NICKEL A VALUE-IN-USE PERSPECTIVE. Barry Jackson, October 2015

Transcription

1 NICKEL A VALUE-IN-USE PERSPECTIVE Barry Jackson, October 21 1

2 CAUTIONARY STATEMENT Disclaimer: This presentation has been prepared by Anglo American plc ( Anglo American ) and comprises the written materials/slides for a presentation concerning Anglo American. By attending this presentation and/or reviewing the slides you agree to be bound by the following conditions. This presentation is for information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy shares in Anglo American. Further, it does not constitute a recommendation by Anglo American or any other party to sell or buy shares in Anglo American or any other securities. All written or oral forward-looking statements attributable to Anglo American or persons acting on their behalf are qualified in their entirety by these cautionary statements. Forward-Looking Statements This presentation includes forward-looking statements. 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If you are in any doubt in relation to these matters, you should consult your stockbroker, bank manager, solicitor, accountant, taxation adviser or other independent financial adviser (where applicable, as authorised under the Financial Services and Markets Act 2 in the UK, or in South Africa, under the Financial Advisory and Intermediary Services Act 37 of 22.). Version: January 21 2

3 About Anglo American Market perspectives Nickel value-in-use 3

4 ANGLO AMERICAN AT A GLANCE Anglo American is the diversified mining company Our mining businesses meet our customers changing needs: Iron ore and manganese Metallurgical and thermal coal Copper Nickel Niobium and phosphates Platinum Group Metals Diamonds More than 1, permanent employees and contractors Operations, growth projects and exploration activities spanning southern Africa, South America, Australia, North America, Asia and Europe.

5 ANGLO AMERICAN PRODUCED 7,7 MT OF NICKEL IN 21 FROM 3 OPERATING ASSETS Barro Alto Ferronickel plant 28,3 mt of nickel contained in ferronickel Production Asset Codemin Ferronickel plant Rustenburg Base Metals Refinery Marketing Office Source: Anglo American 21 Production Report 8,9 mt of nickel contained in ferronickel 2, mt of nickel in form of cathodes (Brand: RPM Nickel)

6 ANGLO AMERICAN WAS THE 3 RD LARGEST FERRONICKEL PRODUCER IN 21 Production 21 in kt of Ni Anglo American Source: Heinz Pariser; November 21; Anglo American production report 6

7 Click to edit Master title style NICKEL MARKETING TEAM Click to edit Master text styles Click to edit Master text styles Second level Third level August 21 7

8 About Anglo American Market perspectives Nickel value-in-use 8

9 21 21 MARKET CONDITIONS 21 Positive impact of Indonesian ore ban NPI production is decreasing High grade nickel ore stocks reported to be very low in China EU anti-dumping duties positive for European and traditional nickel product demand Labour unrest and reported operational difficulties at several producers But Low oil prices and sharp decline generally in commodity prices Persistent concerns about Chinese demand, declining Chinese GDP and steel production ~9kt of stocks on the LME as LME Nickel is only used for niche applications, this indication can be misleading for the overall Ni market. Damstahl Stainless Steel Report April ,, 3, 2, 1, Indexed prices (Jan 1 st 21 = 1) Source: Bloomberg, LME, EIA to Nickel Copper LME nickel stocks (t s) Cancelled Available Aluminium Zinc Lead Tin Oil Source: Bloomberg, LME 9

10 21 NICKEL MARKET DIFFERENCES IN OPINIONS ARE SUBSTANTIAL World Nickel Balance (kt) China NPI Production (kt) Wood MacKenzie BNP Paribas Deutsche JPMogran Bank INSG Macquarie CRU Macquarie CRU Antaike Wood MacKenzie SMM Tsingshan INSG = International Nickel Study Group Source: INSG, Macquarie, CRU, Deutsche Bank, Wood MacKenzie, BNP Paribas, Antaike, SMM, Tsingshan public reports 1

11 21 STAINLESS STEEL PRODUCTION WIDE SPREAD OF VIEWS CHINA BEING UNDER ESTIMATED BY MOST,71 World Stainless Production (kt) 23, China Stainless Production (kt) 23,113-2,69-1,88 2,22 2, 2,229 1,92 1,838 21,87 21,81 21,69 21,722 21,666 SMR Wood Deutsche MacKenzie Bank CRU Macquarie Heinz Pariser CMTA SMR Wood Heinz MacKenzie Pariser SSCC Macquarie CRU Additionally, applied stainless steel scrap ratio s have a huge impact, and vary widely by source CMTA = Stainless Steel Council of China Metal Material Trade Association SSCC = Stainless Steel Council of China Special Steel Enterprises Association Source: SMR, Macquarie, CRU, Deutsche Bank, Wood MacKenzie, Heinz Pariser, SSCC, CMTA 11

