Overview of the EMM and EMD Markets with special emphasis on China

Transcription

1 Overview of the EMM and EMD Markets with special emphasis on China Aloys d Harambure Market Research Manager International Manganese Institute (IMnI) EPD Conference March 19, 2016 China 1

2 Introduction In 2015, global stainless steel production was 42 million mt, up 0.7% over 2014 (Macquarie, ISSF). 6.3% CAGR 4.1% CAGR +5.5% CAGR % CAGR % CAGR Only growth markets in 2015 were India (good prospects until 2020), and South Korea (mainly 400 series production for export). SS production in the EU, Japan and the USA was very weak last year, but growth is expected to bounce back in 2016 due to restocking. Global SS production expected to keep growing from 2015 to 2020, but at slower rate than before: 4.1% CAGR. However, 300s and 400s (containing less Mn but more Ni) will grow faster than 200s, because of lower Ni prices, due to the recent Indonesian nickel ore exports ban (Macquarie).

3 Introduction Last year, China s stainless steel production was 21.9 million mt, up 0.6% over 2014 (Macquarie, ISSF). 4.5% CAGR 14.2% CAGR Slower Chinese growth production forecasts: China s stainless steel exports are slowing (-13% in 2015) because of trade restrictions (in the EU) and the loss of China s competitive advantage (low domestic nickel prices) due to the Indonesian nickel ore exports ban. China s stainless steel production is forecast to fall slightly in 2016, and to grow at a 4.5% average rate between 2015 and 2020 (Macquarie).

4 Outline 1 Electrolytic Manganese Metal (EMM) demand still rising, but at a slower pace than before 2 Electrolytic Manganese Dioxide (EMD) does not fully benefit from the growing automotive battery demand 3 Manganese ore: in spite of recent production cuts, the market will take time to rebalance

5 I EMM Global Capacity Global EMM production capacity is around 3.07 million mt per year. Around 130 EMM producers in China, with a combined production capacity of around 3 million mt py. Manganese metal production capacity in the rest of the world is around 85,000 mt per year: - South Africa (Manganese Metal Company), - Gabon (Eramet started producing EMM in 2015), - Ukraine (Zaporozhye produces aluminothermic manganese metal wih Mn content >95%). China is by far the world s greatest producer of manganese metal.

6 I EMM Global Production In 2015, global manganese metal production slowed to 1.1 million mt, down 10% over In China, EMM production was 1.07 million mt in 2015, down by 11% over In the rest of the world, manganese metal production increased by 6% to around 39,000 mt last year, because of Eramet ramping up production in Gabon. China s EMM production is slowing, even though global stainless steel production increased slightly last year.

7 I EMM China s Production China s EMM production decreased last year, because of lower EMM prices, high inventory and new environmental regulation, forcing most small-scale EMM producers using old technology to shut down. Only 20 EMM producers were still in operation at the beginning of this year in China (out of 130). China now accounts for around 97% of global EMM production, but only 52% of global stainless steel production. Stainless steel mills in the rest of the world rely heavily on China s EMM supplies.

8 I EMM China s Exports China s EMM exports have accelerated after the removal of the 20% export tax at the start of China s EMM exports totalled 323,000 mt in 2015, up by 1.5% over % export tax removed Demand for China s EMM dropped in the EU (-15%) and North America (-11%) last year, China s exports increased to the rest of Asia (+8%), the CIS (+11%) and South America (+21%). China s EMM exports are still growing, but a slower rate than over the last few years, due to the sluggish demand from stainless steelmakers in the EU and the USA.

9 I EMM Price China s price for EMM reduced in 2015, because of: - high inventories, - low stainless steel prices, - low demand from Europe. The price for EMM has been trending down in , before increasing sharply in January 2016 because of an increase in demand ahead of the Chinese New Year in February, and recovering manganese ore prices at the beginning of this year.

10 I EMM Demand Outlook Manganese ore demand for manganese metal production is expected to keep growing over the next few years, driven by higher stainless steel production. 9.4% CAGR 4% CAGR Around 300,000 mt of extra Mn units will be needed for EMM production by 2019 (Macquarie).

