demand for nickel in other emerging markets

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Demand for nickel in other emerging markets Thomas Höhne-Sparborth Senior Economic Analyst Roskill Information Services May 16, 2013

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Thomas Höhne-Sparborth, Senior Economic Analyst at Roskill Information Services delivered this presentation at the 2013 China Nickel conference. For more information about the event or to register your interest for next year’s conference, please visit our website: www.immevents.com/mining-conference/china-nickel-conference

TRANSCRIPT

Page 1: Demand for nickel in other emerging markets

Demand for nickel in other emerging markets

Thomas Höhne-Sparborth

Senior Economic AnalystRoskill Information Services

May 16, 2013

Page 2: Demand for nickel in other emerging markets

Disclaimer

The statements in this presentation represent the considered views of RoskillInformation Services Ltd. It includes certain statements that may be deemed"forward-looking statements“. All statements in this presentation, other thanstatements of historical facts, that address future market developments, governmentactions and events, are forward-looking statements. Although Roskill InformationServices Ltd. believes the outcomes expressed in such forward-looking statementsare based on reasonable assumptions, such statements are not guarantees of futureperformance and actual results or developments may differ materially from those inforward-looking statements. Factors that could cause actual results to differmaterially from those in forward-looking statements include changes in generaleconomic, market or business conditions.

While Roskill Information Services Ltd. has made every reasonable effort to ensurethe veracity of the information presented it cannot expressly guarantee the accuracyand reliability of the estimates, forecasts and conclusions contained herein.Accordingly, the statements in the presentation should be used for general guidanceonly.

Page 3: Demand for nickel in other emerging markets

Overview

� Trends in nickel consumption

� Growth markets for nickel

� Which potential markets?

� Intensity of use of nickel

� Competing trends in nickel consumption

� Production versus consumption of stainless

� Grade substitution

� Recycling rates

� Non-stainless end uses

� Outlook

Page 4: Demand for nickel in other emerging markets

Trends in nickel consumption across major markets

Page 5: Demand for nickel in other emerging markets

On a regional basis, China was the only growth market for primary nickel from 2002-2012

-200

-100

0

100

200

300

400

500

600

700

800

China ROW CIS & OtherEurope

Americas Rest of Asia EU (27)

Consumption of refined nickel, 2002-2012e (kt)

Source: Roskill, WBMS

Page 6: Demand for nickel in other emerging markets

So why is there no growth from the other BRICS countries?

Source: Roskill, WBMS, IMF

France

Germany

Italy

Russia

Spain

United KingdomSA

China

India

Japan

South Korea

Taiwan

Brazil

CanadaUSA

Australia

EU (27)

0

5

10

15

20

25

30

35

40

0 10,000 20,000 30,000 40,000 50,000 60,000

Sta

inle

ss s

teel

co

nsu

mp

tio

n (

kg

/cap

ita)

GDP per capita (2012 US$)

Stainless steel intensity of use, 2012e

Page 7: Demand for nickel in other emerging markets

Growth markets for stainless steel production

Source: Roskill, WBMS

-1,000

-800

-600

-400

-200

0

200

400

600

800

1,000

1,200

Change in production of stainless steel, 2002-2012e (kt)

Page 8: Demand for nickel in other emerging markets

Growth in stainless production does not correlate closely with growth in nickel consumption

Source: Roskill, WBMS

-50

-40

-30

-20

-10

0

10

20

Change in consumption of refined nickel, 2002-2012e (kt)

Page 9: Demand for nickel in other emerging markets

Significant differences between countries in intensity of use of nickel hint at distinct underlying trends

Source: Roskill, WBMS

0.00

0.05

0.10

0.15

0.20

0.25

Consumption of primary nickel per unit of country’s stainless steel

production, 2012e

2012e World average nickel content in stainless 2012e

Page 10: Demand for nickel in other emerging markets

In China, growth rates in nickel consumption are lower than those of stainless steel production

Source: Roskill, WBMS

0.03

0.04

0.05

0.06

0.07

0.08

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012e

Rela

tive i

nte

nsit

y o

f u

se

Co

nsu

mp

tio

n /

pro

du

cti

on

(kt)

China: Nickel consumption vs. stainless production, 2002-2012e

Primary nickel consumption (LHS) Stainless steel production (LHS)

Relative intensity of use (RHS)

Page 11: Demand for nickel in other emerging markets

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

0.16

0.18

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500

Nic

kel

co

nsu

mp

tio

n p

er

un

it o

f sta

inels

s

Stainless steel production (kt)

Change in use of refined nickel per unit of stainless steel, 2002-2012

BrazilSouth Korea

South Africa

India

USA

Japan

Worldwide there has been convergence to lower intensity of use over the last decade

Source: Roskill, WBMS

Russia and

Ukraine

Page 12: Demand for nickel in other emerging markets

Competing trends in the use of nickel

Page 13: Demand for nickel in other emerging markets

Source: Roskill, WBMS, Global Trade Atlas

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Stainless production (kt)

India South Africa

Brazil Russia & Ukraine

0

500

1,000

1,500

2,000

2,500

3,000

3,500Stainless consumption (kt)

India South Africa

Brazil Russia & Ukraine

In the other BRICS countries, stainless consumption has increased at a much higher rate than production

Page 14: Demand for nickel in other emerging markets

Source: Roskill, WBMS, Global Trade Atlas

Difference between trends in consumption and production are accounted for through changes in net exports

