Alcoa 2007 Annual Report Download - page 25

23
Building and Construction
7% $2.2 billion
Alcoa segments that sell products to this market: Flat-Rolled Products,
Extruded and End Products
• In 2007, Alcoa Building & Construction Systems’ Kawneer business
unit expanded its presence in rapidly growing segments and geogra-
phies. One emerging opportunity is in the fast-growing “ green
building” market where BCS’ Kawneer business has collaborated on
projects like the Heifer International headquarters project, which was
designed to meet the U.S. Green Building Council’s Leadership in
Energy and Environmental Design (LEED) certification standards. As
a part of the business unit’s “green” imperative, the Kawneer facility in
Visalia, California, implemented a Photovoltaic Solar Power System in
2007. The business unit also opened offices in India and Singapore to
capitalize on growth in these two regions.
• The value of nonresidential construction starts increased by 7% in
2007 with both the commercial/industrial and the institutional
segments of the market growing significantly. The value of commercial/
industrial construction grew by around 9% while the value of institu-
tional construction grew at a more reserved rate of 5% in 2007. The
primary drivers for the commercial/industrial sector were stores, office
buildings, and manufacturing facilities. The strongest institutional
markets were public buildings, dormitories, and educational buildings.
Aluminum and Alumina
30% $9.3 billion
Alcoa segments that sell products to this market: Primary Metals,
Alumina
• Alcoa is the world’s leading producer and manager of alumina, a
powdery oxide of aluminum refined from bauxite ore and used to
produce aluminum and alumina-based chemicals.
• In 2007, alumina production decreased by 44 kmt compared with
2006. Impacts from the national labor strike in Guinea and Hurricane
Dean weighed on production with 8% and 14% decreases at Point
Comfort, Tex., and Jamaica, respectively, offsetting a 4% increase
at Pinjarra (Australia). Paranam (Suriname), São Luis (Brazil),
Wagerup (Australia), and Pinjarra set production records in 2007.
U.S. Nonresidential
Building Contracts
sq ft millions
Source: McGraw-HillSource: McGraw-Hill
1400
1450
1500
1550
1600
1650
03 07060504
U.S. Nonresidential
Building Contract Value
billions of $
150
175
200
225
250
03 07060504
Reported Stocks – Days Global Consumption
& 3-Month LME Monthly Average
November 2007
0
7
14
21
28
35
42
49
56
63
70
77
84
91
$1,200
$3,000
$2,800
$2,600
$2,400
$2,200
$2,000
$1,800
$1,600
$1,400
11/ 94
11/ 95
11/ 9 6
11/ 97
11/ 98
11/ 9 9
11/ 0 0
11/ 01
11/ 02
11/ 03
11/ 04
11/ 05
11/ 06
11/ 07
Days of Consumption
LME Price / MT ($)
Reported Stocks: Comex, IAI,
Japan Port, LME, & SME
Reported Stocks Days
of Consumption
LME 3 M Price
Source: AIA and LME
• In 2007, slightly more than half of Alcoa’s alumina production was
sold under supply contracts to third parties worldwide, while the
remainder was used internally.
• Aluminum ingot is an internationally produced, priced, and traded
commodity whose principal trading market is the London Metal
Exchange, or LME.
• Worldwide aluminum capacity was 40.0-million mtpy, of which
5% was idle.
• Alcoa’s worldwide capacity was 4.6-million mtpy, of which
10% was idle.
Industrial Products and Other
14% $4.2 billion
Alcoa segments that sell products to this market: Flat-Rolled Products,
Engineered Solutions, Extruded and End Products
• Alcoa’s revenues from this market include sales of aluminum sheet,
plate and extrusions to distributors, products and services for power
generation, and products for the oil and gas industry.
• Industrial gas turbine demand remained strong. Orders for heavy-duty
gas turbines were up significantly in 2007 driven by the Middle East,
Asia, and Europe. Increasing gas turbine utilization rates positively
affected demand for spare parts. Environmental and lead-time con-
cerns around competing types of generation continued to make gas
turbine-fired power plants an attractive option. High levels of activity
in the oil and natural gas market increased demand for the sizes of
turbines used in that industry. These trends are expected to continue
in 2008.
• The oil and gas industry continues to be fueled by an ever-increasing
global demand for hydrocarbon products and, as such, is challenged
to economically find and develop new reserves. To meet demand, the
industry has progressively moved into ever more difficult operating
environments, including ultra-deepwater and extended reach drilling.
The operating conditions in these applications have forced the indus-
try to look for ultra-lightweight technologies capable of significantly
reducing weight while still operating in extreme conditions. Alcoa’s
long and successful history of providing similar technology solutions
for the aerospace industry has uniquely positioned it to meet and
exceed the expectations of the oil and gas industry.
• In support of this strategic market, earlier this year Alcoa announced
the formation of Alcoa Oil and Gas, which is focused on developing
and providing lightweight drilling solutions including such things
as ultralight drill pipe and landing strings, to name just a few. Along
with its portfolio of ultralight products, Alcoa Oil and Gas is also
providing the industry with a variety of forged aluminum, titanium,
steel, stainless steel, and nickel-based products that benefit from
the same engineering and design expertise that Alcoa has applied
within other industries.
Heavy-Duty IGT
Engine Builds
number of turbines
Source: Howmet
0
50
100
150
200
250
300
350
400
0
100
200
300
400
500
600
98 99 00 01 02 03 04 05 06 07 08e
South America
North America
North Sea/Arctic
Asia
Africa
Identified Exploration Targets
2008e-2010e
1084 deepwater wells anticipated
Source: Quest Global Resouces
07 08 09 10