promotion of transparency in the global base metal … · promotion of transparency in the global...

Associação Portuguesa de Geólogos (APG) Coimbra, Portugal

Promotion of Transparency in the

Global Base Metal Markets

Paul White Director of Market Research

International Lead and Zinc Study Group (ILZSG)

11th November 2016

2

Presentation Outline

Overview of the Metal Study Groups

Main Activities of the Groups

Groups’ Focus on Global Market Transparency

Challenges to Transparency

Summary

Current Trends and Developments in the global

Lead, Zinc, Nickel and Copper Markets

3

The Study Groups

International Lead and Zinc Study Group

30 member countries

International Nickel Study Group

15 member countries

International Copper Study Group

21 member countries

4 4

Study Groups Overview

Intergovernmental organizations set up within the UN system

ILZSG established by UN in 1959 in New York

INSG established in 1990 in The Hague

ICSG established in 1992 in Lisbon

From start of 2006 ILZSG, ICSG & INSG co-located in Lisbon, Portugal

www.icsg.org www.insg.org

5 5 5

ILZSG Membership

Membership open to any country involved in lead and/or zinc production, usage, or trade.

30 members (>85% of global lead/zinc industry):

Australia

Belgium

Brazil

Bulgaria

Canada

China

Finland

France

Germany

India

Iran

Ireland

Italy

Japan

Korea Rep.

Morocco

Serbia

South Africa

Spain

Sweden

Thailand

United States

European Commission

Namibia

Netherlands

Norway

Peru

Poland

Portugal

Russian Fed.

6

ICSG Membership

Membership open to any country involved in copper production, usage, or international trade.

24 current members:

Australia

Belgium

Chile

China

Finland

France

Germany

Greece

India

Italy

Iran

Japan

Serbia

Spain

Sweden

United States

Zambia

European

Comission

Luxembourg

Mexico

Peru

Poland

Portugal

Russian Fed.

7

INSG Membership

Membership open to any country involved in nickel production, usage, or international trade.

15 current members:

Australia

Brazil

Cuba

Finland

France

Germany

Greece

Italy

Russian Fed.

Sweden

United Kingdom

European

Comission

Japan

Norway

Portugal

8

The Study Groups Overview

Industry heavily involved in activities of Study Groups

Governments invite industry representatives to attend

meetings as part of delegations

Each Study Group operates an Industry Advisory Panel

(IAP) comprised of leading industry players

Input/feedback regularly received from miners, refiners,

consumers, analysts, consultants and traders

9

The Study Groups Overview

Observer organisations include:

UNCTAD

UNIDO

UNEP

Industry Associations - Producer (IZA, ILA, NI, ICA, Eurometaux)

Industry Associations – Consumer (BCI, Eurobat, EGGA, ISSF, IWCC)

International Council on Metals and Mining (ICMM)

Common Fund for Commodities

10






Summary



11

Study Groups’ Main Activities

Promote Transparency in the Metals Markets Closely monitor production, consumption, prices, stocks, trade flows

and market balances

Reports and directories

Conduct In-depth Research into Other Issues of Interest or Concern to Members

Economic developments

Environmental legislation

Facilitate Co-operation Between Government and Industry Twice yearly meetings

Special conferences/seminars

12

The Study Groups’ Activities - Government/Industry Cooperation

Study Group six monthly meetings bring together

government and industry representatives in Lisbon.

Meetings usually held in April and October.

Over 200 participants attend in October.

Next meetings will be in April 2017 in Lisbon.

Industry or government delegates from non-members can

request participation as observers for limited period

Unique forum where mining ministries can meet their global

counterparts and the international metals industry

13

The Study Groups’ Activities - Government/Industry Cooperation

Groups also regularly organise Special Seminars. In recent years these

have included events covering topics such as:

