Nedmag MAGMIN 2013 CONFERENCE. Are we looking at a more positive future? Paul Schipper Managing Director Nedmag. Getting you closer to perfection

Transcription

1 Nedmag Getting you closer to perfection MAGMIN 2013 CONFERENCE Are we looking at a more positive future? Paul Schipper Managing Director Nedmag

2 The refractpry industry The Oxford dictionary:

3 CONTENT 1) Nedmag Key data and highlights Market positions 2) DBM/EFM demand Global magnesia consumption 2012 Global refractory DBM consumption Global construction forecast Global steel industry trends Global steel industry forecast Global cement industry trends Global cement industry forecast Global non-ferrous/glass forecast DBM/EFM demand trends DBM/EFM demand forecast 3) DBM/EFM supply DBM/EFM supply trends DBM/EFM supply forecast 4) DBM/EFM demand & supply Conclusions 5) Cost of production Freight Energy Labour Conclusions 3

4 NEDMAG

5 NEDMAG - KEY DAYA AND HIGHLIGHTS World leader in high purity Dead Burned Magnesium for use in refractories. Leading producer of magnesium chloride and calcium chloride. Producer of magnesium hydroxide and Caustic Calcined Magnesite (CCM). Established in 1981 by Royal Dutch Shell and sold in 1994 to Lhoist and NOM. : Worldleader in dolomite and lime. : Dutch state owned investment company Total turnover of 105 million Euro in 2012 Total number of employees:

6 NEDMAG S STRONG MARKET POSITIONS Refractories for mainly cement and steel applications with high quality DBM (>98,5% MgO content). Oil & gas exploration where a clean calcium chloride of Nedmag plays a key roll in establishing and maintaining oil wells. Deicing & dedusting in Western Europe, Scandinavia and the east coast of North America where magnesium- and calcium chloride is used for salt spreading on road infrastructures. Food market where Nedmag s high quality and ISO certified calcium chloride is used in beer- and cheese production. PVC where Nedmag s high purity magnesium chloride plays a key roll as a raw material for flame retardants. 6

7 DBM/EFM DEMAND

8 GLOBAL MAGNESIA CONSUMPTION 2012 Global magnesia consumption estimated some 10.5 million ton/year 72 % of global magnesia consumption consisting of DBM Source: Roskill 2010, Nedmag Marketing

9 GLOBAL REFRACTORY DBM CONSUMPTION steel & iron cement & lime glass & non-ferrous 12% 47% 41% Refractories main consumers of DBM DBM mainy consumed in steel/iron applications, followed by cement/lime EFM almost completely used for refractories for steel industry Source: Roskill 2010, Nedmag Marketing

10 GLOBAL CONSTRUCTION FORECAST Perspective positive: developed Europe and Asia Pacific slowly recovering, rest of world growing Source: Holcim, January 2013

11 GLOBAL STEEL INDUSTRY TRENDS China s 12th Five Year Plan (FYP): Reduction in energy use Upgrading technology Value added steel (a.o. for cars) Slowdown in steel production Global efficiency improvement in refractory consumption/ton ~1 % Focus on the development of steel for express railway, high-grade non-oriented silicon steel, high magnetic induction oriented silicon steel, high strength machine steel and other key steel varieties. Support such technical development efforts as non blast furnace iron making, clean steel production and integrated resources utilization. Cheap US gas investments in DRI plants (a.o. Severstal, Nucor, Voestalpine) Strong decline in steel in Europe, in general inventory levels under control: USA, months of steel supply Europe, months of steel supply Brazil, months of steel supply Source: Ernst & Young, January 2013; ArcelorMittal, April 2013

12 GLOBAL STEEL INDUSTRY FORECAST Crude Steel Production Forecast in Mt Total Growth CAGR Region (f) 2014 (f) 2015 (f) EU ,0% 1,0% United States ,6% 1,8% Brazil ,1% 5,4% Russian Federation ,3% 3,6% China ,7% 3,8% Japan ,7% 1,5% South Korea ,6% 3,7% Taiwan ,8% 1,6% India ,5% 6,1% Other ,0% 2,6% World Total ,8% 3,2% Infrastructure investments in India and China (e.g. rail networks) Growth in commercial and residential construction in China (36 M apartments till 2015) Higher consumption of consumer durables in India 2014 FIFA World Cup in India and 2016 Olympic Games in Brazil Rebuilding in Japan post-earthquake not yet started, but contracting car manufacturing industry and shipbuilding End of destocking in Brazil Energy projects and construction activity in Russia Comment: numbers somewhat different from WorldSteel, but growth pattern similar Source: BREE, March 2013

