PREVIEW SAMPLE OF MBR’s NEW STRATEGIC STUDY

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A Strategic Outlook for the Asian Aluminium Flat Rolled Markets out to 2022 - FREE Whitepaper

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NEW Strategic Study from Metal Bulletin Research

(Publishing date - November 2012)

As part of our new strategic study, MBR is pleased to present below a description and preview of some our key findings and conclusions in this white paper ahead of publication.

Thefullreportcoversthekeyaspectsofaluminiumflatrollrolledproducts(FRP)marketinthefollowingcountries:China, Japan, Malaysia, Indonesia, Mynamar, South Korea, Thailand, Philippines, Taiwan, Vietnam and Singapore.TotalFRPdemandintheselectedregionisforecasttogrowbyanimpressive7.2%onanaverageannualbasisovertheperiod2011-2022.MuchofthisgrowthwillbedrivenbycontinuedmarketexpansioninChina,however,weexpectdemandtoalsoexpandatarapidpaceinwhatarecurrentlysomeofthelesserdevelopedmarketsintheselectedregion.Thiswillprovidesignificantopportunitiesforthoselookingtoinvestwithinthisfastgrowingregion.

Onaproductbasisweexpectfirmgrowthacrosstheboard,thoughsomeproductsectorsarelikelytoshowaboveaveragegrowth.Themarketforcommonalloycoilisexpectedtogrowby9.1%p.abetween2011-2022,withmuchofthegrowthcomingfromnewlyemergingmarkets.Wealsoexpecttoseeastrongdemandgrowthprofileforsectorssuchascanstock(bodyandend),heattreatsheetandbuildingsheet.

Thefullreport“TheMarketforAluminiumFlatRolledProductsinSelectedAsianCountries”offersuniqueprimaryandsecondaryresearchdata,insights,analysisandforecaststoformulateyourbusinessobjectives.ThestudyexaminesthefullrangeofstrategicgrowthopportunitiesfortheAsianaluminiumflatrolledproductsmarketinkeyfastgrowingAsianeconomiesanddetailscurrentandfutureprospectsforaluminiumFRPinvestmentsoutto2022.Thestudy:

z Provides comprehensive rolling mill profiles in key producing countries, with a special emphasis on the latest developments in the Chinese rolling sector (see example).

z Presents a detailed analysis of historical and current demand trends by market and by major key products.

z Forecasts demand growth by market out to 2022 by key FRP products and by market

z Provides a detailed assessment of future FRP projects in the selected countries as well as projecting forecast production out to 2022.

z Assesses market pricing structures for key selected products and provides year-by-year forecasts out to 2016.

z Examines regional market share by major producer and the degree of competition for individual aluminium flat rolled products.

z Presents trade flows within the region for flat rolled products and indicative shipping rates for major trade routes for aluminium flat rolled products.SA

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“Despite undoubted cyclicality to be expected in the market out to 2022, our analysis confidently shows that overall, bottom-line long-term trends are bullish enough to support investment sentiment and

business confidence for the industry.”

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NAME: HARBIN COUNTRY: CHINA PROVINCE: HEILONGJIANG

OPERATOR: NORTHEAST LIGHT ALLOY (NELA)

CASTHOUSEFurnaces:

Number Type Fuel Capacity(t)

3 Melting Oil 91 Melting Oil 104 Melting Oil 20-25

16 Holding Oil 15

Casters:Number Type

10 DC

Rawmaterialthroughput(netofrunaround):Primaryingot

HOT MILLPre Heat:

Number Type Fuel Capacity(t)

5 Soaking Oil -

HotBreakdown/FinishingMill:

Type Work Roll Width Power Rating Minimum GaugeMaximum Coil

Weight(mm) (k/W) (mm) (t)

Mino(USSR),4Hi 1500 - 8.00 4.5SMS,4Hireversing,plate 3700 4500 8.00 -SiemensVAI,4Hi3standtandem 1850 - 18.00 -

HotMillCapacity(‘000tpy): 180

COLD MILL

Type Work Roll Width Power Rating Maximum Speed Minimum GaugeMaximum Coil

Weight

(mm) (k/W) (m/min) (mm) (t)

Mino,4Hi 1400 - 800 3.00 -

NKMZ,4Hi 1700 - - 3.00 -

NKMZ,4Hi 900 - - 2.00 -

SMSSiemag6Hinon-reversing 1900 1500 3.00 -

FINISHING

3foilmills,1coldstripmill,continuousheattreatmentline,annealingfurnace.