12 CHINA STAINLESS STEEL PRODUCTION ESTIMATES AND IMPLICATIONS FOR NICKEL CONSUMPTION Stainless production - Total (Mt) Stainless production by grade (Mt) Difference in nickel content (kt) % SSC CMMTA 1.87 SSCC CMMTA The Stainless Steel Council of China Special Steel Enterprises Association said China s crude stainless steel production rose 1.3% year-on-year to million metric tons (Mt) in 21. The Stainless Steel Council of China Metal Material Trade Association said China s crude stainless steel production rose 8.% year-on-year to 23. million metric tons in According to industry sources, CMMTA is seen as more representative of private and smaller mills in China and the SSCC more representative of Chinese state-owned mills SSCC CMMTA 12

13 SMR stainless steel production forecasts Only +.6% growth forecast in 21, +3.6% growth forecast in 216 Quarterly production Annual production 37,728 3,97 2,8 7,71 6,2 +9%,898,13 2,7 7,138 6,38.6%,71,73,176,27 3,33 3,239 7,29 7,33 6,62 6,39 3.6% 6,3,66 3,1 7,38 6,1 17, 2, 23,113 23,33 2, ROW Americas Europe Other Asia China Source: SMR 13

14 CHINA CONSUMED MORE THAN 26 MILLION TONNES OF NICKEL ORE in first 8 months of CHINA: NICKEL ORE MARKET DYNAMICS 21 Stocks 31 st Dec 21 Imports Stocks 31 st Aug 21 CONSUMED Philippino stocks Indonesian stocks + - = Source: Antaike, International Steel Statistics Bureau Nickel ore stocks (Mt) Source: Antaike As at As at Phillipines Indonesia Jan-Aug NPI production 27kt Assuming 21 nickel ore consumption rate: Indonesian ore consumed at a rate of. Mt per month. Implies ~6 months of production in stock Philippines ore consumed at rate of 2.8 Mtpm, implies ~ months of material in stock 1

15 Jan-Aug NPI production 27kt NPI PRODUCERS SWITCHED TO USING PHILIPPINES ORE Nickel ore imports (Mt) Philippines Indonesia , 1,9,1 Indonesian nickel ore ban introduced 2,9 1,3 1,7,9 2,3 3,6 2,1 1,3,8 3,7 2,7 1,,2 2,6 1,6 Nickel ore stocks consumption (Mt),1,2,3,,3 3,8,1 2,7 2,8 3, 3, 3,2 2,3 2,1 1, 2, 1,7 1,1 1,3 1,1,8,9 1,1,6,6,8,3 2,3 2,,3,3 3,8,,3,,9,6,3,3 3,2 3,2, Philippines Indonesia Consumption = opening stock + imports - closing stock Source: Antaike, International Steel Statistics Bureau 1

16 NPI PRODUCTION IN CHINA DECLINING; FERRO-NICKEL IMPORTS INCREASING t s,,, 3, 3, 2, 2, 1, 1,, Chinese NPI production t s, Ni content 16, 1, 12, 1, 8, 6,, 2, Chinese FeNi imports (Ni) Source: Antaike Source: International Steel Statistics Bureau YTD NPI production down 19% year-on-year YTD FeNi imports up 1% year-on-year 16

17 China s increasing nickel demand Nickel cathode imports FeNi imports (Ni content) Stainless steel scrap Pro-rata additional 21 Actual / YTD 21 Source: International Steel Statistics Bureau, China imports except scrap which is all world country exports to China 17

18 CHINA NICKEL PRICES AT A PREMIUM TO THE LME IN 21 2, LME Vs China nickel prices 1, 1, - -1, -1, -2, -2, -3, Source: LME, Antaike, NPI = 1-1% Ni grade Ni metal NPI 18

19 Nickel industry operating costs (C1) 21 2, $/t 22, 2, 18, 16, 1, 12, 1, Latest LME price 8, 6,, 2, -2, -, -6, -8, , 1,2 1, 1,6 1,8 2, 2,2 2, 2,6 2,8 3, 3,2 3, 3,6 3,8,,2 Source: Wood MacKenzie Sep 21, LME price source Fastmarkets 19