13 GLOBAL CEMENT INDUSTRY TRENDS Ongoing increase in usage of alternative fuels Source: Lafarge, Cemex, Global Cement

14 GLOBAL CEMENT INDUSTRY TRENDS 95.0% Utilisation rate cement plants 90.0% 85.0% 80.0% 75.0% 70.0% 65.0% 60.0% 55.0% 50.0% Western Europe Eastern Europe & CIS North America Latin America Middle East Africa Asia ex-china China World Total Utilisation rates: Low in Europe High and increasing in North America and China Source: CW Group, February 2013

15 GLOBAL CEMENT INDUSTRY FORECAST Cement Consumption Growth Forecast in % Total Growth CAGR Region (f) 2014 (f) 2015 (f) Western Europe -14,0% -6,0% 0,0% 3,0% -3,2% -1,1% Eastern Europe & CIS 3,0% 4,0% 5,0% 6,0% 15,8% 5,0% North America 6,0% 7,0% 7,0% 9,0% 24,8% 7,7% Latin America 4,0% 6,0% 6,0% 6,0% 19,1% 6,0% Middle East 4,0% 6,0% 9,0% 8,0% 24,8% 7,7% Africa 5,0% 6,0% 6,0% 6,0% 19,1% 6,0% Asia ex-china 7,0% 6,0% 6,0% 6,0% 19,1% 6,0% China 4,0% 5,0% 5,0% 4,0% 14,7% 4,7% World Total 3,0% 5,0% 6,0% 6,0% 18,0% 5,7% Bottom reached in 2012 Southern Europe (Greece, Portugal and Spain) still weak Strong growth in North America Global cement manufacturing utilisation rate from 77.1 % in 2012 to 80.4 % in 2015 (and 82.0 % in 2017) Global refractory consumption per ton decreasing: ~ -2 % per year (efficiency gains and clinker replacement) Source: CW Group, February 2013

16 GLOBAL NONFERROUS/GLASS FORECAST Non-Ferrous Metal Production and Flat Glass Production Forecast in Mt Total Growth CAGR Region (f) 2014 (f) 2015 (f) Copper 20,4 21,6 22,4 23,7 16,2% 5,1% Zinc 12,7 13,5 14,1 14,5 14,6% 4,7% Aluminium 45,8 46,3 49,5 52,6 14,8% 4,7% Nickel 1,8 1,8 1,8 1,8 4,1% 1,3% Flat glass 61,4 65,3 69,4 73,8 20,1% 6,3% Weighted average NF 4,7% Growing middle class in China and India more motor cars (aluminium, glass, zinc) and electronic goods (copper) Expansion of electricity grids (copper) in China and India Growth in US car and construction industry (glass, aluminium, zinc) Growth in steel production (nickel) Weak situation in Europe exception Germany Source: BREE, March 2013

17 DBM/EFM DEMAND TRENDS China: From low to high value-added steel modernisation of steel plants Energy reduction in steel and cement manufacturing China and ROW: Increased usage of alternative fuels in cement manufacturing Shift towards higher grade refractories and thus higher grade magnesia Investments in higher grade DBM and EFM

18 DBM/EFM DEMAND TRENDS Growth in North America for refractories and thus indirectly for DBM and EFM Given the weight of of North America in global refractory demand, no change in dominance of China Global refractory demand (volume) 8% 3% 8% North America Central/South America 55% 9% 4% Western Europe Eastern Europe Africa/Middle East Asia ex China 13% China Source: Freedonia, March 2011; Nedmag Marketing

19 DBM/EFM DEMAND FORECAST Nedmag view on demand growth per year: GIA view for ( Report October 2012, based upon refractory demand ) Freedonia View for ( Report March 2013, based upon refractory Nedmag View for (Internal Analysis April 2013) Magnesia Product Type demand ) DBM 6,5% 3,4% 3,2% EFM 6,5% 3,4% 2,7% Expected global DBM demand 750 kton/yr higher in 2015 than in 2012 Expected global EFM demand 80 kton/yr higher in 2015 than in 2012 Nedmag bit more conservative than Freedonia and certainly than GIA

