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US/ JAPAn Trade Balance

Explore the dynamic shifts in the aluminum value chain, covering primary production, mill products, and market trends. Examine the impact of Chinese overcapacity on global markets, trade balance shifts, and evolving price dynamics. Understand the downstream-upstream job dynamics and changing demand patterns across industries. Discover the latest trade flows, capacity growth statistics, and market-distorting behaviors. Stay informed with comprehensive insights into the aluminum industry landscape.

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US/ JAPAn Trade Balance

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  1. US/JAPAn Trade Balance

  2. US/argentina aluminum Trade Balance

  3. US/argentina aluminum Trade Flows

  4. US/indiaTrade Balance

  5. US/india aluminum Trade Flows

  6. Increasing Scrap Exports to india

  7. Imports from the EU U.S. Import of Aluminum Products Covered Under the 232 (Metric Tons) Source: U.S. Census Bureau

  8. Imports from the EU Source: U.S. Census Bureau

  9. The Aluminum valuechain:primary, millproducts, and everything in-between

  10. LIFE CYCLE OFALUMINUM

  11. Aluminum value chain Includes the primary sector, semi-finished products, and end products

  12. Aluminum value chain Changing focus throughout the value chain Pricing throughout the Aluminum Value Chain

  13. AthrivingUS Aluminum Industry…

  14. Industry’s economic impact

  15. Downstream up; upstream down While upstream segments of the industry have seen major job losses in recent years largely due to the continued overproduction of aluminum in China, these losses have been offset by gains in downstream sectors like flat-roll products, extruded products, foundries and metal service centers.

  16. Themarketfor Aluminum • Containers & Packaging down 1% Y/Y, and off 3% since 2009 • Transportation market up 3.4% Y/Y and 123% since 2009 • Building & Construction up 4.1% Y/Y and 30% since 2009

  17. Demand growth Continues 2018 demand up an estimated 4.0 % y/y • 28.2 Billion lbs = Record level Demand is up nearly 51% since 2009 Apparent consumption up an estimated 2.6% y/y

  18. U.S. ScrapExports Exports reached 1.75 million lbs ytd (Jan-Jun), up roughly 12% over like-2017

  19. Overcapacity in China:Itstartsupstream…

  20. China’s unprecedented growth 13

  21. Continued Capacity growth in China • In 2018, China’s primary aluminum capacity reached 47.8 million tons. • Growing an estimated 5.7% over the 2017 level. • Over the last five years, China’s capacity has grown 61.9% • While production has only grown 45.0%. +5.7% 47.8mt Data: CRU

  22. COMPARED TO Capacity growth in ROW • In 2018, the Rest of the World’s primary aluminum capacity reached 32.8 million tons. • Increasing roughly 0.8% y/y. • Over the last five years, RoW capacity has fallen 0.7%. • While production has grown 7.3%. 47.9mt 32.8mt 0.8% Data: CRU

  23. Continued Capacity growth in China • ↑ to 12.2 mmt in 2018 • That’s >6.8x total U.S. capacity. • Capacity in excess of consumption in 2018 was equivalent to roughly 37.1% of capacity in RoW. • China’s utilization rate ≈75% in ‘18

  24. Chinese inventories Continue to grow • With production growing, Chinese primary stocks* have reached a record level of nearly 5.4 million tons in March 2018. • An increase of 26.6% Q/Q. • RoW stocks are off 21.4% Q/Q. • Chinese Stocks have increased in 18 of the last 19 months. • Based consumption levels, Q1 2018 stocks = 56 days, up from 47 y/y.

  25. China’sovercapacitysituation Chinese Excess Capacity Weighing on Global Market Chinese excess capacity in 2017 was estimated at roughly 40% of production in the RoW.

