1 V.Nicoletopoulos MagMin 2011 version May 12 Magnesia 2011: Macro and micro economic factors Industrial Minerals MagMin 2011 Vasili Nicoletopoulos

11V.Nicoletopoulos MagMin 2011 versiV.Nicoletopoulos MagMin 2011 version May 12on May 12

Magnesia 2011: Macro and Magnesia 2011: Macro and micro economic factorsmicro economic factors

Industrial Minerals Industrial Minerals MagMin 2011MagMin 2011

Vasili NicoletopoulosVasili Nicoletopoulos

V.Nicoletopoulos MagMin 2011 versiV.Nicoletopoulos MagMin 2011 version May 12on May 12

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Magnesia 2011: Macro and micro economic Magnesia 2011: Macro and micro economic factorsfactors

Contents

1. The global and European situation: economics, finance, politics & policies

2. The Magnesia market today

3. Environmental issues facing the magnesia industry

4. New opportunities and growth in the magnesite sector

5. Conclusions


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1. Review of the global and European situation 1. Review of the global and European situation – Economics…– Economics…

• World economies since MagMin 2009: Contrary to my own predictions, a boom in Asia & elsewhere more than makes up for [predicted] fall in many EU countries [Ireland, Spain, Greece, Portugal,…?]

• EU economy: Germany up, South down, others in-between

• Davos 1/11: Zhu Min, special IMF adviser, coined phrase “3-speed” recovery : emerging economies set to grow by > 6 pct in 2011, US by 3 pct, euro area by < 2 pct


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……1. Review of the global and European 1. Review of the global and European situation – Economics…situation – Economics…

• EU stimulus packages, European Stability Mechanism: for how long?

• US: anemic GDP growth, printing money, stimulus packages – ibid• Rest of World

-China, India booming

-Brazil, Russia doing well

-China top manufacturing country by output, returning to early

19th century position & ending US’s 110-year run as largest

goods producer. Inflation concerns loom large for miners


55

……1. Review of the global and European 1. Review of the global and European situation – Economics…situation – Economics…

• US-China ‘$ Gulf Stream’ – Australia-China ties• China's ambitious, high-growth 5-year plan stirs

climate debate• EU budget problems & privatization: Coal miners

in Poland protest• Fuels: oil up, gas [LNG, fracking]; nuclear major

setback – China, Lithuania insisting, Turkey w/ Russia, but Germany & Italy cancelling nuclear program

• Commodities boom…or bubble?


66

……1. Review of the global and European 1. Review of the global and European situation – Economicssituation – Economics

• Australian mining companies recruiting at Expo in Alberta 5/11

• High oil prices start to hit demand• Indian Premier calls urgent meeting on coal

shortage• Beware risks inherent in the global recovery• RTZ Chairman: "near-term, world financial

markets remain fragile. Persistent economic & financial imbalances continue to pose risks"


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1. Review of the global and European situation 1. Review of the global and European situation - Finance- Finance

• World banking & finance: both tight• Interest rates rising again

• Treasurer’s role: after 30 years of declining real interest rates, need new mindset: building robustness into capital structures to cope w/ more inflation, higher real interest rates, adverse demographics, declining saving rates in

larger Asian economies • Magnesia currencies: low USD vs euro/ yen/ real/

Australian dollar - slightly down vs RMB; DPRK: officially USD1=KPW100, market closer to USD1=KPW3000, ie. Nov. ’09 redenomination all but neutralized


88

1. Review of the global and European situation 1. Review of the global and European situation – Politics & Policies– Politics & Policies

• EU, US: Inequalities, unemployment. Among & within EU countries: eg. Germany plans restructuring Greece’s sovereign debt if reforms fail

• Rising middle classes elsewhere• N. Africa & M. East: major turmoil oil/gas, immigration• N. Korea problems• Blow to push for single EU patent regime


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1. Review of the global and European situation 1. Review of the global and European situation - Politics and policies, mining…- Politics and policies, mining…

• China restricting exports of some minerals, metals. Reasons: own consumption, environment, cost

• EU RMI – criticality - Raw Materials Initiative: Trade and internal market

• Resource efficiency strategy• WTO examining ‘1st wave’ of Chinese export

restrictions


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……1. Review of the global and European 1. Review of the global and European situation - Politics and policies, miningsituation - Politics and policies, mining

• The new geopolitics of oil • RTZ: ‘Australia, don’t ETS before US, China’ • Rising role of resource nationalism [Ernst & Young] –

magnesia unaffected • Chinese buying binge for mining companies – ibid• EUROFER legal action against EU ETS


1111

2. Review of the Magnesia market situation…2. Review of the Magnesia market situation…

• Focusing on demand, economics & politics • I. Wilson to cover supply• A suppliers’ market• Chinese smuggling continues: ‘400-500 ktpy or 50% of

exports to Japan, S. Korea, Taiwan [Asian Metal]• New projects on stream: S.Arabia, Turkey,…• ‘Magnesia's phoenix and flyers’ IM May 2011


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2. Review of the Magnesia market situation, 2. Review of the Magnesia market situation, steel…steel…

• 2010: biggest increase in 55 years! • Global 3/11 crude production: new monthly record 129.3

Mt, driven by growth in Asia even after Japan's earthquakes/tsunami

• China's 2/11 daily crude 1.94 Mt; year-end capacity 768 Mt -- biggest task: controlling excess capacity–CISA; small blast furnaces stop using costly imported iron ore

• US: Q1 losses, but signs of improving global economy spurring demand. U.S. Steel ‘sold out in N.America’


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……2. Review of the Magnesia market 2. Review of the Magnesia market situation, steel…situation, steel…

