德银-全球金属与采矿业：全球碳游戏；提高短期和长期价格-2021.5.26-22正式版

DeutscheBank

Research

Europe

dbSustainability

Date

NorthAmerica

Aluminium

26May2021

Asia

MarketUpdate

Global

Metals&Mining

Metals&Mining

on:26/05/202104:01:45GMT

GlobalCarbonPlay;raisingshort-andlonger-termprices

Willitbedifferentthistime?

Thereisacompellingstructuralstorybuildinginaluminium.Therehavebeenseveralfalsedawnsintheindustryoverthepast10years,butwebelievethenationwidecapacitycapinChina,recoveringglobaldemandandincreasinglyambitiousglobaldecarbonisationpolicieswillleadtostructurallyhigherpricesoverthenext5-10yearscomparedtothe2010s.Primaryaluminiumproductionishighlyenergyintensive;risingCO2costs(andtheinternalisationofthosecosts),coal-firedproductionrestraintandrisinggreenproductpremiumswilldrasticallychangethecompetitivelandscapeoftheindustry.Renewables-basedproducersaretheclearstrategicwinners;wereiterateourBuyratingsonNorskHydro(TPliftedtoNOK70)andAlcoa(TPliftedto$48)andweraiseourRIOTPto£62.

Raisingpricesontighteningshort-andmedium-termoutlook

FollowingonfromourbullishGlobalAluminiumreportearlierthisyear,weareraisingouraluminiumpriceforecastsagainby6%to>$2,300/tin2021and7%to$2,250/tin2022,largelyreflectingglobaldemandupgrades.Importantlyfortheequities,wearealsoliftingourlong-termrealpriceby10%to$2,200/t(2021realbasis).WithChinaplacingahardcapondomesticoutputat45mtpa,marginswillneedtoremainstructurallyhigherthanthepast10yearsinordertoincentivisenewproduction;weexpectabalancedglobalmarketthisyearmovingintoadeficitoverthenext3-4years.InChina,whiletherearetopdownslowingsignals(credit,FAI),thephysicalmarketistightanddemandshouldremainstrongoverthenext6-12monthsonaccountofresilientpropertytrendsandreboundingmanufacturingdemand.Followingrecessionaryconditionsin2019and2020,ex-Chinademandstillhassignificantroomtorecoverthisyearandnext.

Equities;structuralshiftyettobepricedin

Whilethealuminiumpricehasreactedtotheimprovingdemandandsupplydynamics,theequitiesarestilldiscountingthepre-2021pricingregimeoflowprofitabilityandcostcurve-drivenprices(i.e.,analuminiumpriceof<$2,000/tvsspotof>$2,300).ThereishugevarianceinCO2intensityacrosstheindustrydependingonpowersource.Coal-basedproduction(largelyinChinaandIndia)produces>16tofCO2pertonneofprimarymetalcomparedto<4tforrenewables-basedproductionandaglobalaverageof13-14t.Hydro,AlcoaandRIOallbenefitfromrenewables-heavyportfolioswithcarbonintensityatthebottomoftheindustryCO2intensitycurve(detailswithin).

LiamFitzpatrick

ResearchAnalyst

+44-207-541-3233

AbhiAgarwal

ResearchAnalyst

+44-20-75419167

SathishKasinathan

ResearchAnalyst

+1-212-250-3347

BastianSynagowitz

ResearchAnalyst

+41-44-227-3377

KeyChanges

Company

TargetPrice

Rating

AA.N

41.00to48.00

-

BHPB.L

2,100.00to

-

2,200.00

GLEN.L

400.00to

-

420.00

NHY.OL

62.00to70.00

-

RIO.L

6,000.00to

-

6,200.00

S32.L

195.00to

-

200.00

Source:DeutscheBank

Distributed

DeutscheBankAG

DeutscheBankdoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Thus,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.DISCLOSURESANDANALYSTCERTIFICATIONSARELOCATEDINAPPENDIX1.MCI(P)051/04/2021.

