Outlook for copper and DRC in the global context

Transcription

1 Outlook for copper and DRC in the global context Stephane Redon, Director

2 Overview Demand Supply Prices DRC 1

3 Robust global demand prospects expected global demand CAGR of close to 3.5% Accelerating trend Additional 800mtpa required for the next 15 years Chinese demand to be supported by power infrastructure investment motor vehicle production consumer products and less so by construction Alternative sources of long-term growth India (and Asia excluding Japan and China) Brazil (and Latin America) Turkey (and the Middle East) 2

4 Snowballing effect of high growth countries Growth in Refined Copper Consumption (%) India, Brazil and Turkey China Rest of World India, Brazil and Turkey 11% China 39% India, Brazil and Turkey 7% China 51% Source: Wood Mackenzie 3

5 Two ways of looking at copper s macroeconomic leverage China s Demand per GDP Demand per GDP (%) Steel Copper Copper Consumption (kg pc) China Japan Germany USA ,000 20,000 30,000 40,000 US$ PPP GDP per Capita GDP per Capita * Indexed intensity of use Source: Anglo-American, Rio Tinto 4

6 China s path 20 South Korea Copper Consumption (kg pc) China (Peak high case) China (2011) China (2025e low case) US at peak (1973) Germany Japan US today 0 10,000 20,000 30,000 40,000 50,000 60,000 GDP per Capita Source: Exane BNP Paribas 5

7 Supply challenges here to stay Decreasing grades, increasing weight of underground production Increasing OpEx and CapEx Consistently high disruption levels Move to new jurisdictions Environmental / social limitations Access to infrastructure Skills shortage 6

8 Adverse trends Head Grade Unit Capex Cost (c/lb) (%) th Percentile Cost Sources: Wood Mackenzie 7

9 High disruption levels, diversity of factors Weather 5% Pit Walls 13% Other 10% Slow Ramp Up 20% Grades 18% Percentage of Total Volume of Production Lost (%) % 7.4% 6.8% 5.7% 8.0% Technical 17% 5.8% 5.0% Strikes 17% 5.8% Source: Wood Mackenzie 8

10 Solid price supports Good price resilience throughout crisis Our preferred metal Tight supply, steep cost curve Limited short-term downside potential Best-in-class medium-term prospects Long-term price expectations are positive USD 6300/t to USD 7500/t Estimated incentive price of USD 6600/t Market tightness to keep prices above marginal production cost 9

11 Prices still off historical peak 500 Copper Price (c/lb) Nominal 2012 USD Source: Exane BNP Paribas 10

12 Price resilience 2 year peak year peak Percentage Change (%) % -24% -20% -17% Percentage Change (%) % -41% -40% -25% -19% % -70 Iron Ore Zinc Aluminium Zinc Iron Ore Aluminium Palladium Copper Palladium Copper 11

13 Pole position amongst main metals Short term Medium term Availability Surplus - Deficit + Copper Platinum Iron ore Coking coal Thermal coal Zinc Aluminium Nickel Availability Abundance - Scarcity + Coking coal Iron ore Copper Nickel Platinum Thermal Coal Zinc Aluminium Significant - Limited + Price downside Downside - Upside + Price upside Source: Exane BNP Paribas 12

14 Optimism on long-term prices 8500 Copper Price (US$/t) Exane BNP Paribas Wood Mackenzie LT Broker Consensus 13

15 DRC copper prospects: a remote bounty A large club of new frontier producing countries Vast, undeveloped resources Hard and soft challenges Market feedback evidences some key challenges Country risk Realisation and transport costs Power reliability A past and future producer Some major, positive milestones Large commissionings Large acquisitions Large discoveries There is a lot policy can achieve Rule of law Public investment Education Wealth redistribution 14

16 Production migrating to new countries Chile + USA + Australia + Canada c. 40% Peru + Zambia + DRC + Indonesia + Mexico + Russia + Mongolia c. 40% Sources: Wood Mackenzie 15

17 DRC coming back 800 Copper Production in the DRC (kt) Sources: Wood Mackenzie Note: Columns represent total production data for that year 16

18 A deficit of perception Country Taxes / Royalties Availability of Human Resources Access to Infrastructure Licensing / Permitting Community Opposition Electricity Supply Access to Water DRC Peru Chile Guinea South Africa Australia Mongolia USA Brazil Philippines Indonesia Canada Sources: Anglo-American 17

19 High realisation and freight costs Realisation and Freight Costs (c/lb Cu) USA Chile Peru Australia Zambia DRC Paid Metal (Mlb) Sources: Wood Mackenzie 18

20 This presentation has been prepared by BNP PARIBAS for informational purposes only. Although the information contained in this presentation has been obtained from sources which BNP PARIBAS believes to be reliable, it has not been independently verified and no representation or warranty, express or implied, is made and no responsibility is or will be accepted by BNP PARIBAS as to or in relation to the accuracy, reliability or completeness of any such information. Opinions expressed herein reflect the judgement of BNP PARIBAS as of the date of this presentation and may be subject to change without notice if BNP PARIBAS becomes aware of any information, whether specific or general, which may have a material impact on any such opinions. BNP PARIBAS will not be responsible for any consequences resulting from the use of this presentation as well as the reliance upon any opinion or statement contained herein or for any omission. This presentation is confidential and may not be reproduced (in whole or in part) nor summarised or distributed without the prior written permission of BNP PARIBAS. BNP PARIBAS. All rights reserved.