NPI Evolution & Influence on Nickel Price - :: International · PDF file · 2013-10-09NPI Evolution & Influence on Nickel Price A Presentation for INSG Oct, 2013 ... PT Inco.....

2013/10/9

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NPI Evolution & Influence on Nickel Price

A Presentation for INSG

Oct, 2013

© SMM. All rights reserved.

Agenda

NPI Evolution Drives Down Nickel Price

Latest Trend of NPI Investment

About SMM

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Nickel price has fallen by more than 50% since 2011

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LME Nickel Price Trend

Down by >50%

Data source: LME, SMM

Unit: $/ton

− LME Nickel price has fallen from $29,065/ton in Feb, 2011 to only $13,310 in Jul, 2013, dropping by more than 50%.

10,000

15,000

20,000

25,000

30,000

Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13


Slowdown of demand growth, oversupply of Ni and lower cost of NPI push the price down

Slowdown of Demand Growth

• China stainless steel, as the major downstream of Nickel, has driven the global Ni consumption slow down

Lower Cost of NPI

• RKEF technology in China is booming

• Smelters with RKEF are mainly distributed in costal provinces

• RKEF has cost advantage compared with BF and EF

Oversupply of Nickel(Including NPI)

• China NPI has contributed the global Ni supply increase and replaced other Ni materials in SST production

• Global Nickel market has show supply surplus since 2011

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Growth slowdown of demand, oversupply of Nickel and lower cost of NPI push the price down

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China stainless steel has driven the global Ni consumption slow down

China World

Data source: SMM, Brook Hunt

− Stainless steel is the largest Nickel downstream sector in China and the world as well.

− Compared to 67% of Nickel consumption in the world, China stainless steel companies consumed more than 80% of the total.

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Nickel Consumption Structure

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− China stainless steel production accounted for more than 45% of total world in 2012 and has played the role as engine in last few years.

− With China stainless steel output growth slowing down, global stainless steel production growth rate has decreased from about 25% in 2010 to only 5% in 2012.

Global Stainless Steel Output (2007-2012)

Data source: ISSF, SMM

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30%

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2007 2008 2009 2010 2011 2012

Unit: kt

World ex China ChinaWorld Growth Rate China Growth Rate




• China stainless steel, as the major downstream of Nickel, has driven the global output slow down

Lower Cost of NPI





• China NPI has contributed the global Ni supply increase and largely replaced other Ni materials in SST production

• Global Nickel market has shown supply surplus since 2011

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China NPI has contributed the global Ni supply increase and largely replaced other Ni materials in SST production

− In recent years, due to the cost and accessibility advantage in China, NPI has replaced other nickel sources such as refined nickel, Cuban nickel oxide, imported ferronickel, etc., and is estimated to share more than 50% of nickel supply in SST production in 2013

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Global Nickel Output

Source of Nickel Used in Chinese Stainless Steel (SST) Production

− Due to the fast increase of NPI production, China has been the largest contributor to global primary nickel output growth since 2009, with proportion from only about 5% in 2008 to more than 20% in 2013.

Unit: kt

0%

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500

1,000

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2007 2008 2009 2010 2011 2012 2013E

NPI output(Ni Content)world ex NPINPI Proportion

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80%

100%

2010 2011 2012 2013E

NPI Refined NiScrap Import FerroNiCuba Ni Oxide


Global Ni Balance & LME Ni Price

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− Due to the decelerating demand growth and fast supply increase driven by China NPI production, global nickel market has shown supply surplus since 2011, resulting in the nickel price down.

Global Nickel market has shown supply surplus since 2011

Data source: INSG, SMM

0

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2007 2008 2009 2010 2011 2012 2013E

Balance Nickle average price

Unit：1,000Mt Unit：USD/mt

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• China stainless steel, as the major downstream of Nickel, has driven the global output slow down

Lower Cost of NPI





• China NPI has contributed the global Ni supply increase and replaced other Ni materials in SST production

• Global Nickel market has show supply surplus since 2011

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RKEF process, as a new NPI production technology, boomed in recent years

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Supply Proportion of Different Types of NPI, 2009-2013E

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− As SMM estimated, RKEF process produced more than 20% of NPI in China in 2012 and will increase to about 50% in 2013.

Data source: SMM

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100%

2009 2010 2011 2012 2013E

BF（1-2%） BF（4-8%） EAF(10-15%) RKEF（10-15%）

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Smelters with RKEF are mainly distributed in costal provinces

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RKEF Plant Distribution and Typical Process

Electric Arc Furnace

Rotary Kiln

Dryer Kiln

NPI

Wet Ore

Laterite Ore Mining

− Smelters with RKEF are mainly distributed in costal provinces of East and South China with low logistics cost for imported laterite ore.

Provinces with RKEF Plants

Data source: SMM


RKEF has cost advantage compared with BF/EF

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Cost Comparison of Technologies

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− Benefitting from the saving of power (3,500-4,000KWH/ton for RKEF VS 6,000-7,000KWH/ton for EF), logistics (close to the port), etc, RKEF process has cost advantage, which is usually over RMB2,000/ton comparing to BF and EF process.