7T2se3r0Ot6kwoPa

26May2021

Metals&Mining

Aluminium

TableOfContents

Outlook&themes 3

Raisingshort-andmedium-termprices 3

Chinamarket-peaksupplygrowthin2021 6

Ex-Chinarebound-recoverygatheringpace 7

Industrymarginstostructurallylift 8

AluminiumEquities 9

Lowcarbonproducerstoemergeasnetwinners 9

Valuationsandearnings 10

GlobalCarbonPlay 12

Policyriskexposure:carbonintensityhighvsothermetals 13

Lowcarbonproducts 15

Lowcarbontechnologies 16

Page2 DeutscheBankAG

26May2021

Metals&Mining

Aluminium

Outlook&themes

Raisingshort-andmedium-termprices

FollowingonfromourbullishGlobalAluminiumreportearlierthisyear,weareraisingouraluminiumpriceforecastsagainby6%to$2,305/tin2021and7%to$2,250/tin2022reflectingdemandupgrades,furtherevidenceofsupplyrestraintinChinaandrisingindustrycostpressures.

Figure1:Aluminiumandaluminapriceforecastrevisions

Q121

Q221

Q321

Q421

Spot

Aluminium

USC/LB

77.3

95.0

105.5

108.9

108.9

104.5

102.1

104.4

106.8

106.1

USD/T

1,704

2,094

2,325

2,400

2,400

2,305

2,250

2,302

2,355

2,340

%Changefrompreviousforecast

5.7%

6.7%

9.1%

5.4%

7.1%

9.6%

10.0%

AustralianMGAlumina

USC/LB

12.3

13.6

12.7

13.2

13.6

13.3

13.6

14.2

14.6

12.5

USD/T

270

300

280

290

300

292

300

314

321

276

%Changefrompreviousforecast

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

Source:DeutscheBankestimates,BloombergFinanceLP

Wearealsoliftingourlong-termpriceby10%to$2,200(2021realbasis).Weexpectpricestocyclicallymoderatein2022onslowerglobaldemandgrowth,buttosettleatamoreelevatedlevelcomparedtopreviouscycles.WithChinaplacingahardcapondomesticoutput,marginswillneedtoremainstructurallyhigherthanthepast10yearsinordertoincentivisenewproductionfromtheex-Chinamarket.The10-yearphaseofexcessiveproductiongrowthinChinaappearsoverandweexpectalargelybalancedmarketthisyearandin2022beforemovingintoagrowingdeficitoverthenext3-4years.

Figure2:Aluminiumdemandandpriceforecasts

2017

2018

2019

2020

2021

2022

2023

2024

2025

PrimaryAluminiumProduction

ChinaProduction

Kt

36,334

36,270

35,288

36,695

39,494

40,849

41,732

42,177

42,177

growth

%

13.3%

-0.2%

-2.7%

4.0%

7.6%

3.4%

2.2%

1.1%

0.0%

Ex-ChinaProduction

Kt

27,234

27,681

27,935

28,069

29,145

30,143

30,818

31,418

32,413

growth

%

1.2%

1.6%

0.9%

0.5%

3.8%

3.4%

2.2%

1.9%

3.2%

GlobalProduction

Kt

63,568

63,950

63,224

64,764

68,640

70,992

72,550

73,595

74,590

growth

%

7.8%

0.6%

-1.1%

2.4%

6.0%

3.4%

2.2%

1.4%

1.4%

PrimaryAluminiumConsumption

ChinaConsumption

Kt

34,493

35,887

36,212

37,773

40,040

41,241

42,066

42,697

43,124

growth

%

8%

4%

1%

4%

6%

3%

2%

1%

1%

Ex-ChinaConsumption

Kt

28,870

29,327

28,356

25,028

28,333

29,864

30,686

31,337

31,926

growth

%

3%

2%

-3%

-12%

13%

5%

3%

2%

2%

GlobalConsumption

Kt

63,363

65,214

64,568

62,801

68,373

71,105

72,752

74,034

75,050

growth

%

5.9%

2.9%

-1.0%

-2.7%

8.9%

4.0%

2.3%

1.8%

1.4%

Chinabalance(preimport/export)

