aluminum - usitcthe global market has consistently overproduced... world primary aluminum market...

aluminum beyond industry intelligence

The global market has consistently overproduced...

WORLD PRIMARY ALUMINUM MARKET BALANCE VS LME CASH PRICES ( m i l l i o n m t o n vs $ / m t o n ; a n n u a l vs m o n t h l y d a t a )

4

0 . 8 9

r 3 , 2 0 0

2 , 8 0 0

2 , 4 0 0

2 , 0 0 0

1 ,600

1 ,200

Source: HARBOR Aluminum.

jluminum beyond industry intelligence

•

.which has increased global aluminum stocks to a record high of 16 million mton

WORLD PRIMARY ALUMINUM INVENTORIES ( $ / m t o n vs m i l l i o n m t o n ; m o n t h l y d a t a )

L M E 3 M A L U M I N U M

PRICES (LEFT SCALE)

STEALTH (NON-VIS IBLE)

REPORTED (VISIBLE)

3 4 0 0

3 0 0 0

2 6 0 0

2 2 0 0

1 8 0 0 •

1 4 0 0

2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6

Source: HARBOR Aluminum, CME, IAI, LME, Marubeni, SHFE, and SMM data

2 0

16

12


At the same time, China's smelters have become much more competitive

PRIMARY ALUMINUM CASH COST OF PRODUCTION

( m o n t h l y a v e r a g e d a t a : $ / m t o n )

2 , 3 0 0

J a n - 0 9 J a n - 1 0 J a n - 1 1 J a n - 1 2 J a n - 1 3 J a n - 1 4 J a n - 1 5 J a n - 1 6

Source: HARBOR Aluminum

•Before casting (molten metal) . Does not include.depreciation, interest payments or work ing capital; Excludes.applicable VAT of 17%

that Chinese a luminum smelters pay on raw materials, energy and services.

beyond industry intelligence

In fact, China has moved down to the 60 t h percentile of the cost curve

CHINA'S PRIMARY ALUMINUM SMELTING INDUSTRY CASH COST CURVE POSITION* (Q.1 o f e v e r y y e a r ; p e r c e n t i l e )

CD 1 0 0 -i

>

2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6

* Cash cost before casting (molten metal) . Does not include depreciat ion, interest payments, sustained capital expenses or work ing capital; excludes

applicable VAT of 17% that Chinese aluminum smelters pay on raw materials, energy and services.

Source: HARBOR Aluminum . . . . . . . . . . . . . . . . .


...and building low-cost, state-of-the-art mega smelters..

CHINESE PRIMARY ALUMINUM SMELTER PRODUCTION CASH COST* AND CAPACITY ( $ / m t o n a n d t h o u s a n d m t p y )

1 ,550

1 ,480

1 ,410

1 ,340

1 ,270

1 ,200

AVG CASH COST*

1 ,500 ( le f t scale) AVG CAPACITY

(r ight scale)

New Projects

Announced in 2012

New Projects

A n n o u n c e d in 2013

New Projects


N e w Projects


8 0 0

6 0 0

4 0 0

2 0 0

New Projects

Announced in 2016

* On cash cost basis before casting (molten metal). Does not include depreciat ion, interest payments, sustained capital expenses or work ing capital,

excludes applicable VAT of 17% that Chinese a luminum smelters pay on raw materials, energy and services.


• aluminum beyond industry intelligence

...with captive coal mines, power plants and in some cases downstream assets

CHINESE PRIMARY ALUMINUM PROJECTS' STRUCTURE ( N e w p r i m a r y a l u m i n u m p r o j e c t s a n n o u n c e d in 2 0 1 1 - 2 0 1 5 )

#0F PROJECTS UPSTREAM ENERGY DOWNSTREAM

SEMIS P R O D U C T I O N

20 s 10

10

9 s i Bli s 4

3

1 s 2 s 2



• •

Moreover, declining coal prices have reduced China's electricity price by 20%...

CHINA COAL PRICE AND PRIMARY ALUMINUM INDUSTRY ELECTRICITY PRICE ( w e e k l y d a t a ; )

$ / m t o n $ / M W h

55 i r 4 2

5 0

4 5

4 0

35 i

3 0

AVG ELECTRICITY PRICE*

( r ight scale)

AVG COAL PRICE*

( le f t scale)

3 7

3 2

$ 3 5 . 6 - 2 7 % y / y

$ 2 9 . 7 - 2 0 % y / y

2 7

S e p - 1 4 J a n - 1 5 M a y - 1 5 S e p - 1 5 J a n - 1 6

* Domestic price excluding 17% VAT.


beyond industry intelligence

...and have pushed China's electricity cost down to ROW's levels

PRIMARY ALUMINUM ELECTRICITY PRICE BY SELECTED COUNTRIES/REGIONS* ( $ / M W h )

C h i n a A v e r a g e Ch ina N e w R O W USA M i d d l e East C a n a d a

C a p a c i t y

* Excludes 17% VAT for China. . . .



