RMG Presentation (Magnus Ericsson) - Perth

15th Global iron ore and steel forecast March 21st 2012 Perth WA

China, Indiaand theworld market balance

Magnus Ericsson

孟瑞松

Global iron ore production

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Source: Raw Materials Data Iron ore, 2011.

Global iron ore gradesGlobal iron ore grades

Chi dChinese ore grades

S R M t i l D t I 2011

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Source: Raw Materials Data Iron ore, 2011.

Chinese iron ore imports

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Source: Raw Materials Data Iron ore, 2011.

Global steel growth 2030Av. Growth, % av. Growth, %

Country/Region 2000 2010 2000 ‐ 2010 2015 2020 2025 2030 2010 ‐ 2030China 127 236 625 658 17.51 902 671 1 152 062 1 322 640 1 518 473 4.1

6.00 5.00 2.80 2.80 4.05India 26 924 66 848 9.96 102 854 158 254 243 493 374 644 9.0India 26 924 66 848 9.96 102 854 158 254 243 493 374 644 9.0

9.00 9.00 9.00 9.00 9.00Japan 106 444 109 600 1.02 121 007 121 007 121 007 121 007 0.5

2.00 0.00 0.00 0.00 0.50South Korea 43 107 58 453 3.47 64 853 69 518 73 064 76 791 1.4

2.00 1.00 1.00 1.00 1.38Emerging Pacific Rim 28 169 40 304 3.91 49 036 62 584 79 874 112 028 5.3

4.00 5.00 5.00 7.00 5.25North America 135 353 111 798 ‐0.52  112 920 114 054 114 969 114 969 0.1

0.20 0.20 0.00 0.00 0.14South America 39 110 43 775 1.59 53 259 67 973 86 753 121 676 5.34 % China

4.00 5.00 5.00 7.00 5.25Europe 184 925 176 982 ‐0.22  176 982 176 982 176 982 176 982 0.0

0.00 0.00 0.00 0.00 0.00C.I.S 98 489 108 425 1.23 119 710 132 169 138 911 145 997 1.5

2.00 2.00 1.00 1.00 1.50MENA i l T k 30 074 57 413 6 65 79 020 100 851 127 489 155 109 5 1

9 % India

MENA incl. Turkey 30 074 57 413 6.65 79 020 100 851 127 489 155 109 5.15.00 5.00 4.00 4.00 5.10

RoW (Africa & Oceania) 16 690 16 839 0.48 17 264 22 034 28 657 40 193 4.50.50 5.00 7.00 7.00 4.48

Total  World 836 521 1 416 095 5.47 1 799 577 2 177 489 2 513 840 2 957 870 3.3

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Source: Raw Materials Data Iron ore, 2011.

Global iron ore demandMt

Total world3500

4000

Chi2500

3000

3500

Rest of world

China

1500

2000

Rest of world

0

500

1000

0

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Source: Raw Materials Data Iron ore, 2011.

Raw Materials Groupp• Raw Materials Data, Metals/Coal/Iron Ore• Strategy development

– Mining companies, equipment & service providersproviders

• Mineral policy, investment promotionGovernments International organisations– Governments, International organisations

• Pre-feasibility/Feasibility studies– Financial institutions companiesFinancial institutions, companies

• Merged with Intierra to form IntierraRMG

Outline

• India.• China• Conclusions• Conclusions.

I diIndia

Rare earths drawing: Kaianders Sempler.

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Indian steel stagesgPoint of Point of

Peak PointPoint of SaturationPoint of Saturation

Singapore JapanEU

Point of InflectionPoint of Inflection

aEU

USA

Japan

06

China

Trigger PointTrigger Point

Singapore

Australia

EU 15

2000

-06

India0 100 200 300 400 500 600 700 800

India

China

USA

0 100 200 300 400 500 600 700 800Per capita in KG

India steel industry evolutionIndia steel industry evolution

2009 2020 2030Steel production (Mt) 56 6 110 222Steel production (Mt) 56.6 110 222Iron ore demand (Mt) 142 175 355I d ti (Mt) 257 411 832Iron ore production (Mt) 257 411 832Population (million) 1 210 1 480 1 800Steel use per capita (kg) 47 74 123

Indian problemsIndian problems• Sinking ore grades.g g• Increase operation scale.

L i ti

• High alumina problems in BF

• Logistics.

• High alumina problems in BF.• Beneficiation of magnetites.• Iron ore exporters vs steel companies.

China• Exploration • StructureStructure• Production• Projects

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Global exploration16 30Billion USD

Global explorationBillion RMB

12

14

16

25

30Billion USD Billion RMB

8

10

15

20

Total worldChina

2

4

6

5

10

02001 2002 2003 2004 2005 2006 2007 2008 2009 2010

0

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

Chinese exploration 1Chinese exploration 1

Year 2009 total 30.30 billion RMB

Central govLocal govPrivate

Source: MOLAR 2010.Source: MOLAR 2010.

Chinese exploration 2Chinese exploration 2

Coal

Year 2009 total 26.11 billion RMB

GoldCopperIron oreIron orePb/ZnUraniumTungstenOther

Source: MOLAR 2010.Source: MOLAR 2010.

Chinese exploration

Major exploration efforts• Major exploration efforts.• World’s largest exploration spender.g p p• 400 MUSD iron ore 2009.

N t lt• No great results.

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Global iron ore production

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Source: Raw Materials Data Iron ore, 2011.