Kt

1,841

382

-924

-1,079

-545

-392

-334

-520

-947

Globalmarketbalance

Kt

205

-1,264

-1,344

1,962

267

-113

-202

-438

-460

Avg.LMEcashprice

$/t

1,968

2,108

1,795

1,704

2,305

2,250

2,302

2,355

2,409

Avg.LMEcashprice

c/lb

89

96

81

77

105

102

104

107

109

Source:DeutscheBankestimates,CRU,BloombergFinanceLP

DeutscheBankAG Page3

26May2021

Metals&Mining

Aluminium

China:emergingsupplyrestraintandemissionsfocus

DomesticdemandreboundedstronglythroughH2'20and,whiletherearetopdownslowingsignals(credit,FAI),demandshouldremainstrongin2021onaccountofresilientpropertytrendsandreboundingmanufacturingdemand.Domesticaluminiumstocksareattheirlowestlevelssince2017,reflectingtightphysicalconditions.Onaseasonalbasis,demandshouldpeakinlateQ2,leadingtoanongoingdrawdownininventories;weexpectthepaceofinventorydrawdownswillbeakeyindicatorofmarkettightnessinthemonthsahead.

Akeytrendemergingthisyearhasbeenemissions-relatedproductionrestrictionsinthesteelandaluminiumsectors,partofabroaderpushinChinatoreducecoalconsumptionandindustrialemissions.InnerMongoliahasorderedseveralaluminiumplantstoreduceproductioninQ1(capacityof~250ktpa)inordertoreducecoalconsumptionandemissions.Sofar,thelevelofsuspensionsissmallinthecontextoftotaldomesticproductionandlimitedtoInnerMongolia,butthereisatighteningriskfrom2022+thatemissions-relatedrestrictionsimpactplannedexpansionsinInnerMongoliaandspreadtootherregions.WeforecastChinaproductionof~39.5mtin2021(up2.8mtor7.6%YoY),drivenmainlybynewhydro-basedproductioninYunannprovince.Weforecastdemandgrowthof6%leadingtoaChinadeficitof~0.5mtbeforeprimarynetimports.

Beyond2021,productiongrowthshouldslowmarkedlyasunderconstructionsmeltersreachcommissioningandnationwideoperatingcapacityapproachesthenationalcapof45mt(implyingproductionpotentialof~42mt).Chinaisaimingtosignificantlyincreasepostconsumerscrapgenerationandconsumptionintheyearsaheadandthiswillleadtoprimaryaluminiumdemandslowingatafasterratecomparedtototalaluminiumdemand.MajoraluminiumcompaniesinChinaarealreadyinvestinginrecyclingplantsandby2024/25weforecastprimaryaluminiumdemandgrowthof1-2%pavstotalaluminiumdemandgrowthof2-3%pa.

TheChinaNon-FerrousMetalsIndustryAssociationannouncedearlierthisyearadrafttargetforpeakaluminiumemissionsby2025.Amoredetailednationwideplanforthealuminiumindustrycouldbeannouncedlaterthisyearandcouldincludeamoredetailedroadmapandtargetsforachievingpeakemissions,acompletebanonnewcoal-firedcapacity,switchingtorenewables-basedpower,growthinrecycling,participatinginthenewnationalETSandincreasingcarboncostsandpowertariffsfortheindustry.

Ex-China:demandrebounding-2018herewecome!

Followingrecessionarydemandconditionsin2019andthedeepCovid-ledcontractionin2020,weexpectex-Chinademandtoreboundbymorethan12%in2021to2019levels,butbasedoncurrenttrendsourforecastscouldstillbeontheconservativeside.RegionalpremiumsintheUS,EuropeandAsiahavereboundedtomulti-yearhighs,reflectingstronger-than-expecteddemand,tightfreightmarketsandpocketsofscraptightness.

