China, India and the World Market Balance

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15th Global iron ore and steel forecast

March 21st 2012 Perth WA

China, India

and theworld market balance

Magnus Ericsson

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l l

nese ore gra es

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ource: aw a er a s a a ron ore, .

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Chinese iron ore imports

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Source: Raw Materials Data Iron ore, 2011.

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Global iron ore demandMt

Total world

3500

4000

2500

3000

na

1500

2000

500

1000

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Source: Raw Materials Data Iron ore, 2011.

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Raw Materials Grou Raw Materials Data, Metals/Coal/Iron Ore

Strategy developmentMining companies, equipment & service

Mineral policy, investment promotion

,

Pre-feasibility/Feasibility studies

, Merged with Intierra to form IntierraRMG

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Outline

India.

China

.

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Indian steel sta esPoint ofPoint of

Peak Point

Saturation

Saturation

Singapore Japan

Point ofInflectionPoint ofInflection

USA

Japan

Chin

TriggerPointTriggerPoint

Singapore

Australia

EU 15

2000-0

IndiaIndia

China

USA

0 100 200 300 400 500 600 700 800

Per capita in KG

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2009 2020 2030

.

Iron ore demand (Mt) 142 175 355ron ore pro uc on

Population (million) 1 210 1 480 1 800

Steel use per capita (kg) 47 74 123

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Sinkin ore rades.

Increase operation scale.

og s cs.

.

Beneficiation of magnetites.

Iron ore exporters vs steel companies.

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China

Exploration

Production Projects

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Billion USD

12

1425

8

10

15

20

Total world

China

2

4

6

5

10

0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

0

Sources: Total world MEG, China Ministry of Land and Resoruces.

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Year 2009 total 30.30 billion RMB

Central gov

Local gov

Private

Source: MOLAR 2010.

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Coal

Year 2009 total 26.11 billion RMB

Gold

Copper

Pb/Zn

Uranium

TungstenOther

Source: MOLAR 2010.

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Chinese exploration

.

Worlds largest exploration spender.

400 MUSD iron ore 2009.

o grea resu s.

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Global iron ore production

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Source: Raw Materials Data Iron ore, 2011.

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Chinese structure

ragmen e s ruc ure.

Many small mines.

Low grades, under ground.

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Iron ore production costsType of

mining

Efficient

open pit

Difficult

open pit

Efficient

open pit

Difficult

open pitCosts

- - - -

Type of oreHigh grade

DSOHigh grade

DSOBeneficiation

necessaryBeneficiation

necessaryCosts

(USD/t) 5-12 5-12 15-20 15-20

Total rangeFOB (USD/t) 10-24 15-32 30-56 60-105

Freight toChinaUSD t 20-30 20-30 20-30 20-30

Cost CFRChina 30-55 35-65 50-85 80-135

Source:JacquesAstier,MineralEconomics2011, forthcoming.

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Chinese production volumes

USD/t

Sources: J. Astier RMG.

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Chineseproduction costs

Small mines most < 0.5-1 Mt.

Max total volume

.

Marginal cost of production

>140-150 USD/t Deeper underground.

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Chinese foreign expansion

5 0.1 0.5

World production

Ferro-

Chrome

1048 370 102

Chineseproduction

Planned Chinese

Bauxite

14 0.64 0.27

foreign expansion

Copper

0% 50% 100%

Source: BGR 2007.

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h f

.

sD

ata,

2011

aw

Material

Source:

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Iron ore projects Operating mines

Peru 7.0Brazil 1.7

Canada 0.8 28.8

ProjectsAustralia 65

Peru 10

Total ~ 110 Mt

Source: Raw Materials Data 2011.

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Chinese projects in Africa

Awaso Ghana Baux Bosai Min. 80 Oper.

Simandou Guinea Fe Chinalco 45 Project. .

Bong Liberia Fe China Union 100 ProjectTonkolili Sierra L. Fe Shandong 25 Project

.Dilokong South Afr. Cr East Asia Met. 85 Oper.

Weziswe South Afr. PGM JNMC 45 Projectata,

2011.

.

Chambishi Zambia Cu CNMC 85 Oper.

Gwabw/Njali Zambia U JNMC 30 ProjectM

aterials

Muliashi Zambia Cu CNMC 72 Oper.Munali Zambia Cu CNMC 50 Oper.

Lala nazi Zimbabwe Cr Sinosteel 100 O er. ource:Ra

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Chinese FDI

Foreign expansion slow - notcontinuous.

Will increase in the future.

Long term serious problem

Focus control over imports .

control over imports.

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Largest miner

many small, high costmines.

Engine of demand

Largest explorer since 2010. Poor results.

.

Foreign expansion slow, not continuous. Continued high demand for quality ore.

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rsS

empler.

rawing:Kaiande

Selenium

d

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Chi d I di

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China and India

1600000

1200000

1400000

China

800000

1000000

400 000

600 000

India

0

200 000

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Source: Raw Materials Data Iron ore, 2011.

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Steel: two key questions

Where will China end up? . K r : 74 k /

USA: 203 kg/cap

As China 21 % /year (2000 2007)

-

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Restrictions in iron ore trade

Exercisedexportduties

,

China:10

%

Argentina:10%

India:statetradingenterprises

:

Source:UniversittBonn

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l Demand outlook still strong.

China, later India will drive demand. .

India reduced exports.

na overseas expans on.

Prices will fall but remain on a high level.

Rare earths not a problem Chinese importde endenc for iron ore and co er is!

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Thank ou !MagnusEricsson

ox

SE169

03

Solna,

Sweden

[email protected]

Tel:

+46

8

744

00

65

Fax:+4687440066

www.rmg.seREE drawing: Kaianders Sempler.

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Metals first isolated in

061030 Please visit www.rmg.se