ALFED Business Briefing 2023 Speaker Slides

Welcome to the 2023 ALFED Business Briefing Thursday 30th November 2023 De Vere Tortworth Court Hotel, South Gloucestershire

Economic update from the Bank of England Malindi Myers

Agent for the South West, Bank of England

Monetary Policy Report – November 2023 Malindi Myers Agent for the South West 30th November 2023

South West Agency

Headlines

Global GDP growth continues to be subdued UK-weighted world four-quarter GDP growth

Global export price inflation has fallen significantly Quarterly change in export prices

GDP growth modest and below historic averages (Key judgement 1)

GDP growth is expected to be flat in 2023 H2, and ½% over 2023 as a whole

Some business surveys suggest economic activity will weaken in 2023 H2, but forward-looking measures are less pessimistic

GDP growth forecast based on market interest rate expectations

A resilient labour market and a fall in energy prices have supported an improvement in household real income growth

Labour market loosening and unemployment rising (Key judgement 2)

The labour market remains tight but has loosened since mid-2022

Unemployment rate expected to rise gradually towards 5% by late 2025.

Unemployment rate forecast based on market interest rate expectations

Annual private sector regular pay growth

Pay growth should come down as the labour market eases and inflation expectations come down

CPI inflation expected to come down as external cost pressures abate and economic slack opens up (Key judgement 3)

Inflation is expected to have fallen in October and to come down further in Q4

Consumer price inflation has fallen since last year’s peak and continues to fall

Oil prices have increased since August, but gas futures have not

Producer price inflation suggests cost pressures for goods are easing

Underlying services inflation has started to fall back slightly

CPI inflation forecast based on market interest rate expectations

Interest rates: policy Base Rate and market expectations

LME Aluminium Update Christian Mildner

Head of Corporate Sales, London Metal Exchange

1

Classification: Public

ALFED Business Briefing LME Aluminium update

Christian Mildner, Head of Corporate Sales 30 November 2023, De Vere Tortworth Court SETTING THE GLOBAL STANDARD

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Alfed Members visit the Ring at the London Metal Exchange

3

Contents

4

Section

Title

1.

LME Trading Update

2.

LME Action Plan • Closing Price Methodology • New Trading Platform

3.

LME responsible sourcing and sustainability

LME Trading Update

LME average daily monthly volume Q4 continued the trend of higher volumes seen thus far in 2023 LME average daily monthly volume (Thousand lots per day) 700 600 500 400 300 200 100

LME Aluminium Data up to 31-Oct-23 6

LME Copper

LME Zinc

LME Nickel

LME Lead

LME Tin

Other

Oct-23

Sep-23

Aug-23

Jul-23

Jun-23

May-23

Apr-23

Mar-23

Feb-23

Jan-23

Dec-22

Nov-22

Oct-22

Sep-22

Aug-22

Jul-22

Jun-22

May-22

Apr-22

Mar-22

Feb-22

Jan-22

0

LME ferrous monthly volume Q3 volumes were +52% YoY; 2023 is already a record year for annual volumes LME ferrous monthly volume (Lots per day)

5,000

4,000

3,000

2,000

1,000

LME Steel Rebar

LME Steel HRC FOB China (Argus)

LME Steel HRC N. America (Platts)

LME Steel Scrap CFR India (Platts)

LME Steel Scrap CFR Taiwan (Argus)

Oct-23

Sep-23

Aug-23

Jul-23

Jun-23

May-23

Apr-23

Mar-23

Feb-23

Jan-23

Dec-22

Nov-22

Oct-22

Sep-22

LME Steel Scrap

Data up to 31-10-2023 Source: LME

7

Aug-22

Jul-22

Jun-22

0

LME trading by venue – All metals Electronic volume continued to account for ~40% of overall volume in Q3 2023

800

45%

700

40% 35%

25% 400 20% 300

15%

200

10%

LME ADV Data up to 31-10-2023 Source LME. All metals and contracts, ex UNA trades.

8

%age Electronic

Oct-23

Sep-23

Aug-23

Jul-23

Jun-23

May-23

Apr-23

Mar-23

Feb-23

Jan-23

Dec-22

Nov-22

Oct-22

0% Sep-22

0 Aug-22

5%

Jul-22

100

Percentage

30%

500

Jun-22

Lots per day (thousands)

600

LME Action Plan

LME: Strengthening the market In March 2023 the LME published its Action Plan to strengthen its market

10

Additional VWAP Closing Price methodology Additional VWAPs at the front-of-curve where liquidity is sufficient Current methodology

Additional VWAP Closing Price methodology

3M 1st

VWAP

nd

Expert judgement1

2

All other prompts 1st

Last price with expert judgement

3M

Cash

M1

M2

M3

M4

1st

VWAP

2nd

TWAP

All other prompts 1st

Last price with expert judgement

LME forward curve

Cash 1.

11

M1

M2

M3

Current VWAP M4 3M

Additional VWAPs

Where the 3M MVR is not met, for metals using the “current methodology” the waterfall then moves to last price with expert judgement. Where the 3M MVR is not met, for metals using the “Additional VWAP Closing Price Methodology” the waterfall then moves to a TWAP.

New trading platform functionality Q2 2024: What is being delivered?

