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

Agenda

Middle East primary aluminium industry

Introducing Emirates Global Aluminium

Primary aluminium core assets

Product mix

Global dynamics

EGA sales strategy

Emirates Global Aluminium

Middle East primary aluminium industry (1)

Centred in the Gulf Co-operation Council (GCC) region

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

Emirates Global Aluminium

Maaden
Alba
Qatalum DUBAL
EMAL
Sohar

Kuwait

Bahrain
Qatar
UAE

Oman

Saudi Arabia

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

Maaden

740,000

2012

Saudi Arabian Mining Company (Maaden) (74.9%)

Alcoa (25.1%)

Source: Gulf Aluminium Council

* Ownership structure changing, through formation of EGA

Emirates Global Aluminium

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

Emirates Global Aluminium

Agenda

Middle East primary aluminium industry

Introducing Emirates Global Aluminium

Core primary aluminium assets

Product mix

Global dynamics

EGA sales strategy

Emirates Global Aluminium

EGA
Creating a new, UAE-based global aluminium champion

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

EGAs 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

Emirates Global Aluminium

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 (30C)
30 million gallon/day desalination
plant
Port facilities
Warehouses & administration
Residential area

Emirates Global Aluminium

World-class smelter operations on two sites (2)

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

Emirates Global Aluminium

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
8

Total UAE smelter capacity

DUBAL was worlds 2nd largest single-site producer in 2012 (1.025 M t)

EMAL will be worlds largest single-site smelter once fully commissioned in 2014
EGA (DUBAL + EMAL) accounts for 50% of Middle East production
3000

Smelting capacity (000 tonnes per annum)

2500

2315

2000

ktpa

1781

1500

1839

1872

2012

2013

2384

2395

2393

2015

2016

2017

1304

1000

680

864

890

2006

2007

950

970

2008

2009

761

530
500

380
240
135

0
1980

1990

1996

1999

2003

2005

2010

2011

2014

Initially DUBAL only, including EMAL from 2010 onwards

Emirates Global Aluminium

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

380,000

240,000

Unalloyed
Foundry
780,000
1,100,000

Emirates Global Aluminium

Billet
Slab

10

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 worlds 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

Emirates Global Aluminium

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Agenda

Middle East primary aluminium industry

Introducing Emirates Global Aluminium

Primary aluminium core assets

Product mix

Global dynamics

EGA sales strategy

Emirates Global Aluminium

12

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

Emirates Global Aluminium

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Growth in primary aluminium consumption

Annual growth in primary aluminium consumption of 4% to 6%
ROW versus China (ktpa)
90
80
70

000 tonnes

60

39
34

50

29

40
30

24

20
10

17

27

36

40

2020

2025

0
2010

2015
China

Others

Data: CRU

Emirates Global Aluminium

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Protectionism
Import tariff barriers:

Protects interests of older smelters

BUT undermines competitiveness of countrys
Inappropriate warehousing strategies:

Perverse financial incentives

Manipulation to maximise warehouse returns
Aggravating tight supply of products and

X 10,000 tpa

downstream industry

Production of extrusions in China

depressing LME prices

Chinese semi-fabricated exports to the GCC

Chinas tax incentives:

Competitive edge in terms of

tpa

pricing
Extraordinary growth in
Chinese production of
aluminium extrusions
Substantial growth in Chinese
exports of aluminium
products manufactured from
extrusions.

Sources: China NFMA, CRU

Emirates Global Aluminium

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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

Emirates Global Aluminium

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Agenda

Middle East primary aluminium industry

Introducing Emirates Global Aluminium

Primary aluminium core assets

Product mix

Global dynamics

EGA sales strategy

Emirates Global Aluminium

17

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)

15%

39%
Asia
MENA

20%

Europe
Americas

26%

Emirates Global Aluminium

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Regional deficits widening

(especially in North America, Western Europe, China)

Expected primary aluminium market deficits by region 2012-2015*

(million tonnes)

2.80
1.05

0.50

2.86

1.65

1.50
2.17
CHINA 2.11
5.62

NORTH AMERICA

WEST EUROPE

5.01
JAPAN

2012 2015

1.00 1.08

ASIA EXCL.
CHINA AND
JAPAN

GLOBAL
*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.

Emirates Global Aluminium

Source: HARBOR Intelligence

19

GCC: only region with increasing surplus

Expected primary aluminium market surpluses by region 2012-2015*
(million tonnes)

2.58 2.53

3.04 4.51 EAST EUROPE

2012 2015

1.00 1.08

GLOBAL DEFICIT

0.40

0.19

LATIN AMERICA

MIDDLE EAST

1.23 1.24

1.81

1.47

REGIONAL SURPLUS

AFRICA
*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.

Emirates Global Aluminium

OCEANIA

Source: HARBOR Intelligence

20

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

100%
90%
80%
70%
60%

Asia

50%

MENA

40%

Europe

30%

Americas

20%
10%
0%
1,001

1,015

1,032

1,052

2009

2010

2011

2012

Emirates Global Aluminium

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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.

Emirates Global Aluminium

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Thank you

Emirates Global Aluminium

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