companhia vale do rio doce€¦ · 1 companhia vale do rio doce acapulco, mexico january 2007 on...
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1
Companhia Vale do Rio Doce
Acapulco, MexicoJanuary 2007
On the riseOn the rise
2
DisclaimerDisclaimer
”This presentation may contain statements that express management’s expectations about future events or results rather than historical facts. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected in forward-looking statements, and CVRD cannot give assurance that such statements will prove correct. These risks and uncertainties include factors: relating to the Brazilian and Canadian economies and securities markets, which exhibit volatility and can be adversely affected by developments in other countries; relating to the iron ore and nickel businesses and their dependence on the global steel industry, which is cyclical in nature; and relating to the highly competitive industries in which CVRD operates. For additional information on factors that could cause CVRD’s actual results to differ from expectations reflected in forward-looking statements, please see CVRD’s reports filed with the Brazilian Comissão de Valores Mobiliários and the U.S. Securities and Exchange Commission.”
”This presentation may contain statements that express management’s expectations about future events or results rather than historical facts. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected in forward-looking statements, and CVRD cannot give assurance that such statements will prove correct. These risks and uncertainties include factors: relating to the Brazilian and Canadian economies and securities markets, which exhibit volatility and can be adversely affected by developments in other countries; relating to the iron ore and nickel businesses and their dependence on the global steel industry, which is cyclical in nature; and relating to the highly competitive industries in which CVRD operates. For additional information on factors that could cause CVRD’s actual results to differ from expectations reflected in forward-looking statements, please see CVRD’s reports filed with the Brazilian Comissão de Valores Mobiliários and the U.S. Securities and Exchange Commission.”
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AgendaAgenda
Reaping the results of a growth strategy
The nickel market
CVRD’s nickel business
The iron ore market
Reaping the results of a growth strategy
The nickel market
CVRD’s nickel business
The iron ore market
4
Reaping the results of a growth strategy
Reaping the results of a growth strategy
5
CVRD has delivered a growth pipeline since 2002CVRD has delivered a growth pipeline since 2002
1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q071Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07
Funil
Alunorte 3
Carajás70 Mtpa
Sossego
Candonga
Aimorés
Alunorte4&5
São Luís
Trombetas
CapãoXavier
Pier III PDM
Mo I Rana
FábricaNova
Taquari-Vassouras
Capim Branco I
Brucutu
Carajás 85 Mtpa
Carajás100 Mtpa
Paragominas
6
3.3 3.85.1 5.4 5.6
6.47.0 7.5 8.0
9.611.0 11.1
14.716.0
16.750.1%
47.2% 47.0% 46.8%48.9%
51.4% 51.1%54.7% 55.1%
59.2%
64.4%
58.1%
52.9%55.2%
59.6%
1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06
Invested capital (US$ billion) ROIC² (%)
3.3 3.85.1 5.4 5.6
6.47.0 7.5 8.0
9.611.0 11.1
14.716.0
16.750.1%
47.2% 47.0% 46.8%48.9%
51.4% 51.1%54.7% 55.1%
59.2%
64.4%
58.1%
52.9%55.2%
59.6%
1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06
Invested capital (US$ billion) ROIC² (%)
Despite a five fold increase in invested capital, ROIC remains above 50%Despite a five fold increase in invested capital, ROIC remains above 50%
¹ PP&E + working capital + R&D
² Before income tax, last twelve-month period
¹ PP&E + working capital + R&D
² Before income tax, last twelve-month period
Return on invested capitalReturn on invested capital
11
7
Acquisitions are also a source of value creation. CVRD restructured its business portfolio making several acquisitions in the iron ore and nickel industries and divestitures in non-core assets.
Acquisitions are also a source of value creation. CVRD restructured its business portfolio making several acquisitions in the iron ore and nickel industries and divestitures in non-core assets.