• New LMEselect v10 offering improved performance and GTC orders on all prompts • TAS on 3M for all metals • New web-based trading GUI, LMEtrader. Offering improved distribution – to Members and Clients • New LMEsource v4 market data platform for Ring, inter-office and electronic trading

2024+ Future functionality • Carry tick size adjustment • Additional implied pricing routes (chaining of spreads) • Functionality relating to an on-screen options market

12

New trading platform: LMEselect v10 New market data distribution system: LMEsource v4 New trading GUI: LMEtrader

LME responsible sourcing and sustainability

LME responsible sourcing and sustainability initiatives Multi-dimensional covers credentials that cover more than one of Environmental, Social, or Governance

Environmental includes metrics, standards and certifications concerning the natural world, including GHG emissions and biodiversity

2019

2021

Introduction of responsible sourcing requirements

Contracts launched to support transition

2021

Sustainability at the LME

LMEpassport launch

2022 LME announces its net-zero commitments Governance contains metrics, standards and certifications relating to corporate structure, board composition, business ethics and anti-corruption 14

Social comprises all metrics, standards and certifications relating to human rights and equity, which include the LME responsible sourcing policy

2023 Producer profile, targets and sideby-side launch on LMEpassport

LMEpassport This platform stores and maintains essential provenance documents and information for traded metal, as well as showcasing a broad range of sustainability credentials LMEpassport is the electronic certificates of analysis (CoA) and digital credentials register from the London Metal Exchange.

A key component of the LME’s sustainability strategy, LMEpassport is designed to provide participants with two key services: • A digital store for electronic CoAs of metal physically delivered into and out of the LME ecosystem, replacing the current paper-based model.

• A facility for recording information related to metals’ sustainability.

https://www.lmepassport.com

15

LMEpassport live sustainability disclosure https://www.lmepassport.com/#/public/live-sustainability-disclosures

16

Disclaimer © The London Metal Exchange (the “LME”), 2023. The London Metal Exchange logo is a registered trademark of The London Metal Exchange.

All rights reserved. All information contained within this document (the “Information”) is provided for reference purposes only. While the LME endeavours to ensure the accuracy, reliability and completeness of the Information, neither the LME, nor any of its affiliates makes any warranty or representation, express or implied, or accepts any responsibility or liability for, the accuracy, completeness, reliability or suitability of the Information for any particular purpose. The LME accepts no liability whatsoever to any person for any loss or damage arising from any inaccuracy or omission in the Information or from any consequence, decision, action or non-action based on or in reliance upon the Information.

All proposed products described in this document are subject to contract, which may or may not be entered into, and regulatory approval, which may or may not be given. Some proposals may also be subject to consultation and therefore may or may not be implemented or may be implemented in a modified form. Following the conclusion of a consultation, regulatory approval may or may not be given to any proposal put forward. The terms of these proposed products, should they be launched, may differ from the terms described in this document.

Distribution, redistribution, reproduction, modification or transmission of the Information in whole or in part, in any form or by any means are strictly prohibited without the prior written permission of the LME. The Information does not, and is not intended to, constitute investment advice, commentary or a recommendation to make any investment decision. The LME is not acting for any person to whom it has provided the Information. Persons receiving the Information are not clients of the LME and accordingly the LME is not responsible for providing any such persons with regulatory or other protections. All persons in receipt of the Information should obtain independent investment, legal, tax and other relevant advice before making any decisions based on the Information.

LME contracts may only be offered or sold to United States foreign futures and options customers by firms registered with the Commodity Futures Trading Commission (CFTC), or firms who are permitted to solicit and accept money from US futures and options customers for trading on the LME pursuant to CFTC rule 30.10.

The LME is authorised and regulated by the Financial Conduct Authority in respect of its benchmark administration activities under the European Benchmarks Regulation (Regulation No (EU) 2016/1011) (“BMR”), as onshored into UK law.

17

Raw materials and metal flows in a world of shifting trade policy Bruce Alway Director, Metals Research, LSEG

Macro and the outlook for aluminium demand and price Saida Litosh Lead Analyst, LSEG

Aluminium – trade flows, consumption and price outlook 30 November 2023

LSEG Research / ALFED Annual Business Briefing

Bruce Alway Raw Materials and Metal Flows in a World of Shifting Trade Policy Saida Litosh Macro Backdrop, Outlook for Demand and Prices

2

LSEG Data & Analytics

LSEG Data & Analytics is one of the world’s largest providers of financial markets data and infrastructure.

With over 40,000 customers and 400,000 end users across approximately 190 markets, we are an essential partner to the financial community and redefining the future of data in financial services.

We enable customers to draw crucial insights through data, feeds, analytics and workflow solutions.

LSEG Data & Analytics is headquartered in the United Kingdom, with significant operations in 70 countries across EMEA, North America, Latin America and Asia Pacific.

3

Supply Chains Unravel KEY EVENTS Dec’21 – Indonesia confirms export ban to proceed as scheduled in June 2023 Feb’22 – Russia Invades Ukraine Mar’22 – Australia bans alumina and bauxite exports to Russia Mar’22 – UK +35% import duty on Aluminum/articles Jan’23 – China hikes export tariffs from 15% to 30% Mar’23 – US announces 200% import tariffs Jun’23 – Indonesia ban exports of bauxite Jul’23 – Aluminum and “upstream components of bauxite & alumina” added to EU Critical Raw Materials

4

Bauxite Flows – Origin

5

Bauxite Flows - Destination

6

Freight Rates

7

Bauxite Flows – major producers to top discharge locations

8

Bauxite Flows – major producers to top discharge locations

9

Bauxite Flows – major producers to top discharge locations

10

Russian Aluminium has escaped sanctions, but raw materials have not – imports of Alumina (reverse flows)