New Chinese smelters pay about half the electricity price of new smelters in ROW

CHINA AND ROW PRIMARY ALUMINUM ELECTRICITY PRICE* ( a v e r a g e $ / M W h )

3 5

2 8

2 1

1 4 1

7 A

0

C h i n a N e w C a p a c i t y C a n a d a Q u e b e c S m e l t e r s R O W N e w C a p a c i t y

* Excludes 17% VAT for China.


Paluminum beyond industry intelligence

New Chinese smelting projects are more competitive than ROW's if capex is considered

2016-2020 PRIMARY ALUMINUM COMMITED PROJECTS' CAPACITY AND

TOTAL COST* OF PRODUCTION ( thousand m t p y and $ / m t o n o f a l u m i n u m )

1 ,000

7 5 0

5 0 0

2 5 0

Baotou

(Chaico)

1,392

Karmoy

Norway

(Hydro)

1,379

Xinjiang Qjya II

(Sichuan Qiya)

1,489

Yunnan

(Yunnan Metallurgical Group)

1,605

Kitimat

Canada

(RTA)

1,760

BEMO II

Russia

(UCRusa

1,396

Xinjiang Tianshan

(Xinren Aluminum)

1,484 Chongqing Jinghangyuan II

1,396 / ^ (Chongqing Jinghangyuan) a y 1576 a M Xinjiang Jiarun Ningxia Q i n ^ ^

(Xinjiang Jiarun Resource) ( S t a t e P o w e r investment) 0

$ 1 , 3 0 0

Dack Nong I

V ie tnam

(Tran Hong Quan)

1,635

CHINESE SMELTERS

ROW SMELTERS

Ras Zurrayed (Line 6)

Bahrain

(Alba)

1,775

Jharkhand

India

(Hindalco)

1,804

TOTAL COST 1 ,48T

$ 1 , 5 0 0 1,625

$ 1 , 7 0 0 $ 1 , 9 0 0

•Includes, interest payments, depreciat ion and work ing capital. Excludes applicable VAT of 17% that Chinese aluminum smelters pay on raw materials,

energy and services. Bubble size = product ion capacity

Source: HARBOR Aluminum . . . . . . . . . . . .

Paluminum beyond industry intelligence

...and World's production cash costs are down to year 2000 levels with a flatter curve

GLOBAL ALUMINUM PRODUCTION CASH COST CURVE BEFORE CASTING BY SMELTER* ( in $ / m t o n )

3 , 5 0 0

3 , 0 0 0 i

2 , 5 0 0

2 , 0 0 0

1 ,500

1 ,000

5 0 0

MMjilllliailPBI KSaSiOiSSsiBilKsa!

1ST QUARTILE 2 N D QUARTILE 3 R D QUARTILE

0 25 5 0 75 *Does not includes depreciation, sustained capital expenses, working capital or amortization. Excludes applicable VAT of 17%

that Chinese aluminum smelters pay on raw materials, energy and services. Source: HARBOR Aluminum

4 T H QUARTILE

2010

% o f cumu la t i ve 1 0 0

g lobal capaci ty


US primary aluminum production has been declining since 1980

USA PRIMARY ALUMINUM PRODUCTION ( m i l l i o n m t o n ; a n n u a l d a t a )

5 i

3 H

1980 4.6 32 Smel te rs

2017 0.6 5 Smel te rs

i | j | t i i i i i ! i i

1 9 5 0 1 9 5 5 1 9 6 0 1 9 6 5 1 9 7 0 1 9 7 5 1 9 8 0 1 9 8 5 1 9 9 0 1 9 9 5 2 0 0 0 2 0 0 5 2 0 1 0 2 0 1 5

Source: HARBOR Aluminum w i th Aluminum Association data


China's economic and industry's transformation drove prices and margins up... and now down

CHINA GDP ANNUAL GROWTH VS LME 3 M ALUMINUM PRICES

( a n n u a l % c h a n g e vs $ / m t o n )

13 3 5 0 0

12 A

i 1 1 1 1 i 1 r

2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6

Source: HARBOR Aluminum w i th LME and NBS data

aluminum - usitcthe global market has consistently overproduced... world primary aluminum market...

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