Metal Bulletin India Ferroalloy Conference Hyderabad 8-1 February 24 Alloy Market: Present Situation & Trends
Introduction 1. BHP Billiton s position in the carbon steel materials and ferroalloy industry 2. Trends in world steel and ferroalloy demand 3. Possible implications for India
Part 1 BHP Billiton and Samancor in the Ferroalloy Industry
BHP Billiton - The largest company in a consolidating sector CVRD Alcan Barrick Norilsk Anglogold Amplats Gold Fields Placer Dome Impala Xstrata Inco Pechiney Phelps Dodge Freeport Alumina Newmont Alcoa Rio Tinto Anglo American BHPB 45 4 35 3 25 2 15 1 Market Cap. on 22/8/3 (US$Bn) 5 Market value of minerals industry US$36 bn Value of Top Five US$141 bn Value of BHP Billiton US$ 42 bn Source: Datastream
A global footprint Petroleum Aluminium Base Metals Carbon Steel Materials Diamonds & Spec Prod Energy Coal Stainless Steel Materials
Carbon Steel Materials 27% of BHPB EBIT Customer Sector Group EBIT: Stainless Steel Materials Base Metals 4% 8% Diamonds & Spec. Prod. 1% Carbon Steel Materials 27% Aluminium 15% Energy Coal 5% Petroleum 31% Data for year ended 3 June 23
Carbon Steel Materials Assets WA Iron Ore (85-1%) Prod: 77Mtpa Years of Life: 35 No 3 Seaborne supplier QLD Coal (5 8%) Prod: 52Mtpa Years of Life: 5 No 1 Seaborne supplier Boodarie Iron (1%) Prod: 1.7Mtpa Samarco Iron Ore (5%) Prod: 15Mtpa Years of Life: 4 Low cost pellet producer Manganese (6%) Prod: Ore 4.1Mtpa Alloy etc.7mtpa Years of Life: Aust 25 SA 3 No 1 Supplier Illawarra Coal (1%) Prod: 7Mtpa Years of Life: 45 Niche supplier 1% nominal production capacity
Samancor Manganese BHP Billiton Samancor Manganese 6% 4% Samancor Anglo American Chrome Mines Alloys Mines Alloys Wessels Mamatwan Gemco Metalloys Temco South African operations
Samancor Managese Operations Hotazel Johannesburg Metalloys Saldanha Bay SOUTH AFRICA Port Elizabeth AUSTRALIA GEMCO Groote Eylandt TEMCO Bell Bay
Samancor share of world Mn Alloy production HCFeMn SiMn AMERICAS 6% OTHER 3% SAMANCOR 12% AMERICAS 9% OTHER 2% SAMANCOR 4% INDIA 6% EUROPE 14% INDIA 5% EUROPE 12% TH AFRICA 5% CIS 11% OTH AFRICA 3% JAPAN 1% CIS 29% JAPAN 9% CHINA 35% CHINA 34% World Mn Alloy Production 23 = 8.9Mt Source: IMnI
Part 1 Summary BHP Billiton is the world s largest supplier of steelmaking raw materials Samancor is the world s largest producer of manganese units
Part 2 Trends in world steel and ferroalloy demand
Annualised steel and pig iron production trends 68 Annualised pig iron production 14 Annualised crude steel production 66 64 Totals 22 61Mt 23 655Mt 23 1 96 Totals 22 93Mt 23 962Mt 23 (Mt) 62 (Mt) 92 6 88 Seasonal Trends 58 56 Seasonal Trends 84 8 Seasonal Trends Seasonal Trends Seasonal Trends January March May July September November January March May July September November January March May July September November January March May July September November Source: IISI
28 24 2 16 12 8 4-4 -8-12 -16 24 16 December Divergent trends emerged during the year Monthly YOY % Change Crude Steel January February March April May June July August September October November Global EU China Japan US India Monthly YOY % Change Pig Iron December Crude Steel 12 month running totals 96 94 92 9 88 86 84 82 21 22 23 12 months running total actual monthly data 1998 de-seasonalised 1999 monthly data 2 21 22 66 64 Pig Iron 12 month running totals 9 86 82 78 74 7 66 62 6 58 56 8 62 54 52-8 -16 December January February March April May June July August September October November December 6 58 56 21 22 23 12 months running total actual monthly data 5 48 46 44 Source: IISI -24 Global EU China Japan US India de-seasonalised monthly data
World Mn Alloy Demand 1 95 Crude steel (Mmt) Mn Alloy Demand (Mmt) 9. 9 8. 85 8 7. 75 6. 7 65 5. 6 95 96 97 98 99 ' '1 '2 '3 4. Crude steel Mn alloy demand Source:IISI, IMnI
World Mn Alloy Consumption Trends Steel industry/technological trends Manganese consumption HC,SiMn (Kg Aly/ ton steel) MC/LCFeMn(Kg Aly/ ton steel) 1.5 4.9 MC/LCFeMn (3%pa) 1 4.7 HCFeMn (-1.4%pa).95.9 4.5.85 SiMn (.4%pa).8 4.3 4.1?.75.7.65 3.9 94 95 96 97 98 99 ' '1 '2 '3 '4 Source: IISI, IMnI.6