11

Russian exports of unwrought Aluminium and Alloy

12

Exchange Stocks EXCHANGE STOCKS Although historically at very low levels – TOTAL LME stocks (reported on 23 Nov) at just over 470,000 tonnes are roughly 150,000 or 45% higher from the recent low in October 2022

13

Aluminium Price and WBMS Market balance

14

Global economy: resilient start to 2023, but weak outlook, with risks tilted to the downside and growing divergencies Global Manufacturing PMI vs. Aluminium Consumption and Price, Yoy % 120%

100%

80%

Yoy % change

60%

40%

20%

0%

-20%

-40%

Global PMI

15

Price

Consumption

Ja n23

Ja n22

Ja n21

Ja n20

Ja n19

Ja n18

Ja n17

Ja n16

Ja n15

Ja n14

Ja n13

Ja n12

Ja n11

Ja n10

Ja n09

Ja n08

Ja n07

-60%

Global consumption is flat YTD; China growth vs. weakness in Europe and the US Global Primary Aluminium Consumption and Price 7000

3600 3200

6000

5000 2400 4000

2000

3000

1600 1200

2000 800 1000

400 0

Ja n20 M ar -2 0 M ay -2 0 Ju l-2 0 Se p20 N ov -2 0 Ja n21 M ar -2 1 M ay -2 1 Ju l-2 1 Se p21 N ov -2 1 Ja n22 M ar -2 2 M ay -2 2 Ju l-2 2 Se p22 N ov -2 2 Ja n23 M ar -2 3 M ay -2 3 Ju l-2 3 Se p23

0

Asia

16

Europe

America

Other

Global

Price (RHS)

Price $/t

Consumption (000 tonnes)

2800

China remains a key driver of global demand growth Global Aluminium Consumption by Major Regions

2023* Global Primary Aluminium Consumption by Region

45000 40000

1% China

35000

2021

000 tonnes

30000

2022

2023*

US

America 15000

Africa 10000

Oceania 5000 0

China

17

10% 7%

Europe

20000

* Jan-Sep data

3%

Asia

25000

0%

Europe

US

Japan

16%

63%

Aluminium is set to remain in surplus in 2023/24, before moving into more balanced market later in the forecast Aluminium Market Balances and Prices 3%

2900

Forecast Surplus 2700 2%

1%

2300

2100

0%

1900 -1% 1700

Deficit -2%

1500 2020

2021

2022

2023

Market balance (% of annual production)

18

2024

2025

LME 3 month $/t (RHS)

2026

Price $/t

Market balance (%)

2500

Thank you Contact details: bruce.alway@lseg.com saida.litosh@lseg.com

An outlook for aluminium in 2024: What to look out for Paul Williams

Head of Aluminium, CRU

Primary Aluminium Market Outlook – the year ahead Paul Williams Head of Aluminium +44 207 9032204 paul.williams@crugroup.com

November 2023

Legal Notice This presentation is private and confidential. It must not be disclosed in whole or in part, directly or indirectly or in any other format without the prior written permission of CRU International Limited.

CRU International Limited’s responsibility is solely to its clients and its liability is limited to the amount of the fees actually paid for professional services.

Although reasonable care and diligence has been used in the preparation of this presentation, we do not guarantee the accuracy of any data, assumptions, forecasts or other forward-looking statements.

We accept no liability to third parties, howsoever arising.

CRU takes information security seriously and currently holds the UK Government approved Cyber Essentials certification. This certifies that we have the appropriate security controls across our organisation and third party suppliers to protect our information assets. CRU also has a privacy policy in place which explains how we handle personal data on our customers.

Copyright CRU International Limited 2023. All rights reserved.

2

CRU Aluminum: Expertise across three continents

Guillaume Osouf Kaustubh Head of Prices Chandorkar Development Head of N America, Aluminum

Joseph Cherrez Senior Analyst

Zaid Aljanabi Principal Analyst

Min Wang Senior Analyst

Deborah Idowu Analyst

Ross Strachan Lead Analyst, Primary & Recycled Metal

Tiantian Zheng Senior Analyst

Steve Williamson Matthew Abrams Research Manager Analyst

Alexey Pavlov Senior Analyst

Marziyeh Horeh Analyst

Ravindra Panwar Research Analyst

CRU International Limited London | Sydney | Tokyo | Beijing | Shanghai | Singapore | Mumbai | New York | Pittsburgh | Sao Paulo | Santiago Registered in England No.940750. Registered office: Charles House, 108-110 Finchley Road, London NW3 5JJ

THIS DOCUMENT IS CONFIDENTIAL TO CRU

3

THIS DOCUMENT IS CONFIDENTIAL TO CRU

What we will discuss today

What has transpired for the price in 2023?