Weexpectex-Chinaproductiontoexpandbyalmost4%in2021drivenprimarilybyexpansionsfromRusalandVedanta.Weanticipateanex-Chinamarketsurplusin2021ofslightlybelow1mt,whichmovesbacktowardsbalancein2022asdemandrecoverstowards2018levels.Sofar,therehavebeennomajorsmelterrestartannouncementsintheex-Chinamarket,butAlcoarecentlyindicatedthatitisassessingarestartofthe~450ktpaSaoLuissmelterinBrazil(aJVwithSouth32).Intotal,wefactorin~2mtofex-Chinaproductiongrowthby2025fromuncommittedprojectsandrestarts.

Page4 DeutscheBankAG

26May2021

Metals&Mining

Aluminium

EuropeanCBAMdecisionexpectedinmid-2021

InEurope,aluminiumisdefinedasakeystrategicrawmaterialwithexistingcarbonleakagemeasures.TheEuropeanCommissionisexpectedtopresentalegislativeproposalonaCarbonBorderAdjustmentMechanism(knownasaCBAM)inJuneorJuly2021.ThenewmechanismwillbepartofabroaderEUindustrialstrategyandcoverallimportsofproductsandcommoditiescoveredbytheEmission

TradingSystem(ETS),includingthepowersectorandenergy-intensiveindustrialsectorslikecement,steel,aluminium,oilrefinery,paper,glass,chemicalsandfertilisers.ACBAMwouldbeappliedtoimportsofcertainproductstoensurealevelplayingfieldwithEU-basedproductionbylevyingacarbontariffbasedonthecarboncontentoftheproductandthedifferenceincarbonpricesbetweentheexportingcountryandtheEU.

Ifaluminiumisincludedinthefirstphase,thetradeflowimpactcoulddrivemateriallyhigherpremiumsfordownstreamvalue-addedproductsinEurope,butfarlesssoforcommoditygradealuminium.WediscussedthebackgroundtotheCBAM,thepotentialimpactonEuropeanmarketsandthekeyuncertaintiesandvariablesinourGlobalAluminiumreportearlierthisyear.

Aluminapriceslargelyunchangedonsurplusconditions

WeexpecttheAluminamarkettoremaininasurplusoverthenextthreeyears,however,wedoexpectthebalancetonarrow.Weleaveourpriceforecastsunchangedat$300/tfor2022.Overthelasttwoyears,Chinesecompanieshavebecomeincreasinglyself-sufficientinaluminawhichhasreducedthevolatilityinthealuminamarket.AluminaproducersinChinahavealsobecomebackwardlyintegratedintobauxiteinGuinea(andhaveaccesstosizablestockpiles),whichreducesvolatilityinrefiningcosts.Thereis~17mtofadditionalsupplycomingonlineby2025,ofwhich12.5mtisscheduledtocomeonlineinChina.Barringanysupplyissues,weexpectthemarkettoremaininsurplusfortheforseeablefuture.Pricesinourviewshouldimproveonthebasisofcostescalation(higherinputcosts)andanarrowingsurplus.

DeutscheBankAG Page5

26May2021

Metals&Mining

Aluminium

Chinamarket-peaksupplygrowthin2021

Figure3:Chinadomesticstocks-seasonaltrends

2,500 Chinaaluminiumsocialstocks,

kt primaryali

2,000

1,500

1,000

500

0

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2017

2018

2019

2020

2021

Figure4:Chinaaluminiumapparentdemandgrowth

25%

ImpliedChinaaluminiumdemandgrowth(y/y)

20%

15%

10%

5%

0%

-5%

-10%

-15%

Apr-17

Oct-17

Apr-18

Oct-18

Apr-19

Oct-19

Apr-20

Oct-20

Apr-21

Source:DeutscheBank,Wind

Source:DeutscheBank,ChinaCustoms,SMM

Figure5:Chinamonthlyaluminiumproduction

3500

60%

3000

50%

40%

2500

30%

2000

20%

1500

10%

0%

1000

-10%

500

-20%

Apr-06

Apr-07

Apr-08

Apr-09

Apr-10

Apr-11

Apr-12

Apr-13

Apr-14

Apr-15

Apr-16

Apr-17

Apr-18

Apr-19

Apr-20

Apr-21

RefinedAlproductionmonthly(NBS),kt

%chgyearonyear3MMA

Source:DeutscheBank,ChinaCustoms

Figure6:Chinaprimaryaluminiumproductiongrowth(absolute)