  26. Overcapacity in China:…and movesdownstream

  27. Primaryexportduties & vatRebate Tax Policies Incentivizing Downstream (Semi-fabricated) Exports* Chinese Semi-fabricated Product VAT Rebate Chinese Aluminum-Related Export Duties * As of End of 2015

  28. Huge Investment in Aluminum Downstream Capacity in China DownstreamCapacitybuildcontinues Source: Antaike

  29. Huge Investment in Aluminum Rolled Product Capacity in China State of Roll Productsin China • Capacity has increased from 9.5 million metric tonnes/year in 2012 to an estimated 15.8 million tonnes/year in 2016. This is forecast to grow to approximately 19.2 million tonnes/year by 2020. • The consumption of aluminum rolled products in China has increased but at a much slower rate; 6 million metric tonnes per year in 2012, 8.6 million tonnes estimated in 2016 and 10.2 million tonnes forecast for 2020.

  30. Similarly, Chinese extrusion capacity significantly outpacing production State of extrusionsin China Source: Hydro, Antaike: 2017 • Extrusion capacity in China has increased from 5.2 million metric tonnes/year in 2005 to an estimated 26.5 million tonnes/year in 2016. • At the same time, consumption of aluminum extruded products in China has increased but at a much slower rate; 3.4 million metric tonnes per year in 2005, to 17.3 million tonnes in 2016.

  31. Overcapacity in China:…Leading to marketdistorting and ilegal behavior

  32. Global trademeasuresagainst China

  33. Subsidyprogramsunderinvestigation in Aluminum foil

  34. Growth in chinesefake semis

  35. 20

  36. Overcapacity in China:…impactfelt in the US

  37. Trends in thePricefor Aluminum MWP = ¢21/Lb MWP = ¢9/Lb LME + MWP LME Cash

  38. Chinese Price advantage

  39. Comparing MWP (Platts) vs. Others

  40. Aluminum MWP 2018 YTD Change: 128.9% • Percent Change YTD for Aluminum MWP and Contextual Commentary Source: Arconic GMI, Platts, ​Bloomberg, Reuters, Harbor, CRU

  41. Price fluctuations align with market events LME aluminum and FOB WA alumina prices, Jan-Jun 2018 ($/t) Source: Alcoa Analysis INTERNAL USE LME Easing of UC Rusal Sanctions (4/23) FOB WA Escalation of trade tensions (5/29) Rumors of US Tariff Considerations (1/18) End of MEP Winter Cuts (3/15) FOB WA Alumina Section 232 Tariffs (3/23) LME Chinese Alumina Export Window Opens (3/28) Chinese Alumina Export Window Closes (5/18) DOC Releases Report (2/18) Alunorte Curtailment (3/1) UC Rusal Sanctions Announced (4/6) 12/28 1/11 1/25 2/8 2/22 3/8 3/22 4/5 4/19 5/3 5/17 5/31 6/14 6/28 7/12

  42. LME CASH PRICE 2000 – 2018 YTD ($/MT) Global financial crisis 2008-2009 Trade-related volatility2018 China conditions for surplus begin 2011 Strong demand 2005-2007 China temporary curtailments begin2017 China emerges as producer 2000 Source: Trading Economics, Oct. 2018. Not adjusted for inflation.

  43. LME CASH PRICE 2017 – 2018 YTD ($/MT) Rusal sanctions implementation delayed Apr. 23 Alunorte full curtailment announced (Oct. 3) followed by intent to reopen (Oct. 8) Revised $50B 301 list published June 15 US and Mexico announce trade deal without Canada Aug. 26 DOC releases reportFeb. Chinese winter cuts less than anticipated Nov. ‘17 Alunorte refinery curtailed 50%March 1 US announces add’t $200B in tariffs on China July 10 Rumors of US tariff consideration Jan. ‘18 232 tariffs announced March 1 Chinese Yuan hits 13-month low July 24 Rusal sanctions announced, Apr. 6 Source: Trading Economics, Oct. 2018. Not adjusted for inflation.

  44. u.s.PrimaryProduction

  45. Trends in US Primary Aluminum 46

  46. Primary& secondary 11

  47. Growth in ChineseImports Decline from 2015 to 2016 due to the suspension of irregular and nontransparent trade practices (i.e. fake-semis). In this case, primary aluminum disguised as aluminum plate. Antidumping/Countervailing Duties imposed on Chinese imports of extruded products 16

  48. China capturing foil demand 13

  49. Thevalue of our trading partnersimports: A vital component of supply

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