Sustainibility in the aliminium industry
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Transcript of Sustainibility in the aliminium industry
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Sustainability in the aluminium industry
Jørgen C. Arentz Rostrup, Executive Vice President and CFOCRU’s 16th world aluminium conference, June 2011
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Hydro, an integrated aluminium producer
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A transforming transaction
Albras, aluminium smelter
Paragominas, bauxite mine
• Capacity: 6.3 million tonnes• Ownership: 91%• First quartile cash cost position including Paragominas bauxite
• Capacity: 10 million tonnes• Ownership: 60%, 100%
from 2015
Alunorte, alumina refinery
• Capacity: 460 000 tonnes• Ownership: 51%• Upper second quartile cash cost position
Bauxite licenses
CAP aluminarefinery project
MRN bauxitepurchase agreement
Competence
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Strong positions across aluminium value chain
Bauxite Alumina Energy Primary Casting Products
Rolling
Extrusion
Recycling
Recycling
The integration of Vale Aluminium is transforming Hydro
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Key operational priorities
• Integration of Alunorte and Paragominas• Operational improvements • Improve efficiency to achieve nameplate production
capacity
• USD 300 cost improvement program
• Qatalum ramp-up
• Responsible aluminium player in HSE and CSR0
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1995 1998 2001 2004 2007 2010
Alunorte Paragominas
Million tonnes
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Attractively positioned, global reach
Continental Europe• Leading mid and downstream position
Asia• Growing metal marketing position• Extrusion expansion in China
Norway• 900 000 tonnes hydro-powered aluminium production• Technology centre, R&D for next-generation smelter• Hydropower developments• New recycling centre
North America• Alouette aluminium smelter in Canada• Leading position in US Extrusion• Growing metal marketing position
Brazil• World-class operations and resource base• Bauxite and alumina growth projects• Albras aluminium smelter
Middle East• Qatalum 1 in production• Qatalum expansion opportunity
Australia• Primary aluminium production
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Strategy for further value creation
Bauxite & Alumina
Primary Metal
Energy
Mid- and downstream • Continue proven high-end product strategy• Pursue profitable life-cycle investments:
recycling, energy-efficient building systems, aluminum in transport
• Expand in emerging markets
• Develop current asset base• Implement global approach to power sourcing
• Reposition – 300 USD/t program• Qatalum top quartile operation• Expand in high-class assets
• Improve operations• Integrate• Expand• Commercialize
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Fantastic opportunities for aluminium
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The big challenges of our generation
Climate changeMillions climb out ofpoverty
Increased energydemand
Growth must be sustainable
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Significant aluminium demand growth expected
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World outside China ChinaDemand for semis
Fight for raw materials to continueResource-constrained world
Million tonnes
+80%
Source: CRU
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Aluminium is the metal of the future
• Formability• Extrusion, rolling, casting• Low melting point vs. steel
• Excellent conductivity• Thermal – electrical
• Alloying technology• Gives wide range of physical properties
• Lightweight• 1/3 density of steel
• Recyclability• 5% of original energy consumption• 75% of all aluminium produced still in use
• Corrosion resistant• Oxide layer
Properties leadto increasedmarket share
• Aluminium intensive urbanization and infrastructure• Climate challenge – aluminium as part of the solution• Recyclability more important with high energy prices
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Innovation drives aluminium demand
10µm 10µm600:1
Aluminium tubing
Minimum thickness for maximum protection Power house
Hydro aims at forefront position
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A sustainable industry?
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Aluminium weakest performer among base metals
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Aluminium Copper LeadNickel Tin Zinc
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Aluminium,ex. China
Aluminium
Coal
Bauxite
Nickel
Tin
Uranium
Gold
Zinc
Iron Ore
Copper
Premium above 90th percentile cash cost(1990-2005), percentage
Average
Source: McKinsey, CRU, Reuters
Commodity prices, indexed
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Total shareholder returns for aluminium companies low compared to other industries
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71 67 6762
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5141
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1812 12 10 9 7 4 4 4 4 1 0 -1 -2 -2
-10 -14-7
-2
-17 -14 -10
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-10-16
-24 -26 -23-19
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-40
-20
0
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Average annual TSR, 2005–2009 () High
Low
Industry weighted average
Chemicals
Machinery and Construction
ConsumerGoods
Mining and Materials
Media andPublishing
Travel andTourism
Pharmaceuticalsand MedicalTechnology
Technology and Telecom-
munication
Transportation and Logistics
Utilities Retail Pulp and Paper
MultibusinessAutomotive and Supply
Aluminum
Source: Boston Consulting Group
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Low returns permeates the whole value chain
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Low High AverageEBITDA margin downstream businesses, percentage
2005 2006 2007 2008 2009 2010
Source: Company reports. 8 core companies
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Encouraging developments
• Development of more liquid bauxite and alumina markets
• Bauxite, a fight for cost efficient resources going forward
• Technology and application development
• Continued strong demand in overseas market for advanced technology products
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Responsibility
The world needs aluminium
Ability
Aluminium is a fantastic material to meet market needs
Profitability
Sustainable return is the premise for developingaluminium’s full potential
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www.hydro.com