• ArcelorMittal SA sees sharp drop in Q1 profit• German carmakers’ sales soar • Rautaruukki better-than-expected Q1 ’11 - robust sales,

higher prices • Turkey's crude up 31 pct Q1 ’11: 7.9 Mt • Ernst & Young: concern about global over capacity &

continued increase in input costs


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……2. Review of the Magnesia market situation, 2. Review of the Magnesia market situation, steel, steel, mi. mtmi. mt

Europ. EU (27) CIS N.Amer S.Amer Asia China Japan Σ*

2004 340 203 113 134 46 513 283 113 1 072

2005 334 196 113 128 45 596 353 113 1 144

2006 355 207 120 132 45 672 419 116 1 247

2007 365 210 124 133 48 757 489 120 1 346

2008 342 198 114 125 47 771 500 119 1 327

2009 266 139 98 82 38 805 574 86 1 229

2010 315 173 109 112 44 898 627 110 1 414

% 10/09 18.6 24.6 11.2 35.7 15.9 11.6 9.3 25.2 15

*Also includes Africa, M.East, Australia, N.Zealand

1515V.Nicoletopoulos MagMin 2011 versiV.Nicoletopoulos MagMin 2011 version May 12on May 12

2. Review of the Magnesia market 2. Review of the Magnesia market situation, cement, situation, cement, mi. mtmi. mt

2010e 2010eChina 1800 Egypt 48India 220 Korea 46USA 64 S.Arabia 45Turkey 60 Indonesia 42Brazil 59 Italy 35Japan 56 Mexico 34Iran 55 Germany 31Spain 50 Thailand 31Vietnam 50 Pakistan 30Russia 49 Other Countries 520World Total ’10 : e3300

World Total ’09 : e3060


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……2. Review of the Magnesia market situation…2. Review of the Magnesia market situation…

Refractories • Global demand to rise 5.3% pa through ’14, to

40.7 million metric tons. • China to remain largest national market,

comprise the majority of global demand • RHI seeking security of supply, acquires SMA

Magnesia for fused magnesia supply• M&A: Krosaki Harima buys Tata Refractories

majority 4/11, RHI/Magnesita?• RHI Q1 sales up 21% but profit margin down


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……2. Review of the Magnesia market 2. Review of the Magnesia market situationsituation

CCM• Good marketBrucite • Chinese export market keeps activeTrade policy• EU ccm antidumping terminated 2010, dbm May 2011–

1st time in over two decades w/o EU MgO antidumping • US: mag-carbon brick industry materially injured by

subsidised imports fm China & Mexico, in line w/ Dept of Commerce’s decision

• EU Chinese ceramic tiles anti-dumping duties• WTO and the Chinese export regime


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3. Environmental issues facing the magnesia 3. Environmental issues facing the magnesia industry…industry…

ETS

• In the EU/EFTA, & ~ nowhere else!• Free allowance allocation rules • Possible financial support for indirect emission costs…but

state-aid issues • SILC initiative on funding to reduce GHG• Organized criminals stealing EU ETS permits, sparking police

hunt across, battering confidence in the 80 billion-euro market• Roadmap to a competitive low carbon economy in 2050


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……3. Environmental issues facing the magnesia 3. Environmental issues facing the magnesia industryindustry

• EU Energy taxation proposals

• SOx/NOx emissions reduction --> trading in the EU?

• REACH

• CLP: MSDS etc

• BAT: EU MgO producers’ case before EU General Court of Justice

• DPRK eyes carbon market

• Euromines new Communications Committee


2020

4. New opportunities and growth in the 4. New opportunities and growth in the

magnesite sector…magnesite sector… MgO production side:• Natural gas: price down, new ‘deposits’ due to frack

sands MgO demand side:• Major breakthrough for a new application

[environmental?] still missing• Potential exception: Novacem, Calera, TecEco etc.

cement absorbing CO2 & other GHG, converting into carbonate [CO3] - ‘Can effectively store CO2 & other pollutants in building materials: CO, NOx, SO2, Hg, particulates,…’


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……4. New opportunities and growth in the 4. New opportunities and growth in the magnesite sectormagnesite sector

Other

• EU Innovation strategy • Brucite as an alternative magnesium hydroxide source to

reduce CO2 output?• Can Mg(OH)2 replace aluminium tri hydrate in certain

applications?• Other?• In processing: have not been following – RE ‘turmoil’,

calcination, SOx/NOx reduction? • Blow to push for single EU patent regime


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Closing Remarks - ‘Take home’ - Closing Remarks - ‘Take home’ - General…General…

• World economies defy gravity• Rebound in 2010, 2011…mostly in Asia• Strong BRIC role• China could get as strong as in the early 19th century & ending US’s 110-year run as largest

goods producer• Are govt stimulus packages [+US printing $]

sustainable? – debts, deficits• Inequalities, unemployment,…• Fuel uncertainty


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……Closing Remarks - ‘Take home’ - Closing Remarks - ‘Take home’ - Magnesia…Magnesia…

• Strong rebound from 2009• Suppliers’ market• ‘Security of supply’ comeback• Capacity additions• No new applications, so far…• EU: high emphasis on environment…with nobody

else following - ‘Until recently, China the enemy of EU magnesia & EC its’ ally; now roles reversed!’…

• …but EU producers still profitable• China: from exporter to ‘regulator/driver’ [&

consumer? but wherefrom?]


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Thank you very much Vasili Nicoletopoulos

Documents

1 V.Nicoletopoulos MagMin 2011 version May 12 Magnesia 2011: Macro and micro economic factors Industrial Minerals MagMin 2011 Vasili Nicoletopoulos