Sandeep biswas luxor - presentation final
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Transcript of Sandeep biswas luxor - presentation final
Aluminium industry global trends and growth in the Middle East
Sandeep BiswasSenior Vice-President, Business Development & GrowthRio Tinto Alcan
ARABAL 20102 November 2010Luxor, Egypt
October 2010 Aluminium industry global trends and growth in the Middle East ٢
Cautionary statement
This presentation has been prepared by Rio Tinto plc and Rio Tinto Limited (“Rio Tinto”) and consisting of the slides for a presentation concerning Rio Tinto. By reviewing/attending this presentation you agree to be bound by the following conditions.
Forward-Looking Statements
This presentation includes forward-looking statements. All statements other than statements of historical facts included in this presentation, including, without limitation, those regarding Rio Tinto’s financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives relating to Rio Tinto’s products, production forecasts and reserve and resource positions), are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Rio Tinto, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
Such forward-looking statements are based on numerous assumptions regarding Rio Tinto’s present and future business strategies and the environment in which Rio Tinto will operate in the future. Among the important factors that could cause Rio Tinto’s actual results, performance or achievements to differ materially from those in the forward-looking statements include, among others, levels of actual production during any period, levels of demand and market prices, the ability to produce and transport products profitably, the impact of foreign currency exchange rates on market prices and operating costs, operational problems, political uncertainty and economic conditions in relevant areas of the world, the actions of competitors, activities by governmental authorities such as changes in taxation or regulation and such other risk factors identified in Rio Tinto's most recent Annual Report on Form 20-F filed with the United States Securities and Exchange Commission (the "SEC") or Form 6-Ks furnished to the SEC. Forward-looking statements should, therefore, be construed in light of such risk factors and undue reliance should not be placed on forward-looking statements. These forward-looking statements speak only as of the date of this presentation.
Nothing in this presentation should be interpreted to mean that future earnings per share of Rio Tinto plc or Rio Tinto Limited will necessarily match or exceed its historical published earnings per share.
October 2010 Aluminium industry global trends and growth in the Middle East ٣
Market update and outlook
Industry growth – drivers and challenges
Aluminium growth in the Middle East
Rio Tinto Alcan in the Middle East
Conclusion
October 2010 Aluminium industry global trends and growth in the Middle East ٤
Strong recovery but cautious about short term volatility
Industrial Production Index (2007 = 100) Positive pressures• China growth
• Government tightening to prevent bubbles
• Improving OECD demand
Negative pressures• Sovereign risk and debt
concerns
• Risk of over aggressive measures to cool the Chinese property market
• Diminishing effect of stimulus measures80
85
90
95
100
105
110
Jan-07 Jan-08 Jan-09 Jan-10
OECD Global
October 2010 Aluminium industry global trends and growth in the Middle East ٥
Aluminium price has recovered, inventory levels remain high
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
janv89
janv92
janv95
janv98
janv01
janv04
janv07
janv10
0
5
10
15
20
Aluminium price vs. inventory • LME aluminium price remains in contango
• Strong demand recovery in 2010 versus 2009
– 18-20% China, about 15% globally
• Physical inventory balances stabilized and dropping in weeks of consumption
• Inventory tied up in financial deals
• Increasing marginal cost of production providing higher price floor
2009$ / tonne weeks
Price
Inventory
October 2010 Aluminium industry global trends and growth in the Middle East ٦
Global alumina market situation
Source: CRU, Global Insight
Medium-Term Alumina Balance Benchmark
(250)0
250500750
10001250150017502000
2010
2011
2012
2013
2014
ktpa
BH June 2010 CRU Q2 2010
CRU Average Spot Price
0
100
200
300
400
500
600
700
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
US
$/t A
lum
ina
October 2010 Aluminium industry global trends and growth in the Middle East ٧
Market update and outlook
Industry growth – drivers and challenges
Aluminium growth in the Middle East
Rio Tinto Alcan in the Middle East
Conclusion
October 2010 Aluminium industry global trends and growth in the Middle East ٨
• Our base case is for ~4%-5% growth in aluminium demand over the next two decades
• Current energy surplus in China expected to be temporary
• Increasing competition for energy in China from residential and transportation sectors