Data source: SMM

Unit: $/ton

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24,000

2012/1/4 2012/4/4 2012/7/4 2012/10/4 2013/1/4 2013/4/4 2013/7/4

Fujian (RKEF) Inner Mongolia （EF）

Jiangsu and Shandong (EF) Shandong (4-6% BF)

LME nickle price

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Nickel Price is expected to be between 13,600-15,000 $/ton in Q4, 2013

LME Nickel Price Expectation

Data source: LME, SMM

Unit: $/ton

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2013 Q4 price range: 13,600-15,000 $/ton

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Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13

13,600


Agenda



About SMM

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PT Inco

Antam-1

Antam-2

Antam-3

MCOERN-2

MCOERN-1

Weda Bay Nickel

TITAN

ERAMET

Jiangsu Mingzhu International

Beijing Shenwu Environment & Energy Technology Co., Ltd.

Fujian Pan-Chinese Mining

IndoferroHOROC

Hanwang Industrial Group

Tsingshan Group

New Metallurgy & Dafeng

Hong hehenghao

SOLWAY

BOSOWA

Bukaka Teknik Utama

Bakti Bumi Sulawesi

INTEGRA

Operating Plant Planned Plant ex China

Rush to Indonesia

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Chinese Planned PlantData source: SMM


Gaining control of Laterite ore is the prime focus for NPI producers

Typical RKEF Cost Structure (2012)

Data source: SMM

− As Laterite ore is the most important raw material for NPI and accounts for more than 40% of total cost, gaining control of Laterite resources to secure stable supply and low ore cost, has become the prime focus for NPI producers.

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Laterite Ore

Bituminous

Electricity

Others

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Indonesia’s banning export policy makes NPI producers rush to smelting in Indonesia

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China’s Monthly Laterite Imports

Data source: China Customs, SMM

− Indonesia and Philippines are the two dominate sources of laterite ore to China, sharing more than 99% of total ore imported.

− As Indonesia government is restricting laterite ore export, China NPI producers are rushing to smelting in Indonesia to secure the laterite ore supply.

Indonesia started collecting export tax and issued quotas.

50% division

Unit: kt

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Philippine Indonesia Indonesia Share


Strength of smelting in Indonesia

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− Indonesia is one of the largest laterite ore resource countries in the world

1. Rich Resources

− Only a few producers in Indonesia which is much less competition compared with hyper-competitive market in China.

4. Less Competition

− No sea freight charges and cheaper coal lead to low NPI production cost.

2. Low Cost

− The Indonesian government plans to ban the export of unprocessed minerals from 2014.

3. Legal Avoidance Policy

Rush to Smelting in Indonesia

Smelting in Indonesia

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Agenda



About SMM

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About SMM

Daily Online Information

Analysis Reports

IndustryStatistics

Research & Consulting

BusinessOpportunity

Company Evolution

Service Portfolio

Market Intelligence

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19991999

Company established

20042004

China No. 1 website in non ferrous metal

industry

20062006

China Zinc & Lead price benchmark

20102010

China Copper RMB price benchmark

2011201120092009

China Strategic Metals price benchmark

Strategic Metal price starts to

influence global market

Start to compile China Steel

PMI

Start to compile non-ferrous metal PMI

20122012

Start cooperation with third party data

platform (Bloomberg, Thompson Reuters,

etc.)

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Service mix

SMM Consulting

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nsu

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ces Expansion

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Distribution

Restructuring & Repositioning

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Precious Metals

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Market Entry Feasibility &

Strategy

Metal Scrap

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Analytic process methods are based on our experience in market research andmanagement consulting, using an iterative process to carry out the analytical work. Eachcomponent has been designed to sequentially develop information and understandings inorder to inform and enable the next step, as illustrated:

Program initiation

Secondary research/direction setting

Value Chain Framework Review

Primary Field Research

Coordination/analysis

Review with client

Report preparation

Verification

Final presentation/work session

Potential next steps

Our methodology is …

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Foreign-related Investigation Lincense

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Why SMM?

SMM Consulting Typical Consulting Firms

Highly experienced people at all levels

Experienced partners, inexperienced consultants

Leveraging our experience to resolve clients’ issues

Leveraging consulting to sell other services

Highly professional in nonferrous metals industry

Targeting many industries, nonprofessional in nonferrous metals industry

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We have a preeminent position in syndicated research across many nonferrous metals markets-Examples include :

• Online intelligence & database

- News

- Historical price

• Weekly report

- China Nickel Briefing

- China Lead Weekly

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- China Aluminum Market Briefing

- China Aluminum Alloy Weekly

- China Copper Scrap Weekly

• Monthly report- China Nickel Monthly- China Aluminum Monthly- China Copper Monthly

• Annual report

- China Nickel Industry Chain Report

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SMM is a leading domestic consulting and research firm dedicated

to providing the kind of insight and knowledge that helps companies

find a clear path to success. The firm has served the management

consulting and market research needs of organizations in the non-

ferrous metal industries for over 10 years. For more information,

visit www.metal.com or en.smm.cn .

If you require additional information about the contents of this document or the services that SMM provides, please contact:

Ryan Dong+86-21-3133 [email protected] west, No. 2000,North Zhongshan RoadShanghai, PC 200063, China

NPI Evolution & Influence on Nickel Price - :: International · PDF file · 2013-10-09NPI Evolution & Influence on Nickel Price A Presentation for INSG Oct, 2013 ... PT Inco.....

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NPI Evolution & Influence on Nickel Price - :: International · PDF file · 2013-10-09NPI Evolution & Influence on Nickel Price A Presentation for INSG Oct, 2013 ... PT Inco.....