: a changing paradigm for the manganese industry? -

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1 : a changing paradigm for the manganese industry? - Metal Bulletin 29 th Ferro-alloys Conference ALLOYS, ORES & PEOPLE. Arnaud Tissidre, Senior VP Commercial Eramet Comilog Manganese

2 DISCLAIMER Disclaimer: This presentation expresses personal and individual views based on available information that have not been independently verified. This presentation should not be understood as a recommendation or forecast by Eramet Comilog or the speaker. Forward looking statements are not predictions of future performances. 2

3 A CHANGING PARADIGM FOR THE MANGANESE INDUSTRY? Overview of Eramet and its manganese activities Future drivers for the Manganese Industry Conclusion

4 WORLD LEADERSHIP POSITIONS ERAMET Manganese ERAMET Nickel ERAMET Alloys #2 high-grade manganese ore & global manganese alloys producer #2 ferronickel producer #1 high speed steels producer #1 refined manganese alloys & manganese chemical derivatives producer #3 high-purity nickel producer #2 closed-die forging parts producer #1 Oil spent catalyst recycling #1 nickel chloride producer #7 nickel producer North America 1 manganese alloys plant 3 manganese chemical plants 2 recycling plants Europe 4 manganese alloys plants and 1 TiO2 plant 1 manganese chemical plant 2 recycling plants China 2 manganese alloys plants 1 manganese chemical plant Sandouville (refinery) Paris Grenoble (Eurotungstène) Poum Tiebaghi Etoile du Nord Népoui-Kopéto Mines SLN nickel de nickel mines SLN Usine Metallurgical métallurgique plant Kouaoua Thio NOUVELLE-CALÉDONIE NEW CALEDONIA Doniambo (Nouméa) Prony Convention avec la Province Sud Projet mine et usine de nickel Romeoville Boonton Drawn bars Tianjin Drawn bars and threads for bimetal saws Vikmanshyttan Strips Warrington Edge wire for bimetal saws Chalon-sur- Saône Långshyttan Wire rod hot rolling Commentry Conventional elaboration Bars & wire rod hot rolling, peeled bars, metal sheets and drawn bars Söderfors Powder metallurgy Billet line Champagnole Flat and square bars, profiles France China Mines Alloys Chemical Recycling Senegal Grande Côte Mineral Sands project Gabon 1 manganese mine 1 beneficiation and agglomeration plant 1 manganese alloy plant and 1 manganese metal plant under construction (2013) Concession of the Transgabonais railway and of the mineral port of Owendo 1 niobium / rare-earths project mine PT Weda Bay Nickel Halmahera (Indonesia) Project: mine/nickel plant INDONESIA Gennevilliers Imphy Les Ancizes Heyrieux UKAD Issoire Firminy Interforge Pamiers Distribution & Close-die forging finishing Germany Thermal treatment Wuxi Italy Elaboration & transformation ERAMET - October,

5 ACTIVITES IN GABON Yaoundé CAMEROUN Comilog #2 high-grade manganese ore (44% to 52% grade) producer worldwide from the open-pit mine of Moanda Owendo 2012 reserves of 157 MT Production capacity: 3.6 MT in 2013, ongoing plan to increase production capacity to 4 MT and further expansion under study for mid-term, c.19% of the high-grade ore worldwide production Moanda enrichment plant Comilog operates its own mineral port in Owendo Setrag, since November 2005, railway operator (Le Transgabonais) for 30 years Ongoing construction of a metallurgy complex in Moanda (SiMn & EMM production). Port-Gentil OCEAN ATLANTIQUE Scale N2 Libreville Gamba 0 GUINEE EQUATORIALE N1 Ogooue N1 N2 Nyanga Oyem Mounana Moanda Ngounié 100 km N3 Ivindo Transgabonais railway towards Brazzaville Kinshasa Franceville Equateur CONGO 5