Long-run story continues to be attractive
Global Aluminium Consumption (million tonnes)
0
20
40
60
80
100
120
140
160
2000 2010 2020 2030 2040 2050
One Saguenay system required every nine months
October 2010 Aluminium industry global trends and growth in the Middle East ٩
Continued cost pressure on marginal cost producers will provide upward price lift
2010 world BOC curve (2010$/t)
Source: CRU (LME assumption = $2,044/t)
1,000
1,250
1,500
1,750
2,000
2,250
2,500
2,750
3,000
0% 25% 50% 75% 100%
• Electricity cost (particularly in China) • Raw material prices including alumina• Renminbi appreciation• CO2 costs• Capital charges of new capacity
October 2010 Aluminium industry global trends and growth in the Middle East ١٠
Aluminium is well positioned for the future
Increased focus on carbon emissions reduction will favour the use of aluminium in transportation, building and thermal transfer
• Aluminium has an excellent strength to weight ratio; aluminium is 2.7 times lighter than steel; although steel is generally stronger some Aluminium alloys have similar or greater strength than the common A36 steel
• Aluminium contributes to global CO2 emissions reductions though recycling and the light-weighting of vehicles
• Aluminium has outstanding thermal and electrical conductivity properties – it is therefore widely used in applications such as heat exchangers, air conditioning systems, electrical cables
• Technological developments in production lowering carbon associated with primary production, for example Rio Tinto Alcan’s proprietary AP50 technology
October 2010 Aluminium industry global trends and growth in the Middle East ١١
Market update and outlook
Industry growth – drivers and challenges
Aluminium growth in the Middle East
Rio Tinto Alcan in the Middle East
Conclusion
October 2010 Aluminium industry global trends and growth in the Middle East ١٢
Aluminium growth in the Middle East
The region is already a major primary aluminium producer with more growth to come in the near future.
0
1,000
2,000
3,000
4,000
5,000
6,000
2000 2008 2010 2015F
KSAQatarOmanUAEIranBahrainEgypt
Note: 2015 forecast is with the confirmed/under serious consideration projects
Global CAGR of 5.4% per year versusMiddle East CAGR of 9% per year in same period
October 2010 Aluminium industry global trends and growth in the Middle East ١٣
Middle East aluminium industry growth drivers
Energyadvantage
Availability -Carbon -
footprint -
Proximity to emerging markets and Europe
Capital availability
Cost-effective logistics and infrastructure
Growth in downstream
transformation
Economic diversification
Job creation
October 2010 Aluminium industry global trends and growth in the Middle East ١٤
18
151413
119
66
3
ChinaUSAMiddle East
OceaniaSouth Africa
EuropeLatin America
Canada India
Aluminium smelter carbon emission intensity, including power source emissions
Tons CO2e per ton of aluminium produced
SOURCE: Rio Tinto Alcan
Middle East has a carbon emission intensity advantage
Hydro/nuclear power and/or lower energy consumption technology
Coal power and/or
higher energy consumption technology
Aluminium production mostly natural gas powered
Natural gas power
October 2010 Aluminium industry global trends and growth in the Middle East ١٥
• Competitively priced natural gas
• Competition and demand for power
• Attracting qualified talent and training and educating local andregional workforce
• Sourcing of key raw materials of acceptable quality and at a competitive price
– Procuring alumina is a significant challenge
• Increasing alumina pricing and delinking the price from the LME
• Achieving a sustainable business model
Middle East: Industry Challenges
October 2010 Aluminium industry global trends and growth in the Middle East ١٦
Market update and outlook
Industry growth – drivers and challenges
Aluminium growth in the Middle East
Rio Tinto Alcan: A partner of choice in the Middle East
Conclusion
October 2010 Aluminium industry global trends and growth in the Middle East ١٧
Bauxite
30.7Mt
Alumina
8.8Mt
Aluminium
3.9Mt
Solid operating growth strategy: long-life,large-scale, low-cost assets, leveraging competitive advantages
• Global presence & scale– Best bauxite reserves and resources– No. 2 for aluminium production– No. 3 for Alumina production– B&A ‘hub’ in North East Australia to add value over
long term• Fully integrated, long in bauxite and alumina,
providing growth opportunities and robust supply chain
• Very strong electricity position – low-cost with low-carbon footprint
• Modern large-scale smelters and refineries– Smelter assets average in Q2 cost curve and
modernization programs will continue enhancing position
– With Yarwun II, alumina production moving down cost curve
– Transformation to continue lowering costs
• Leadership position in R&D and technology• Strong reputation on sustainable development
External Sales
All volumes shown reflect Rio Tinto Alcan share of production for 2009, including joint ventures.