Issues impacting market

Demand outlook

Russian trade flows and price outlook

4

LME 3-month price has mostly “flatlined” since late 2022 despite weak demand LME aluminium 3-month price, $/t 3,900

2022 daily low: $2103 /t 2023 daily low (to date): $2123 /t

3,700 3,500 3,300 3,100

China’s post covid optimism

2,900

Demand reality weighs

2,700 2,500 2,300 2,100 1,900 Jan-21 Mar-21 May-21 Jul-21

China story steadies market Sep-21 Nov-21 Jan-22 Mar-22 May-22

Jul-22

Sep-22 Nov-22 Jan-23 Mar-23 May-23 Jul-23

Sep-23 Nov-23

DATA: LME

THIS DOCUMENT IS CONFIDENTIAL TO CRU

5

Issues impacting the primary market: Weak demand but stocks not building up

THIS DOCUMENT IS CONFIDENTIAL TO CRU

Surplus market but low inventories • Ex. China Aluminium market in surplus due to demand contraction • But China sucking in surplus primary metal – especially Russian primary • Stock levels still relatively low – especially in China and LME stocks low • Primary production growth muted and Yunnan power shortages impacting in China Sanctions still hang over Russian metal • US tariffs and self sanctioning moving Rusal eastwards • European metal ban still pushed – would lead to further major shits in trade flows • Russian metal is 80% of all LME reported on-warrant stock Demand weakness has really been prolonged and extensive in key regions • Inflation and higher interest rates has bitten demand and consumer spending • Economic shift back to services and away from manufacturing post Covid has hurt • Inventory overhang in supply chain has led to extensive destocking in 2023

6

World ex. China: Weak primary demand – levels will not pick up until late 2024 World ex. China aluminium consumption, y/y % change

• Demand will remain weak for a couple more quarters at least.

6% 4% 2%

4.5% 3.3%

full year, 2.3%

2.9%

3.7%

2.1% 1.1%

0% -2%

-0.1%

-0.7%

-0.3%

full year, -1.1% -3.7%

-4%

full year, -3.3%

-6% -8% -10%

• Y/Y growth only because of the very low base. Demand LEVELS will remain weak for next few quarters • European demand has been very weak – down 8.3% in 2023 • B&C has collapsed • Packaging soft • Industrials down sharply also • Transport – a bright spot but slowing

-10.3% -10.2%

• Downside risks still outweigh for 2024

-12% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2022 2022 2022 2022 2023 2023 2023 2023 2024 2024 2024 2024

• India is a bright spot for primary demand and will grow ~20% this year

DATA: CRU, Associations

THIS DOCUMENT IS CONFIDENTIAL TO CRU

7

European extrusions: meaningful recovery will likely only come in 2025 – same for UK 1. We now expect a flat 2024 in Europe and a recovery thereafter y/y growth

25%

2. Transport and electrical will continue to drive growth.

22-23 growth

23-24 growth

24-25 growth

Building (48%)

20% 15%

Transport (24%)

10% 5%

Machining (13%)

0% -5%

Electrical (6%)

-10% -15% -20%

Total

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

-30% -25% -20% -15% -10% -5%

0%

5% 10% 15% 20%

DATA: CRU, European Aluminium. (CRU forecasts)

THIS DOCUMENT IS CONFIDENTIAL TO CRU

8

Slowdown in European FRP demand in 2023 with moderate pick up only in 2024 Longer term demand to be driven by transport sector, beverage cans and foil Other Electrical

Consumer durables

Foil

Packaging exl can stock

Machinery

Transport

Construction

Can stock

+2,2%

5.435

2022

Transport the only sector to grow y/y in 2023

+6,5%

-8,2% kt

stock

5.428

4.989

5.099

2023

2024

We forecast an 8% y/y reduction in European FRP consumption in 2023 with modest 2.2 y/y growth projected for 2024.

•Weak B&C •Weak packaging also.

•Auto is up in 2023 however •Longer-term, foil and can stock as well as transport remain the main growth engines •UK similar trends on can sheet and auto demand in 2023 as in rest of Europe.

DATA: CRU, European Aluminium (CRU forecasts)

THIS DOCUMENT IS CONFIDENTIAL TO CRU

9

Balance: Global surplus 2023 but exports to China limit stock builds outside China 000s t

2023

2024

400 200 0 -200 -400 -600 -800 -1,000 -1,200 -1,400

World balance

Aluminium | Market Outlook | November 2023 THIS DOCUMENT IS CONFIDENTIAL TO CRU

China balance

Ex. China balance

China net exports

10

LME 3M price forecast: Decline in 2024 but Chinese price strength supports • 2023 price expected to average $2286/t

2500 2435 2400

2400 2358 2345

2300

• This time last year at this briefing CRU’s forecast for this year was $2167/t for 2023

2340 2300

2281

• 2024 average price forecast: $2310/t

2230 2200

2200 2200

2100

• Upside risk: Yunnan production – hydro power remains a major issue • Downside risk: no improvement in demand ex. China – will take price lower but that could trigger more cuts.

2000 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 Q4 2024

DATA: CRU, LME

THIS DOCUMENT IS CONFIDENTIAL TO CRU

11

Takeaways

a

Demand remains weak for next couple of quarters but late 2024 is turning point. UK faces another difficult year in 2024

Primary production issues in China due to power. supported primary net imports into China of ~1.2 Mt. price has stayed above $2200 /t

This has Hence LME

LME to stay around $2200 /t - $2300 /t over next 6 months. Will rise in H2 2024 and beyond.

DATA: CRU

THIS DOCUMENT IS CONFIDENTIAL TO CRU

12

Please address questions to:

Paul Williams Head of Aluminium +44 20 7903 2204 Paul.williams@crugroup.com

CRU International Limited London | Sydney | Tokyo | Beijing | Shanghai | Singapore | Mumbai | New York | Pittsburgh | Sao Paulo | Santiago Registered in England No.940750. Registered office: Charles House, 108-110 Finchley Road, London NW3 5JJ

13

ALFED ESG Training Update Lord Rupert Redesdale

Rupert Redesdale 30 years in Parliament Helped write legislation in this area

What is ESGc? Why can’t we just go to lunch?