OUTPUT

TotalPlantCapacity(‘000tpy): 180

TotalPlateCapacity(000tpy): 70

TotalColdMillProduction(‘000t): 2011:1212010:115

PlateOutput(‘000t): 2011:392010:25

HotRolledShipments(‘000t): 0

Productrange: Sheet,coil,finstock,foilstock,plate,foil,strips

Mainmarkets: Buildingproducts,defence,civilianaerospace

Othercomments:

Constructionoftheplantbeganin1953withfirstproductionin1956.AlltheoriginalequipmentwassuppliedbytheUSSR.Thecompanybecameasolestate-ownedcorporationin1998andwasputundertheadministrationoftheHarbingovernmentin2000.In2007ChinalcotookovertheownershipoftheplantforUS$159mfora75%stake.Thecompanyannouncedamajorinvestmentprogrammeoverthe2007-2010periodtorenewtheoutdatedRussianequipment.AnewwideplatefacilitywascommissioninQ42010withasheetandcoilmillinstalledin2011.

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Key Findings of MBR’s New Study

Despite undoubted cyclicality to be expected in the market out to 2022, our analysis confidently shows that overall, bottom-line long-term trends are bullish enough to support investment sentiment and business confidence for the industry.

MBRhasundertookadetailedresearchprojectonthemarketforaluminiumflatrolledproductsinselectedAsianmarkets.

ThefocusoftheresearchwasaimedatprovidingdeepinsightintothefastgrowingbutratheropaquealuminiumflatrolledproductsindustryinselectedAsianmarkets.Thereportprovidesdetailedanalysisofthemainrollingmillswithintheregioncoupledwithanin-depthanalysisofthesizeandscopeofmarketdemandonanindividualcountrybasisaswellasbymajorproductsegments.Ourdemandsideresearchwasdrivenfromabottomupapproachinvolvingdiscussionswithsomeofthemajorconsumersofaluminiumflatrolledproductsuserstogaugebothcurrentandfutureunderlyingdemandpatternsandmarketbehavior.

Allourresearchreportsutilizecomprehensiveresearchmethodologiesinvolvingface-to-faceorphoneinterviewswithallmajormarketparticipantswiththealuminiumflatrolledproducts(FRP)spaceintheregion.

Ontheproductionside,MBRhasputtogetherover80majorindividualrollingmillsprofilesinAsiawherewespecifydetailedrollingmillequipmentmetricsforfurnaces,casters,breakdownandcoldmills.Wethenprovideanin-depthdetailonfinishingequipment,plantcapacityspilt(whererelevant)betweenhotandcoldmills.Wethenfurtheridentifythemillproductrange

andmainend-usemarketsaswelldetailsonpast,presentandfutureinvestmentandcorporateactivity.

China to dominate FRP markets out to 2022 with significant changes in volumes and product mix

MBR’s analysis indicates that in China in recent years investment has been focused on up-scaling production capacities as well as moving up the product value chain.Wehaveseenanumberofinvestmentsinaddinghotrollingcapacityaswellastheproductionofhighervalueproductssuchascanstock,lithographicsheet,thingaugesheetandfinstock.Despitethis,themainvolumefocusisconcentratedonfoilandfoilstockforthepackagingindustry.Therehasbeenlittleinvestmentinproductssuchasautobodysheetorheattreatablesheetandplate.

