Chrome Industry Overview Victor Constant Market Research Analyst 31 st Stainless & Its Alloys Conference 2017 October 26 th, 2017 Doubletree Hotel Downtown Pittsburgh, PA - USA
ICDA: Competition / Antitrust Policy Statement and Guidelines The activities of the ICDA are not and shall not be intended to restrain competition or to inflict prejudice or harm on consumers. The inherent purpose and objectives of the ICDA are to promote free competition and to provide benefit to consumers. In connection with membership and participation in the ICDA and related activities, there shall be no discussion, communication or disclosure among Members or Guests which are actual or potential competitors of any of the following individual company information: prices, discounts or terms or conditions of sale of products or services, pricing methods, profits, profit margins or production cost data, production plans, market shares, distribution, volumes, sales territories or markets, allocation of territories or customers ( Business Sensitive Information ). The ICDA, its constituent bodies and all related social and other activities shall not be used for the purpose of bringing about or attempting to bring about, any understanding or agreement, whether written or oral, formal or informal, express or implicit between and among actual or potential competitors with regard to matters concerning their Business Sensitive Information. The ICDA and each Member and Guest, in relation to the activities of the Association, shall be expected to use their best reasonable judgement to respect and comply with the letter and spirit of the Antitrust Laws and this Policy Statement. ICDA Members are permitted to bring legal advisers to ICDA meetings and events (at Members own costs). In order to minimize risk for the ICDA and its Members and Guests and consistent with the ICDA By-Laws, any behaviour inconsistent with this Policy will be dealt with in an appropriate manner by the ICDA Council and may result in suspension or termination of attendance privileges or membership.
Global outlook on Cr industry Cr industry has held its trend in 2016 35 30 25 Global Cr and FeCr output 2001-2016 Millions 20 15 but 2017 was off to a rocky start as 10 5 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 EU FeCr (USD/lb) and average Cr Ore (index Jan 2012=100) prices 2005-2017 there was a sharp fall in prices from Q4 2016. Prices have picked up in the past weeks. Source: FerroAlloyNet, Metal Pages, ICDA
Chrome ore and concentrate overview
Chrome ore production by grade 2015-29.7Mt with 17 countries worldwide 2016 29.02 Mt Metallurgical grade Chemical grade Foundry sand grade Refractory grade +/- % in volume -5.5% +30% +4% -16% Source: ICDA
Chemical and Foundry sand grades Chemical grade Foundry sand grade 1000 Sodium dichromate Na 2 Cr 2 O 7 Metallurgical grade Chemical grade 700,000 600,000 Foundry Sands Metallurgical grade 800 500,000 in Kt 600 (in tonnes) 400,000 400 300,000 200,000 200 100,000 0 2012 2013 2014 2015 2016 0 12 2012 2013 2014 2015 2016 Increasing use of chemical grade in 2015/2016. In 2016 the Cr ore use for Na 2 Cr 2 O 7 was around 1 Mt i.e. 786 Kt of chemical grade + 176Kt of metallurgical grade (incl.ug2) consumed for SDC i.e. 668 Kt. 2016 = 550 Kt i.e. 499 Kt of foundry sand grade + 50 Kt of metallurgical grade, screened in China who started using real Cr foundry sand from Q2 2016. Source: ICDA
Around 77% of ferrochrome production is used to produce stainless steel. Ferrochrome and stainless steel are highly correlated! Cr ore production 2016 by type 29.02 Mt Chromite usage FeCr production 2016 by type 11.85 Mt Ferrochrome applications FeSiCr 319 Kt FeCr HC Fe Cr 28% 3.1 Mt Charge Cr 65.7% 7.29Mt Chemical 176 Kt Source: ICDA Foundry 50 Kt Source: ICDA Source: Industry 95.36% of total chrome ore production is used in metallurgical applications in 2016. HC FeCr & charge Cr production represents 93.7% of global ferrochrome production in 2016.
