Finance & Investment Club Materials Sector Fall 2014 Senior
Analyst: Joo Sung Kim Junior Analysts: TBD Aluminum
Manufacturing
Slide 2
Aluminum Industry Companies in this industry manufacture
aluminum and aluminum products from either original or recycled
material Products are used in vehicle frames, residential
construction and medical equipment. Successful companies are those
that manage to achieve highest economies of scale through size, or
technical superiority through advanced furnace technology. Century
Aluminum NASDAQ: CENX Kaiser Aluminum NASDAQ: KALU Constellium
Aluminum NYSE: CSTM Reliance Steel NYSE: RS Alumina Limited OTC:
AWCMY Alcoa Aluminum NYSE: AA
Slide 3
Industry Breakdown Materials Sector ($2,000B) Metals and Mining
($674.02B) = 33.70% Aluminum ($107B) = 15.87%
Slide 4
Industry Summary
Slide 5
Business Model: Aluminum Manufacturing Industry Raw Material
Sourcing Smelting Product Diversificatio n Sales to Customers
Recycling
Growth of Demand Industries Source: IBISWorld Automobile
Manufacturing industry 4.97% CAGR 10-14 0.67% CAGR 15-19 Metal Can
Manufacturing industry 0.76% CAGR 10- 14 0.53% CAGR 15- 19 Stable
or increasing growth from demand industries positive forecast for
aluminum industry Predictable revenue for aluminum industry CAGR
4.97% CAGR 0.67% CAGR 0.76% CAGR 0.53%
Slide 8
Stable Aluminum Price Total number of active plants fell by
CAGR 1.5% in 2010-2014 Number of active plants forecasted increase
by CAGR 0.71% for 2014- 2018 Fall of aluminum price near
slowdown/recovery LME Benchmark aluminum price increase 27% at end
of August
Slide 9
Improving Domestic Competition Increasing globalization means
expected increase in aluminum exports over next 5 years Increasing
share of domestic demand fulfilled by imported aluminum High
industry assistance caps import affect domestic production CAGR
3.62% CAGR 0.99% CAGR 3.71% CAGR 2.69%
Slide 10
Industry-wide Risks Industry overcapacity and excess supply
Supply from developing countries may develop quicker than actual
demand in their economies, thereby over-flooding the market and
driving down profits Increased competition from alternative
materials Designers and engineers increase usage of lightweight
materials such as aluminum, composite materials and plastics
Especially prevalent in automotive industry due to strict
regulations regarding safety and efficiency Increased environmental
regulation Production facilities may need to undergo
capital-intensive restructuring and increase operating costs in
order to comply with new regulations Limited availability of raw
materials Problems with suppliers related to delays, defaults or
limited supply adversely affect production by decreasing efficiency
and increasing costs Source: Company 10- Ks
Industry Rating Aluminum Manufacturing Industry Rating:
Overweight Improving demand and high industry assistance give the
industry a positive outlook 1.Industry Outlook Strong revenue
growth due to increasing demand for materials from demand
industries Increasing globalization raises exports but imports kept
under control by high tariffs for nearly all aluminum products
2.Industry Risk Factors Profits may decrease due to falling
aluminum prices from an inundated market Loss of revenue as demand
industries explore alternative materials