Chinese structure

F t d t t• Fragmented structure.• Many small mines.• Low grades, under ground.• Vertical integration.Vertical integration.

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Iron ore production costsType of mining

Efficientopen pit

Difficultopen pit

Efficientopen pit

Difficultopen pit

Costs (USD/t) 5 12 10 20 5 12 10 20(USD/t) 5-12 10-20 5-12 10-20

Type of oreHigh grade

DSOHigh grade

DSOBeneficiation

necessaryBeneficiation

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

Total range O ( S / ) * **FOB (USD/t) 10-24 15-32 30-56 * 60-105 **

Freight to China (USD/t) 20-30 20-30 20-30 20-30(USD/t) 20 30 20 30 20 30 20 30Cost CFR China 30-55 35-65 50-85 80-135

Source: Jacques Astier, Mineral Economics 2011,  forthcoming.

Chinese production volumesUSD/t

Sources: J. Astier, RMG.

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Sources: J. Astier, RMG.

Chinese cost curvesUSD/t

Sources: J. Astier, RMG.

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Sources: J. Astier, RMG.

Chinese production costs

• Small mines most < 0.5-1 Mt.• Max total volume

300- 400 Mt300- 400 Mt.• Marginal cost of production

>140-150 USD/t• Deeper underground.

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Chinese foreign expansion

124

5

17

0.1

24

0.5

World production

Ferro-Chrome

1048

124

370

17

102

24ChineseproductionPlanned Chinese

Bauxite

Iron ore

14 0.64 0.27

foreign expansionIron ore

Copper

0% 50% 100%

Source: BGR 2007.

Chinese foreign projectsChinese foreign projects

.s

Dat

a, 2

011

Raw

Mat

eria

lsSo

urce

: R

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Iron ore projects• Operating mines

Australia 19.3Australia 19.3Peru 7.0Brazil 1.7Canada 0.8 28.8

• ProjectsAustralia 65Peru 10Sierra Leone 3 78Sierra Leone 3 78Total ~ 110 MtSource: Raw Materials Data, 2011.

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,

Chinese projects in AfricaCountry Metal Company Share % TypeCountry Metal Company Share % Type

Awaso Ghana Baux Bosai Min. 80 Oper.Simandou Guinea Fe Chinalco 45 Project Forécariah Guinea Fe China Int F 50 ProjectForécariah Guinea Fe China Int. F. 50 Project Bong Liberia Fe China Union 100 Project Tonkolili Sierra L. Fe Shandong 25 Project Avantuur South Afr Mn Baosteel 11 ProjectAvantuur South Afr. Mn Baosteel 11 Project Dilokong South Afr. Cr East Asia Met. 85 Oper.Weziswe South Afr. PGM JNMC 45 ProjectBaluba Zambia Cu CNMC 72 Oper D

ata,

201

1.

Baluba Zambia Cu CNMC 72 Oper. Chambishi Zambia Cu CNMC 85 Oper.Gwabw/Njali Zambia U JNMC 30 Project

w M

ater

ials

D

Muliashi Zambia Cu CNMC 72 Oper.Munali Zambia Cu CNMC 50 Oper.Lalapnazi Zimbabwe Cr Sinosteel 100 Oper. So

urce

: Raw

p p S

Chinese FDI• Foreign expansion slow - not

continuous.• Will increase in the future.• Long term serious problem

for China.for China.• Focus control over imports .

Not reach internal goals of• Not reach internal goals of control over imports.

ChinaChina• Largest miner –many small, high cost mines.• Engine of demand –reduced growth pace

• Largest explorer since 2010. Poor results.reduced growth pace.

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

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g q y

World marketWorld marketrs

Sem

pler

.ra

win

g: K

aian

deSe

leni

um d

Crude steel growth patternCrude steel growth pattern

China and India steelproductionsteelproduction

1 600 000tonnes

1 200 000

1 400 000 Chinatonnes

800 000

1 000 000

400 000

600 000

India

0

200 000

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

India

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Source: Raw Materials Data Iron ore, 2011.1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Steel: two key questions

• Where will China end up?– S. Korea: 974 kg/capS. Korea: 974 kg/cap– USA: 203 kg/cap

• How fast will India grow?• How fast will India grow?– As China 21 % /year (2000 – 2007)

Slower faster– Slower - faster

Restrictions in iron ore trade• Exercised export duties

India: 10 % lump 20 % fines– India: 10 % lump, 20 % fines– China: 10 %Viet Nam: 20 %– Viet Nam: 20 %

– Argentina: 10 % 

• Exercised quantitative restrictions:• Exercised quantitative restrictions:– India: state trading enterprisesMalaysia non automatic export licence– Malaysia: non‐automatic export licence

Source: Universität Bonn

ConclusionsConclusions• Demand outlook still strong.• China, later India will drive demand.• Supply constraints increasingSupply constraints increasing.• India reduced exports.

Chi i• China overseas expansion.• Prices will fall but remain on a high level.• Rare earths not a problem – Chinese import dependency for iron ore and copper is!

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p y pp

Thank you !Magnus Ericsson

PO B 3127

y

PO Box 3127 

SE‐169 03 Solna, Sweden

[email protected]

Tel: +46‐8‐744 00 65   

Fax: +46‐8‐744 0066

www.rmg.seREE drawing: Kaianders Sempler.

Metals first isolated in Sweden/Finland

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Sweden/FinlandPlease visit www.rmg.se