Considera*ons in Bauxite Value- in- Use (ViU) Pricing The CBIX Index. Alan Clark, CM Group

Transcription

1 Considera*ons in Bauxite Value- in- Use (ViU) Pricing The CBIX Index Alan Clark, CM Group

2 Bauxite Index Pricing and the Idea of Value- in- Use (ViU) Presenta)on to MB Bauxite & Alumina Conference The views expressed herein contain information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. Any forwardlooking information in this presentation has been prepared on the basis of a number of assumptions which may prove to be incorrect. This presentation must not be relied upon as a recommendation or forecast by CM. Thursday, 26 February 2015 Prepared by CMGroup Bauxite and Alumina Team The views expressed herein contain information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. Any forward-looking information in this presentation has been prepared on the basis of a number of assumptions which may prove to be incorrect. This presentation must not be relied upon as a recommendation or forecast by C&M. Alan Clark, CM Group

3 Structure of Presenta.on 1 Index Pricing and CBIX? 1.1 CBIX Methodology and Trends 1.2 CMAAX China s DomesCc Alumina Price 2 China Bauxite and Alumina Industry Metrics 3

4 EvoluCon of Commodity Markets Commodity markets tend to follow a palern of market evolucon: 1. Shorter- term pricing periods 2. Market transparency 3. Physical trading plaporms 4. Risk management tools Benchmark Pricing Short term Pricing JournalisCc Pricing Further Market Development Physical Trading PlaPorm Index Pricing Commodity Established Index Crude oil Energy coal Copper Aluminium Nickel Gold Soybeans Corn Coffee Freight Iron ore Steel (Inc. scrap) Metallurgical coal Evolving Manganese ore Evolving Alumina Evolving Bauxite Early Stages Source BHPBIlliton CMGroup

5 Or maybe pricing mechanisms may become more cyclical Former RioTinto Iron Ore execucve advises [a] return to long- term benchmark contracts. Some)mes it bears no rela)on to the actual iron ore price, it s just deals - and deals within deals. Iron ore pricing is now in the hands of the traders who can wheel and deal. Source Australian Financial Review February 23,

6 A discussion about bauxite pricing is meaningless in the absence of ViU.. The CM Value- In- Use Adjusted Daiquiri Index Alcohol (ml) Cost (SGD) ml alcohol per SGD ViU adjustment Daiquiri Index Strawberry Daiquiri Source(s): CM Group Singapore Sling On The Beach Pink Lady B- 52 Bloody Mary Kamikaze Long Island Iced Tea Pina Colada Blue Lagoon 6 Margarita

7 CBIX Flow Chart Available at thebauxiteindex.com Source: CM Group 7

8 Introducing The CBIX Index - thebauxiteindex.com Price Calculator Industry News Industry Overview CBIX Price Index Freight Rates Explanatory Notes CBIX index presents a VIU- adjusted bauxite price index CFR Shandong port, as well as a simple tool to generate an indica)ve price for different bauxite types. 8

9 CBIX Screenshot Week 2 February 2015 Source(s): CM Group 9

10 The Influence of China and the Development of the CBIX Index Global iron ore prices are driven by Chinese demand and China s ability to mine domescc iron ores. We take the view global bauxite prices will, in the future, also be driven by Chinese demand and China s ability to mine domescc bauxite. Therefore, understanding and forecascng the evolucon of China s domescc bauxite and alumina industries is fundamental to understanding the future of global bauxite prices. Source thebauxiteindex.com

11 CBIX (USD/dmt CFR) Looming Indo ban triggers stock- building frenzy, drives prices significantly higher Lower ViU- priced bauxite arrives from Malaysia, higher ViU AtlanCc Basin bauxite stops Prices and quality both variable - prices trending higher as demand grows from merchant refiners. Draw down on inventories, higher priced bauxite arrives from AtlanCc Basin High inventories in China, low purchasing accvity, prices fall

12 Bauxite Prices vs Iron Ore Prices CFR China a taste of things to come.? Iron ore Bauxite US$/t During Week 1 January 2015, 1 tonne of bauxite was more expensive than 1 tonne of iron ore 0.0 Source(s): China Customs, CM 12