Metals Recycling

The Outlook for Metals in China

Mining Investment Policy in Southern Africa

The Impact of the Financial Crisis on Metals Supply and Demand

Materials Stewardship for Mining and Metals

New and Innovative Applications for Metals

Energy Issues and Climate Change Policies Impacting on the Non-Ferrous

Metals Industries

The Contribution of Metals to our Sustainable Future

14

The Study Groups Activities - Economic and Environmental Issues

Economic Issues

Study of the Main By-Products of Copper, Lead, Zinc and Nickel

The Impact of the Financial Crisis on Metals Exploration

The Potential Impact of Electric Vehicles on Lead Demand

The Impact of Investment Legislation on Global Copper Supply

Metals Taxation and Royalty Policies

Substitution in China’s Copper Industry

Lead and Zinc: the Supply-Side Response to the Economic Crisis

Estimating Value Added by the European Lead and Zinc Industries

Lead and Zinc: National Trade Tariffs and Measures

15

The Study Groups Activities - Economic and Environmental Issues

Environmental Legislation

Energy Emissions in Nickel Production

Copper, Carbon Trading and Climate Change

The Development of Stewardship for Non-ferrous Metals

Overview of the Extractive Industries Transparency Initiative

Environmental Health Controls on Lead

Environmental Health Controls on Zinc

The Economic and Environmental Role of Zinc

The Lead Fact Book

Environment, Health and Safety Regulations for Nickel

16






Summary



17

The Study Groups - Promotion of Transparency

Publication of detailed and accurate global statistics

ILZSG, INSG, ICSG publish statistical Bulletins every month

These provide comprehensive overview of current situation in

global lead, zinc, nickel and copper markets

18

The Study Groups

- Promotion of Transparency

Monthly Statistical Bulletins include detailed country by country

statistics on:

mine supply

refined metal supply

refined metal usage

concentrate and metal trade flows

This information is used to calculate global market balances which

allow users to determine whether markets are in surplus or deficit

They also contain the latest information on

LME, SHFE, producer and consumer stocks

prices

19

The Study Groups


• Very detailed supply and demand forecasts published on twice yearly basis – in April and October

• Information provided mainly by industry representatives in member countries in response to global survey

• October forecasts released at beginning of LME week

• Consensus unbiased view provides unique insight into the plans of miners and smelters

• Also provide useful assessment of economic trends

• Results widely covered in global metals press

• Accuracy carefully monitored and reported on

20

The Study Groups


Data Sources – Worldwide Network • Member governments • Industry – producers and consumers • United Nations • European Union • Industry Associations - IZA, ICA, ECI, NI • National Metals Associations – USGS, CNIA, JOGMEC • End User Representatives – ZOPA, EGGA, AGA, IWCC,

ISSF, World Steel • Specialist Consultancies – BGRIMM, CBI, Antaike • Private consultants (swap arrangements) – CRU,

Wood Mackenzie, Metal Bulletin

21

The Study Groups


Who Uses This Data? • Governments – members receive automatically as

part of their membership • Miners and Smelters – some receive via thier

governments and other subscribe • End Users – companies who are major users of

metals need reliable data re supply and demand • Analysts – many of the major banks track the metals

markets on behalf of their clients • Consultants – the Study Groups work closely with the

major consultants such as CRU, Wood Makenzie and Metal Bulletin

• Traders - now major players in the markets

22

Selected ILZSG Publications

Lead and Zinc New Mine and Smelter Projects 2016

World Directory: Continuous Galvanizing Lines

China Lead Acid Battery Market

China Zinc Recycling Industry

Principal Uses of Lead and Zinc

World Zinc Oxide and Zinc Dust Production

World Directory: Primary & Secondary Zinc Plants

The Market for Lead: Fundamentals Driving Change

The Use of Zinc in Construction and Public Infrastructure

The Market for Zinc: Fundamentals Driving Change

23

SELECTED ICSG

PUBLICATIONS

• The Indian Copper Market – Focus on recycling

• Directory of Copper Mines and Plants

• Directory of Copper and Copper Alloy Fabricators

• The China Factor in Global Copper Usage and its

Consequences

• The Russian Copper Market”

• The World Copper Factbook

• Currently undertaking studies on the Scrap Market in China, India

and Russia

24

Selected INSG

publications

World Nickel Statistics Bulletin

World Nickel Statistics Annual Special Issue Special issue published once a year in November; annual

data for the latest available 11-year period.

World Directory of Nickel Production Facilities Nickel Mines, Nickel Smelters and Refineries, New Nickel

Industry Developments (Committed Developments, Likely Project Developments, Potential Project Developments) and Contact details.

