China Aluminum Market Status and Forecast

1. China Aluminum Market Status and Forecast Eric Zhang SMM&Analyst Nov, 2012

2. Contents Policy Supply Demand Forecast 2

3. Policy-SRB purchased Aluminum Time and Volume of SRB’s Aluminum Ingot Purchases Data source: CNIA, SMM The State Reserve Bureau (SRB) once purchased aluminum ingot in December 2008 and February 2009 in history. SRB issued a tender to state-owned aluminum producers to purchase100,000mt of aluminum ingot in last week. Total expected purchase volumes will get the 400,000mt in late this year or late next year. 3

4. Policy-Local government subsidy The extent of power price subsidy by provinces Unit: RMB/kwh Henan After subsidy Before subsidy Guangxi Sichuan Guizhou Data source: SMM In order to reduce losses at aluminum producers, local governments granted electricity price subsidy to producers in Guangxi,Sichuan,Guizhou and Henan province. 4

5. Contents Policy Supply Demand Forecast 5

6. Supply-Capacity and output China’s aluminum capacity and output (2008-2012) The proportion of output by province in China 2012 According to SMM statistics,3.9 million mt/yr new capacities will put into operation in 2012.The total aluminum capacity is 27.1 million mt/yr and the output will arrive to around 21.89 million mt. Data source: SMM 6

7. Supply-Western transfer status Western Transfer Status Henan Aluminum Smelters Western Transfer Projects • Northwest China has become the largest aluminum production region in China, which is mainly due to its lower energy cost. • There are more than 10 million mt/yr new aluminum capacities will be built in Xinjiang.

8. Supply-Import&Export China Aluminum Monthly Import and Export China Aluminum Import and Export Breakeven Ratio Data source: SMM China’s imports and exports of aluminum are not only affected by supply and demand at home and abroad, but are also affected by SHFE/LME aluminum price ratio. 8

9. Contents Policy Supply Demand Forecast 9

10. Demand-Terminal consumption The proportion of aluminum consumption in Terminal consumption 2012 China’s aluminum consumption 2008-2012 Data source: SMM China’s aluminum consumption is around 21.7 million in 2012. 10

11. Demand-Operating rates of aluminum semis Operating rates of aluminum downstream in China operating rates at aluminum processors haven been somewhere near 60% so far this year, lower than last year. This is mainly because capacity has been expanding rapidly, while slowing consumption has compounded overcapacity.

12. Demand-Inventories China Aluminum Spot Inventory aluminum inventories in trading markets in Shanghai, Wuxi, Hangzhou and Nanhai have now approached 1 million mt from 450,000 mt early this year, which has weighed down domestic aluminum prices.

13. Contents Policy Supply Demand Forecast 13

14. Prices-positive&negative Postive Negative 1.The government has rolled out some policies to stimulate aluminum consumption 2.The aluminum production cost is very high which is supporting spot price 1.Newly-added aluminum capacity remains large in China 2.High inventories will also put downward pressure on spot aluminum market

15. Prices-forecast China Aluminum Price (SHFE&Spot) Domestic aluminum prices will face many uncertainties in 2013 and are subject to LME aluminum prices to a large extent. SMM expects domestic aluminum prices to fluctuate between RMB 15,000-17,500/mt in 2013.

16. About SMM Company Evolution 1999 2004 2006 2010 2011 Company established China No. 1 website in non ferrous metal industry China Zinc & Lead price benchmark China Copper RMB price benchmark Established strategic cooperation with HKMEx Service Portfolio Daily Online Information Market Intelligence IndustryStatistics Analysis Reports Research & Consulting BusinessOpportunity 16

17. Service mix SMM Consulting Industry Practices Base Metals Precious Metals Minor Metals Rare Earth Metals Metal Scrap Market Entry Feasibility & Strategy Expansion Strategy and M&A Sourcing Consulting Services Distribution Restructuring & Repositioning 17

18. Our methodology Analytic processmethods are based on our experience in market research and management consulting, using an iterative process to carry out the analytical work. Each component has been designed to sequentially develop information and understandings in order to inform and enable the next step, as illustrated: Program initiation Primary Field Research Secondary research/direction setting Value Chain Framework Review Verification Coordination/analysis Review with client Report preparation Final presentation/work session Potential next steps 18

19. Why SMM? SMM Consulting Typical Consulting Firms Highly experienced people at all levels Experienced partners, inexperienced consultants Leveraging our experience to resolve clients’ issues Leveraging consulting to sell other services Targeting many industries, nonprofessional in nonferrous metals industry Highly professional in nonferrous metals industry 19

20. We have a preeminent position in syndicated research across many nonferrous metals markets- Examples include : • Online intelligence & database • News • Historical price • Weekly report • China Aluminum Market Briefing • China Aluminum Alloy Weekly • China Nickel Briefing • China Lead Weekly • China Zinc Weekly • China Copper Scrap Weekly • Monthly report • China Aluminum Monthly • China Nickel Monthly • China Copper Monthly • Multi-client • China Aluminum Cost Study • China Aluminum Scrap Study 20

21. SMM is a leading domestic consulting and research firm dedicated to providing the kind of insight and knowledge that helps companies find a clear path to success. The firm has served the management consulting and market research needs of organizations in the non-ferrous metal industries for nearly 10 years. For more information, visit www.smm.cn. Eric Zhang +86-21-3133 7233 Zhangchenguang@smm.cn 23rd west, No. 2000, North Zhongshan Road Shanghai, PC 200063, China