Transcript Novelis Overview - The United States Conference of Mayors

MWMA Fall Summit
Aluminum Market Trends
October 20, 2005
1
Novelis Overview
2
Novelis: Worldwide Footprint
North America
Employees:
Revenues:
Shipments:
3,000
$3.0Bn
1,115kt
Europe
Employees:
Revenues:
Shipments:
6,500
$3.1Bn
984kt
Novelis Total
Employees
Revenues
Shipments
36
11
4
13,000+
$7.8Bn
2,785kt
Plants
Countries
Continents
Note: Rolled products shipments only.
Financial and shipment figures based upon 2004.
South America
Employees: 2,100
Revenues: $0.5Bn
Shipments : 234kt
Asia
Employees: 1,600
Revenues:
$1.2Bn
Shipments: 452kt
3
Novelis: Markets Served
Focused on aluminum rolled products markets, including:
Automotive and Transportation
Printing & Lithography
Flexible & Semi-rigid Packaging
Cans & Closures
Building & Construction
Distribution Services
4
Strength of Novelis 
Metal Supply Management
• World’s largest purchaser of aluminum
• Leader in aluminum recycling
• Able to produce 70% of sheet ingot in-house
5
Aluminum Supply & Demand Global Estimate
31
Global Production
30
Mar-04
29.1
Shipments
Million tonnes per annum .
29
28
Jan-04
30.4
27
26
25
24
23
22
21
20
1996
1997
1998
1999
2000
2001
2002
2003
2004
6
Global Aluminum Discussion
• Aluminum historically a cyclical industry
• Prices Rise:
• Prices Fall:
Investment increases
Capacity comes in large increments
New capacity typically “exported energy”
Capacity growth > demand growth
Capacity at high end of cost curve curtailed
NA and European capacity “at risk”
Capacity reduction hesitant due to economics
• Current market would typically signal peak of cycle, expect decline.
7
2002 Aluminum Consumption
Total Western World
Aluminum Consumption
Total North America Aluminum
Consumption
28,575 Kt
10,025 Kt
Primary
68%
Scrap
32%
Primary
68%
Scrap
32%
Scrap Based 9,070 Kt
Prime Based 19,505 Kt
Scrap Based 3,220 Kt*
Prime Based 6,805 Kt
Total North America Aluminum Scrap
Consumption*
Total North America Aluminum
Post Consumer Scrap Consumption
3,200 Kt
2,250Kt
Customer
30%
950 Kt
Build/Const
12%
Post
Consumer
70%
2,250Kt
UBC
32%
725 Kt
Other
16%
Transport
29%
Mach&Equip
Durable
5%
6%
Based on internal Alcan Estimates Scrap includes Post Consumer and Customer Scrap Material
8
North America UBC Supply
Chain
Beverage Consumers
Recyclers/ Collectors
Purchasers
800+, Scrap Dealers, Curbside, Buy-Back, etc
Novelis, A-BRC, ARC, Wise, Others
Can Sheet Manufacturers
Alcan, Alcoa, ARCO, Wise
Can/Lid Manufactures Rexam, Ball, Crown, MCC
Breweries/Fillers
Coke, Pepsi, A-B, Miller, Others
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Life Cycle of the Aluminum Can
10
Recycling Rate vs. UBC Prices - North
America
70%
$0.70
$0.65
65%
$0.60
60%
$0.55
55%
$0.50
Rec. Rate
UBC Price
$0.45
50%
$0.40
45%
$0.35
P
05
20
04
20
03
20
02
20
01
20
00
20
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
19
19
91
$0.30
90
40%
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Used Beverage Can Recycling Rate
70%
CA
MA
DE
NY
60%
doubles
CRV
HI
CA
50%
Alcoa
ceased
media
campaign
ME
40%
MI
CT
30%
IA
20%
Reynolds
exits and
ARC
begins to
reduce
equipment
ABRC
Formed
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
10%
12
U.S. Scrap Exports
2,000
1,800
China enters the Market
1,600
1,400
mlbs
1,200
1,000
800
600
400
200
0
1998
1999
Other Scrap
2000
2001
2002
2003F
UBC
13
Global Aluminum - Scrap Dynamics
• US Dollar Weak:
• China Factor:
Weak $ reduces price on USA scrap in other currencies.