5,000

4,000

3,000

2,000

1,000

0

-1,000

Source:DeutscheBank,CRU

Figure7:Openarbitrageandstrongdomesticdemandhassupportedstrongprimarymetalimportssincemid-2020

250

Imports

200

150

100

50

0

Exports

-50

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Primaryaluminumnetimports/(exports),kt

Source:DeutscheBank,ChinaCustoms,Wind

Figure8:Semisexportshavestagedonlyamodestrebound

600

500

400

300

200

100

0

2013 2014 2015 2016 2017 2018 2019 2020 2021

Chinaunwroughtaluminiumandproductexports(kt)

Source:DeutscheBank,ChinaCustoms,BloombergFinanceLP

Page6 DeutscheBankAG

26May2021

Metals&Mining

Aluminium

Ex-Chinarebound-recoverygatheringpace

Figure9:LMEinventoriesversuspricetrend

4,000

2,600

3,500

2,400

3,000

2,200

2,500

2,000

2,000

1,800

1,500

1,600

1,000

1,400

500

1,200

May-15

May-16

May-17

May-18

May-19

May-20

May-21

WarehouseStocks:LMEAluminium(LHS,kt)

Aluminiumprice(RHS,USD/t)

Source:DeutscheBank,BloombergFinanceLP

Figure10:Regionalphysicalpremiumshavereboundedonimprovingdemand

250

600

USD/t

200

500

400

150

300

100

200

50

100

May-16Jul-16Sep-16Nov-16Jan-17Mar-17May-17Jul-17Sep-17Nov-17Jan-18Mar-18May-18Jul-18

Sep-18Nov-18Jan-19Mar-19May-19Jul-19

Sep-19Nov-19Jan-20Mar-20May-20Jul-20Sep-20Nov-20Jan-21Mar-21May-21

Europe(Rotterdam)

Japan

USMidwest(RHS)

Source:DeutscheBank,BloombergFinanceLP

Figure11:Regionaldemandtrends-Ex-China,EuropeandNorthAmerica

%demandgrowthrateYoY

15%

10%

5%

0%

-5%

-10%

-15%

2016

2017

2018

2019

2020

2021e

2022e

2023e

2024e

2025e

Ex-China

Europe

NorthAmerica

Source:DeutscheBank,CRU

Figure12:Aluminiumproductiontrends-China,ex-Chinaandglobal

y/y(%)

25%

20%

growth

15%

10%

production

5%

Monthly

0%

-5%

-10%

Apr-15

Jul-15

Oct-15

Jan-16

Apr-16

Jul-16

Oct-16

Jan-17Apr-17

Jul-17

Oct-17

Jan-18Apr-18

Jul-18

Oct-18

Jan-19Apr-19

Jul-19

Oct-19

Jan-20

Apr-20

Jul-20

Oct-20

Jan-21

Apr-21

China

Ex-China

Global

Source:DeutscheBank,IAI,SMM

Figure13:Pricesralliedforalmosttwoyearsduringpreviousrecoveries

ofaluminium

225

175

200

performance

125

150

price

100

Indexed

75

1

51

101

151

201

251

301

351

401

451

501

551

601

651

701

751

No.ofdaysfromtheperiodtrough

Q1-09

Q4-15

Q2-20

Source:DeutscheBank,BloombergFinanceLP

Figure14:Broad-basedend-marketexposureshouldbenefitfrompostvaccineactivityrebound

Machinery&

Equipment

9%

Other

5%

Consumerdurables

5%

Transport

30%

Electrical

13%

Construction

Foilstock

19%

Packaging

5%

14%

Source:DeutscheBank,CRU

DeutscheBankAG Page7

26May2021

Metals&Mining

Aluminium

Industrymarginstostructurallylift

Marginsandreturnsinthealuminiummarkethavebeenveryweakoverthepast10yearsduetoovercapacityandexcessiveproductiongrowthfromChina.Withproductionsettoslowpost2021,weexpectanextendedperiodoftightermarketconditionswithmarginsintheyearsaheadmorecomparablewiththepre2009period.