13 Bauxite Imports: Sources, Volumes and Prices. 100# Indonesia) Australia) India) Jamaica) Dominic)Rep.) Brazil) Ghana) Guinea) Guyana) Malaysia) Fiji) Bauxite#Price $/t# 95# 90# 85# 80# 75# 70# 65# 60# 55# 50# 45# 40# 35# Nov/12# Jan/13# Mar/13# May/13# Jul/13# Sep/13# Nov/13# Jan/14# Mar/14# May/14# Jul/14# Sep/14# Nov/14# Jan/15# Source(s): China Customs, CM 13

14 Bauxite Imports by Country 9.0" 90" 8.0" 7.0" Indonesia) Australia) India) Malaysia) Other) 80" 70" Imports,"Mln"tonnes" 6.0" 5.0" 4.0" 3.0" 60" CIF"Price,"US$/t" 50" 40" 30" 2.0" 20" 1.0" 10" 0.0" 0" Jan/12" Apr/12" Jul/12" Oct/12" Jan/13" Apr/13" Jul/13" Oct/13" Jan/14" Apr/14" Jul/14" Oct/14" Jan/15" Source(s): CM, China Customs 14

15 Imported Bauxite Inventories 45" 60" 40" Revised(methodology( 50" Imported"Bauxite"Inventory,"Mln"tonnes"Bx" 35" 30" 25" 20" 15" 10" 5" Refineries( Port( Weeks(of(Supply( 40" 30" 20" 10" Imported"Bauxite"Inventory,"Weeks"of"Supply" 0" 0" Jan/12" Apr/12" Jul/12" Oct/12" Jan/13" Apr/13" Jul/13" Oct/13" Jan/14" Apr/14" Jul/14" Oct/14" Jan/15" Source(s): CM, Aladdiny 15

16 Apparent bauxite ConsumpCon (mln t per month) 12" Domes3c$Bauxite$ Imported$Bauxite$ %$Bauxite$Consump3on$Domes3c$ revised$calcula3on$ methodology$ 100.0%$ 90.0%$ 10" 80.0%$ Bauxite"Consump?on,"Mln"tonnes" 8" 6" 4" 70.0%$ %"Bauxite"Consump?on"Domes?c" 60.0%$ 50.0%$ 40.0%$ 30.0%$ 2" 20.0%$ 10.0%$ 0" 0.0%$ Jan/12" Apr/12" Jul/12" Oct/12" Jan/13" Apr/13" Jul/13" Oct/13" Jan/14" Apr/14" Jul/14" Oct/14" Jan/15" Source(s): CM Group 16

17 CMAAX China DomesCc Alumina Price 3,100" 300" 2,900" Volume' NAX'+'North'China'Alumina'Index'Price' SAX'+'South'China'Alumina'Index'Price' 250" 2,700" RMB/t"(inc"17%"VAT)"" 2,500" 2,300" 2,100" 200" Trades" 150" 100" 1,900" 1,700" 50" 1,500" 0" Jan/12" Apr/12" Jul/12" Oct/12" Jan/13" Apr/13" Jul/13" Oct/13" Jan/14" Apr/14" Jul/14" Oct/14" Jan/15" Source(s): CMAAX.com 17

18 Alumina Capacity, ProducCon and UClisaCon 120$ Specula(ve*Capacity* Produc(on* Current*&*Commi6ed*Capacity* Forecast* 100%$ 90%$ 100$ U(lisa(on* 80%$ 80$ 70%$ Capacity/Produc.on$MTPY$ 60$ 60%$ U.lisa.on$ 50%$ 40%$ 40$ 30%$ 20$ 20%$ 10%$ 0$ 2006$ 2007$ 2008$ 2009$ 2010$ 2011$ 2012$ 2013$ 2014$ 2015$ 2016$ 2017$ 2018$ 0%$ Source(s): CM, CNIA, Aladdiny 18

19 End of Presentation Thanks to Metal Bulletin CM Group Bx & Aa Team