Nickel Market Report

Comprehensive analysis of drivers for change in the world

nickel market

First issue in 2008. Published each year

25






Summary



26

The Study Groups - Market Transparency Challenges

China

• Metals production is very fragmented, consisting of hundreds of small mines and smelters spread throughout the country

• Industry is expanding very rapidly

• Major re-organisation of the Chinese metals sector in recent years with a reduction in central control

• Data collection in China is a highly complex operation

27

The Study Groups - Market Transparency Challenges

China • Have been working closely with Chinese

authorities to improve data - CNIA regularly send delegations to Study Group meetings

• Groups have commissioned number of studies on aspects of Chinese metals markets

• Joint seminars on China organised in 1996 (Beijing), 2002 (Stockholm), 2009 (Wuhan), 2011 (Lisbon), 2012 (Nanjing)

• ILZSG/CNIA are continuing to actively co-operate in a number of key areas

28

The Study Groups

- Market Transparency Challenges

Quantity of Metal Recycled

• Lack of a set of recycling rates that can be used across the metals was causing confusion.

• The Metal Study Groups’ established a Recycling Project Team (RPT) to address this issue

• Many associations/organisations involved

• After much work methodology agreed

• Major Recycling Seminar held in Lisbon in Oct 2007

• Work to determine rates for different metals ongoing

• Integrating highly regarded flow work of Yale University

29

The Study Groups


Recycling Input Rate = Metal Recycled (from EOL & New Scrap)

Metal Produced

EOL Recycling Rate = Metal Recycled (from EOL Scrap)

Metal Available for Recycling (EOL Scrap)

EOL Collection Rate = Metal Collected (EOL Scrap)

Metal Available for Recycling (EOL Scrap)

EOL Processing Rate = Metal Recycled (from EOL Scrap)

Metal Collected (EOL Scrap)

30

The Study Groups


Price Distortion

• Fund activity in commodities markets has increased in recent years

• Due to large amounts of money invested, prices sometimes move in direction which is contrary to fundamentals

• However, these distortions tend to be short term and main impact of funds is to increase volatility

31

The Study Groups


Price Distortion

• Similiar distortions have taken place in past and, up to now, market dynamics have always returned to follow the basic fundamentals

• Important to remember that most funds and investors closely track fundamentals themselves

• Low interest rates and anticipation of possible future global commodity shortage are added complications to current situation

32






Summary



33

Overview

• The non-ferrous metals industry must ensure the continued supply of concentrates, secondary material and refined metal to meet evolving demand, both in the near term and the long term

• At the same time supply must respond flexibly to changing

demand for the industry to remain profitable

• New technologies must be developed and implemented to maintain the competitiveness of the non-ferrous metals industry, enhance environmental performance and reduce energy intensity

34

Overview (2)

• The industry must rise to the challenges presented by the three strands of sustainable development – economic, environmental and social

• The industry must also respond to the challenges that are created by a carbon-constrained regulatory environment

• In this environment it is essential to ensure transparency in the markets for raw materials, metals and products

• The International Metal Study Groups recognise that they have an important role here in meeting the data and analysis needs of governments and industry

35






Summary



36

LEAD

Pb

World Lead Demand 1965 to 2015

www.ilzsg.org 37

Source: ILZSG

Lead End Uses

www.ilzsg.org 38

Source: ILZSG

0.0 20.0 40.0 60.0

USA

Japan

EU

Russia

Brazil

China

Mexico

Turkey

Indonesia

India Car Sales

per 1,000 population

2015

39 39

Variations in Car Sales

Source: LMC Automotive

40 40

Chinese Vehicle Population and Production 1985-2015

Source: ILZSG

41 41

Distribution of Refined Lead Usage

Europe 27%

USA 20%

China 20% Japan

4%

Korea Rep 5%

Other 24%

2005 2015

Source: ILZSG

Europe 16.0% USA

14.9%

China 41.5%

Japan 2.5%

Korea Rep 5.4%

Other 19.7%

42

Steady Rise in Environmental Legislation

LEAD MARKET

REACH Waste

Directive (Directive

2008/98/EC)

Directicve on battery and

accumulators (Dir. 2006/66/EC)