World Mn Alloy Capacity History 12, ' Mt Thyssen,BS closures 12,1 Huta Pokoj closure SFPO closure Moi Rana start-up 1, 8, 9,628 6, 4, 2, 1975 1985 1989 1991 1993 1995 1997 1999 21 23 Source:- IMnI
$85 $8 $75 $7 $65 $6 $55 $5 $45 $4 Jan-2 Feb-2 Mar-2 Apr-2 May-2 Jun-2 Jul-2 Aug-2 Sep-2 Oct-2 Nov-2 Dec-2 Jan-3 Feb-3 Mar-3 Apr-3 May-3 Jun-3 Jul-3 Aug-3 Sep-3 Oct-3 Nov-3 Dec-3 Jan-4 MN Alloy Pricing trends US monthly $/t (Fob Warehouse) HCFeMn SiMn Source: CRU
8 75 7 65 6 55 5 45 4 Jan-2 Feb-2 Mar-2 Apr-2 May-2 Jun-2 Jul-2 Aug-2 Sep-2 Oct-2 Nov-2 Dec-2 Jan-3 Feb-3 Mar-3 Apr-3 May-3 Jun-3 Jul-3 Aug-3 Sep-3 Oct-3 Nov-3 Dec-3 Jan-4 MN Alloy Pricing trends Europe monthly Euro/t (Del) HCFeMn SiMn HC$ Si$ Source: CRU
Part 2 - Summary Global Steel production has grown dramatically over the last 2 years, driven by Asia, and in particular China and India The fall in HCFeMn consumption per ton of steel has now stopped Alloy Capacity has fallen consistently over the last few years Prices have increased as supply has failed to keep up with demand
Part 3 Implications for India
World Manganese Alloy Supply 23 Mt 2 15 1 5 North America Mt 2 15 1 5 Europe Mt 2 15 1 5 China Mt 2 15 1 5 FUSSR HCFeMn SiMn Mt 2 15 1 Japan& Korea 5 2 South America 2 15 India Mt 15 1 5 Mt 2 15 1 RSA Mt 1 5 2 15 MtAustralia 1 5 5 Source:- CRU, Reuters, Interfax
World Manganese Alloy Demand 23 Mt 15 1 North America 15 1 Europe 15 1 China 15 1 FUSSR 5 Mt 5 Mt 5 Mt 5 HCFeMn SiMn Mt 15 1 5 Asia excl China 15 South America 15 15 1 India 1 1 Mt Africa Mt 5 Mt 5 5 Source:- CRU, Reuters, Interfax
Manganese supply:demand in China 23 Domestic alloy apparent consumption increase ±5Kt met by imported ore Mn ore ( mt) Mn alloy ( mt) 3 7,5 6,5 5,5 4,5 3,5 2,5 1,5 25 2 15 1 5 5 95 96 97 98 99 ' '1 '2 '3 Mn ore imports Domestic ore Mn alloy apparent cons Source:IISI, China trade statistics, IMnI
MN Alloy exports from China Mn alloy exports showing signs of slowing down from Q4 23 35 3 25 2 Mn Alloy ( mt) 25 2 15 1 5 Kt China exports Mn alloy - 23 Q1 Q2 Q3 Q4 Crude steel (Mmt) 25 2 15 15 1 1 5 5 95 96 97 98 99 ' '1 '2 '3 Mn alloy apparent cons Mn alloy export Crude steel Source:IISI, China trade statistics, IMnI
Indian Mn Alloy Industry 23 Mt CAPACITY PRODUCTION APPARENT CONSUMPTN EXPORT 6m annualised IMPORT 6m annualised HCFeMn 432 23 172 1 1 SiMn 57 39 258 42 2 Refined 15 13 1 7 TOTAL 1 17 539 443 53 1 Source:CRU, India trade statistics
Mn Alloy consumption in India 4 Crude steel (Mmt) Mn Alloy ( mt) 5 3 4 2 3 1 95 96 97 98 99 ' '1 '2 '3 2 Crude steel Mn alloy apparent cons Source:IISI, IMnI
MN Alloy supply and demand in India 51 Mt Alloy ( ) 41 31 21 11 1 95 96 97 98 99 ' '1 '2 '3 Mn alloy production Mn alloy exports Mn alloy demand Source:IMnI, India trade statistics
Mn Industry issues for India CRUDE STEEL Production fcst to increase to 33-35 mt in 24 +5 mt on 23, and reach 47 mt by 27 Majority of this increase will be via BOF capacity expansions (Source: CRU) MANGANESE Power availability and cost Coke availability and cost Steady increase in Mn ore production in next few years Transport logistics for both ore and alloys Reduction of import duties on ferroalloys from 25% to 15% could in the long run induce imports into India
Part 3 - Summary India is in the unique position, similar to China, of being both a large user and a large producer and exporter of ferroalloys As steel production takes off, India will quickly need to make decisions about: whether to continue exporting ferroalloys whether sufficient high quality ore can be sourced in India to make HCFeMn in particular If not, whether the best option is to buy HCFeMn or high quality Mn Ore depending on factors such as power, coke and transport logistics
Summary 1. BHP Billiton is importantly placed to meet demand for all carbon steel materials. 2. Samancor is well placed to supply not only Mn ore and also high quality HCFeMn and SiMn 3. Demand for these products is growing sharply as the steel industry grows and makes more steel via the BOF route 4. India will soon need to make decisions about where to source Mn units in the future We look forward to discussing the options!
Thank You Brett.Suann@BHPBilliton.com