Figure15:Aluminiumindustrymargins

40%

2,700

30%

2,500

20%

2,300

10%

2,100

0%

1,900

-10%

1,700

-20%

1,500

-30%

1,300

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021e

2022e

2023e

2024e

50thMargin(%,LHS)

90thMargin(%,LHS)

Aluminiumprice(USD/t,RHS)

Source:DeutscheBank,CRU

Figure16:Aluminiumpricescenarios

3,500

USD/T

3,250

3,000

2,750

2,500

2,250

2,000

1,750

1,500

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Upsidecase($50/tcarboncostembeddedby2030)

Basecase(DBe)

Downsidecase(weakerdemand,lesssupplydiscipline)

Source:DeutscheBank,BloombergFinanceLP

Page8 DeutscheBankAG

26May2021

Metals&Mining

Aluminium

AluminiumEquities

Lowcarbonproducerstoemergeasnetwinners

PrimaryaluminiumproductionishighlyenergyandCO2intensiveandwillbeheavilyimpactedbyclimate-basedpoliciesandtaxes.ThereishugevarianceinCO2intensityacrosstheindustry;basedondetailedemissionsdatafromCRU,renewables-basedoperationsproducelessthan4tofCO2pertonneofmetalcomparedtoaglobalaverageof13-14tandover15tforcoal-basedproduction(mostlyinChinaandIndia).EvenmodestCO2pricingand/orpremiumsforcertifiedgreenproductswillhaveasignificantimpactonthecompetitivepositioningandcoststructureoftheindustry.Asglobalclimateambitionconvertsintoconcretepolicies(startingwiththeEuropeanGreenDealthisyear),lowcarbon(renewablesbased)producersinEuropeandgloballyshouldbenetwinnersthroughasteepeningcostcurve(CO2costsmovingintothecostbase),coal-firedproductionrestraintinChinaandgrowthingreenproductpremiums.

FromourGlobalcoverage,NorskHydro(Buy,NOK70TP),RioTinto(Hold,£62TP)andAlcoa(Buy,$48)arewellpositionedduetotheirlargerenewablespoweredproductionbases.

Figure17:Globalaluminiumcarbonintensitycurve(fromCRUdata)

Source:CRU

Belowweshowaluminaandaluminiumproductionforthefourcoveredaluminiumproducersandtheshareofaluminiumproductionthatispoweredfromrenewables.Alcoa,RIOandS32arealllongalumina.Hydroisclosertoanintegrated/balancedpositionbutisstillnetlong.

DeutscheBankAG Page9

26May2021

Metals&Mining

Aluminium

Figure18:Percentageofaluminiumproductionpoweredusingrenewableenergy(DBestimates)

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

AA NHY RIO S32

Source:DeutscheBankestimates

Figure19:FY21Alumina&aluminiumproduction

14,000

7,000

12,000

6,000

10,000

5,000

8,000

4,000

6,000

3,000

4,000

2,000

2,000

1,000

0

0

AA

NHY

RIO

S32

ALUMINA

ALUMINIUM

Source:DeutscheBankestimates

Valuationsandearnings

Figure20:EBITDAchanges

Old

New

Change

2021

2022

2021

2022

2021

2022

AA($M)

2,197

2,058

2,431

2,183

11%

6%

NHY(NOKM)

21,684

20,369

23,987

23,316

11%

14%

RIO($M)

37,540

24,569

38,340

25,507

2%

4%

S32($M)

1,911

1,837

1,970

1,924

3%

5%

Source:DeutscheBankestimates,CYforS32

Wehaverevisedearningsupwardsforthealuminiumexposedequitiesasdetailedabove(reflectingthepricechangesinFig1).WehavepublishedseparatelinkednotesonNorskHydroandAlcoa,providingfurtherdetailsonourchanges,valuationsandinvestmentdrivers.