Basel Convention

CLP Regulation / Reg

1272/2008

Limitation of EU Policy for

regulating use of lead shot and

sinkers

End Of Life vehicle (Dir. 2000/53/EC)

Lead Poisoning

Restrictions on Hazardous

Substance directive (Directive

2002/95/EC)

1000

1500

2000

2500

3000

3500

4000

4500

5000

5500

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

43

Growth in Lead Mine Output has been in China

Source: ILZSG

World Ex-China

China

‘000 tonnes

44

59% of Refined Lead Metal Produced in 2015 was from Recycled Material

0

2000

4000

6000

8000

10000

12000

1985 1995 2005 2015

Total

Secondary

‘000 tonnes

Source: ILZSG

45

World Refined Lead Metal Balance – Small Surplus in 2016 and 2017

Source: ILZSG

46

ZINC

Zn

47

World Zinc Reserves 2015

Resources: about 1900 million tonnes (Mt)

Reserve Base 480 Mt

Mine Production

13.5 Mt

Reserves 200 Mt

Sources: USGS, ILZSG

Not to scale

contained zinc metal

48 48

World Zinc Reserves 2015 Breakdown

Source: USGS

Australia 32%

China 19%

Peru 13%

Kazakhstan 2%

Mexico 9% USA

6% Canada

3%

Other 19%

• According to the USGS total global zinc reserves

amounted to 200 million tonnes in 2015.

45%

25%

23%

7%

Construction

Transport

Consumer products & Electrical Appliances

Industrial Machinery

54% 15%

14%

8%

6% 3%

Galvanizing Alloys Brass and Bronze Chemicals Semis Miscellaneous

49 49

Zinc First and End Uses

Source: Brook Hunt / ILZSG

Zinc First Uses Zinc End Uses

50

European Zinc Demand Remains Well Below Peak

–15%

Source: ILZSG

51

A Significant Tonnage of Zinc Demand has been lost in the US since 2004

850

900

950

1000

1050

1100

1150

1200

1250

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: ILZSG

‘000 tonnes

–25%

52

Zinc Demand Growth China vs Rest of the World 2003-2015

Source: ILZSG

53

Spread of Urbanisation in China

Source: China National Bureau of Statistics, Wood Mackenzie

54

Distribution of Refined Zinc Usage

Europe 31.4%

USA 14.9%

China 15.6%

India 2.7%

Korea Rep 4.8%

Japan 7.5%

Other 23.2%

2000 2015

Source: ILZSG

Europe 17.6%

USA 6.7%

China 46.8%

India 4.6%

Korea Rep 4.2%

Japan 3.5%

Other 16.6%

55

China Continues to Import Significant Quantities of Zinc Concs & Metal

Reversal in trend

56 56

Strong Growth in Indian Zinc Mine Output

Source: ILZSG

Debottlenecking of Rampura Agucha

1st Expansion of Rampura Agucha by 63%

2nd Expansion of Rampura Agucha by 33%

3rd Expansion of Rampura Agucha by 20%

Conversion of Rampura Agucha to u/g starts

Opening of Sindesar Khurd

Opening of Kayar

57

Zinc Metal World Balance – Significant Deficits in 2016 and 2017

Source: ILZSG

58

NICKEL

Ni

Relative Size of Refined Metal Markets

www.ilzsg.org 59

Source: ILZSG / INSG / ICSG

0

2

4

6

8

10

12

14

16

18

20

Pb Zn Ni Cu

m tonnes

Plenty of nickel reserves

available to the world

Source: USGS, INSG

Resources: 130 million tonnes (Mt)

Mine Production

2.15 Mt

Reserves 79 Mt

Not to scale

2015

World Nickel Ore

Production

(f) forecast October 2016

Africa6%

Americas23%

Indonesia13%

Philippines19%

Other Asia6%

Europe11%

Oceania22%

Asia38%

2017 f

Africa5%Americas

32%

Indonesia13%

Philippines5%

Other Asia4%

Europe22%

Oceania19%

Asia22%

2007

NPI Production

China and Indonesia (Kt)

Source: Antaike, SMM, INSG

in 1000 tonnes


Principal End Uses of Primary Nickel in 2016

63

Stainless Steel

63%

NF Products

(incl. Castings)

