Global Aluminium Industry - Feb'14


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Global Aluminium Industry - Feb'14

  1. 1. Global Aluminium Industry All rights reserved. This publication is protected by copyright. No part of it may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic mechanical, photocopying, recording or otherwise without the prior written permission of the publisher.
  2. 2. MARKET OUTLOOK Global Primary Aluminium Production vs. Consumption Trend (Million Tonnes), 2012-2018 45.2 46.6 43.4 2012E 48 44.9 2013e 46.6 2014f Production 49.5 48.3 51 50.3 52.6 52.5 2015f 2016f 2017f 54.3 54.5 2018f Consumption Source: International Aluminium Institute (IAI), RNCOS Note: E = IAI Estimation, e/f = RNCOS Estimation/Forecast Aluminium is one of the most versatile and essential materials for the global economy. The commodity’s extensive properties, including strength, conductivity, recyclability, and lightweight make it the world’s second most used metal after steel. Aluminium finds major use in transportation and construction sectors. China dominates the global aluminium market in both production and consumption. Boom in the residential and infrastructure markets drive its aluminium market. Recent years have seen a continuation of volatility in aluminium market prices, with prices increasing from US$ 1843 per Tonne in August 2012, to a high of US$ 2087 per Tonne in December 2012. A few na- tions have seen government intervention to absorb losses by aluminium producers, or providing tax breaks or cheaper energy. This government intervention is resulting in a large quantity of over-supply of aluminium suppressing prices further. Worldwide, rising aluminum stocks have hampered production and cut down prices. Manufacturers have slowed down production to reduce pressure on prices. Industry estimates reveal that while primary aluminium production is growing at a CAGR of around 3%, the primary aluminium consumption is estimated growing at around 4% during 2012-2018. Global Aluminium Industry
  3. 3. MARKET SIZE AND GROWTH RATE World primary aluminium markets have witnessed five consecutive years of surplus since 2008. However, production which was in excess of consumption in 2008 contracted in 2012. The fall was due to low aluminium prices, driven by weak demand and high stocks. Consumption, on the other hand, increased at a comparatively faster pace by 6.8% in 2012. Amongst key industry verticals, transportation accounts for 25% consumption share, followed by construction (24%), packaging (17%), power (12%) and machinery (10%). Regionally, APAC dominates both production and consumption of Aluminium. China alone accounts for around 40% of global aluminum production and 45% of consumption. In the last ten years, China has quadrupled its consumption of aluminum. Already accounting for 42% of global aluminium consumption, China is forecast to boost this share to 52% by 2025. Chinese growth Share of Major Aluminium Producers, (%), 2012 in aluminium consumption is largely driven by urbanization, goals and strategies of the Chinese Government has resulted in investments in infrastructure and housing which also consume large amounts of aluminum. Besides, the continued strong position of China as a producer of industrial and consumer goods for export result in large investments in the aluminum industry. Share of Major Aluminium Consumers, (%), 2012 22.2% 38.1% 40.0% 3.9% 45.0% 4.5% 10.4% 6.4% 6.6% 8.9% 14.0% China Canada China EU Russia EU US Japan India Others Others Source: RNCOS Global Aluminium Industry
  4. 4. Opportunities & Challenges Opportunities MIDDLE EAST EMERGING AS MAJOR MARKET Looking over the supply-side, the market is shifting towards the Middle East due to the availability of cheap energy in the region. Aluminium growth in Middle East further benefits from advantages such as rich bauxite reserves as well as economical energy. Also, the close proximity of the GCC region to European countries enables smelter operators to further reduce costs. ENHANCED APPLICATION AREAS The new markets for aluminum are found within aviation, solar cells, electronics, cars and new types of material for construction. Aluminum has already succeeded in entering part of the copper market since copper is higher priced and is heavier than aluminum. Therefore manufacturers can save costs and weight in their production if they are able to exchange copper materials for aluminum materials. SUSTAINABLE PRODUCTION TECHNOLOGIES Researchers at the DOE’s Argonne National Laboratory and Noranda Falconbridge are developing a way to produce aluminum at significantly reduced temperatures. The ITP, working with Aleris Inc., among others, has supported the development of a radically new concept for melting aluminum— isothermal melting—that can dramatically improve energy efficiency in melting and other molten metal processes. Alcoa has launched a carbon capture technology at its Kwinana alumina refinery in Western Australia. Global Aluminium Industry