ACQUISITIONS DIVESTITURESACQUISITIONS DIVESTITURES
US$ 23.7 billionUS$ 23.7 billion US$ 2.8 billionUS$ 2.8 billion
2000-20062000-2006
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CVRD: a global leader in total shareholder return among major global companiesCVRD: a global leader in total shareholder return among major global companies
COMPANY TSR¹ (%) COMPANY TSR (%)
1 Apple 57.4 1 CVRD 47.9
2 CVRD 53.5 2 BAT 29.8
3 Ebay 39.3 3 BHP Billiton 21.1
4 Samsung Electronics 35.3 4 Apple 18.0
5 Softbank 30.7 5 Caterpillar 8.1
6 BAT 27.4 6 Samsung Electronics 1.1
7 Mitsubishi Corporation 26.8 7 Lowe's -6.1
8 Lowe's 24.8 8 Mitsubishi Corporation -13.5
9 BHP Billiton 24.1 9 Ebay -30.4
10 Caterpillar 22.5 10 Softbank -53.5
¹TSR average between 2001 and 2005
²Source: Boston Consulting Group. Large cap = companies with market cap above US$ 35 billion
³Source: Bloomberg
THE LARGE CAP TOP 10, 2001 - 2005² TSR 2006³
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CVRD has the highest total shareholder return among major mining companiesCVRD has the highest total shareholder return among major mining companies
Source: BloombergSource: Bloomberg
23.3%
27.6%
28.9%
39.0%
42.7%
Rio Tinto
Anglo American
BHP Billiton
Xstrata
CVRD
23.3%
27.6%
28.9%
39.0%
42.7%
Rio Tinto
Anglo American
BHP Billiton
Xstrata
CVRD
Total shareholder return (TSR)2001-2006
Total shareholder return (TSR)2001-2006
1 Since Xstrata was listed in the London Stock Exchange only in 2002, the TSR was calculated for the period from March 19, 2002 to December 31, 2006.
1 Since Xstrata was listed in the London Stock Exchange only in 2002, the TSR was calculated for the period from March 19, 2002 to December 31, 2006.
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10
After Inco’s acquisition, CVRD will have a new sales revenue distributionAfter Inco’s acquisition, CVRD will have a new sales revenue distribution
Iron ore & pellets48.4%
PGM1.2%
Copper7.1%
Nickel23.4%
Others2.7%
Aluminum9.4%
Logistics5.7%
Manganese & ferroalloys
2.1%
Iron ore & pellets48.4%
PGM1.2%
Copper7.1%
Nickel23.4%
Others2.7%
Aluminum9.4%
Logistics5.7%
Manganese & ferroalloys
2.1%11
1 cobalt, kaolin and potash2 aluminum, alumina and bauxite
1 cobalt, kaolin and potash2 aluminum, alumina and bauxite
CombinedUS$ 18.2 billion
CombinedUS$ 18.2 billion
22
Iron ore & pellets68.4%
Copper4.6%
Others2.9%
Aluminum13.2%
Logistics8.0%
Manganese & ferroalloys
2.9%
Iron ore & pellets68.4%
Copper4.6%
Others2.9%
Aluminum13.2%
Logistics8.0%
Manganese & ferroalloys
2.9%
CVRDUS$ 12.9 billion
CVRDUS$ 12.9 billion
22
9M069M06
11
… and a new level of financial indicators… and a new level of financial indicators
Selected financial indicators
9M period ended at September 30, 2006
US$ million
Combined
Gross revenues 18,214
Adjusted EBIT 7,185
Adjusted EBIT margin (%) 40.6
Adjusted EBITDA 8,680
Net earnings 5,447
Total debt 22,1511
Selected financial indicators
9M period ended at September 30, 2006
US$ million
Combined
Gross revenues 18,214
Adjusted EBIT 7,185
Adjusted EBIT margin (%) 40.6
Adjusted EBITDA 8,680
Net earnings 5,447
Total debt 22,1511
1 includes bridge loan1 includes bridge loan
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The nickel market