InrecentyearsoutsideofChina,apartfrominvestmentatNovelis’Koreanmills,therehasbeenlittlesignificantinvestmentinnon-Chinesemills.Mostinvestmenthasbeencentredontechnicalimprovementsandprocesscontroladjustments.

OuranalysisoncapacitysuggeststhatChinawillcontinuetodominatetheregionalshareofcapacityoutto2022.In2011weestimatethattheChinesealuminiumrollingindustryaccountedfor71%ofregional*capacityandweexpectthisfiguretorisetoaround76%in2022.Muchofthegrowthincapacitywillbedrivenbythecontinuingtrendforoff-shoringfrommaturemarketsbykeyend-usesectorssuchautomotive,consumerdurablesandindustrialproducts.However,weexpecttoseesomeshiftinproductioncapacitytomarketssuchSA

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asThailandandIndonesiaasdomesticdemandrequirementspushproducerstolocateclosertofinalend-usecustomers.

China dominates regional aluminium FRP capacity in 2011

Our analysis of future additions to capacity indicate that China will continue to attract the lion’s share of investment, though the type of investment is likely to change moving into the future. We expect China to make a qualitative and sizeable shift in new capacity towards the production of higher value added FRP’s such as canstock, auto body sheet and heat treat sheet and plate.

We believe that investment in foil stock and common alloy sheet capacity will plateau over the coming decade. We forecast Chinese alminium flat rolled products capacity to grow 38% between 2011-2022, which will represent the largest single producing country at a global level.

*MBRdefinesregionalasChina,Japan,Malaysia,Indonesia,Mynamar,South

Korea,Thailand,Philippines,Taiwan,VietnamandSingapore.

Elsewhere,weprojectJapanesecapacitytoreach1.8milliontonnesperyear,littlechangedfromthe2011level.AnyinvestmentatJapaneserollingmillsislikelytoinvolvechangesinprocessandcontrolequipmentandupgradestoobsoletetechnologyratherthananysignificantinvestmentinmajorcapacityadditions.WeexpectasimilarpicturetoemergeinSouthKoreaandTaiwan.

For 2011 we provide a detailed matrix of product mix with estimated production for the major rolling mills in the region. Fornon-Chineserollingmillsouranalysisshowsthatcanbodystockproductionisthesinglelargestproducttype,followedcloselybycommonalloycoil.Buildingsheet,lithosheet,foil/finstockandcanendstockstandoutatthelargestsegmentbyvolume.Incontrast,commonalloycoilandfoilstockdominatetheproductmixinChina.Outputofotherproductsegmentslagsfarbehindthesesectorsonavolumebasis.However,ouranalysisoffutureplannedcapacityinvestmentsinChinasuggeststhatthisproductmixislikelytochangesignificantlyoverthenext10years.

MBR’s report provides a detailed breakdown of demand by product and market.Ouranalysissuggeststhattheregionconsumedanestimated7.7milliontonnesofflatrolledproductsin2011.Aswithproduction,Chinadominatestheregionalshareofdemandanddemandgrowth.Muchofthishasbeendriventheunderlyingfastpaceofoveralleconomicgrowth.However,end-usesectorssuchasconstruction,packagingandconsumergoodshavespecificallydrivengrowthinFRPdemandinChina.Based on our analysis of population, demographic and socio-economic trends, we estimate that China’s consumption of aluminium flat rolled products will increase by 65% out to 2016. Further out, we expect demand to continue grow at a healthy, but moderating pace out to 2022.

OutsideofChinaweexpectfirmannualgrowthinmostofthenewlyemergingmarkets,albeitfromaverylowbase.However,

Key Findings of MBR’s New Study

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Key Findings of MBR’s New Study

theoverallpictureismixedonacountry-by-countrybasis.WeexpectJapanesedemandtoshowmodestgrowthovertheforecastperiodastheindustrialbaseishollowedoutwithtrendgrowthaveragingaround1.0%p.a.between2011and2022.DemandgrowthinTaiwanandSouthKoreaisexpectedtofarebetterovertheforecastperiodwithgrowthaverage3.5%-4.5%p.a.InemergingmarketssuchasIndonesia,Vietnam,MalaysiaandThailandweexpectdemandtogrowby5.5%-6.5%p.a.onatrendbasis,drivenbystronginfrastructuralinvestmentaswellasbyagrowingconsumersectorwhichislikelytobenefitsectorssuchasconsumerdurables,packagingandtransport.