Because it’s important

Definition of ESGc • ESG stands for • Environmental • Social • Governance.

• The c stands for Carbon

Why should I care?

• ESG is a set of unregulated standards that measure the impact a business has on the environment and society, and the accountability it takes for this impact.

• Companies that can show they have ESG policies will benefit from greater customer and investor confidence.

• Companies that don’t have ESGc policies face reputational risk and potentially loss of business and investment.

Still thinking about lunch?

• Will there be choccy pudding?

• Must make the killer argument.

Procurement • Companies are asking for detailed ESG policies in procurement contracts.

• If you don’t have the policies to hand then time and effort will be needed to create and formulate policy.

• How do you produce adequate policies that and who has the skillset to write them?

• Will you loose business or investment without detailed policies?

Alfed ESGc officer •Alfed has created the ALFED ESGc Officer course and register.

• The course will train an employee, or more than one, to be able to compile all the ESGc policies a company will need.

• The course will cover the roughly 90 main topics through 25 hours of learning.

• The entire course is podcast.

• The learners will on completion of the course and an end of course interview, be listed as an ALFED ESGc officer.

How will this help a company?

• The ESGc officer will be able using the training and policy templates create all required ESGc policies.

• This will allow companies to make sure they have policies that protect the environment, reduce risk of activities impacting negatively on society and through the carbon element (c) address Climate Change.

• The companies can through a risk register provided, bring all the policies together and make sure they are signed off by the executive or Board of the company and kept up to date.

Why train your staff?

• Your company will be asked for this information.

• Having comprehensive ESGc policies is ethically important for your shareholders, your company and your employees.

• You can ask your supply chain the right questions • Having all the policies in one place signed off by the executive Board will save time and money

Cost and what you get • £480 per person Alfed members get to train a second employee for free • The Course is over 25 hours learning all of which is Podacst and CPD • Includes Templates for policies covering all ESGc topics • A risk register • Those trained will be on the Alfed and ESGc register • All learners will be included on regular seminar and webinar invitee list to update skills and talk to other company ESGc officers.

Thank You

Q&A

CBAM’s importance for the global aluminium industry How CBAM in its current and future forms could affect the trading relationship between UK exporters and the EU

Gabriel Rozenberg Cbamboo

An introduction to CBAM and its implications for the aluminium industry

Aluminium Federation, 30 November 2023

Gabriel Rozenberg CEO, Cbamboo Cbamboo

1

Gabriel Rozenberg

Cbamboo

Founded Cbamboo in May 2023.

Previously worked in investment management and financial journalism

The operating system for the world’s carbon border taxes

CEO, Cbamboo

Cbamboo

Software platform for CBAM compliance and data, launching January 2024

2

🏳 st

1 Jan 3

Europe’s biggest ever carbon law A revolution in trade and supply chains A hugely complicated tax

Cbamboo

M A CB

EU producers today get free allowances against ETS

Cbamboo

4

The EU is phasing these out – creating a risk of ‘carbon leakage’

Cbamboo

5

CBAM levels the playing field on carbon prices

Cbamboo

6

And it’s a model for carbon price regimes everywhere

Cbamboo

7

Thousands of EU businesses must now comply…

Every day: 30,000 tonnes of aluminium 30,000 tonnes of cement 50,000 tonnes of fertiliser 210,000 tonnes of iron and steel

Cbamboo

Imported by:

✈ Aerospace & defence

Automotive

Chemicals

Construction

Consumer

Energy

Engineering

Forestry

Manufacturing

Metals & mining

Paper & packaging

Pharma & life science

Power & utilities

Retail

Technology

8

… with the world’s most complex tax

Compliance

Cbamboo

Report on your company

Report on your sales and purchases

Report on your suppliers, and their suppliers, down to the specific factory, for each product imported

Corporation Tax

VAT

CBAM

CSRD

EU ETS

9

CBAM in a nutshell Non-EU Manufacturer / Distributor

Assess production process and relevant calculation methods.

Monitor emissions

Attribute emissions to production processes and then goods

EU Reporting Declarant

Collect data on precursor emissions and add these to your own emissions

Report on the specific embedded emissions of your CBAM goods

Share the CBAM emissions report with EU customer, for all installations & goods

Determine the scope of goods covered by CBAM

Identify all the parameters you need to report on

Receive CBAM data from suppliers

Collect data on carbon price due in third country

Definitive period Create CBAM reports and file with National Authority

Cbamboo

Contact your suppliers and request CBAM data

Jan 2026: purchase CBAM certificates in proportion to embedded CO2e

1 0

From 2026, CBAM becomes a financial responsibility Product volume imported from China

Embedded Direct1 emissions

CBAM price (Average of weekly ETS)

Carbon price paid at origin

500 tonnes of aluminium

3 tonnes of CO2e per tonne

€85 per tonne of CO2e

€8 per tonne of CO2e

CBAM Cost

€115 500

Product Cost (at €2 000 per tonne) Cost increase % Cbamboo

€1 000 000 11.6%

1. As the regulation stands today, CBAM tax will only cover direct emissions for aluminium

Note: CBAM costs will be phased in progressively from 2026 (2.5% of total) to 2034 (100% of total)

11

CBAM charge is phased in over nine years

Cbamboo

12

Scope of CBAM – Aluminium industry Aggregated goods category

CN Code

Product and description

Unwrought aluminium Aluminium products

7601 7603 7604 7605 7606 7607

Unwrought aluminium Aluminium powders and flakes Aluminium bars, rods and profiles Aluminium wire Aluminium plates, sheets and strip, of a thickness exceeding 0,2 mm Aluminium foil (whether or not printed or backed with paper, paper-board, plastics or similar backing materials) of a