6 MANGANESE ALLOYS: INDUSTRIAL SITES CLOSE TO END MARKETS 6

7 A CHANGING PARADIGM FOR THE MANGANESE INDUSTRY? Future drivers for the Manganese Industry The end of the raw material super-cycle? The «new» ore supplies and its impact on the manganese ore and alloys market The global energy revolution and its impact on the manganese alloys industry The policies of resource rich countries and the response from the Mn industry: a Gabonese example The evolution of pricing

8 SLOW DOWN OF GROWTH : END OF COMMODITIES SUPERCYCLE Because of the slowdown of economic growth in China, the industry has to get used to a more moderated growth in percentage (with the relay from the other BRICS not yet there). Annual growth of Chinese GDP Source: McKinsey, Worldsteel. 8

9 A CHANGING PARADIGM FOR THE MANGANESE INDUSTRY? Future drivers for the Manganese Industry The end of the raw material super-cycle? The «new» ore supplies and its impact on the manganese ore and alloys market The global energy revolution and its impact on the manganese alloys industry The policies of resource rich countries and the response from the Mn industry: a Gabonese example The evolution of pricing

10 THE NEW ORE SUPPLIES 2013 has been definitively a «defining» year for the Mn market with The sharp increase of the South African Mn ore exports, made possible by The emergence of new ore supplies sources The depreciation of the rand, which has made possible to export ore through more expensive routes The emergence of a 2 tier market: high grade and semi-carbonated ore RSA exports (Mt) kt Port Elizabeth Others ports (Durban, Richard Bay...) Total Q Q annualized trend Source: South African custom data, GTIS, Eramet estimations, Yahoo finance 10

11 STABILIZATION OF MN ORE PRICE THANKS TO THE NEW SUPPLY OF ORE The emergence of large amount of new ores has stabilized prices in 2013 Without additional supplies the ore market in 2013 would have been in deficit In 2013, the growth of South African ore supply has been quicker and smoother than expected And has happened at a time of good demand Resulting in a balance market And relatively stable prices Limiting the risk of large price variations between 2012 and 2020 Mwt of Ore Exports Port Capacity (PE & Ngqura) Source: TRANSNET, GTIS 11

12 VALUE IN USE OF HIGH GRADE Mn ORE The emergence of large new medium grade ore supplies has raised awareness on the high value in use of high grade ores Increase need of high grade ore The proportion of high grade Mn Ore (>43%) in the world Mn ore production is decreasing Price/dmtu Value in use vs Mn Grade (calculated on wet tonnes basis) Local ore 1 dot = 1 ore type Value in Use %Mn 0 20% 30% 40% 50% Source: GTIS, Eramet Estimation. 12

13 THE EFFECT OF THE NEW ORE SUPPLY ON THE Mn ALLOY MARKET The new ore supplies support the alloy oversupply New miners want to find an outlet for their ore and push for capacity increases that exceed by far the alloy demand growth outside China and India While the overcapacity in China and India is fed by the new imported ores Increase of Mn alloy capacity and Steel production, Ex China Ex India Malaysia RSA Ukraine Malaysia Gabon RSA Russia Korea Source: World Steel, Metal Bulletin Research and Eramet Estimation. - 13

14 A CHANGING PARADIGM FOR THE MANGANESE INDUSTRY? Future drivers for the Manganese Industry The end of the raw material super-cycle? The «new» ore supplies and its impact on the manganese ore and alloys market The global energy revolution and its impact on the manganese alloys industry The policies of resource rich countries and the response from the Mn industry: a Gabonese example The evolution of pricing

15 THE ENERGY REVOLUTION IS A «GAME CHANGER» 3 years ago, the vision was: Energy costs were converging world wide With very high increase in fast growing countries, requiring new infrastructures While «mature» countries were benefiting from lower costs China, South Africa and India were not the «low cost production» base of the future anymore Estimation of Electricity rate by year and region (for electro-intensive customers) Ukrainian power tariffs: +10% announced in 2012 Japan power tariffs: +17% in April % announced by Kansai Electric for sept 2013 Indian power tariffs +16% average increase in 2012 Another +15% for 2013 US Norway Ukraine RSA S Korea China Source: CRU, Eramet Estimation. South African power tariffs: + 16% in April % annual rate increase for the next 5 years 15