Risingurbanizationandthegrowthofthemiddleclassresultinginfastgrowingdisposableincomeswillultimatelydrivetheoveralltrendforfirmgainsinaluminiumdemandandwebelievethattheflatrolledproductssegmentwillbenefitsignificantly.Indeed,weprojectFRPdemandgrowthintheregiononatrendbasistomorethansurpassMBR’sassumptionforlongrunprimaryaluminiumdemandgrowthof4.5%-5.0%p.a.

On the other hand, we expect aluminium FRP demand in the selected markets to grow faster, by an average annual rate of just over 7.0% over the forecast horizon.TheramificationofthisisthatthiswillprovidenewopportunitiesforsuppliersintotheAsianFRPsector(includingprimarysmelters,technologyproviders,servicecompaniesetc).

Demand by major FRP product segment (2011)

Onaproductbasisweexpectfirmregionaldemandgrowthincommonalloycoilandbuildingsheet,whilesectorssuchasheattreatsheetandcanbodystockarealsoexpectedtoshowsolidgrowthoverthenext10years.Onacountrybasis

weexpectChinesedemandgrowthtoshowthefastestaverageannualrateofgrowth,butothermarketssuchasVietnamandthePhilippinesareprojectedtobegrowingatafastpaceaswell.Incontrast,weexpectdemandfromtheeconomicallymaturemarketsintheregionsuchasJapan,SouthKoreaandTaiwantogrowatmoremodestpace.

MBRhasalsoindentifiedthelevelofcompetitionforeachproductsegmentintermsofanoverallcompetitionindexandintermsofprice.Ouranalysisshowsthatproductsofrelativelylowerproductioncomplexitysuchascommonalloywilltendtohavethehighestlevelofcompetitionwithlowerbarrierstoentry.Incontrastmorecomplexproducts(intermsofproductionprocessandmarketstructure)suchasautobodysheetwillhavealoweroveralllevelofmarketandpricecompetition.

Aspartofouruniqueresearchwepresentananalysisofconversionmarginsforwhichwehaveobtainedhistoricaldata.OurforecastsarebasedonMBR’sprojectionoftheLMEaluminiumpricestogetherwithanassessmentofmarketconditions.Forcanbodysheet,canendsheetand1050H14sheetwehaveindicativeaveragemarginsprevailingintheregionasawhole.

In broad terms our research indicated that there is a significant disparity in conversion fees within similar product types due to freight and quality variations. Mostbuyingisdoneona6monthtoannualbasiswithlittlematerialsoldonatrulyspotbasis.UnlikeEuropeandNorthAmerica,inventoriesaregenerallyatahigherlevelrelativetothelevelofunderlyingbusiness,thoughthisisnowchangingtowardsamore“justintime”policy.SA

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AStrategicOutlookfortheAsianAluminiumFlatRolledProductsoutto2022containsvaluableanalysis,recommendations,pricesandmarketforecastsinover90+pages.

ThefullreportwillbereadyinNovember2012.

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Metal Bulletin Research (MBR) is the independent research division of Metal Bulletin Ltd, otherwise known as American Metal Market Research (AMMR) in the North American market. MBR was established in 1991, and specializes in market research and consulting services for the ferrous and non-ferrous markets.

MBRprovidesregularanalysisandforecastsofglobalmarkets,andbusinessconditionswithintheglobalmetalsmarkets.Thecompanymakesitsresearchavailabletoclientsthroughvariouspublications,services,andconsultingarrangements.

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