-400-200

0200400600800

1,0001,2001,4001,600

Net exports of stainless steel, 2002-2012e

India South Africa

Brazil Russia and Ukraine

Total exports Total imports

• While stainless consumption in the

other BRICS countries increased by

an average of 6.8%py over the last

decade, production increased only

2.6%py

• China’s emergence as a net exporter

accounts or 42% of the decline in net

exports of the other BRICS countries

• The recent rise in net exports is largely

accounted for by rising demand in

other emerging markets

• Indonesia had estimated net imports

of 256kt of stainless steel in 2012

Page 15: Demand for nickel in other emerging markets

Source: Roskill, ISSF

The price of nickel has inspired a change in the composition of stainless steel

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

0

10

20

30

40

50

60

70

80

90

100

Nic

kel

pri

ce (

US

$2012/t

)

% o

f sta

inle

ss s

teel

Stainless steel production by grade, 2001-2020f

300 series (CrNi grades) 400 series (Cr grades) 200 series (CrMn grades)

Other/not known Nickel price

Page 16: Demand for nickel in other emerging markets

Source: Roskill

However, trends in manganese consumption hint at significant regional differences in this substitution process

Manganese consumption by end use, 2012e

Steel

Aluminium alloys

Cast iron

EMD, batteries, direct, other

Other non-ferrous alloys, superalloys

-10%

0%

10%

20%

30%

40%

CAGR of stainless steel production and manganese ore

consumption, 2002-2012e

Stainless steel production

Manganese consumption

Page 17: Demand for nickel in other emerging markets

Source: Roskill

Where growth in manganese consumption outpaces stainless production, substitution of 300-grades is the most likely cause

-8%

-6%

-4%

-2%

0%

2%

4%

6%

China Brazil Russiaand

Ukraine

Japan SouthAfrica

India USA SouthKorea

World

Difference between trends in stainless steel production and manganese consumption, 2002-2012e

Page 18: Demand for nickel in other emerging markets

Source: Roskill, WBMS, INSG

Recycling rates have contributed to decreased consumption of primary nickel, but at different rates

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

India Russia SouthAfrica

Brazil

Estimated change in recycling rate, 2002-2012e

0

50

100

150

200

250

300

350

Estimated stainless scrap consumption (2002 = 100)

Russia Brazil India South Africa

Page 19: Demand for nickel in other emerging markets

Source: Roskill, Airline Monitor, UNEP, Prismark

Partners, Goldman Sachs, EIU

Considerable growth expected from other applications of nickel

• Strong growth in demand for nickel

alloys from aerospace industry (23%

forecast increase in airline deliveries,

2012-2020)

• Electronics and chemical industries

expected to grow at 4-5%py globally

• World vehicle demand expected to grow

from 87M in 2012 to 107M in 2020

• 70% growth in construction sector

expected from 2010-2020

• On-going economic growth driving

demand for other nickel-containing metal

goods

End uses of primary nickel, 2012e

Stainless steel Nickel alloy

Electroplating Other steel mill

Foundry Other uses

Page 20: Demand for nickel in other emerging markets

Source: Roskill, Airline Monitor, UNEP, Prismark

Partners, Goldman Sachs, EIU

Considerable growth expected from other applications of nickel

3.3%

2.8%

3.2%

3.1%

2.2%

2.2%

1.6%

4.8%

4.3%

3.0%

Total

Others

Industrial machinery

Automotive

Other energy

Nuclear

Oil & Gas

Electronics/ appliances

Chemical/process industry

Aerospace

Forecast growth in nickel alloy consuming industries, 2012-2020f

0

100

200

300

400

500

600

700

800

900

2012 2013 2014 2015 2016 2017 2018 2019 2020

Forecast nickel consumption in non-stainless steel applications,

2012-2020 (kt)

Plating Nickel alloy

Other alloy steels Other applications

Page 21: Demand for nickel in other emerging markets

Outlook

Page 22: Demand for nickel in other emerging markets

Source: Roskill, WBMS

Considerable growth expected from other applications of nickel

0.00

0.05

0.10

0.15

0.20

0.25

Consumption of primary nickel per unit of country’s stainless steel production, 2012e-2020f

2012e

2020f

World average nickel content in stainless 2012e

World average nickel content in stainless 2020f

Page 23: Demand for nickel in other emerging markets

Source: Roskill, WBMS

Considerable growth expected from other applications of nickel

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

0.16

0.18

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500

Nic

kel

co

nsu

mp

tio

n p

er

un

it o

f sta

inle

ss

Stainless steel production (kt)

Change in use of refined nickel per unit of stainless steel, 2002-2012e-2020f

BrazilSouth Korea

Japan

South AfricaUSA

India

Russia and

Ukraine

Page 24: Demand for nickel in other emerging markets

Primary nickel consumption in selected countries, 2012e-2020f (kt)

780

1,100

2012 2020

China

2852

2012 2020

India

29 33

2012 2020

Russia and Ukraine

35 39

2012 2020

South Africa

1318

2012 2020

Brazil

Forecast growth in world consumption of primary nickel: 4.3% - 5.3%py

For a full breakdown of growth by region, see Roskill’s upcoming Nickel report

Source: Roskill

128

187

2012 2020

USA

Page 25: Demand for nickel in other emerging markets

STEEL ALLOYS – MINOR METALS – INDUSTRIAL MINERALS

Roskill Consulting Group Ltd.

Thomas Höhne-SparborthSenior Economic Analyst

+44 (0)20 8417 [email protected]

New Nickel Market Outlook Report due Q3 2013

Facing a major decision? We help you explore the impact on the market – and the impact on you