EXTERNAL ENVIRONMENT, OPPORTUNITIES AND THREATS

OPPORTUNITIES AND THREATS AFFECTING OUR VALUE DRIVES

  THREATS
   OPPORTUNITIES
AVAILABILITY OF CAPITAL
AND INCENTIVES
CONVERSION MARGINS
AND METAL PRICES
PRIMARY INPUT SUPPLY AND COSTS (GAS, ELECTRICITY, LABOUR)
PRICE AND AVAILABILITY OF ALUMINIUM SCRAP INPUTS
   
AVAILABILITY OF
ROLLING SLAB
AVAILABILITY OF
PRIMARY ALUMINIUM
LOCAL/REGIONAL MARKET DEMAND AND MIX
EXPORT MARKET DEMAND AND MIX


Click on the numbers above to go to the relative
sections

GLOBAL PRIMARY ALUMINIUM INDUSTRY
SITUATION AND TRENDS   IMPACT, OPPORTUNITIES AND THREATS
dot Steady growth in global consumption of aluminium (driven predominantly by China, but also Brazil, India and North America)  
1
Volatile metal premiums put pressure on producers and consumers, introduce “margin squeeze” risk, impact demand for aluminium products, put pressure on establishment and maintenance of multi-year/longterm contracts
2
Falling LME puts pressure on high-cost,
marginal producers
dot However, global supply in excess of demand, resulting in underperformance of LME aluminium price relative to other metal commodities  
dot Concerns over slower Chinese economic growth, volatile emerging market currencies and the curtailing of the Federal Reserve’s bond-buying programme have contributed to accelerated decline in the LME aluminium price  
dot Predominance of high metal premiums in recent years, which have insulated marginal smelters from the impact of low LME aluminium price. However, current low premiums and increased volatility have put pressure on producer and consumer sectors  
dot Impact of growing pressure to reduce carbon emissions and changing energy environments will place pressure on high-cost smelters  
dot Global shift towards recycling scrap as an alternative input to primary aluminium gaining momentum  
         
SOUTH AFRICAN PRIMARY ALUMINIUM INDUSTRY
SITUATION AND TRENDS   IMPACT, OPPORTUNITIES AND THREATS
dot Cost (labour) and price pressures (low LME aluminium price) on local South 32 aluminium smelter in Richards Bay  
3
Upward pressure on primary metal pricing to local
semi-fabrication industry
4
Viability of local primary aluminium smelters under pressure:
– Pressure on South 32’s Hillside smelter remains
5
Isizinda Aluminium can provide linkage between local smelter and downstream aluminium semi-fabrication and fabrication.
dot Local aluminium smelter is a significant electricity consumer and has been the focus of significant negative media attention and public sentiment due to the preferential deal which it has with Eskom while local electricity supply is constrained and other consumers have incurred sharp escalations in electricity pricing  
dot Local smelter exports the majority of primary aluminium in an unbeneficiated form, while the Bayside value-added products (VAP) casthouse is underutilised, leading to large-scale importation of aluminium VAPs by the local downstream industry at high cost. Opportunity for this to be addressed by growth of Isizinda Aluminium  
dot Proposed carbon tax legislation will have a significant negative impact on the aluminium smelters which could potentially render them unviable; however, the local downstream industry, which is reliant on these smelters, is not carbon intensive  
         
SOUTH AFRICAN ECONOMIC AND POLITICAL ENVIRONMENT
SITUATION AND TRENDS   IMPACT, OPPORTUNITIES AND THREATS
dot Industrialisation is a national priority. Government policy is seeking to restructure the economy toward more value-adding, labourintensive and environmentally sustainable growth. Focus on improving exports of beneficiated products  
6
Increasing local cost base and reduction in supply availability (labour, electricity and gas)
7
Scrap export legislation will promote local processing of scrap for the benefit of local industry
8
Proposed carbon tax legislation will have a significant negative impact on smelters and could, in turn, severely impact downstream fabricators
9
Aluminium can play a significant role in supporting downstream fabrication and industrialisation, job creation, development of high-technology applications and industries and promoting reduced carbon intensity in the economy
dot National focus on energy efficiency and recycling initiatives  
dot South African government is becoming increasingly aware of the role for trade agreements and regulatory frameworks to protect and support the economy  
dot Labour costs escalating above inflation, combined with significant volatility and unrest in labour relations  
dot Availability and supply shortages of local gas and increasing and high pricing. Opportunities to unlock shale gas  
dot Constraints in availability of electricity supply and increased load shedding as well as increasing prices  
         
GLOBAL ALUMINIUM SEMI-FABRICATION MARKET
SITUATION AND TRENDS   IMPACT, OPPORTUNITIES AND THREATS
dot Significant demand growth in packaging, transport and infrastructure applications driven largely by the growth in developing economies  
10
Conversion margins under pressure due to additional capacity roll-out in low-cost and governmentincentivised regions
11
Increased global demand for secondary metal impacts on price and availability thereof
12
Increased pressure from imports on domestic
manufacturing
13
Growth in demand for new and non-traditional applications for aluminium, such as consumer electronics and military markets. Significant growth in automotive sectors forecast
dot Significant growth in automotive consumption of rolled products in developed countries and ongoing development of new applications for aluminium  
dot Significant roll-out of capacity in low-cost regions such as China and Middle East  
dot Trade politics continues to influence global flows of aluminium semi-fabricated products  
dot Global shift towards recycling scrap as an alternative input to primary aluminium gaining momentum  
 
         
REGIONAL MARKET DEVELOPMENT
SITUATION AND TRENDS   IMPACT, OPPORTUNITIES AND THREATS
dot Rapid population expansion and urbanisation in sub-Saharan Africa resulting in increased infrastructure and transport spend growth, rising income levels and increasing consumer spend, leading to growing per capita spend on aluminium  
14
Growing regional consumption of aluminium primarily in consumer applications and packaging, transport and construction/infrastructure
15
Opportunities for increased investment in downstream fabrication industries in South Africa to capitalise on growth in the region
16
Increasing availability of aluminium scrap in the region
dot Ongoing efforts by African states to secure regional economic development and industrial integration  
     

 

Risks

Opportunities

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