Figure21:EuropeanMetals&Miningvaluations&recommendations(basedonDBestimates)

Company

Rating

CCY

Target

Current

Upside

MarketCap

EV

Year

P/E(x)

EV/EBITDA(x)

FCFYield(%)

Netdebt/EBITDA(x)

DivYield

Price

Price

toTP

US$m

US$m

End

2020

2021

2022

2020

2021

2022

2020

2021

2022

2020

2021

2022

2020

2021

2022

Diversified

AngloAmerican

Buy

GBP

3600

3158

14%

60,932

66,519

Dec

18.2

6.3

9.0

9.1

4.1

5.1

3.9

11.7

7.2

0.6

0.1

0.1

2.2

9.5

4.4

Glencore

Buy

GBP

420

312

35%

58,797

74,534

Dec

nm

9.5

10.6

6.6

3.9

3.7

6.5

15.8

15.9

1.4

0.5

0.2

1.4

6.2

6.2

South32

Buy

GBP

200.0

154.0

30%

10,305

10,018

Jun

46.7

12.7

12.8

8.2

5.1

5.2

2.7

8.0

7.8

(0.3)

(0.2)

(0.3)

1.1

3.1

4.3

Teck

Buy

USD

30

23

30%

12,312

6,596

Dec

nm

6.8

7.3

1.7

1.2

1.4

(17.5)

(7.0)

3.6

2.6

1.2

1.2

0.7

0.7

0.7

BHPBilliton

Hold

GBP

2200.0

2103

5%

169,789

181,628

Jun

15.2

7.9

10.9

7.2

4.3

5.5

5.2

12.7

8.7

0.5

0.2

0.2

5.2

11.5

6.4

RioTinto

Hold

GBP

6200

5992

3%

140,192

145,705

Dec

11.0

6.3

10.3

6.2

3.8

5.6

6.8

13.5

7.4

0.0

(0.0)

0.1

6.6

14.3

7.8

Base&PreciousMetals

Alcoa

Buy

USD

48

37

32%

6,815

8,877

Dec

nm

6.2

7.4

4.0

3.7

4.1

2.2

14.3

16.3

0.8

(0.0)

(0.5)

0.0

0.0

0.0

AngloGoldAshanti

Buy

ZAR

385

352

10%

10,570

11,294

Dec

12.1

13.0

15.3

4.9

5.3

5.8

6.9

5.3

5.6

0.2

0.2

(0.0)

1.9

1.5

1.4

Freeport-Mcmoran

Buy

USD

50

42

20%

60,922

76,707

Dec

136.8

12.7

12.2

19.2

6.5

6.1

1.7

7.8

11.1

1.5

0.1

(0.1)

0.0

2.1

6.2

Lundin

Buy

CAD

18

13

33%

8,012

8,074

Dec

47.2

8.1

7.9

9.4

3.7

3.3

1.0

11.6

14.7

0.1

(0.3)

(0.7)

1.1

2.1

3.1

NorskHydroAsa

Buy

NOK

70

52

35%

12,734

13,335

Dec

28.3

10.1

10.4

7.0

4.3

4.5

6.7

8.2

9.4

1.6

0.2

0.0

2.4

4.7

4.8

BolidenAb

Hold

SEK

310

332

-7%

10,906

11,179

Dec

13.3

10.8

12.6

6.6

6.0

6.4

5.5

7.4

5.9

0.2

(0.0)

(0.1)

4.3

4.6

4.0

FirstQuantum

Hold

CAD

33

27

21%

15,612

24,322

Dec

nm

12.4

9.4

12.8

5.7

4.6

2.5

11.1

12.7

3.9

1.4

0.8

0.1

0.1

1.8

AntofagastaPlc

Sell

GBP

1350

1525

-11%

21,284

21,366

Dec

42.7

14.1

14.7

11.9

6.3

6.1

2.2

5.7

6.2

0.0

(0.1)