The nickel market
13
The stainless steel industry is the largest user of nickelThe stainless steel industry is the largest user of nickel
Non ferrous alloys¹14%
Plating7%
Alloy steels5%
Batteries3%
Others9%
Stainless steel62%
Non ferrous alloys¹14%
Plating7%
Alloy steels5%
Batteries3%
Others9%
Stainless steel62%
Global nickel consumptionGlobal nickel consumption
¹ includes superalloys and high nickel alloys used by the aerospace industry and energy exploration, production and storage
Source: CRU
¹ includes superalloys and high nickel alloys used by the aerospace industry and energy exploration, production and storage
Source: CRU
14
The stainless steel industry and nickel demandThe stainless steel industry and nickel demand
global production 2006
Stainless steel 28.1 Mt
Austenitic steel 1 21.2 Mt
Austenitic ratio (AR)2 75.5%
Scrap Ratio3 48.0%
Nickel Content4 8.3%
Primary nickel 915 kt
global production 2006
Stainless steel 28.1 Mt
Austenitic steel 1 21.2 Mt
Austenitic ratio (AR)2 75.5%
Scrap Ratio3 48.0%
Nickel Content4 8.3%
Primary nickel 915 kt
1 Steel that contains nickel. Series 200 and 300.2 austenitic steel production / total stainless steel production, that is Series 200 and 300 production / Series 200, 300 and 400 production.3 use of scrap / total nickel used in austenitic steel production, that is scrap/(scrap+primary nickel). 4 average nickel content in the austenitic steel production
1 Steel that contains nickel. Series 200 and 300.2 austenitic steel production / total stainless steel production, that is Series 200 and 300 production / Series 200, 300 and 400 production.3 use of scrap / total nickel used in austenitic steel production, that is scrap/(scrap+primary nickel). 4 average nickel content in the austenitic steel production
Sources: CVRD and CRUSources: CVRD and CRU
15
Price elasticity of demand for nickel by the stainless steel industry is constrained by technological options
Price elasticity of demand for nickel by the stainless steel industry is constrained by technological options
World austenitic ratioWorld austenitic ratio
71%
73%
75%
77%
79%
1980 1990 2000 2006
71%
73%
75%
77%
79%
1980 1990 2000 2006
Source: CRUSource: CRU
16
Scrap prices varies from 75% to 97% of the LME nickel priceScrap prices varies from 75% to 97% of the LME nickel price
70
75
80
85
90
95
100
1Q
98
2Q
98
3Q
98
4Q
98
1Q
99
2Q
99
3Q
99
4Q
99
1Q
00
2Q
00
3Q
00
4Q
00
1Q
01
2Q
01
3Q
01
4Q
01
1Q
02
2Q
02
3Q
02
4Q
02
1Q
03
2Q
03
3Q
03
4Q
03
1Q
04
2Q
04
3Q
04
4Q
04
1Q
05
2Q
05
3Q
05
4Q
05
1Q
06
2Q
06
3Q
06
4Q
06
-20%
-15%
-10%
-5%
0%
5%
10%
15%
70
75
80
85
90
95
100
1Q
98
2Q
98
3Q
98
4Q
98
1Q
99
2Q
99
3Q
99
4Q
99
1Q
00
2Q
00
3Q
00
4Q
00
1Q
01
2Q
01
3Q
01
4Q
01
1Q
02
2Q
02
3Q
02
4Q
02
1Q
03
2Q
03
3Q
03
4Q
03
1Q
04
2Q
04
3Q
04
4Q
04
1Q
05
2Q
05
3Q
05
4Q
05
1Q
06
2Q
06
3Q
06
4Q
06
-20%
-15%
-10%
-5%
0%
5%
10%
15%
Scr
ap p
rice
( %
of
LME n
icke
l)Scr
ap p
rice
( %
of
LME n
icke
l)
Source: CRUSource: CRU
Quarterly co
nsu
mptio
n g
row
th (%
)Q
uarterly co
nsu
mptio
n g
row
th (%
)
17
Laterites45%
Sulphides55%
Laterites45%
Sulphides55%
Sulphides28%
Laterites72%Sulphides
28%
Laterites72%