7608 7609 00 00 7610

Aluminium tubes and pipes Aluminium tube or pipe fittings (for example, couplings, elbows, sleeves) Aluminium structures (excluding prefabricated buildings of heading 9406) and parts of structures (for

thickness (excluding any backing) not exceeding 0,2 mm

example, bridges and bridge-sections, towers, lattice masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, balustrades, pillars and columns); aluminium plates, rods, profiles, tubes and

the like, prepared for use in structures

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7611 00 00

7611 00 00 – Aluminium reservoirs, tanks, vats and similar containers, for any material (other

7612

7612 – Aluminium casks, drums, cans, boxes and similar containers (including rigid or

7613 00 00 7614

7613 00 00 – Aluminium containers for compressed or liquefied gas 7614 – Stranded wire, cables, plaited bands and the like, of aluminium, not electrically insulated

7616

7616 – Other articles of aluminium

than compressed or liquefied gas), of a capacity exceeding 300 litres, whether or not lined or heat-insulated, but not fitted with mechanical or thermal equipment collapsible tubular containers), for any material (other than compressed or liquefied gas), of a capacity not exceeding 300 litres, whether or not lined or heat-insulated, but not fitted with mechanical or thermal equipment

13

New obligations for non-EU aluminium producers What is in scope and not in scope of CBAM reporting obligations?

System boundaries: embedded emissions of basic aluminium products

Unwrought aluminium – primary smelting Alumina

Electricity

Pre-baked anodes

Primary smelting

Unformed aluminium

Anode paste (Søderberg route)

Optional: fuels

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CO2

PFCs

CF4 and C2F6

Input

CBAM good

14

New obligations for non-EU aluminium producers What is in scope and not in scope of CBAM reporting obligations?

Unwrought aluminium – secondary melting

System boundaries: embedded emissions of aluminium (secondary smelting)

Aluminium scrap

Fuels

Secondary production (re-melting)

Unformed aluminium

CO2

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Input

CBAM good

15

New obligations for non-EU aluminium producers What is in scope and not in scope of CBAM reporting obligations?

System boundaries: embedded emissions of basic aluminium products

Aluminium products production process

Unformed aluminium

Forming steps

(alloying, casting, extrusion, rolling, etc)

Basic aluminium products

Fuels

CO2

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Input

CBAM good

16

Monitoring and reporting obligations for aluminium producers

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Figure 7-16, CBAM Guidance for Installation Operators, European Commission

17

To send data to importers, you can use the EU’s Excel template (Other user-friendly systems are also available…)

Cbamboo

18

What must EU aluminium importers do?

Transitional period Oct 2023 to December 2025

Definitive period January 2026 onwards

- Collect the data you need to submit the first report, using default values where required.

- Continue monitoring your CBAM imports and submit the reports yearly.

- Communicate with your suppliers to obtain their emissions data as soon as possible.

- Analyse your supplier’s carbon risk to change your procurement strategy and/or renegotiate contracts in advance of tax implementation.

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- Monitor regulatory updates, as product scope will be broadened.

- Financially plan your CBAM certificate purchases to minimise impact on working capital.

- Optimise your procurement strategy to use less emissions intensive suppliers and lower your tax bill.

19

Key facts Scope ❖

Aluminium producers must report on both direct and indirect embedded emissions in the Transitional Period.

❖

But the CBAM charge will only apply to direct emissions

❖

Commission hopes to include indirect emissions “as soon as possible”

Aluminium scrap ❖

No CBAM charge applies to scrap

❖

However, installation operators must measure the tonnes of scrap used and the percentage that is pre-consumer scrap

Timeline ❖

Full data on supplier emissions is mandatory from July 2024

❖

Limited data from suppliers (ie location of installations) will be required from the first report

Thresholds and fines ❖

The threshold for CBAM declarations is just €150

❖

Fines are €10-€50 per tCO2e of unreported emissions

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20

UK CBAM: ready, or not?

Treasury plans a UK CBAM in 2026

MARCH

“The changes proposed by the UK government are the furthest reaching carbon leakage measure proposed by any country to date. … will go beyond the EU’s own proposed measures” – Redshaw Advisors

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But deadlines are missed…

…as divergent prices store up trouble for UK plc

NOVEMBER

30 Nov: EUA €70.8 vs UKA €48.2

21

The long-term opportunity for global aluminium

Carbon anode consumption + anode effects

Source: Net Zero by 2050: Science-based decarbonisation pathways for the European aluminium industry, European Aluminium, November 2023

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22

CBAM will reward capex for green breakthroughs

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CIM Magazine, 15/6/23. FT, 29/11/23

23

Thank you!

Contact: Gabriel Rozenberg, CEO gabriel@cbamboo.com

Cbamboo Cbamboo

24

Update on carbon leakage David Jenkins

Senior Policy Advisor Low Carbon Projects Team

Autumn Statement • The Government has made permanent the tax breaks for investment.

Under the measures, companies can deduct 100% of the cost of investments in machinery from profits – effectively giving back 25p for every pound invested.

• Announcement of the £960m Green Industries Growth Accelerator, alongside more than £2bn for the automotive sector, and £975m for the aerospace sector. All this to support development of low carbon technology and boosting green supply chains.

