Petcoke and its role within the aluminium industry

1. Petcoke and its role within the aluminium industry McCloskey 6th Petcoke Conference May 2008 Calvin Graham Consultant CRU Analysis E-mail calvin.graham@crugroup.com Tel: (+44) 20 7903 2280

2. Fundamental Analysis Strategic Consultancy Conferences & Events CRU is the world’s leading independent provider of consultancy, business analysis and conferences focusing on the mining, metals, power, cables, fertilizers and industrial chemicals sectors. • Founded in the late 1960s • Privately owned to ensure its independence • Located in London, Beijing, Santiago, Sydney, Rio de Janeiro and key centres in the United States • Employs more than 200 experts

3. The Aluminium Business Unit • A team of 20 analysts, metallurgists, chemists and economists • A multi-cultural team in the UK and abroad • Undertake research, analysis, client and site visits, innovation • Strength in depth to allow in-depth knowledge in areas such as power, carbon products and semi’s markets • A recognition and emphasis on China, hence our office in Beijing • 2008 aluminium conference in Chongqing, China Sep 21-24.

4. Structure of Presentation • Aluminium market outlook • Petcoke consumption by the aluminium industry • Anode-grade petcoke production forecast • Quality and pricing implications for smelters • Conclusions

5. Aluminium price performance LME 3M aluminium price (May 06 – Jun 08)

6. Forecast: rising operating costs lead to continued strong aluminium prices • Highlights: • Reduction in expected market surplus and escalating costs from a weaker US dollar and higher oil prices lead to 2008 price rise • -Market balance in 2008 cut to 660,000 tonnes on output disruptions • Strengthening yuan and higher Chinese power prices lead to 2009 price increase, surplus in H1 2009 all in China • Continued high prices forecast 2010-2012 on higher costs expectation and tighter S/D balance • Risks: Global recession leads to fall in demand and lower LME prices • Yuan appreciates more than our base case, leads to higher prices

7. Calcinable green coke consumption forecast

8. Calcinable green coke consumption forecast for the aluminium industry Growth during 2007-2012

9. World anode grade production has kept up with smelter consumption rates in recent years

10. This will change over the next few years as the production of new low sulphur cokes stalls

11. The rapid rise of CPC costs in the last year

12. The rise and fall of Chinese green coke exports during 2005-2008

13. Chinese production of high quality cokes will not keep up with the rate of aluminium expansion

14. Low sulphur levels are not the only concern when judging quality vs. marginal material

15. Prices in China have diverged with some smelters forced to take lower grade materials: US$/t FOB 2008 2007

16. Options for the aluminium industry are fairly limited: Continue to pay higher prices until highest cost smelters close Use lower grade material: either higher metal content or higher sulphur levels Some new smelter projects in the Middle East may set up joint coke/calciner projects Blend lower and higher grade materials together Develop new smelting technology; eg. sulphur scrubbers or inert anodes

17. Inert Anodes are on the horizon, although still a few years away Ceramic Metal Oxides – Physical properties are a problem, as are chemical reactions with the electrolyte Metal-Based Anodes – such as Fe-Ni-Cu alloys, corrosion and contamination issues Cermets – ceramic/metal mix to take advantage of each set of properties, NiFe2O4 + NiO + Cu is most tested • Researched being made by: • Moltech • Alcoa • NAT • Argonne National Lab • Noranda • UC RusAl • Chalco • Rio Tinto Alcan • Hydro • etc

18. Acceptance of lower grade cokes will bring down the price of coke in China Calcined coke prices peaking at just over $700/t Base case assumes an average rise in acceptable sulphur level from 2.5% to 3.3%

19. Conclusions • We see strong growth in the primary aluminium market: 17.4m tpy of new capacity between 2007 and 2012. • In the west, 3.2m tpy of new anode grade green coke demand • The only new major sources of coke for the aluminium industry will be Brazil and China • Quality will decrease and prices for high quality will continue to escalate at smelters continuing to demand tight specifications • Higher quality material will continue to carry a premium, but average prices will stabilise and plateau

20. Thank you for your attention. • We publish a bimonthly overview of the latest developments in the anode grade carbon market including regional pricing and short term market assessments. Also available on-line at our www.crumonitor.com website. • The 5-Year Carbon study – Published each November with a half-yearly update (through a conference call) covering the global carbon market and is a key tool for well-informed decision making. This year we continue to build on our findings about the carbon situation in China, especially concerning future availability of anode grade green petroleum coke. Your contact at CRU: Primary Aluminium Raw Materials Calvin Graham Consultant CRU Analysis 31 Mt Pleasant London, WC1X 0AD UK +44 (20) 7903 2212 calvin.graham@crugroup.com