13%

Plating

7%

Steel castings

(alloyed)

4%

Other alloy

steels

6%

Other uses

7%

World Stainless Steel Melting

Source: ISSF, INSG estimates, Antaike

in 1000 tonnes

38353 41648 41404

43814 45300

19270 21823 21532 23615 24000

0

10000

20000

30000

40000

50000

2013 2014 2015 2016 (e) 2017 (f)

Ex-China China

World Primary Nickel

Usage (consumption)


Africa1%

Americas9%

China P.R.52%

Other Asia21%

Europe17%

Oceania0.1%

Asia73%

2017 f

Africa3%

Americas13%

China P.R.25%

Other Asia27%

Europe32%

Oceania0.2%

Asia42%

2007

World Primary Nickel

Balance - annual in 1000 tonnes


Cumulative surplus 2007-2015 ~680 kt

67

Copper

Cu

Not to scale

(contained copper metal)

Resource = A mineral resource is a natural occurrence of material in the earth's crust for which there is reasonable prospect for current or eventual economic extraction Reserves = A mineral reserve is that part of a measured or indicated resource for which current economic extraction has been demonstrated.

World Mine Production

19 Mt

Total Resources

(identified and undiscovered2)

5,600 million tonnes (Mt)

2015 World Copper Reserves & Production 1

Identified Resources

2,100 Mt

Reserves

720 Mt

2/ Identified and Undiscovered Copper Resources

in Porphyry and Sediment-hosted Stratabound Copper

Deposits

1/ Source: USGS (resources/reserves data) and ICSG

(production data)

68

China Copper Mine Production 1.7 Mt Cu

USGS World Copper Reserves 2014

Copper will continue to

contribute to society’s

sustainable development due

to geological availability and

industry innovation.

International Copper Study Group Metal Bulletin 12th Asia Copper Conference

69

Chile29%

Australia12%Peru

12%United States

5%

Mexico6%

China4%

Russia4%

DRC3%

Zambia3%

Other22%

Source: USGS, contained copper metal

Despite increased demand for copper

produced from ore in recent years,

reserves have grown more, and there is

more copper available to the world than

at any other time in the past.

In the period 2005-2015, 180 Mt of copper

were mined and in the same period

however, reserves grew by 250 Mt.

0

100

200

300

400

500

600

700

800

1930 1960 1980 2000 2015

Mil

lio

n T

on

s C

u

USGS Reported World Copper Reserves

Average annual grow rate in the last century: 4% Average annual grow rate in the last decade: 2.3 %

Average annual grow rate in this decade: 3%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

World Copper Mine Production, 1900-2015 (thousand metric tonnes copper)

Source: ICSG

Concentrates SX-EW


70

Distribution of World Copper Mine Production

by Country (1990 vs 2017)

Chile to continue as the biggest copper mine producer in the world

United States losing share and Peru and China increasing their share

significantly

ICSG commissioning a study on the Copper Mining Industry in China (Nov

2016)

Chile , 17.2%

Peru , 3.3%

China , 3.2%

United States , 17.2%

Australia , 3.5%

Indonesia , 1.8%Congo , 3.9%

Zambia , 4.6%

Mexico , 3.6%

Russian Fed. , 8.7%

Canada , 8.6%

Kazakhstan , 3.4%

Poland , 3.6%

Brazil , 0.4%

Others, 17.1% 1990 Chile, 28.2%

Peru, 11.4%

China, 8.7%

United States, 7.2%

Australia, 4.7%

Indonesia, 4.2%

Congo, 4.2%

Zambia, 4.2%

Mexico, 3.7%

Russian Fed., 3.4%

Canada, 3.0%

Kazakhstan, 2.6%

Poland, 2.1%

Brazil, 1.8%Others , 10.7% 2017


71

Looking into the future mining companies

are starting now to look at possible offshore

deep-sea minerals exploration.

The oceans represent around 70% of the

world surface and its floor is believed to

contain important mineral resources among

which are copper, zinc, nickel, manganese,

gold and silver.

To meet increasing copper demand, the

discovery and exploration of new resources

will be crucial and sea floor deposits could

represent an important opportunity for

additional supply.