Ferrochrome usage Source: ICDA Grade % Carbon/Cr/Si Producing countries Charge Cr Low grade HC FeCr High grade HC FeCr Cr: 45-75% C: 4-8% Si: 2.5-7% Cr: 47-65% C: max. 10% Si: up to 4% Cr: 65-72% C: max. 10% Si: max. 2.5% South Africa Finland Brazil China India Zimbabwe Kazakhstan Albania Sweden Russia Turkey Specifications of Charge Cr and HC FeCr, and their producing countries, divided into three categories separated by grade. Source: H.Pariser, ICDA
35 30 Overview and trends by country Cr ore and Conc. producing countries 2006-2016 Est. Cr ore and concentrate producing countries 2006 2016 29.7 Mt 29.02 Mt 29.01 Mt 25 20 Millions 15 10 5,000 0 Source: ICDA Global chrome ore produc9on by country 2006-2016 Est. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Est. South Africa Kazakhstan India Turkey Finland RoW South Africa: down by 5.7% from 2015 due to low Turkey: down by 21% as several businesses closed domestic demand, and some companies reducing mines during low Cr prices and took time to reopen output/stopping mines amid low Cr prices during when prices rebounded. Q4 2015/Q1 2016 and taking time to reopen after. Output in H1 2017 is down from H2 2016 but up from H1 2016. Kazakhstan: down by 1.2%, relatively stable activity, some safety checks in H1 2016. Output in H1 2017 is up from both H1 and H2 2016. Output in H1 2017 is down from H2 2016 but up from H1 2016. India: output jumped by 25% as government reopened some mines and demand from local FeCr increased. Output in H1 2017 is down from both H1 and H2 2016
UG2 chrome output 2006-2016 5.0 in million tonnes 4.5 4.0 3.5 3.0 2.5 2.0 1.97 1.79 2.58 2.86 3.26 3.54 3.80 3.07 3.90 4.40 1.5 1.0 1.30 0.5 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2016 UG2 output is up from 2015 following the 6-month strike in 2014. 12.8% Source: ICDA
Global Cr ore trade overview H1 2017 Chrome ore global production H1 2017 15.6 Mt Previous stocks Global Cr ore trade 7.4 Mt Domestic use + Stocks 13.3 Mt Russia 344 Kt India 65 Kt USA 35 Kt Others 361 Kt China Cr ore Imports 6.6 Mt India 2.24 Mt South Africa 6.84 Mt Finland 546 Kt Kazakhstan 2.11 Mt Source: ICDA, Official Customs Data
Ferrochrome overview
World s FeCr producing countries by capacity 6000 5000 Produc(on capacity 2016 (in,000 tonnes) Capacity Capacity produc>on 5.0 4.5 4.0 China vs South Africa FeCr produc7on (2006-2016) China South Africa 4000 3000 2000 Millions 3.5 3.0 2.5 2.0 1.5 1000 1.0 0.5 0 China South Africa Kazakshthan Kazakhstan India 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 China production capacity est. around: 5.0Mt South Africa production capacity around: 4.3Mt China overpassed SA in 2012 Source: ICDA Kazakhstan FeCr production capacity around: 1.5 Mt India s FeCr production capacity around: 1.3 Mt
12 Overview and trends by country Ferrochrome producing countries 2006-2016 2006-2016 11.59 Mt 11.85 Mt 11.49 Mt 10 in million tonnes 8 6 4 2 0 Source: ICDA 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Est. China South Africa Kazakhstan India Finland RoW China: output was up by 11.4% as local FeCr producers were encouraged to increase output by higher tender prices from Chinese stainless steel producers and higher stainless steel output. Output in H1 2017 is down from H2 2016 but higher than H1 2016. South Africa: down by 5.7% from 2015 due to some companies shutdowns (business rescue) and taking time to restart following acquisition. Output in H1 2017 is up both from H1 and H2 2016 Kazakhstan: up by 3.7%, steady growth over the years. Output in H1 2017 is up both from H1 and H2 2016 India: up by 22.2% in response to higher domestic Cr availability. Output in H1 2017 is up both from H1 and H2 2016 Finland: up by 3.1%, steady growth as well. Output in H1 2017 is down from both H1 and H2 2016
Global Ch.Cr/ HC FeCr trade overview H1 2017 Charge Cr/HC FeCr global production H1 2017 Global Production 6.05 Mt Global trade 3.02 Mt Domestic use + stocks 3.03 Mt (est.)
