Mine to Market International trade in industrial minerals

Transcription

1 Mine to Market International trade in industrial minerals Mike O Driscoll Editor, Industrial Minerals Critical Mineral Resources: Challenges & Opportunities 2012 SME Annual Meeting & Exhibit, Seattle, 22 February 2012

2 Industrial Minerals Since 1967, from mine to market, global non-metallic minerals intelligence Please visit our booth #914

3 Industrial Minerals Please visit our booth #914 TAKE A FREE ONLINE TRIAL 15% DISCOUNT IM SUBSCRIPTION AT SME 2012 EXHIBITION

4 Outline 1. Mine to market overview 2. Primary trade drivers 3. Specific trade drivers: Influencing factors & developments 4. Conclusions & Outlook Flint clay for export, Bosai Minerals, Tianjin, China

5 1. Overview Without a market, an industrial mineral deposit is merely a geological curiosity Recently closed olivine source, Seqi, Greenland

6 1. Overview Papermaking at Stora Enso, Sweden Talc mining, Pingdu Talc, Shandong, China Market demand + Mineral development = Mineral trade Talc exported to US from Fancheng, Guangxi, China

7 1. Overview Mine to market supply chain overview supply sector trade sector consuming market sector

8 1. Overview Mine to market supply chain SUPPLY SUPPLY - exploration - mineral finance - plant engineering - mining - processing TRADE - trading - port handling - mineral inspection - freight/logistics - warehousing/distribution MARKET - direct market mineral consumer - intermediate market mineral consumer - end market mineral consumer DEMAND

9 2. Primary trade drivers Mineral consuming market demand 1. Economic growth 2. Population growth $ 3. Development

10 2. Primary trade drivers Economic growth Source: Richard Flook, Shinagawa 2011

11 2. Primary trade drivers Economic growth Source: Richard Flook, Shinagawa, 2011

12 2. Primary trade drivers Regional development Source: Richard Flook, Shinagawa, 2011

13 2. Primary trade drivers Regional evelopment China urbanised 300m in last 20 years By bn will live in cities 221 cities >1m. 5bn m 2 paved roads 170 mass transporation systems 40m 2 floor space in 5m buildings 50,000 buildings = skyscrapers Emerging Asian middle class 2,700m Source: Per Storm, Raw Materials Group

14 Summary a. Resource-market proximity b. Specific market demand hotspots c. Limited resource distribution d. Reliance on overseas sources e. China f. Critical mineral supply security g. Vertical integration h. Pricing i. Environment j. Logistics k. World events

15 a. Resource-market proximity eg. Kaolin for EU & Asian paper markets (data 2009)

16 a. Resource-market proximity eg. Oilfield minerals for North Sea drilling market

17 a. Resource-market proximity Oilfield eg. Oilfield minerals minerals for North for North Sea Sea drilling drilling market market Morocco Mediterranean India China Barite Bentonite

18 b. Specific market demand hotspots Sudden high demand from existing markets eg. oil/gas exploration High demand for frac sand in shale gas exploration Overseas sources seek opportunity to export

19 b. Specific market demand hotspots

20 b. Specific market demand hotspots New & emerging technologies eg. auto market for REE

21 b. Specific market demand hotspots New & emerging technologies eg. energy Application Li-ion batteries Fuel cells Photovoltaic cells Wind turbines Minerals lithium minerals, fluorspar, graphite borates, graphite, lithium minerals, phosphates, rare earths, zircon quartz, fused silica, silicon carbide, fluorspar, filler minerals fibreglass minerals, rare earths, boron, graphite, filler minerals, bauxite

22 c. Limited resource distribution Rare earths

23 c. Limited resource distribution Andalusite, bauxite, kyanite, sillimanite France Ukraine China China USA Guyana Greece Turkey India South Africa Peru Brazil Brazil

24 d. Reliance on overseas sources Japan s refractories industry

25 d. Reliance on overseas sources Japan s refractories industry Total import reliance of 60% refractory raw materials *50% imports est.

26 d. Reliance on overseas sources Japan s refractories industry

27

28 d. Reliance on overseas sources US minerals trade 2011 Source: USGS

29 d. Reliance on overseas sources US minerals trade 2011: minerals >50% import reliance 50-56% Chromite Magnesia Iron oxide Lithium 68% Ti-minerals 76-78% Barite Silicon carbide 23.84m t 80-88% Antimony Potash 100% Asbestos Bauxite/Alumina Fluorspar Graphite Iodine (99%) Mica (sheet) Quartz crystal Rare earths Strontium Yttrium 0.92m t 1.10m t 2.34m t 5.60m t 13.88m t

30 d. Reliance on overseas sources US minerals trade 2011: minerals >50% import reliance Canada Asbestos Graphite Magnesia Potash Ti-minerals Europe, CIS Iron oxide Magnesia Potash Quartz Silicon carbide Africa Chromite Fluorspar Ti-minerals Asia, Japan Antimony Fused alumina Barite Bauxite Fluorspar Graphite Iodine Magnesia Mica (sheet) Quartz Rare earths Silicon carbide Mexico & South America Antimony Bauxite Graphite Lithium Barite Fluorspar Iodine Magnesia Mica Silicon carbide Strontium Australia Ti-minerals