• Extension of Climate Change Agreements (CCAs), providing around £300m tax relief annually to industry for meeting energy efficiency targets. The extension starts in 2025 for a 6 year period.

• Various simplifications to R&D tax relief will qualify more SMEs for relief.

• Joint action plan with Ofgem to drastically reduce the time it takes viable projects to connect to the electricity grid.

Carbon leakage consultation: an overview OFFICIAL-SENSITIVE

Addressing carbon leakage risk to support decarbonisation November 2023

Carbon leakage consultation: an overview OFFICIAL-SENSITIVE

2

Background On 30 March 2023, the UK Government launched a consultation to explore domestic measures to mitigate future carbon leakage risk.

We aim to publish the government response soon which will set out further policy details.

•

Carbon leakage refers to the movement of production and associated emissions from one country to another due to different levels of decarbonisation effort through carbon pricing and climate regulation. As a result of carbon leakage, the objective of decarbonisation efforts – to reduce global emissions – would be undermined.

•

The UK is prioritising working with international partners to address carbon leakage

•

However, this will take time, so we are also considering domestic policies to ensure UK efforts lead to a true reduction in global emissions.

•

The government is therefore exploring a package of potential measures to mitigate carbon leakage risk at all stages of the UK's net zero transition.

•

‘Demand-side policies’ could also be used to grow demand for low carbon products, supporting domestic and international decarbonisation.

•

Consultation online at: https://www.gov.uk/government/consultations/addressing-carbon-leakagerisk-to-support-decarbonisation

Carbon leakage consultation: an overview OFFICIAL-SENSITIVE

3

Carbon border adjustment mechanism (CBAM) A carbon border adjustment mechanism (CBAM) could be applied to imports to ensure they are subject to a comparable carbon price, with respect to their emissions, to that incurred by UKbased production subject to the UK ETS and considered at risk of carbon leakage. The proposals for potential UK CBAM are owned in the UK by HM Treasury, and we therefore wont discuss them beyond the info on this slide.

minus Effective UK carbon price

Key policy questions

Imported emissions

Effective carbon price already incurred

UK CBAM price

CBAM liability

Sectoral targeting

Which sectors and which products could and should be in scope?

Emissions scope

Which emissions could be and should be in scope?

Emissions measurement

How are emissions measured? Verification and default values.

Implementation

How and when could and should polices be implemented?

Price measurement

How could and should a potential UK CBAM liability4 be calculated?

UK Carbon Leakage & emissions reporting

OFFICIAL-SENSITIVE

Product standards - objectives Product standards could be used to: • Help mitigate the risk of carbon leakage • Voluntary product standards could support this by enabling domestic producers to charge a ‘green premium’ to consumers willing to pay more for a lower carbon good • Mandatory products standards could support this by blocking the highest carbon imports • Support businesses to decarbonise by increasing confidence in the profitability of decarbonisation • Voluntary product standards could support this by providing benchmarks and a uniform approach to comparing products by emissions intensity, helping to define ‘lower’ and ‘higher’ carbon products • Mandatory product standards could support this by narrowing the range of goods on the market, and possibly setting a timetable for major technological changes

Scope and Targeting • Initially we are proposing that standards could be aimed at intermediate industrial products (such a bar of steel), and account for ‘cradle to gate’ emissions.

• Once established, there would potential to expand the policy either to cover (i) later stages in the supply chain, (ii) downstream, ‘to grave’ emissions, or both.

5

Carbon leakage consultation: an overview OFFICIAL-SENSITIVE

Products standards, continued • Products standards could support a system for product labelling. This could further support consumers to make greener choices, further driving demand for low carbon products.

• Officials are considering options for different models of benchmarking schemes which could used for setting Voluntary Product Standards (VPS). VPS could then be used as the basis for other policies such as product labelling, or Mandatory Product Standards.

6

Carbon leakage consultation: an overview OFFICIAL-SENSITIVE

Embodied emissions reporting Standardised embodied emission reporting for products could support: • implementation of carbon leakage mitigation policies • policies to grow the market for low carbon products UK CBAM would require mandatory reporting requirements. Demand-side policies could be progressed on the basis of the same reporting system for any CBAM taken forward, or be based on a voluntary reporting system.

A key consideration is to minimise and consolidate burdens on business, including by making requirements streamlined and non-duplicative as far as possible.

This also presents an opportunity for UK government to play a role in driving reporting standardisation, support comparability of products, and introduce clarity into the embodied emissions reporting space. “[Government should] Commit to establishing a national carbon accounting framework for industry with Government providing steer to simplify and strengthen carbon accounting practices across industry.”

Energy Systems Catapult, 2022

Carbon leakage consultation: an overview OFFICIAL-SENSITIVE

7

Consultation reporting proposals Option 1: Attribute installation level emissions data to products This could build on the existing UK ETS emissions reporting framework, but If Scope 2 and Scope 3 emissions data are required, it may be necessary to include additional sources.

The government is considering the quality of data that may be derived from this method.

Option 2: Product Life Cycle Assessments This option would set out a standardised LCA methodology for eligible products (specific methodologies are considered in the consultation).

UK businesses and importers would be responsible for providing independently verified LCAs, in line with rules set out in the methodology.

Carbon leakage consultation: an overview OFFICIAL-SENSITIVE

8

Research on Data quality of Whole Life Carbon Assessments in construction In support of this work, and wider UK decarbonisation objectives, UK government is commissioning research on data quality of product level embodied emissions assessments.