Current nickel supply depends on sulphides, while future supply depends on lateritesCurrent nickel supply depends on sulphides, while future supply depends on laterites
World nickel resourcesWorld nickel resources
- high mining costs- low smelting costs- low capex costs
- no technological challenge- high by-products credits
(eg. Au, Ag, PGMs)
- low mining costs- high smelting costs- high capex costs
- technological challenge- low by-products credits
(eg. cobalt)
Sources: CRU, MEG and Brook HuntSources: CRU, MEG and Brook Hunt
World nickel production1
World nickel production1
1 2006 estimated world production1 2006 estimated world production
18
Sulphide benefits from higher by-product creditsSulphide benefits from higher by-product credits
-3
-2
-1
0
1
2
3
4
5
Laterites Sulphides Sulphides exc. Norilsk
By-product credits Mine site & delivery costs Smelting Refining & marketing
-3
-2
-1
0
1
2
3
4
5
Laterites Sulphides Sulphides exc. Norilsk
By-product credits Mine site & delivery costs Smelting Refining & marketing
C1 Cost Components(2005 Basis)
C1 Cost Components(2005 Basis)
Source: Brook HuntSource: Brook Hunt
US$/l
b N
i
3.53 3.82 3.82
3.29 0.98 2.57
before credit
after credit
(2.82) (1.25)(0.23)
19
Besides the technology challenge, lateriteprojects present higher capex per tonBesides the technology challenge, lateriteprojects present higher capex per ton
Source: Brook HuntSource: Brook Hunt
20
Low real prices for more than a decade led to underinvestment in nickelLow real prices for more than a decade led to underinvestment in nickel
0
5000
10000
15000
20000
25000
30000
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
US
$ /
ton
0
5000
10000
15000
20000
25000
30000
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
US
$ /
ton
nickel prices, in real terms¹nickel prices, in real terms¹
¹ 2005 prices, deflated by US PPI
Sources: LME and CVRD
¹ 2005 prices, deflated by US PPI
Sources: LME and CVRD
21
Major greenfield nickel projectsMajor greenfield nickel projects
Voisey’s Bay 55
Onça Puma 57
Goro 60
Vermelho 46
BHPB Ravensthorpe 45
AA Barro Alto 40
Voisey’s Bay 55
Onça Puma 57
Goro 60
Vermelho 46
BHPB Ravensthorpe 45
AA Barro Alto 40
CVRDCVRD
Capacitykt
Capacitykt
22
The BRICS stainless steel consumption per capita still lowThe BRICS stainless steel consumption per capita still low
0
5
10
15
20
25
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44
GDP $ '000 per capita
Sta
inle
ss C
on
sum
pti
on
(K
g)
pe
r ca
pit
a
0
5
10
15
20
25
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44
GDP $ '000 per capita
Sta
inle
ss C
on
sum
pti
on
(K
g)
pe
r ca
pit
a
India
India
GermanyGermanyJapanJapan
USAUSA
GDP and stainless steel consumption per capita - 2005GDP and stainless steel consumption per capita - 2005
Source: World Stainless Steel Statistics, 2006 editionSource: World Stainless Steel Statistics, 2006 edition
Chin
aChin
a
Bra
zil
Bra
zil
Russ
iaRuss
ia
South KoreaSouth Korea
ItalyItaly
SpainSpain
CanadaCanada
UKUKFranceFrance
23
China will be the major driver of nickel demand growth in the next years, with an estimated growth rate close to 20% p.a.
China will be the major driver of nickel demand growth in the next years, with an estimated growth rate close to 20% p.a.