However, the challenge is to be able to

exploit those deposits efficiently and turn

them into economically-viable operations

ICSG identified three off-shore copper

Source: Nautilus Minerals Inc website

Offshore Deep-Sea Minerals Exploration


72

China, 49%

United States, 8%

Germany, 5%

Japan, 4.2%

Korean Rep., 3.2%

Russian Fed., 1.4%

Italy, 2.5%

Taiwan, 2.2%

Turkey, 2.2%

India, 2.1%

Brazil, 1.2%

Mexico, 1.6%

Spain, 1.5%

Poland, 1.2% Others , 15%China , 5%

United States , 20%

Germany , 9%

Japan , 14.5%

Korean Rep. , 2.9%Russian Fed. ,

5.5%

Italy , 4.4%

Taiwan , 2.5%Turkey , 0.9%

India , 1.2%

Brazil , 1.3%

Mexico , 1.2%Spain , 1.3%

Poland , 1.5%

Others, 28%

Distribution of World Copper Refined Usage

by Country (1990 vs 2017)

Strong growth in Chinese apparent refined usage, up from 5% of world

share in 1990 to around 49% by 2017

EU share in world usage declining from around 30% in 1990 to 15% by

2017 but in tonnage terms only slightly lower

United States share in world usage declining from 20% in 1990 to 8% in

2017

Japan share in world usage declining from around 15% in 1990 to 5% in

2017

1990 2017


73

Major Uses of Copper: Usage by Region and End Use Sector, 2015

Source: International Wrought Copper Council (IWCC) and International Copper Association (ICA)

Industrial12%

Transport12%

Infrastructure15%

Building Construction

30%

Equipment31%

Around 30% of the total copper demand is used in the building

construction and equipment sectors respectively.

Asia is the major copper end use region representing 63% of the

total world use. International Copper Study Group Metal Bulletin 12th Asia Copper Conference

74

Americas13%

Asia63%

ROW6%

Europe18%

ICSG World Copper forecast (Oct 2016) – summary table

ICSG projections for 2016 indicate that the market is expected to remain balanced with

a small surplus expected for 2017

The International Copper Study Group recognizes that numerous factors create significant uncertainty, and that the global

market balances could vary from those projected currently

1/ Based on a formula for the difference between the projected copper availability in concentrates and the projected use in primary refined production;

2/ based on average ICSG forecast deviations for preceding 5 years. 3/ Estimated Chinese bonded stock changes; averaged from multiple sources

75

Thousand tonnes Cu

75

REGIONS

(1000 t) 2015 2016 2017 2015 2016 2017 2015 2016 2017

Africa 1,896 1,829 1,901 1,384 1,222 1,250 258 233 227

N.America 2,708 2,880 2,885 1,906 2,043 2,046 2,317 2,312 2,353

Latin America 7,895 8,266 8,664 3,312 3,273 3,119 497 456 454

Asean-10 / Oceania 1,906 2,119 2,272 979 1,063 1,160 953 1,060 1,096

Asia ex Asean/CIS 2,376 2,449 2,474 11,110 11,664 12,092 14,845 15,109 15,189

Asia-CIS 618 677 738 398 420 433 103 103 103

EU 857 880 896 2,731 2,675 2,746 3,215 3,240 3,298

Europe Others 872 837 872 1,062 1,032 1,094 847 879 908

TOTAL 19,128 19,936 20,702 22,883 23,393 23,940 23,035 23,391 23,628

World adjusted 1/ 2/ 19,128 19,884 19,878 22,883 23,383 23,791 23,035 23,391 23,628

% change 3.8% 4.0% 0.0% 1.8% 2.2% 1.7% 0.7% 1.5% 1.0%

World Refined Balance (China apparant usage basis) -153 -8 163

World Refined Balance Adjusted for Chinese Bonded Stocks Change 3/ -256

FORECAST TO 2017

MINE PRODUCTION REFINED PRODUCTION REFINED USAGE


75

76

THANK YOU!

77

Towards Global Leadership in Minerals and Metals

November 2008 – New Delhi, India

Indian Institute of Metals

To learn more about the Groups:

www.icsg.org

www.insg.org

www.ilzsg.org

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