  5. 5. Challenges PRICE VOLATILITY In the past few years, aluminium prices have become very volatile, especially due to global economic uncertainties. During 2012, aluminium prices slipped to an average of US$ 2,053 per Tonne, down almost 15% compared to 2011. Renewed setbacks to global recovery and surplus situation led prices to fall below US$ 2,000 a Tonne during June-August 2012. HIGH INVENTORY The global aluminium market is set to remain in surplus over the next couple of years as demand growth failed to keep pace with rising supply. Global inventories have remained at 7 Million Tonnes since the beginning of the year equating to 60 days of consumption and more than double the levels seen before the financial crisis in 2008. HIGH ENERGY AND CARBON COST Another challenge is the demand to save energy and reduce energy consumption in all aspects of the primary aluminium production process. Also, challenge is to reduce the emissions of greenhouse gases from the aluminium production process. Both the electric power generation from fossil fuels and the smelting process are major sources of greenhouse gas emissions. Although significant progress has been made in recent years, this problem is not yet solved, and it will be one of the biggest technological challenges for the aluminium industry in the years to come. COMPETITION FROM SUBSTITUTES Carbon fibre-reinforced plastic (CFRP), Titanium, Steel and Composite materials give stiff competition to aluminum. The rivalry between substitutes would become harsher in the following decades as consumers continuously assessed not only the functional characteristics of competing materials but also their relative prices. Global Aluminium Industry
  6. 6. Way Forward Demand for aluminum will continue to rise, particularly in the emerging markets, due to lower per capita consumption of the metal in these parts of world. Additionally, the demand of aluminum is increasing owing to high aluminum use in the construction and power transmission industries. Growing demand for “green” building is another driver. Furthermore, aluminum’s role in a wide range of building and construction applications is poised to grow, due to aluminum’s recyclability, light weight, reflectivity, and durability. Usage of aluminum in automobiles will again amplify and continue its growth track as public demand for a greener environment and increased fuel efficacy compel policymakers to amplify fuel economy standards, reduce carbon dioxide emissions, and increase the usage of aluminum in automobiles. Besides, aluminum content in the aerospace industry, like aircrafts and missiles is expected to grow, reflecting its positive outlook. Major players are concentrating on innovative technologies for production of aluminum so that the consumption of energy can be minimized. The future of the global aluminium industry will be influenced by its ability to minimize environmental impacts and to be considered as a solution to some of the problems generated by CO2 emissions. Further, legislation on CO2 emissions may impact both sides of the market simultaneously. Supply growth may to some extent be hindered by higher production costs related to emissions and higher raw material and power prices. However, CO2 caps may also favour the use of aluminium by encouraging energy efficiency and light-weighting, with potential beneficiaries in the transportation, power distribution & transmission, air conditioning & refrigeration, renewable energies, green buildings and other end-use sectors. Global Aluminium Industry
  7. 7. Looking for an in-depth study Our Proposition RNCOS is a leading Business Consultancy firm helping its clients to enter new geographies and in attaining growth by developing market strategies for them. GROWTH PARTNER We help you make informed decisions through the practical application of research, hand holding you to your success… Critical questions that businesses need to address: • • • • Where should you set up your business? Who should be your distributors? What is the current market structure & size? Who should be your customers? We understand your immediate needs and your long-term goals and objective and work with you on how to accomplish them. RNCOS blends the best of strategy consulting with the best of market research to provide organizations with accurate, succinct answers to their most important business questions. Our offerings Product Segments Market Insights • • • What is the market size Structure of the market Who are buyers • • • • Competitive Assessment Identification • • Most suitable distributors and channels for your business. Analyzing their strength, credibility. Similar products in the market Features, attributes & market share of these products Customer preferences Price range of these products • • Financial & strategic analysis of existing competition Acceptance level among customers Global Aluminium Industry
  8. 8. For more information on how we can work with you, contact MARKETING TEAM RNCOS E mail: Website: Phone: +91 120 4224700 /01 / 02/ 03