(0.2)

2.5

4.5

4.3

521,610

570,302

0.3

8.9

12.4

7.4

4.5

5.7

5.7

11.6

7.6

0.5

0.2

0.2

4.2

9.5

5.5

Source:DeutscheBankestimates.BloombergFinanceLP,Pricedataason24thMay;calendariseddataforBHP&S32

Page10 DeutscheBankAG

26May2021

Metals&Mining

Aluminium

Figure22:AlcoaFY21EBITDAexposure

Bauxite

10%

Alumina

28%

Aluminum

products

62%

Source:DeutscheBank

Figure24:RIOFY21EBITDAexposure

Aluminium

Bauxite&Alumina 8%

4%

Copper

13%

Diamond

0%

IOC

4%

IronOrePilbara

Energy&minerals

exIOC

70%

1%

Source:DeutscheBank

Figure23:NHYFY21EBITDAexposure

Energy

12% Bauxite&Alumina

15%

Extruded

products/SAPA

23%

MetalMarkets

3% PrimaryMetal

47%

Source:DeutscheBank

Figure25:South32CY20EBITDAexposure

Nickel

12%

Alumina

24%

Australiancoal

14%

SouthAfrica

manganese

6%

Aluminium

19%

Australia

Manganese

25%

Source:DeutscheBank

DeutscheBankAG Page11

26May2021

Metals&Mining

Aluminium

GlobalCarbonPlay

PrimaryaluminiumproductionishighlyenergyandCO2intensive.Bauxiteisfirstrefinedintoaluminaandaluminiumisthenproducedviaelectrolysis.ThereishugevarianceinCO2intensityacrosstheindustry;Scope1emissionsarerelativelyconstantacrosstheglobalCO2curve,butScope2emissionsvaryhugelydependingonpowersources(coalvsgasvsrenewables).HydropoweredsmelterssuchasRIO'sCanadianoperationsandNHY'sNorwegiansmeltersproducelessthan3tofCO2pertonneofmetalonaveragecomparedtoover15tforthetophalfofthecarbonintensitycurve(largelycoalfiredaluminiuminChinaandIndia).

Figure26:Globalaluminiumcarbonintensitycurve(CRUbaseddata)

Source:CRU

Aluminium'sphysicalcharacteristics(light,strongandhighrecyclability)meanthatitcancontributetosignificantreductionsinenergyconsumptionfromafulllifecycleperspective.Therecyclingofaluminiumrequires95%lessenergycomparedtoprimaryaluminiumproduction.Itsabundance,limitedsupplyconstraintsandlowercostcomparedtocopperhasalsoseenaluminiumgainmarketsharefromcopperincertainapplications.

Theclearestlifecyclebenefitsareseeninthetransportsectorwherelightweightingimprovesfuelefficiency.Studieshaveshownthat1kgofaluminiumreplaces2kgofsteelintheautomotivesectorandresultsinsavingsof13-23CO2/kgofaluminiumoverthevehicleslifetime.Grossedup,thisisequivalentto13-23tCO2reductionspertonneofaluminium.Basedonindustryaveragefigures,1tonneofprimaryaluminiumproductioncreates~14tofCO2comparedto~2.2tforcarbonsteel(BF-BOFroute).So,inthisexample,aluminiumcanbejudgedagreenermetalfromafulllifecycleperspectiveaslongasprimaryproductionCO2intensityisinthelowerhalfoftheglobalcarbonintensitycurve.Thelifecyclebenefitsareevenmorepronouncedinthetrucking,aviationandshippingsectors.Aluminiumisalsousedextensivelyinfoodpackagingpreservingfoodforlongerandrequiringlessenergytotransportcomparedtoothermaterials.

Page12 DeutscheBankAG

26May2021

Metals&Mining

Aluminium

Figure27:Decarbonisationoutlookbymajorcommodity/metal

EuropeanMetals&Mining

EuropeanSteel

Ironore

CokingCoal

Copper

Lowcarb