31 d. Reliance on overseas sources Upshot Consumers seek to switch to alternative sources Increased exploration & development of alternative sources Especially outside China In particular, Bauxite Barite Fluorspar Magnesite Graphite Rare earths Silicon carbide

32 e. China

33 e. China huge influence on trade Share of world output: Rare earths 97% Refractory bauxite 95% Fused magnesia 85% Graphite 80% Mica (scrap/flake) 69% Wollastonite 59% Brown fused alumina 55% Silicon carbide 55% Fluorspar 53% Barite 51% Dead burned magnesia 45% Talc 28% Vermiculite 22%

34 e. China dominant role CHINA DBM, FM Bauxite Fused alumina SiC Graphite Spinel Mullite China dominant in refractory raw material supply early 1980s-mid-2000s = low cost Chinese exports = demise of Western producers = refractory product reformulation to use Chinese material

35 e. China forced consolidation in West Demise of producers outside China Consolidation of fewer, larger, and dominant producers Examples: World Japan Synthetic magnesia Fused alumina Silicon carbide Zircon A-K-S Source: Isao Watanabe

36 e. China major change in trade flow Chinese exports decline & prices rise from mid-2000s CHINA DBM, FM CHINA DBM, FM Bauxite Fused alumina SiC Fused Graphite alumina Spinel Mullite SiC Graphite Spinel Mullite = supply security threat to world refractory producers = growth of Western mineral capacity expansions & alternative sources

37 e. China exports discouraged A sea change in world supply of raw materials with China s dominance diminishing Still a major producer, but exports discouraged by government measures (export taxes, licences, quotas) Export licence availability unpredictable, and large quotas controlled by select few players Export licenses sold to non-licence holders at high prices = price rises & unpredictability

38 e. China domestic demand priority Government crackdown on smuggling Rising costs in power, fuel, environment Interruptions in power (fused minerals) and internal freight Availability and quality problems from inefficient, polluting mines and plants, some closed = tight supply Domestic demand priority for minerals, eg. bauxite to aluminium smelters = tight supply

39 e. China export quotas % -20.0% Threat of no H2 ELs if H1 ELs unsold Rare earths 30,184 31,130

40 e. China WTO ruling upheld 2009: US, EU, Mexico steelmaking lobby complaint over Chinese export policies (bauxite, fluorspar, SiC) 2011: WTO finds against China: export policy inconsistencies - WTO instructs China to abide by WTO rules - China appeals against WTO ruling 2012: WTO dimisses bulk of Chinese appeals - ruled that fluorspar, SiC export duties illegal - refractory bauxite export quota unjustified

41 e. China - future Possible outcomes? China totally discards export licence system (ELS) Further appeals to WTO ruling by China China discards ELS, but introduces new and uses other taxes to offset ELS loss, eg. environmental tax

42 e. China - future Trader s comment: It is clear they [China] are not going to change their general idea, which is to protect local demand and domestic production, by exporting finished product, not raw materials, and protect their sources. I am sure that if China would agree to give up the ELS we would see a new system regulating the exports and managing the prices within a short while.

43 e. China shape of things to come? July 2011: Natural resources tax expanded to coal February 2012: China ups mining tax on boron, talc ($3.18/t) and magnesite ($2.38/t) Haicheng General Refractory Group, Haicheng, Liaoning, China

44 e. China impact on trade Tight, uncertain, and expensive supply from China Opportunities for exporting minerals to China Driving development of new and alternative sources outside China Driving expansions of established Western capacity Encouraging mineral consumers to embark on strategy of securing captive raw material supply outside China

45 f. Supply security of critical minerals Feb 2011: EC Raw Materials Initiative Dec 2011: US DoE Critical Materials Strategy Fair and sustainable supply from global markets Foster sustainable supply of raw materials from EU sources Boost resource efficiency and promote recycling Monitor issues of critical raw materials Update list of critical raw materials every 3 years Policy actions not limited to critical raw materials exclusively

46 f. Supply security of critical minerals Rare earths EC Critical Raw Materials Study July 2010 SUPPLY RISK Barytes Fluorspar Graphite Diatomite, talc, perlite, clays Gypsum, feldspar Lithium, bentonite borates, silica, titanium Bauxite Magnesite Chromite ECONOMIC IMPORTANCE

47 f. Supply security of critical minerals Source: European Commission

48 f. Supply security of critical minerals Quest for resources within EU = potential new development/trade routes Source: European Commission

49 g. Vertical integration eg. refractories Source: Magnesita

50 g. Vertical integration eg. RHI Source: Gernot Harm, RHI

51 g. Vertical integration eg. RHI RHI refractory plants Mineral source % Europe Europe 46 Asia 41 Others 13 Asia Asia 94 Others 6 North America Asia 35 South America 30 North America 20 Others 15 South America South America 70 Others 30 RHI secures 0.9m tpa from 3 rd party sources Source: Gernot Harm, RHI