20 DBM/EFM SUPPLY

21 DBM/EFM SUPPLY TRENDS Difficult 2012 for refractories: Some stock building in EFM and DBM by producers General principle: price more important than volume Adjustment of DBM/EFM output to demand:production slowed down, installations idled or not started up at all Overcapacity at the moment Magnesita annual report 2012: ( ) The lower sinter volume is a reflection of a strategic decision to hold approximately 30 thousand tons in inventory due to lower prices observed in the 4Q12. Source: Magnesita, March 2013; IM, January 2013

22 DBM/EFM SUPPLY TRENDS Bull-whip effect: upswings/downswings in demand by the end customer are amplified upwards in the supply chain

23 DBM/EFM SUPPLY TRENDS Analysis of 125 companies in 2011: The further away from the end consumer, the larger the fluctuation Source: Value Added Europe, September 2011

24 DBM/EFM SUPPLY TRENDS Contributing factors to bull whip effect, a.o.: Overreaction to backlogs Forecast errors Lot sizes/ order batches Price fluctuations (fire sale) Long lead times Indication for bull whip effect in refractory supply chain: Level Indicator Change Global car production (units) % 2 Global steel production (Mton) % 3 Refractory production steel RHI (kton) Refractory production Magnesita (kton) 4 DBM production Liaoning China (kton) DBM production Nedmag (kton) % % % % Source: OICA, Roskill, World Magnesia Forum ; WorldSteel, RHI, Magnesita, Nedmag Marketing

25 DBM/EFM SUPPLY FORECAST Nedmag view on new realised capacities : DBM: China: kton/yr Russia: + 50 kton/yr Other: kton/yr TOTAL: kton/yr EFM: Russia: kton Norway: + 80 kton/yr Other: + 40 kton/yr TOTAL: kton/yr

26 DBM/EFM DEMAND & SUPPLY

27 DBM/EFM SUPPLY & DEMAND - CONCLUSIONS 1) Global EFM capacity increase (220 kton on annual basis) likely to be more than EFM increase in demand (80 kton on annual basis) in ) Global DBM capacity increase(650 kton on annual basis) likely to be less than DBM increase in demand (750 kton on annual basis) in this period, however: Temporary overcapacity at the moment, in order to keep stocks under control Some bull whip effect to be expected when upswing in economy takes place 3) Thus, new DBM supply-demand equilibrium being established in ) Shift towards high grade DBM

28 COST OF PRODUCTION

29 COSTS OF PRODUCTION FREIGHT Transportation: Shipping costs back at level of begin 2012 and volatile Security concerns due to piracy in the Gulf of Aden Inter Asia shipping growing fastest Market consolidation of shipping players and port routes likely Higher growth in container freight ports with mechanisation and deeper drafts gaining importance Global oversupply until 2014 Source: KPMG, 2013; Maersk March 2013

30 COSTS OF PRODUCTION ENERGY Energy: Oil prices back to level of before crisis Advantage in USA thanks to shale gas Future oil prices expected to remain more or less stable Source: BREE, IEA,March 2013

31 COSTS OF PRODUCTION LABOUR Labour: Labour costs China increasing %/yr, especially in mining Unit labour costs in manufacturing going up strongly in China, relatively stable in Germany and USA Source: China Times, February 2013;Enst & Young, September 2012; Oxford Economics, February 2013

32 COSTS OF PRODUCTION CONCLUSIONS 1) DBM/EFM manufacturing costs in China increasing Labour Flotation for quality improvement Only improve bulk chemistry, not micro-structure Non sustainable mining has significantly reduced the reserves of high quality magnesite Resource tax but shipping cost favourable for the moment 2) DBM/EFM manufacturing costs outside China not significantly changing

33 THANK YOU FOR YOUR ATTENTION!

34 BACK-UP SLIDES

35 WORLD STEEL SHORT RANGE OUTLOOK Crude Steel Production Forecast in Mt Total Growth CAGR Region (f) 2014 (f) 2015 (f) EU ,0% 1,0% United States ,6% 1,8% Brazil ,1% 5,4% Russian Federation ,3% 3,6% China ,7% 3,8% Japan ,7% 1,5% South Korea ,6% 3,7% Taiwan ,8% 1,6% India ,5% 6,1% Other ,0% 2,6% World Total ,8% 3,2%