Under Water At End Of 2011 Chinese Primary Metal Production by Full Operating Cost (millions of tons) Unprofitable Smelter Production by Province (millions of tons) Henan 1.7 Guizhou 0.8 Unprofitable Yunnan 0.8 Costs At Or Above SHFE $2, MnT, 32% Profitable Sichuan Shandong Costs Below SHFE $2, MnT, 68% Guangxi Shaanxi Liaoning 0.2 Zhejiang 0.1 * 17% VAT inclusive in the price and cost ** Full operating cost excludes depreciation and capital charge Source: CRU, AMM, Aladdiny, Alcoa analysis Platts Aluminum Symposium

10 2012 Primary Aluminum Moves Into Deficit, Alumina Balanced 2012E Supply/Demand Balance (in kmt) Primary Aluminum Alumina Deficit (600) Balanced Supply Demand Supply Demand (000 mt) China Rest of World 2011 Production Run Rate 17,800 26, Production Additions 3, Capacity Curtailments (1,100) (700) Total Supply 20,450 26,000 Demand (21,300) (25,750) Net Balance (850) 250 (000 mt) China Rest of World Supply 36,700 57,200 Demand (39,200) (54,700) Net Balance (2,500) 2,500 Import/(Exports) 2,500 (2,500) Net Balance 0 0 Source: Alcoa estimates, Brook Hunt, CRU, CNIA, IAI Platts Aluminum Symposium

11 Shanghai premium to LME now conducive to higher imports 500, , , , ,000 0 (100,000) (200,000) (300,000) (400,000) China Primary Net Imports vs. SHFE Differential to LME as of Dec Net Primary Imports SHFE Differential to LME Imports are attractive Exports are attractive $750 $500 $250 $0 -$250 -$500 (500,000) -$750 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Source: China Customs Bureau, LME, SHFE Platts Aluminum Symposium

12 Premiums Decline But Remain Strong, Inventory Increases Aluminum Inventories (in MMT) And Regional Premiums Premiums Off Highs But Strong Historically Inventories 4 Days Higher Year-on-Year Midwest Japan Europe $170 /MT $112 /MT $163 /MT 57 days of consumption LME at 40 days Non-LME at 17 days Global Inventories Rose 4 days vs. 3Q 11 0 Source: IAI, LME, Metal Bulletin, Marubeni, Platts Platts Aluminum Symposium

13 Combination Of Factors Signals Constructive Outlook Demand Macro economic indicators showing positive signals 7% global aluminum demand growth in 2012 Primary aluminum balance moving into deficit Supply Producers taking action to cut unprofitable output Capacity growth in 2012 is very modest Visible supply of 57 days is stable Platts Aluminum Symposium

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