1.236
1.352
1.463 1.4861.547
1.638
500
700
900
1100
1300
1500
1700
2005 2006e 2007p 2008p 2009p 2010p
China
Rest of the World
1.236
1.352
1.463 1.4861.547
1.638
500
700
900
1100
1300
1500
1700
2005 2006e 2007p 2008p 2009p 2010p
China
Rest of the World
15.5%17.9%
21.4% 23.1% 25.3%28.6%
2005-2010
CAGR
2005-2010
CAGR
19.6%19.6%
5.8%5.8%
2.3%2.3%
‘00
0 t
on
s o
f co
nta
ined
nic
kel
‘00
0 t
on
s o
f co
nta
ined
nic
kel
Source: CRUSource: CRU
(% China/Total World)(% China/Total World)
24
The imbalance in the nickel market should continueThe imbalance in the nickel market should continue
Global growth and Chinese investments in stainless
steel will continue to drive demand growth.
Austenitic ratio less sensitive to price variations due to
technology limitations.
Demand in non-stainless steel applications is being
driven by recovery in aerospace, energy and batteries
industries.
Supply expansion is constrained in the short-term by
technological challenges, high capex, lack of resources
and production disruptions.
Global growth and Chinese investments in stainless
steel will continue to drive demand growth.
Austenitic ratio less sensitive to price variations due to
technology limitations.
Demand in non-stainless steel applications is being
driven by recovery in aerospace, energy and batteries
industries.
Supply expansion is constrained in the short-term by
technological challenges, high capex, lack of resources
and production disruptions.
25
Nickel inventories are minimal and demand is growing stronglyNickel inventories are minimal and demand is growing strongly
Source: LMESource: LME
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
2000 2001 2002 2003 2004 2005 2006
inve
ntor
y (m
etric
tons
)
0
5000
10000
15000
20000
25000
30000
35000
40000
pric
e ( U
S$ p
er to
n)
Inventories - LME Nickel 3-month LME
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
2000 2001 2002 2003 2004 2005 2006
inve
ntor
y (m
etric
tons
)
0
5000
10000
15000
20000
25000
30000
35000
40000
pric
e ( U
S$ p
er to
n)
Inventories - LME Nickel 3-month LME
26
CVRD’s nickel
business
CVRD’s nickel
business
27
Top global nickel producers in 2005Top global nickel producers in 2005
91
115
145
204
242
Jinchuan
Xstrata
BHP Billiton
CVRD
Norilsk Nickel
91
115
145
204
242
Jinchuan
Xstrata
BHP Billiton
CVRD
Norilsk Nickel
2005 Production‘000 tons of contained nickel
2005 Production‘000 tons of contained nickel
Sources: AME Mineral Economics and CVRDSources: AME Mineral Economics and CVRD
28
The largest world reservesThe largest world reserves
1.1
1.3
1.5
4.6
6.0
11.3
Anglo American
Xstrata
Minara / Glencore
BHP Billiton
Norilsk Nickel
CVRD
1.1
1.3
1.5
4.6
6.0
11.3
Anglo American
Xstrata
Minara / Glencore
BHP Billiton
Norilsk Nickel
CVRD
Reserves1
million tons of contained nickel
Reserves1
million tons of contained nickel
1 P&P reserves 2 part of CVRD’s P&P reserves, representing 3.5 Mt, are not audited.
Sources: AME Mineral Economics and CVRD
1 P&P reserves 2 part of CVRD’s P&P reserves, representing 3.5 Mt, are not audited.
Sources: AME Mineral Economics and CVRD
22
29
CVRD’s nickel reservesCVRD’s nickel reserves
2006Mt
2006Mt
reserves Nickel Nickel
P&P (%)
Vermelho1 245.3 0.81 1.99
Onça Puma1 86.3 1.75 1.51
Sudbury 163.0 1.22 1.99
Thompson 25.0 1.90 0.48
Voisey’s Bay 32.0 2.75 0.88
Indonesia 147.0 1.80 2.65
New Caledonia 120.0 1.48 1.78
Total 818.6 1.34 11.30
reserves Nickel Nickel
P&P (%)