External Sales
October 2010 Aluminium industry global trends and growth in the Middle East ١٨
Clean, low-cost energy supply Secured energy sources
Short & medium-term contracts
(5%)
Self-generated(48%)
Long-termcontracts
(47%)
• 3,815MW owned hydro electric generating installed capacity in Canada
• Compares favourably to global aluminium industry total of about 35% hydro based power for smelting
• Long-standing water rights in Canada
• Compares favourably to global aluminium industry average of about 35% self-generated power for smelting
Hydro(67%)
Nuclear(11%)
Gas/coalthermal
(24%)
Unrivalled position in clean, renewable,self-generated power
Only 16% of power contracts linked to LME
October 2010 Aluminium industry global trends and growth in the Middle East ١٩
Increasing growth opportunities through technology leadership with AP5X
AP5X industry benchmark for productivity, energy efficiency, and GHG emissions • Unsurpassed amperage of 545+ kA
• Using the same number of pots, an AP5X potline can produce approximately 50% morethan the latest versions of AP3X technology
• Up to $50-$100 per ton full economic cost (FEC) advantage over AP3X technology• AP5X Pilot Plant currently under construction will act as the platform for development
of AP6X operating at 600+ kA
AP5X platform for breakthrough technologies APXe well within this decade• Absolute Specific Energy Efficiency benchmark for Hall-Héroult process
• Enabling containment of direct emissions of GHG form smelting
• Highest health and safety standards
AP technology further reduces capital and operating costs through
– Fewer pot-tending assemblies (PTAs)
– Improved building and equipment design
– Comprehensive engineering packages and training modules
– Experienced support teams at all project stages
– Reduced construction and start-up times
October 2010 Aluminium industry global trends and growth in the Middle East ٢٠
Global options in our project pipeline
Africa
Europe
SouthAmerica
NorthAmerica
Australasia
Asia
Additional opportunities in early stages of development
AP 50 Pilot PlantArvida, Canada (100%)• Ph 1 under construction: ~60kt• Potential Ph 2: ~140–340kt(replacing current Arvida smelter with capacity of ~165kt)
Alma II, Canada (100%)• ~180-240kt
Yarwun II, Australia (100%)• ~2.0Mt
Kitimat, Canada (100%)• ~400kt (replacing current plant with capacity of ~275kt)
Malaysia (60%)• ~460-920kt
Sohar, Oman (20% Ph 1)• Ph 1 completed: ~360kt• Potential Ph 2: ~360kt
Guinea (45%)• 1.6 – 3.2 Mt
ISAL, Iceland (100%)• ~45kt
Edea, Cameroon (47%)
• ~600-700kt
Alumina greenfield
Aluminium greenfieldAluminium brownfield
Alumina brownfield
Under constructionUnder consideration
October 2010 Aluminium industry global trends and growth in the Middle East ٢١
Sohar: the world’s most modern smelter
• Rio Tinto Alcan led project development team and is managing partner
• Secure, long term, low cost electricity
Project structure
Construction completed on schedule
and budget at $340m (Rio Tinto
Alcan share)
First metal poured in June 2008
• Advanced AP 36 technology,
• Largest single potline in the world
Technology
Sohar will operate in the first quartile of the industry cash cost curve
October 2010 Aluminium industry global trends and growth in the Middle East ٢٢
Rio Tinto Alcan - The partner of choice in aluminium for the Middle East
• Strong operating experience – 5 bauxite mines, 10 refineries and 23 smelters on 5 continents
• Backstop alumina supply from world-class refineries in Australia
• State-of-the-art technology, engineering and technical solutions
• Growth-driven mindset and organisation-wide commitment to sustainable development
• Significant experience working in diverse locations
• Strong corporate governance and recognized for a solid reputation
October 2010 Aluminium industry global trends and growth in the Middle East ٢٣
Market update and outlook
Industry growth – drivers and challenges
Aluminium growth in the Middle East
Rio Tinto Alcan: A partner of choice in the Middle East
Conclusion
October 2010 Aluminium industry global trends and growth in the Middle East ٢٤
Conclusion
• Long-term aluminium industry fundamentals remain strong with short-term volatility
• Middle East is well positioned to capture more than its share of primary aluminium production growth
• Industry must focus on meeting the challenges facing aluminium producers in the Middle East
– Competitively priced natural gas
– Competition and demand for power
– Attracting qualified talent and training and educating local and regional workforce
– Sourcing of key raw materials of acceptable quality and at a competitive price• Procuring alumina is a significant challenge
– Increasing alumina pricing and delinking the price from the LME
– Achieving a sustainable business model
• Rio Tinto Alcan is a partner of choice for the Middle East