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En+ GROUP En+ Group Annual Report 2021 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES BUSINESS REVIEW METALS SEGMENT REVIEW 69.0 mt global primary aluminium demand grew by 8.8% y-o-y Market overview Current situation on the market is largely affected by various sanctions imposed. In present circumstances any forecast or outlook made or previously made may very rapidly become irrelevant due to ongoing developments on the market and therefore the stakeholders should exercise due caution when making their analysis or decision. The analysis below is referring to the situation as of the end of 2021. Global aluminium demand In 2021, global primary aluminium demand grew by 8.8% y-o-y to 69.0 mt. In the Rest of the World ex-China ("ROW") demand increased by 12.8% to 28.6 mt, while demand in China increased by 6.1% to 40.4 mt. Demand in China was suppressed throughout the August-November period due to power rationing policy but rebounded strongly in December with the normalisation of power supply. Regardless, the global manufacturing sector ended 2021 on a positive note. The global manufacturing PMI rose for three consecutive months and, in December, settled at a respectable 54.2. Global aluminium demand in construction, the largest segment of aluminium end- use, grew by 5% in 2021 compared to the previous year, and by 3% compared to pre-COVID 2019. The European construction sector has been supported by government stimulus packages and showed strength in late 2021 despite material supply issues. The US construction sector was supported by low mortgage rates, driving demand across the residential sector. In June, President Joe Biden signed a USD 1.2 trillion infrastructure bill, to be invested over the next eight years. China's construction sector showed a sharp decline in the second half of 2021. Pressure on developers to de-leverage- particularly from the government's Three Red Lines policy-has led to serious financial problems at Evergrande and other development companies. Aluminium demand in the transportation sector, the second largest end-consuming segment, grew by 10% compared to 2020 levels, but at the same time remained 4% lower in comparison with 2019. Global semiconductor shortage forced OEMs to reduce their planned vehicle output in 2021. As per analyst consensus, approximately 8 million cars have either not been produced or were deferred in 2021 due to the semiconductor chip shortage. Many OEMs prioritised production of more expensive models, including EVs, in order to make up for material shortages and secure revenue. Global sales of BEVS and plug-in hybrids grew over 70% in 2021, while in China electric vehicle sales surged 154%. The majority of global OEMs have committed to achieving carbon neutrality, increasing BEVs and hybrids in their portfolios. This trend reinforces aluminium usage in the automotive sector, boosting further lightweighting and implementing new applications such as the battery tray. The aerospace sector has also shown clear signs of a recovery. Key aircraft manufacturers, namely Airbus and Boeing, released their annual orders and deliveries for 2021, showing strong growth in aircraft deliveries of 8% and 117%, respectively. The packaging sector remains a bright spot in aluminium demand growth. Having not contracted in demand in 2020, the segment grew another 9% in 2021. Beverage brands continue to position new drinks in aluminium cans as environmentally friendly, targeting sustainability-conscious consumers as well as carbon neutrality. The growing demand in the aluminium packaging segment is also evidenced by the fact that the largest can manufacturers are actively investing in expanding production capacities across the world. Finally, aluminium demand in the power sector grew by 7% compared to 2020. Global trends in decarbonisation and the green energy transition have stimulated investment into renewable energy to address climate change. According to preliminary IEA data, additions of renewable power capacity set another annual record in 2021, with almost 290 GW added, driven by solar PV. This is 3% higher than 2020's already exceptional growth. Solar PV alone accounts for more than half of all renewable power expansion in 2021, followed by wind and hydropower. The majority of solar panels are fitted with aluminium frames, which provide mounting attachment points and protection for the edges of the glass laminate. In rooftop and commercial applications, mounting systems for PV panels are also made of aluminium to ensure lightweight and durability. Global aluminium supply, inventories and premiums The worldwide supply of primary aluminium continued to grow in 2021, increasing by 3.9% y-o-y to 67.8 mt. At the same time, RoW production increased up by only 2.8% to 28.9 mt. High gas prices in Europe have caused significant disruption to the aluminium smelting production due to smelters' negative cash margins. Nine European smelters with 1.46 mtpa capacity executed or announced c. 720 ktpa of operating aluminium capacity cuts starting from 4Q 2021, which is equal to c. 14.4% of the total installed aluminium capacity in the region (c.5.02 mtpa). This has triggered a strong growth in EU aluminium ingot premiums, which rose by 33% on average over November-December 2021 period. Regional premiums remained strong and elevated with Midwest Al premium reaching levels above 27.6 cents/lb and EU DU premium - above USD 250 tonne. This growth occurred against the backdrop of sellers raising quotations on expectations that the premium will continue to climb in line. with strong physical demand, and in anticipation of possible further smelting disruptions in Europe following a significant rise in the cost of power. LME aluminium price dynamics (USD/t)1 3,500 2,800 2.100 Overall, the global market recorded a deficit of 1.2 mt in 2021 compared to the 1.9 mt 1,400 700 of surplus observed during the same period of 2020 о Supply growth in China slowed significantly from 7.4% in 9M 2021 to 4.7% for FY 2021 and the resulting supply in China was 39.0 mt. Despite easing of power supply tightness in China and a drop in domestic thermal coal prices, significant smelting capacity cuts are still in place due to power constraints in some provinces and dual control for decorbanisation targets. Chinese primary aluminium production has therefore fell steadily since July 2021. Chinese unwrought aluminium and semis exports continued to recover during 4Q 2021 and numbers for the full year 2021 demonstrate strong growth of 15.6% y-o-y to 5.6 mt. This result was largely due to attractive export arbitrage and rising overseas demand. At the same time, Chinese import of unwrought aluminium and products, which include primary metal and unwrought, alloyed aluminium, was 3.2 mt in 2021, a new record high and up from 2.7 mt in 2020. During 2021, aluminium inventories were mostly falling, starting from March, with total LME stocks remaining below 0.9 mt at the end of the year. Metal held outside of LME warehouses (off- warrant reported stocks) fell to 447 kt by the end of November 2021. Jan Feb Mar Apr May June July Aug Sept Oct Now Dec Jan Feb Mar Apr May June July Aug Sept Oct Now Dec 2020 2021 30 Bloomberg data. 31