Vermelho1 245.3 0.81 1.99
Onça Puma1 86.3 1.75 1.51
Sudbury 163.0 1.22 1.99
Thompson 25.0 1.90 0.48
Voisey’s Bay 32.0 2.75 0.88
Indonesia 147.0 1.80 2.65
New Caledonia 120.0 1.48 1.78
Total 818.6 1.34 11.30
1 Not audited. 1 Not audited.
30
-3
-2
-1
0
1
2
3
4
5
0 250 500 750 1.000 1.250 1.500 1.750 2.000 2.250 2.500
C1
Cash
Co
st (
US
$/lb
.Ni)
-3
-2
-1
0
1
2
3
4
5
0 250 500 750 1.000 1.250 1.500 1.750 2.000 2.250 2.500
C1
Cash
Co
st (
US
$/lb
.Ni)
One of the lowest cost producers in the world
2006 industry cash cost
One of the lowest cost producers in the world
2006 industry cash cost
Source: Brook HuntSource: Brook Hunt
Norilsk NickelNorilsk Nickel
CVRD
31
CVRD produces more value-added products, being less exposed to the steel industry compared to the general nickel market
CVRD produces more value-added products, being less exposed to the steel industry compared to the general nickel market
Others5%
Stainless steel &
alloy steels41%
Foundry4%
Value-added
specialty9%
Plating24%
Non ferrous alloys17%
Others5%
Stainless steel &
alloy steels41%
Foundry4%
Value-added
specialty9%
Plating24%
Non ferrous alloys17%
CVRD’s nickel salesCVRD’s nickel sales
22
¹ includes superalloys and high nickel alloys used by the aerospace industry and energy exploration, production and storage2 powders, foams, flakes, oxides and nickel-coated graphite. These products are used for consumer electronics, powder
metallurgy, rechargeable batteries, fuel cells, auto parts, computers, cellular telephones and hard metal bindersSource: CVRD
¹ includes superalloys and high nickel alloys used by the aerospace industry and energy exploration, production and storage2 powders, foams, flakes, oxides and nickel-coated graphite. These products are used for consumer electronics, powder
metallurgy, rechargeable batteries, fuel cells, auto parts, computers, cellular telephones and hard metal bindersSource: CVRD
11
32
The iron ore market
The iron ore market
33
Chinese iron ore imports reached 326.4 Mt in 2006, 51 Mt higher than 2005 importsChinese iron ore imports reached 326.4 Mt in 2006, 51 Mt higher than 2005 imports
0
50
100
150
200
250
300
350
2002 2003 2004 2005 2006
mill
ion t
ons
0
50
100
150
200
250
300
350
2002 2003 2004 2005 2006
mill
ion t
ons
Source: CEICSource: CEIC
Chinese iron ore imports - LTMChinese iron ore imports - LTM
34
0
100
200
300
1999 2000 2001 2002 2003 2004 2005 2006e
mill
ion t
ons
0%
10%
20%
30%
40%
50%
60%
70%
80%Domestic ore
Domestic / total
0
100
200
300
1999 2000 2001 2002 2003 2004 2005 2006e
mill
ion t
ons
0%
10%
20%
30%
40%
50%
60%
70%
80%Domestic ore
Domestic / total
China’s domestic iron ore has lost ground in its iron ore consumption despite production growth since 2002
China’s domestic iron ore has lost ground in its iron ore consumption despite production growth since 2002
Sources: CVRD and Tex ReportSources: CVRD and Tex Report
35
15,818,6
29,5
41,0
54,2
74,3
2001 2002 2003 2004 2005 2006
Iron ore sales to ChinaCAGR 2001-2006 = 36.3%
million tons
CVRD is supporting the massive growth of Chinese iron ore demand
CVRD is supporting the massive growth of Chinese iron ore demand
1
1 LTM period ended at September 30, 2006
36
SSF price is still lower than spot prices, even when adjusted by the 2007 benchmark priceSSF price is still lower than spot prices, even when adjusted by the 2007 benchmark price