11 Outline 1 Electrolytic Manganese Metal (EMM) demand still rising, but at a slower pace than before 2 Electrolytic Manganese Dioxide (EMD) does not fully benefit from the growing automotive battery demand 3 Manganese ore: in spite of recent production cuts, the market will take time to rebalance

12 II Auto Battery Demand outlook Global auto battery demand will grow from 15GWh in 2015 to 115GWh in 2020 (Macquarie), mostly driven by China where the government is pushing toward electric vehicle adoption to reduce air pollution and energy security concerns. At the moment in China, demand for LiNMC batteries mostly comes from electric city buses. But with the improvement of charging facilities, demand for private electric passenger cars is on the rise. Demand for auto battery is also expected to increase in the US, where Google and Apple are said to be working on driverless electric vehicles. E-CV EV PHEV HEV Electric Commercial Vehicle (e-bus & e-truck) Electric passengers Vehicle Plug-in Hybrid EV Hybrid EV Demand for batteries in electric vehicles is forecast to grow by 50% CAGR by 2020 (Macquarie), increasing demand for Mn batteries.

13 II Battery Types Demand for Electrolytic Manganese Dioxide (EMD) mostly comes from the battery industry: - primary batteries (alkaline and zinc carbon), - and rechargeable batteries (including lithium ion batteries for electric cars). NCA batteries are used by Tesla for their electric vehicles because of very good energy density, but they are more expensive to use in cars than NMC batteries. To reduce the cost of their new cars, Tesla could turn to Mn batteries (Jefferies). LFP batteries are only used in China because of poor performance. American automakers have gradually abandoned LFP batteries and turned to purchasing Mn-series batteries from Japan and S. Korea. Among the 5 different types of lithium-ion batteries for electric vehicles, LMO and LiNMC batteries are the most popular because of good performance, safety and competitive price.

14 II EMD Demand EMD s main application is alkaline batteries, but it is also used in LMO rechargeable batteries, which power traditional phones and laptops (but not smartphones because their energy density is too low). LMO batteries only use Mn for their cathode. LiNMC batteries (which contain around 30% of Mn, the rest being nickel and cobalt) use MnSO4 (low grade for portable devices, high-grade for automotive). The main application of MnSO4 is animal feed and fertilisers. Demand for LiNMC batteries from the automotive sector is growing sharply. EMD s main markets (alkaline and LMO batteries for portable devices) are mature markets (demand is not growing). Demand for LMO batteries in automotive is on the rise, but Mn3O4 tends to be favoured over EMD.

15 II EMD China China is the world s greatest producer and exporter of EMD. After 4 years of reducing exports, China increased its EMD exports in 2015, by 19% to around 47,000 mt. According to industry sources, this increase is mostly contextual, and does not represent an improvement of demand fundamentals.

16 II EMD Price The average price for EMD has been decreasing since In 2015, EMD price decreased by 11% on average (for all grades of EMD). This is due to the lower price for EMD s main raw material: manganese ore (-56% in 2015), to the large supply and stable demand for EMD last year.

17 Outline 1 Electrolytic Manganese Metal (EMM) demand still rising, but at a slower pace than before 2 Electrolytic Manganese Dioxide (EMD) does not fully benefit from the growing automotive battery demand 3 Manganese ore: in spite of recent production cuts, the market will take time to rebalance

18 3 Global Mn Ore Mn ore supply in 2015: -14% over 2014, to 16.4 million mt (Mn units). Meanwhile, demand: -19% YoY, to 14.9 million mt (Mn units). Even though Mn ore supply reduced last year, it was still larger than demand, so the market remained oversupplied. 18

19 3 Global Mn Ore Excess supply in 2015: around 1.5 million mt (Mn units): stocks increased, both at alloy plants (due to overbuying) and at mines (when demand started to decrease), especially in Brazil, some African countries, India and Australia. Supply adjustments have only been made at the very end of last year, because of price falls in November and December. Because of these production cuts announced in 2015/2016, some of these stocks accumulated in (mostly at alloy plants) are being consumed in 2016, and the market is getting more balanced. 19