16 RMB /kwh The energy revolution Today the shale gas boom created regional oversupplies and the world is divided between Areas in energy oversupply (US, Northern Europe) and areas in short supply (Japan, Korea, Brazil, RSA ) Alloy suppliers supported by integrated or dedicated energy source, either based on coal, gas, hydropower or others Integrated energy supplies and available ores are supporting the emergence of new players Very large discrepancies of energy costs exist within the same area 1 Electricity cost difference for various players in China 0,75 0,5 0,25 Producer with captive electricity production Producer buying electricity from the grid in coal producing region Producer buying electricity from the grid in other region of China Source: Eramet Estimation. - 16

17 A CHANGING PARADIGM FOR THE MANGANESE INDUSTRY? Future drivers for the Manganese Industry The end of the raw material super-cycle? The «new» ore supplies and its impact on the manganese ore and alloys market The global energy revolution and its impact on the manganese alloys industry The policies of resource rich countries and the response from the Mn industry: a Gabonese example The evolution of pricing

18 THE POLICY OF «RESOURCE RICH» COUNTRIES Resource rich countries want a bigger share of their resources: Tax wise (see below the example of copper) Through local transformation While the decrease of raw materials prices and the financial crisis limit access to financing for the necessary infrastructure investments Industry has to engage in joint developments: the example of the CMM in Gabon (next slide) Examples of governmental measures worldwide to increase revenue from Copper : Peru: royalties increased in 2011 Chile: royalties increased in 2010, legal framework changed in June 2012 Poland: Large royalties increase in march 2012 DRC: review of mining code, increased tax planned Zambia: royalties doubled to 6% in Debate on raw material export ban Philippines: review of mining law in 2012, intend of increase royalties Indonesia: new 20% mineral export tax in May 2012 Australia: higher Cu taxes mooted Source: Metal Bulletin and Eramet Estimation. - 18

19 MOANDA METALLURGICAL COMPLEX AN EXAMPLE OF LOCAL PARTNERSHIP GABON The Gabon emergent project Green Gabon Industrial Gabon Services Gabon Setting of the Grand Poubara Dam COMILOG silicon-manganese plant (65,000 t/yr.) and manganese metal plant (20,000 t/yr.) 500 people trained, 427 direct new jobs created Building of 60 villas for the workers (8 million Euros) Sponsorship and funding of the Moanda Mining and Metallurgy School (12 million Euros Capex) ECONOMIC DRIVERS Local transformation of non commercial ores Ultra low Boron SiMn production New source of EMM production outside of China EMM produced in environment respectful way, 5 times less sludge production compared to traditional way, thanks to high Mn grade ore usage 19

20 A CHANGING PARADIGM FOR THE MANGANESE INDUSTRY? Future drivers for the Manganese Industry The end of the raw material super-cycle? The «new» ore supplies and its impact on the manganese ore and alloys market The global energy revolution and its impact on the manganese alloys industry The policies of resource rich countries and the response from the Mn industry: a Gabonese example The evolution of pricing

21 EVOLUTION OF PRICING MECCANISM The manganese «seaborne» ore prices have evolved towards more volatility But still based until 2013 on one type of ore 2013 has seen the emergence of other price references Moving differently The new semi carbonated ores from RSA seems to become a «spot market» reference Due to a higher liquidity of the supply New and multiple price references require that market participants change their pricing habits with More focus on each ore value in use and logistic costs Understanding of the price discovery mechanism Source: Metal Bulletin 21

22 A CHANGING PARADIGM FOR THE MANGANESE INDUSTRY? Overview of Eramet and its manganese activities Future drivers for the Manganese Industry Conclusion

23 CONCLUSION Without the large RSA new ores, the ore market would have been in shortage in 2013 High grade ore Value in Use and competitiveness have proven high, compared to new ores Overcapacity in alloys production will be supported by new ore supplies Relative competitiveness of alloys producers is dramatically changing due to the energy revolution, with production costs among alloy producers diverging again The mining industry will have to engage more in supporting the development of mining countries 23

24 Thank you for your attention 24