20
40
60
80
100
120
140
jan/
04fe
v/04
abr/04
jun/
04ag
o/04
out/04
dez/
04ja
n/05
mar
/05
mai/0
5ju
l/05
set/05
nov/
05de
z/05
fev/
06ab
r/06
jun/
06ag
o/06
out/06
dez/
06
US
$ /
to
n
SSF C&F Beilun Chinese iron ore spot Indian iron ore C&F
20
40
60
80
100
120
140
jan/
04fe
v/04
abr/04
jun/
04ag
o/04
out/04
dez/
04ja
n/05
mar
/05
mai/0
5ju
l/05
set/05
nov/
05de
z/05
fev/
06ab
r/06
jun/
06ag
o/06
out/06
dez/
06
US
$ /
to
n
SSF C&F Beilun Chinese iron ore spot Indian iron ore C&F
Sources: Mysteel, Clarksons and CVRDSources: Mysteel, Clarksons and CVRD
79.085.993.6
37
The results of our econometric tests show that iron ore prices do not revert to the meanThe results of our econometric tests show that iron ore prices do not revert to the mean
nono44,844,819581958--20042004
nono45,845,819581958--20062006
nono41,941,919001900--20062006
Mean reversalMean reversalAverageAverage realreal priceprice 11PeriodPeriodIronIron oreore
0
20
40
60
80
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
US$ c
ents
/ f
e unit
0
20
40
60
80
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
US$ c
ents
/ f
e unit
SSF prices – EuropeSSF prices – Europe
1 US$ cents per Fe unit, adjusted by PPI; 2006 basis.Sources: USGS and CVRD
38
We expect the global iron ore market to stay tight for the near future
We expect the global iron ore market to stay tight for the near future
CISA forecasts a 13% p.a. average growth rate for
Chinese steel production during 2006-2012
The Middle East is the new world booming region:
investments in construction and industrial capacity
in the GCC1 countries are growing dramatically
Indian iron ore export growth will lose steam due
to the requirements of an expanding domestic
steel industry
CISA forecasts a 13% p.a. average growth rate for
Chinese steel production during 2006-2012
The Middle East is the new world booming region:
investments in construction and industrial capacity
in the GCC1 countries are growing dramatically
Indian iron ore export growth will lose steam due
to the requirements of an expanding domestic
steel industry
1 GCC(Gulf Cooperation Council) countries: Saudi Arabia, UAE, Kuwait, Oman, Qatar and Bahrain.1 GCC(Gulf Cooperation Council) countries: Saudi Arabia, UAE, Kuwait, Oman, Qatar and Bahrain.
39
92 112 148 208 270 320 370445
360 372389
395400
405410
440
2001 2002 2003 2004 2005 2006 2007E 2010E
China RoW
92 112 148 208 270 320 370445
360 372389
395400
405410
440
2001 2002 2003 2004 2005 2006 2007E 2010E
China RoW
We expect the global demand for iron ore to increase 215 Mt from 2006 to 2010 We expect the global demand for iron ore to increase 215 Mt from 2006 to 2010
World ChinaChina RoWCAGR 2001CAGR 2001--0505 11.0% 31.5%31.5% 3.2%CAGR 2005CAGR 2005--10E10E 5.7% 10.5%10.5% 1.9%
452452 484484 537537603603
670670725725
885885
Global seaborne tradeGlobal seaborne trade
780780
Source: CVRD
40
283309 320
344367
450
2003 2004 2005 2006e 2007p 2010p
283309 320
344367
450
2003 2004 2005 2006e 2007p 2010p
Sources: CRU and CVRD
Pellet demand
million t
We expect the global demand for pellet to increase 106 Mt from 2006 to 2010 We expect the global demand for pellet to increase 106 Mt from 2006 to 2010