20 3 Mn Ore Capacity Closure Production cuts in announced in 2015/2016: We estimate that around 23% of China s Mn ore capacity has been closed in Globally, around 11.7 million mt of Mn ore capacity cuts have been announced at the end of 2015 and beginning of 2016, due to low Mn ore prices and high stock levels. 20

21 3 Mn Ore Future Projects Several new manganese ore projects have been announced to come on stream over the next few years, especially in Asia. Assuming all these projects will actually come on line, extra capacity (+2.3 Mt) is much lower than mine closure (-11.7 Mt). So the Mn ore market is progressively adjusting to the lower demand, and it could return to equilibrium by mid-2017 (CRU), or even before if more mines cut output. 21

22 3 Mn Ore Focus on Africa Mid-grade ore production in South Africa has been growing at a 38% per year average rate between 2009 and 2014, much faster than exports (+23% CAGR) and domestic Mn alloys production (+18% CAGR): - constraints on Transnet s rail capacity (limiting exports), - Eskom s electricity supply and rising prices (limiting domestic Mn alloys production). Rail capacity in South Africa is now improving following Transnet s investments, and exports have been supported by the fall of the South African rand in 2015, but demand for seaborne ore decreased last year. South Africa s total Mn ore exports decreased by 8% in 2015 to 11.4 million wet mt, forcing several producers to adjust supply. But SA s exports to China increased by 9.4% to 6.4 million mt in

23 3 Focus on China: Mn Ore Prod vs Imports Due to large Mn alloys production cuts, manganese ore demand weakened in China last year. Manganese ore production and imports followed the same trend. China imported 15.8 million tonnes of manganese ore in 2015, down 3% from the previous year. Domestic Mn ore production was around 12 million mt, down 23% over Why did China s manganese ore production drop so much more than its imports last year? 23

24 3 Focus on China: Mn Ore Prod vs Imports Why did China s manganese ore production drop so much more than its imports last year? - high grade ore requirements of newly built closed furnaces (domestic output is low grade), - depletion of local mines and corresponding higher mining costs, - weak incentive to mine domestic low-grade ore when the price of imported ore is so low (it decreased by 57% in 2015). In summary, although Mn ore imports in China decreased last year, imported ore is progressively replacing domestic ore at Chinese smelters. That is why China s manganese ore imports reduced by only 3% in 2015, while domestic manganese ore production fell by 23%. 24

25 3 Focus on China: Mn Ore Prod vs Imports China imported 15.8 million tonnes of manganese ore in 2015, down 2.8% from the previous year. Imports from Australia dropped by 17%, Malaysia 38%, Ghana 49% and the ROW 47%. South African Mn ore exporters increased their market share of China s imports, shipping 11% more material in 2015, to 6.4 million tonnes, supported by the 25% fall of the Rand against the dollar. Imports from Gabon rose by 27% to 1.9 million mt, and those of Brazil reached 1.5 million mt, up by 90%. 25

26 Conclusion Stainless steel: In 2015, global stainless steel production was 42 million mt, up 0.7% over Global SS production expected to keep growing from 2015 to 2020, but at slower rate than before: 4.1% CAGR. EMM: China s EMM production decreased last year, because of lower EMM prices, high inventory and new environmental regulations. EMD: -0.8% Among the 5 different types of lithium-ion batteries for electric vehicles, Mn batteries (LMO and LiNMC) are the most popular because of good performance, safety and competitive price. Demand for batteries in electric vehicles is forecast to grow by 50% CAGR by 2020 (Macquarie), increasing demand for Mn batteries. EMD s main markets (alkaline and LMO batteries for portable devices) are mature markets (demand is not growing). Demand for LMO batteries in automotive is on the rise, but Mn3O4 tends to be chosen over EMD. Manganese ore: The Mn ore market remained oversupplied last year, as demand fell faster than production, but recently announced production cuts could rebalance the market by 2017.

27 Thank you! All the data used in this report is available to IMnI Members Non-Members can get in touch at Aloys d Harambure International Manganese Institute (IMnI) 27