20 About Anglo American Market perspectives Nickel value-in-use 2

21 ANGLO AMERICAN USES VALUE-IN-USE CAPABILITIES TO OFFER THE RIGHT PRODUCT TO THE MARKET Anglo American has VIU capabilities for Iron ore, Met Coal and Nickel Raw materials Production process Incentive for use Raw material properties Nickel raw materials have varying chemical and physical properties Key VIU effects Raw material mix Transportation costs Nickel losses Production costs (electricity, refractory, consumables) Process time Constraints Constraints vary from plant to plant (e.g. final product quality, capacity, environmental legislation) Outcome Nickel consumers determine the incentive to substitute an existing raw material in their specific blend mix Substitute if Incentive for use is larger than Price of raw material positive Value-in-use Value-In-Use (VIU) is essentially a cost-benefit analysis associated with the use of a raw material in a specific process 21

22 IRON CONTENT OF NICKEL MATERIALS IS A VIU ADVANTAGE IF IT IS NOT FULLY PRICED IN Iron content of material FeNi3: Intrinsic value of high purity Fe units contained In % 7 8 LG NPI 8 FeNi2 $/t of Nickel HG NPI FeNi3 76 1, , SS scrap NPI FeNi Electrolytic Nickel Source: Typical industry standards. SS Scrap: Min. 18%Cr & 8% Ni; Max. 19.% Cr & 1.% Ni; Source: Fe units priced using the carbon steel scrap price WVS 2. but some mills may not value iron units in nickel product because of high scrap ratio or high transportation cost 22

23 FOUR CATEGORIES OF PRODUCT CHARACTERISTICS INFLUENCE VALUE-IN-USE ViU effect Chemical Raw material properties Physical Ni, Fe, Cr P, Co, Cu C, Si, S Size, shape Raw material mix Nickel losses O, N, Ar consumption Slag production, lime, dolomite, FeSi Electricity consumption Refractory cost Process time Source: Bryanston 23

24 2 3 COMPARISON OF RAW MATERIALS Phosphorus Cobalt Copper P, Co, Cu (in kg per t of Nickel) SS Scrap HG NPI LC FeNi Electrolytic SS Scrap HG NPI LC FeNi Electrolytic SS Scrap HG NPI LC FeNi Electrolytic Carbon Silicon Sulphur C, Si, S (in kg per t of Nickel) SS Scrap HG NPI LC FeNi Electrolytic SS Scrap HG NPI LC FeNi Electrolytic SS Scrap HG NPI LC Electrolytic FeNi 2 Note: SS Scrap = SS Scrap 3 Europe. Source Bryanston, typical industry specifications

25 THE SHARE OF FERRO-NICKEL IN STAINLESS STEEL IS RISING DUE TO ITS HIGH VALUE-IN-USE % 2 Ferro-nickel share of primary nickel consumption in stainless steel 22 2 World ex-china Source: SMR - Steel & Metals Market Research GmbH Ferro-nickel advantages Easy charging in EAF / AOD Control of metal temperature Increased productivity of melting Reduced Ni-losses in melting as FeNi can be added in AOD Better control of melt compositions (Fe Scrap contamination) Fe in FeNi No technical limitations for use in STS industry; theoretically all STS grades can be melted with >9% FeNi Source: SMR - Steel & Metals Market Research GmbH 2

26 STRONG GROWTH POTENTIAL FOR FERRO-NICKEL IN CHINA Share of consumption Primary nickel consumption (t s) 788,72 2% 2% 23% 62% 68% 8% 8% 72% 3% 9% 32% 17,6 62,71 166,32 6,8 Europe America s O. Asia China ROW Europe America s O. Asia China ROW Source: SMR - Steel & Metals Market Research GmbH. Stainless steel Source: SMR - Steel & Metals Market Research GmbH. Stainless steel Others NPI Class 1 FeNi 26

27 TAKE-AWAYS Ferro-nickel demand is increasing due to the Indonesian nickel export ban and it s high value-in-use properties Fe in FeNi combined with low impurities makes FeNi attractive Chinese NPI production down -19% YoY Jan-Aug China nickel prices at currently a premium to the LME There is strong growth potential for ferro-nickel in China, but there is only so much available. Consumption of other types of primary nickel will increase as well as the use of stainless steel scrap 27

28 Click to edit Master title style THANK YOU Click to edit Master text styles Click to edit Master text styles Second level Third level August 21 28