Alcoa (AA) Presentation at Bank of America Merrill Lynch Conference

Roy Harvey – President and CEO

China is key in the aluminium industry

“when we look at the world today, we think about the impact that China is having on the entire aluminum value stream. We see a constructive market. We see a bauxite market that is balanced. And any excess bauxite that might be produced, there’s an insatiable appetite in China to bring that in-country in either stockpile or use….The entire world market, we follow the alumina price index, but it’s very much tied back to Chinese demand and the number of cargoes going in there.”

A balanced market for alumina

“we continue to see a balanced market through a small surplus. We’ve seen some ups and downs in prices over these last 12 months, from the end of 2015 where we saw simply too much alumina in the market to a period of time in the middle of 2016 where prices had recovered very significantly to the latest headwinds that we see today, although it starts to look as perhaps we’ve reached the plateau as China starts to buy alumina again.”

three connected markets

“we see these three constructive markets, each one of them feeds into the next – bauxite into alumina, alumina into aluminum. But across the board, I see a lot of opportunities for the future.”

China drives world demand in the bauxite market

“the vast majority of bauxite demand sits in China. There is some third-party demand outside, but for the most part it’s a China story. I think what we’ve seen over these last few years and we’ll continue to see is that China continues to struggle to find very high grade, very cost efficient bauxite mines to the point where they actually mine some bauxite underground.”

Higher costs making miners selective on bauxite mining

“with bauxite prices moving up slightly, as well as coal prices that are directly tied to both alumina and aluminum in China specifically, you’re starting to see that cost push that’s driving a higher cost and, therefore, they have a lot more thought about how can they run their plant more efficiently. And that drives them to be more selective about the bauxite that they use.”