Opportunities and challenges in manganese industry - Metal Bulletin 14 th Asian Ferro-alloys Conference ALLOYS, ORES & PEOPLE.
DISCLAIMER Disclaimer: This presentation expresses 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. Forward looking statements are not predictions of future performances. 2
OPPORTUNITIES AND CHALLENGES IN MANGANESE INDUSTRY Eramet group Key learning from 2012 Challenges for the industry
AN INCREASING INTERNATIONAL PRESENCE A FRENCH INTERNATIONAL GROUP: 15,000 PEOPLE ACROSS THE 5 CONTINENTS 3 sites Manganese 1 site TiO2 1 hydroelectrical plant 1 site Erasteel 3 sites Erasteel 46 sites in 12 countries 20 countries with ERAMET sales network 1 site Manganese 1 site Erasteel 5 site Manganese 2 sites Nickel division 2 sites Erasteel 7 sites Aubert & Duval 2 sites Manganese 3 sites Manganese 1 site A&D (Wuxi) 1 site Erasteel 1 site Manganese 1 site Titanium JV ERAMET presence Nickel Division Manganese Division Alloys Division Lithium project 1 manganese mine 1 alloy and 1 manganese metal plants being built 1 niobium and rare earths mine project 1 nickel mining project (WedaBay - Indonesia) 1 metallurgical plant 6 mining centers (SLN New Caledonia) Group (Lithium) Diversified geographical presence with an expanding footprint in emerging countries 4
ERAMET MARKETS WITH LONG-TERM GROWTH Specialty chemicals 4% Energy 4% Pigments Batteries 2% 3% Tooling 8% Carbon steels 33% Steel: 55% Other 10% Aerospace 14% Stainless and alloy steels 22% 2012 TURNOVER BY MARKET - 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 2011 reserves of 153 MT Production capacity: 3.4MT in 2012, ongoing plan to increase production capacity to 4MT by 2013 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 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 Control of and access to transport infrastructure is a strong asset 6
MANGANESE ALLOYS: INDUSTRIAL SITES CLOSE TO END MARKETS 7
MOANDA METALLURGICAL COMPLEX (GABON): LOCAL VALUE CREATION Construction of a silicon-manganese plant (65,000 t/yr.) and a manganese metal plant (20,000 t/yr.) in Moanda. On stream early 2014. PROJECT GOALS Developing the value creation and technical skills in Gabon By transforming locally non commercial ores Using state of the art and local hydroelectricity COMMERCIAL OBJECTIVES Respond to steel producers policy to find new sources for Mn metal Offer low B SiMn to existing and new customers based on long term guaranteed supply of electricity and ore COMMERCIAL CONSTRAINTS Logistics out of Gabon require to build o A stable logistic set-up out of Gabon o Thus, contractual agreements with customers 8
MOANDA METALLURGICAL COMPLEX (GABON): LOCAL VALUE CREATION Silicomanganese production Furnaces expected to start early 2014 Ramp-up phase in 2014 Nominal capacity: 65,000tpy Manganese metal production Pilot plant to start in April 2013 EMM electrolysis to start end-january 2014 Ramp-up phase in 2014 Nominal capacity: 20,000tpy Product will be EMM in flakes 9
OPPORTUNITIES AND CHALLENGES IN MANGANESE INDUSTRY Eramet group Key learning from 2012 Challenges for the industry
STRONG VOLATILITY ON THE MARKET IN 2012 The Slow growth of the demand from the steel industry and the strong variation of Chinese inventory along the supply chain brought volatility on the market. White goods production and inventory in China Automotive production and inventory in China Source: World Steel, Chinese customs - 11
Resilience of Manganese ore prices Despite drastic variations in Chinese apparent demand, Manganese ore price have been relatively resilient in 2012. Manganese ore price and inventory evolution 8,7% price variation (peak to peak in 2012) 70% price variation (peak to peak in 2012) Source: Metal Bulletin - 12
2012: an indication of the Manganese ore floor price? Major ore producers have worked at full capacity but the high grade Manganese ore supply have remained limited, because of technical disruption. Adjustment of supply to demand is made on local ore supply, the cost of lower grade ore seems to become a major price driver A substantial reserve of marginal offer can come back on the market with a sufficient enough price incentive. Source: Eramet Estimation. - 13
2012: situation of oversupply of Manganese alloys In 2012, like in 2011, the Manganese alloy market was affected by The slow down of the Manganese alloy demand growth from the steel industry The capacity addition in some countries which was not in line with this demand This created an oversupply and hence a price decrease of Manganese alloys Manganese alloys exported from India Source: GTIS, World Steel, Metal Bulletin Research and Eramet Estimation. - 14
Mn alloys production Cost increase tendency The 2012 situation should not hide the tendency of overall cost increase of alloy production Electricity cost increase Environment regulation cost constrains The increase in costs is modifying the Manganese alloys offering Japan power tariffs: +17% in April 2012 +30% announced by Kansai Electric for sept 2013 Estimation of Electricity rate by year and region (for electro-intensive customers) Ukrainian power tariffs: +10% announced in 2012 Indian power tariffs +16% average increase in 2012 Another +15% for 2013 US Norway Ukraine RSA S Korea China Source: CRU, Eramet research. South African power tariffs: + 16% in April 2012 + 8% annual rate increase for the next 5 years - 15
OPPORTUNITIES AND CHALLENGES IN MANGANESE INDUSTRY Eramet group Key learning from 2012 Challenges for the industry
Increase of demand Despite a possible slower growth, the demand for Manganese ore will continue to increase in the coming years, with a need of 700 thousands additional Manganese units on average per year. 18 16 Mn ore production capacity and demand in 2013-2015 Mt Mn 14 12 10 8 6 4 2 0 2008 2009 2010 2011 2012 2013 2014 2015 Local (local+asean) Major excl RSA RSA Others Australian (CML, OMH, PMI) New projects Others producers (excl Australia) demand - 17
The energy revolution Competitiveness gap between alloy producing regions is reducing. Developed countries have solid infrastructures which helps to decrease electricity costs, while labor and electricity prices are increasing in developing regions. Globally Energy Under supplied country Well supplied country Source: Eramet Estimation. - 18
Change of paradigm for the mining industry Between 2004 and 2009, the mining industry had to catch up with the demand. Many new projects were launched Since 2010: Cost awareness becomes predominant Less money is available to be invested Financing become scarce The mining industry and the investors will be more selective More Projects will be delayed or cancelled The Performances of these projects will be intensely scrutinized Source: UNCTAD, Rio Tinto. - 19
Regulation constraints Environment and OHES The regulatory framework on environment and OHES becomes a key competitive issue in mature economies (EU, US, Japan) Public pressure in newly industrialized countries will soon even out the regulation in various regions Mining legislation Mining countries have a legitimate wish to capture more value from raw material extraction This will be a key driver for the future development of the Mining industry 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 2012. 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 - 20
CONCLUSION Despite a possible slower growth, the demand for commodities is still positively oriented in the coming years However with an increasing volatility Prices of ore and alloys are supported by cost increase Investment is still required But financing will be more selective 21
Thank you for your attention 22