The impact of the GFC on global minerals trade
(the critical themes & drivers affecting the GLOBAL economy)
Drivers of Global Tradeeven in a GFC
Melinda Moore CleanUp Commodities 17 November 2011
Demand - who wants what?
World Steel
Demand - who wants what?
Push-Pull: Developed vs Developing
o Growth or Contraction
o Structural vs Cyclical drivers
o Policy prescriptions / Fire-power
========> 2 tones / 2 speeds
2010 vs 2005 global steel incremental consumption delta (mt)
World Steel
4Q08 global growth blip
Supply who has what?
Domestic Short or Longs?
Operating Disruptions Weather
Mechanical failures
Labour disputes
Grade declines & mine depletions
Cost Curve Positioning CFR (transport), not FOB;
Total, not Cash cost
Investment Disruptions Macro conditions (risk-off)
Nationalistic fervour (ownership)
Political climate (taxes)
Approvals processes (environment)
Equipment / Labour shortages
Pricing conflicts
Bloomberg; Note: 1 Jan 08=100
Price - Negotiating a worthy outcome
Arbitrage beneficiaries
Affordability not limitless
beware Commodity Strangulation
-140
-120
-100
-80
-60
-40
-20
0
20
40
60
2005 2006 2007 2008 2009 2010 2011E
China Thermal Coal Net trade
Turnaround from
Surplus to Deficit
0
50
100
150
200
250
Jan 08 Sep 08 May 09 Jan 10 Sep 10 May 11
Newcastle Thermal Coal (6700 Kcal) CFR price China domestic spot price
Arbitrage turnaround
Indicators to Watch or Avoid
WATCH
Turkish Scrap price real economic activity
AVOID
Freight rates Baltic Dry Index
US and EU capacity recovery rates
Urbanisation Rate Comparisons
Urbanisation Rates
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Japan
S Korea
China
India
Vietnam
US
Japan S Korea China India Vietnam US
China vs ex-China growth patterns
-50
0
50
100
150
200
250
300
2010 2015 2020 2025 2030 2035 2040
world ex-China
-150
-100
-50
0
50
100
150
200
250
300
2010 2015 2020 2025 2030 2035 2040
China