Offset if ultimate product sale is based on $ LME
Will increase USA scrap demand if final sale in local f/x
Central policy reducing profitability of smelters (energy)
Secondary development appears to be getting support
Infrastructure will be developed, but will lag demand
Inexpensive ocean freight from USA (trade surplus)
• Commodity Funds:
If funds artificially inflate LME, will scrap spreads
artificially widen? Will scrap continue to follow
fundamentals, while LME is driven by other
factors?
• Fundamentals:
trend?
be generated,
market.
If N.A. primary production “loses” in global picture,
will N.A. secondary market follow the same
Domestic consumption stable, scrap will
logistics will keep significant % in domestic
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Recycling Aluminum:
Makes Economic and
Environmental Sense
15
Aluminum Can Recycling Rates 2004
100%
88.0%
90%
85.0%
87.0%
86.0%
80%
69.0%
70%
60.0%
Percent
60%
51.0%
50%
48.0%
40%
30%
20%
10%
Size of
Can
Market
0%
Global
190 Bn
Switz
Sweden
0.3 Bn
0.9 Bn
Brazil
Japan
Canada*
10 Bn
16 Bn
6 Bn
US
99 Bn
W/EU
30 Bn
* Novelis estimate
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Recycling Rate (%)
U.S. Beverage Container
Recycling Rates – 1990-2005F*
70
65
60
55
50
45
40
35
30
25
20
15
10
5
0
90
92
94
96
Aluminum
98
Glass
*Published Rates: Thru 2004 for Aluminum & Thru 2002 for PET & Glass
00
02
04
PET
Source: NAPCOR, Packaging Strategies, GPI, CMI
17
Packaging Material:
Recycling Revenue and Cost
1,800
1,600
The aluminum can is the only package
that consistently pays more than its
own recycling cost.
$1,367
1,400
CDN$M
1,200
The can subsidizes the recycling
stream for all other package materials.
1,000
800
600
400
Weighted Average Cost of Recycling ($208)
200
$84
$3
$243
$81
Steel Cans
Glass Bottles
PET Bottle
Paper Pkg
0
Aluminum
Cans
Recycling Revenue
Avg Recycling Cost
Source: Stewardship Ontario, 2004 Ontario Blue Box Data
18
Aluminum’s Recycling Advantages
Aluminum’s Recycling Advantages
% of New Metal Energy Requirement
…an “Energy Bank”
100%
100%
80%
••Recycling
Recyclingonly
only needs
needs5%
5%
of
of the
theenergy.
energy.
••Recycling
Recyclingemits
emits95%
95%less
less
greenhouse
greenhouse gas
gasemissions.
emissions.
60%
40%
5%
20%
0%
New Aluminum
Recycled Aluminum
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20
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Novelis Sponsorships
Aluminum Can Council
Cans for Habitat
America Recycles Day
www.recyclecurbside.org
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Novelis Sponsorships
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Grand Prairie, TX partnered with Chick-fil-A
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• Community Special Events
– Salt Lake City’s community art project encouraged
residents to create a recycling symbol filled with
aluminum cans
25
Milwaukee Mayor Barrett Certifying Guinness Book of World Records Attempt
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Charlotte Mayor Patrick McCroy recognizes Cans For Cash Winners Odessa Mayor Larry Melton
and Knoxville Mayor Bill Hasalam during the Environmental Committee Meeting. Brenda Pulley,
Corporate and Governmental Affairs Novelis Incorporated and Assistant EPA Administrator
Stephen L. Johnson also congratulate the winners.
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How Can We Work Together?
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www.recycle.novelis.com
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Net Import (Export) : US
Million lbs.
7000
Ingot
Semifab.
6000
Scrap & Dross
5000
4000
3000
2000
1000
0
-1000
-2000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
CAGR ‘90-’04
Net imports of Ingot
Net imports of Scrap & dross
CAGR ‘01-’04
18.6%
8.5%
3.8%
(118.7%)
Source : Aluminum Association
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