52 g. Vertical integration eg. refractories February 2011: RHI AG targets 80% raw materials self-sufficiency over five years; actively seeking alternative sources Executing on this strategy is the key to expanding our no.1 market position and improving on our performance. Henning Jensen, CEO, RHI AG, 12 May 2011

53 g. Vertical integration eg. refractories May 2011: Magnesita embarks on vertical integration, 90% by 2013, seeks alternative raw material sources to China Any company that is in this industry that is serious about being in the business has to find a solution to their raw materials outside of China Flavio Barbosa, CFO, Magnesita Refratarios

54 g. Vertical integration eg. RHI RHI captively mines 1.3m tpa magnesite & dolomite Acquired 2011 Acquired 2011 Expanding 2011/12 Source: Gernot Harm, RHI

55 h. Pricing Factors influencing industrial mineral pricing

56 h. Pricing trending up Sharp rise in prices from 2007 Source: PRE

57 h. Pricing trending up Chinese refractory bauxite exports Source: Roskill Information Services

58 h. Pricing trending up Increasing EU Chinese MgO import price components Index normalised to 100 for 2002 Source: PRE

59 i. Environment Increased recycling Emergence of secondary raw material sources REACH

60 i. Environment Increased recycling/secondary raw material sources Source: Krzysztof Galos 2011

61 i. Environment Increased recycling/secondary raw material sources Source: Krzysztof Galos 2011

62 i. Environment Secondary raw material sources Foundry landfill site, Ohio Alexander Mill Services Int., chromite reclamation plant, Ohio Source: John Alexander, AMSI, 2011

63 i. Environment Source: John Alexander, AMSI, 2011

64 i. Environment Secondary Al salt slag to alumina raw material Source: RVA

65 i. Environment EU - REACH Registration, Evaluation, Authorisation of CHemicals Ores/Concentrates Recovered metals & alloys* Production Intermediates Massive Metals, Minerals metal and mineral compounds No Registration (if not chemically modified) * No Registration (if information in hand) Registration Registration Impact on EU processed minerals imports 10 Feb. 2012: EU banned borates in detergents under REACH guidelines

66 j. Logistics innovating & optimising Source: Abel Coplet, Yasheya 2011

67 j. Logistics Cargo parcels Source: Abel Coplet, Yasheya 2010

68 j. Logistics Multimodal Source: Abel Coplet, Yasheya 2010

69 j. Logistics Technical Source: Abel Coplet, Yasheya 2010

70 j. Logistics IT innovations Source: Abel Coplet, Yasheya 2011

71 j. Logistics IT innovations

72 j. Logistics IT innovations Source: Abel Coplet, Yasheya 2011

73 j. Logistics alt. routes RHI freighed 40,000t since 2010 Source: Abel Coplet, Yasheya 2011

74 j. Logistics alt. routes Mongolia REE Fluorspar Graphite Lithium Kazakhstan Borates Chromite Lithium Phosphates Russia Lithium Phosphates Potash REE Rutile

75 j. Logistics port development eg. Sohar, Oman Sohar Aggregates Chromite Clays Gypsum Limestone Marble Quartz Salt Silica sand

76 k. World events March 2011: Japanese earthquake disrupted GCC, iodine, steel, glass, paper, refractories iodine supply scare cement refractory demand 2011/2012: North African Spring phosphate supply concerns EU bans Syrian phos imports

77 4. Conclusions Outlook - fundamentals Industrial minerals remain vital ingredients for industrial growth Market demand will remain as long as there is economic and population growth and development Thus feeding global trade in industrial minerals Overall recession recovery has restored demand & trade flows Economic growth in BRIC continues to stimulate demand Transshipment of Chinese talc in Amsterdam

78 4. Conclusions Outlook - China Too late to cancel 2012 ELS, but unlikely to be renewed in 2013 However, much concern over its replacement Expected to be in form of alternative taxes and new rules for mineral exporters to be vertically integrated, ie. own and operate mines which must have a range of permits/licenses eg. mining, environmental, social care Upshot: will take out chunk of Chinese supply sources, and a period of constricted supply expected for H as new regs implemented and Chinese supply sector adjusts Chinese domestic demand still a factor, although construction bubble near bursting Nevertheless, consumer confidence in Chinese supply still impacted

79 4. Conclusions Outlook challenges & opportunities Overall outcome = drive to secure new/alternatives supply sources, esp. ex-china, new trade patterns to emerge Supply security concerns in EU and USA owing to China and limited global resources have boosted mineral project development and existing capacity expansions worldwide not just for critical minerals Alert on corporate level for consumers: switching supply souces; vertical integation expect more to follow RHI example Expect to see more mineral development in Africa, central Asia, Middle East, South America, (eastern Europe) Also note potential of: Afghanistan, Iraq, North Korea, Cuba, Russia EU: balance of needs v environmental concerns; mining regs/reach Competition with China in securing global resources, eg. bauxite

80 4. Conclusions Outlook challenges & opportunities Chinese (and Indian) domestic market growth ongoing opportunity to supply Inceased recycling & secondary raw material use will see new sources closer to end markets and thus new trade patterns emerge Innovations in improving and optimising logistic solutions will see new trade routes emerge as new sources opened up

81 Thank you