Source: Official Customs Data, ICDA Ch.Cr & HC FeCr imports by country of origin H1 2017 Americas European Union Asia 2016 Americas EU Asia
Global HC FeCr trade flows in H1 2017 (in 000 tonnes) USA 21.6 40.7 216.6 13.7 11.4 230.6 Europe Finland 102.6 58.7 9 10.2 16 Kazakhstan 495 49.2 5 210 India 421 Russia 733 15.4 149 237 32.7 S.Korea China 80 146 Taiwan 60 Japan 35 169 85.6 Major HC FeCr exporter Exports to «other» FeCr purchasing countries (in 000's tonnes) South Africa 14.2 Kazakhstan 10.6 India 22.3 Finland 1.9 Zimbabwe 4.9 Zimbabwe 75.7 South Africa 1 595 Source: ICDA, based on official customs data for 2015
China Ch.Cr/ HC FeCr overview H1 2017 Production 2.26 Mt Ch. Cr/HC FeCr 3.6 Mt Imports 1.34 Mt 1t FeCr 3.33t Stainless Steel (depending on grade) China Stainless steel output in 2016 was 24.9 Mt (7.48x3.33) +15.7% YoY, in Q1 2017 it was 6.2 Mt +16% YoY, in Q2 2017 it was 5.8 Mt -11.5% YoY, in Q3 2017 it was 6.3 Mt -0.33% YoY 25,000 20,000 China Stainless Steel Produc2on 2001-2016 6 5 If Chinese stainless steel production growth keeps up, in correlation FeCr production should increase. China FeCr produc8on 2006-2017 Est.? (in '000 tonnes) 15,000 10,000 5,000 0 Source: ISSF 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 in million tonnes 4 3 2 1 0 Source: ICDA 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Est. 2017 Est.
in 000s tonnes 1,000 900 800 700 600 500 400 300 200 100 0 Source: ICDA Asia: Up by 18.4% in 2016 mainly pushed by China. Eastern Europe: Up by 7.6% in 2016. Output for H1 2017 was up from both H1 and H2 2016. Africa: down by 79% in 2016. Output for H1 2017 was up from H1 and H2 2016. MC/LC overview and trends Global output down by 16.2% in H1 2017 LC & MC FeCr produc.on by region 2006-2016 747 Kt 663 Kt 646 Kt 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Asia Eastern Europe Africa Western Europe Americas Output for H1 2017 was down from both H1 and H2 2016 Western Europe: up by 29.9% in 2016. Output for H1 2017 was up from both H1 and H2 2016. Americas: up by 13.7% in 2016 due to better power supply in Brazil enabling Ferbasa to increase output. Output for H1 2017 was down from H2 2016 but on par with H1 2016.
MC/LC FeCr imports by country of origin H1 2017 Americas European Union Asia 2016 Americas European Asia Union Source: Official Customs Data, ICDA
China impact on Cr ore prices Cr ore stocks were at low levels, under 1.5 Mt end of 2015 and under 1 Mt in 2016. Q2 2017, Cr ore stocks over 2 Mt So higher Cr ore prices in Q4 2016 from Q2 2016 boosted by higher demand from Chinese FeCr sector. Sharp price drop in Q1 2017 amid low demand and high stocks. Price were low in Q2 2017 rose again and are now stabilizing. Source: FerroAlloyNet
China stainless steel influence on FeCr prices Sources: ISSF, CSSC Increasing stainless steel output in China in 2016 - up by 15.7% YoY Average HC FeCr tender price in China by Baosteel, Tisco, Jisco (RMB/tonne) Leads to higher demand for FeCr Leads Chinese stainless steel producers to increase their FeCr tender prices Sources: FerroAlloyNet
Expected Regional Stainless Steel Growth TOTAL WORD + 1.440 kt? + 140 kt + 105 kt + 945 kt AMERICAS EUROPE CHINA Forecast 2017 Growth 2015/16 Growth 2014/15 Source: SMR (real demand excl. stock variations) Rest of the WORLD (including India and Turkey) + 160 kt + 90 kt Other ASIA (Australia, Japan, South.Korea, ASEAN)
To sum up What are the expectations of the Chromium Industry? The Cr industry recovered from a very difficult phase in 2015 as a result of the challenging economic conditions globally, and particularly in China which has a significant impact on the chrome industry, by decreasing prices. Restart of Chinese FeCr production locally (+11.4% in 2016) China imported significantly more Cr ore from January 2017 As stainless steel production in 2015 was down worldwide (-0.3%) and in China (-0.6%) China expects again an increase for the coming years (2016: +15.7%), Q1 2017 followed that trend (+16% YoY). Cr ore and FeCr prices dropped sharply during H1 2017 but have picked up in Q3, before dropping slightly in the past few weeks. Cr industry is expecting a significant restart of Europe and USA stainless steel markets, and other countries to drive global stainless steel demand: Africa (Nigeria), Brazil, Mexico, Turkey, Vietnam India with its population now almost as high as China s, and with a new government pushing for economic and industrial development, has a strong potential for the future.
Thank you for your attention ICDA Membership: the access to privileged information!