This project will compare the methodology, outputs and data quality of different Life Cycle Assessment methodologies and standards widely used for construction products, particularly steel, cement and concrete.

Project outputs: • Comparison of methodologies EPDs (including EN 15804), the newly developed EU CBAM methodology, and the GHG Protocol.

• Tool to enable users to produce LCA reports using the different methodologies based on the same inputs.

• Benchmark input data and steel/cement/concrete product data will be produced to plot on

See: https://www.find-tender.service.gov.uk/Notice/032476-2023

Carbon leakage consultation: an overview OFFICIAL-SENSITIVE

9

The global aluminium industry’s sustainability journey – plans and progress Miles Prosser

Secretary General, International Aluminium Institute

The Aluminium Industry’s Progress on Sustainability Miles PROSSER Secretary General, International Aluminium Institute

0

The IAI… Members of the IAI are companies engaged in the production of bauxite, alumina and aluminium, the recycling of aluminium and/or fabrication of aluminium, or as joint venture partners.

The International Aluminium Institute (IAI) is the only body representing the global primary aluminium industry.

1

Current IAI membership represents all major regions of global bauxite, alumina and aluminium production.

Founded in 1972, the IAI has been key to bringing the industry together on shared purpose over the past 50 years.

Aluminium contributes to a sustainable economy RENEWABLE ENERGY

2

TRANSITION TO ELECTRIC VEHICLES

THE MOST RECYCLED DRINK CONTAINER

Aluminium and the UN SDGs § Aluminium and aluminium production; § Positive and negative impacts; § All 17 Sustainable Development Goals; § Case studies.

3

Aluminium’s contribution to the UN SDGs

4

Aluminium’s six key sustainability issues

Climate change

Emissions & Waste

Circularity

5

Biodiversity

Water

People

Progress for each key sustainability issue

6

Climate Change

Circularity

Emissions & Waste

Water

Biodiversity

People

Base Knowledge

üü

üü

üü

ü

ü

ü

Sector Ambition

üü

üü

ü

-

-

-

Measurable Goals

üü

üü

ü

-

-

-

Metrics to Track Progress

üüü

üü

ü

ü

ü

-

Technology/Knowledge Development Technology/Knowledge Deployment Implementation and Action

üü

üü

üü

ü

ü

üü

ü

ü

ü

ü

-

ü

ü

ü

ü

ü

ü

ü

Greenhouse Gas Trajectories 2000

Aluminium Sector (million tonnes CO2e) – 2021 Update

1500

1182 1020

1175

1000

1095

810

500 0 2005

2010

2015

2020

2025

Historical

B2Ds

IAI GHG Pathways to 2050 (IAI, 2021), IAI Statistic (IAI, 2022)

7

2030 1.5DS

1285 840 340 2035 BAU

1426

640 200 2040

1512

1556

B2DS

440 120 2045

BAU

250 53 2050

1.5DS

Greenhouse Gas Pathways

8

Early tracking…

2000

Aluminium Sector (million tonnes CO2e) – 2021 Update

1500

1182 1020

1175

1000

1095

810

500 0 2005

2010

2015

2020

2025

Historical

B2Ds

IAI GHG Pathways to 2050 (IAI, 2021), IAI Statistic (IAI, 2022)

9

2030 1.5DS

1285 840 340 2035 BAU

1426

640 200 2040

1512

1556

B2DS

440 120 2045

BAU

250 53 2050

1.5DS

GHG emissions reduction in the global aluminium industry

Electricity Decarbonisation Direct Emissions Recycling & Resource Efficiency

10

Summary The aluminium industry’s sustainability journey…

Aluminium will benefit from an increased focus on sustainability.

11

Climate change is the key issue but we must not overlook other aspects of sustainability.

We must continually work to demonstrate progress on all sustainability issues.

12

Meet the Aluminium Ambassadors Rob Bennett

Bloodhound Education

Aluminium Ambassador Programme

Aluminium Ambassador Programme • Train and equip industry role models to engage with schools • Careers talks and hands-on workshops • Showcasing careers in a leading sustainable industry

Training – on-line and face to face

Workshop resources

Interactive Presentation

Willenhall Primary School, Coventry - 8 Nov

Learning about aluminium

Using equipment & developing new skills

Meeting industry professionals

Teacher feedback “An excellent opportunity for the children to extend their knowledge of the working world and raise aspiration.”

“The children were able to develop their understanding of testing, analysis and evaluation.”

“A great practical experience to develop group work, problem solving and language skills.”

Feedback from 60 Year 6 pupils • 100% responded they had fun and learned something new • 99% responded they know more about what an engineer does.

• 100 responded they enjoyed making and building the car.

• 90% responded they were now more interested in engineering.

• Words used to describe the event:Fun / engineering / exciting / aluminium/ informative / amazing /

Ambassador feedback “I thoroughly enjoyed delivering the workshop and looking forward to taking this into another school.” “ I learnt a huge amount about how to present it and how it can be adapted to suit different age ranges.”

To sign up to the ambassador programme: Contact Nadine at E: n.bloxsome@Alfed.org.uk Or Kirsty.allpress@bloodhoundeducation.com

Using Recycled Aluminium Charlie Turner Penrhos Spirits

Why Penrhos was created Kate

Harriet

Sally

Dickie Charlie

introducing ‘connie’ our copper still

our journey into glass

Why we moved to recycled aluminium

Where we are now

@penrhosspirit s @charlietuner @harrietwilliam s @penrhosspirits