UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT

MULTI-YEAR EXPERT MEETING ON COMMODITIES AND DEVELOPMENT

9-10 April 2014

Developments and New Challenges for Base Metals: The Case of Copper, Zinc, Lead and Nickel

by

Mr. Carlos Risopatron Director of Economics and Environment

International Copper Study Group (*), Lisbon Portugal

*presentation prepared with the assistance of the International Lead and Zinc Study Group and

the International Nickel Study Group

The views expressed are those of the author and do not necessarily reflect the views of

UNCTAD.

1

Carlos Risopatron, Director of Economics and Environment

International Copper Study Group (*), Lisbon Portugal (*) presentation prepared with the assistance of the

International Lead and Zinc Study Group and the International Nickel Study Group.

UNCTAD 2014 Multi-year Expert Meeting on Commodities and Development

Geneva 9-10 April 2014

Developments and New Challenges for Base Metals:

The Case of Copper, Zinc, Lead and Nickel

Summary

1. Description of the Study Groups: Membership and Objectives

2. Global Use, Mining and Recycling of Refined Copper

3. Global Use, Mining and Recycling of Refined Lead and Zinc

4. World Mining, Scrap Use and Demand for Nickel

5. Regulatory Trends and Non Ferrous Metals Based Development

6. Role of China in the Use of Copper, Lead, Zinc and Nickel

7. World Metal Balances and Inventories 2013-2014

8. Metals Study Groups Activities 2014 and Publications

2

ICSG Membership Autonomous International Governmental Organization. Active industry involvement.

Main source of unbiased information for governments, the public and the industry.

Membership open to countries involved in copper production, use or international trade.

23 member countries and the EU. 4 recent member states. Non-members can attend as observers.

Australia

Belgium

Chile

China

European

Community

Finland

France

Germany

Greece

India

Italy

Iran

Japan

Serbia

Spain

United States

Zambia

Luxembourg

Mexico

Peru

Poland

Portugal

Russian Federation

Sweden

3

4 4 4

International Lead and Zinc Study Group

Autonomous International Governmental Organization.

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

30 members (>85% of global lead/zinc industry). Key role in the industry.

Australia

Belgium

Brazil

Bulgaria

Canada

China

Finland

France

Germany

India

Iran

Ireland

Italy

Japan

Korea Rep.

Mexico

Serbia

South Africa

Sweden

Thailand

United States

European Union

Morocco

Namibia

Netherlands

Norway

Peru

Poland

Portugal

Russian Fed.

European Union

Greece

Portugal

Brazil

France

Japan

Sweden

Australia

Finland

Italy

Russian

Federation

Cuba

Germany

Norway

United

Kingdom

International Nickel Study Group

Autonomous International Governmental Organization.

Co-located with ICSG and ILZSG resulting in significant cost savings

Enhancement of market transparency in the nickel market.

Active industry involvement. Forum for discussions on nickel. 15 members.

5

World industrial uses of refined and scrap copper, nickel, zinc and lead.

52%

16%

17%

6%

6%3%Galvanizing

Alloys

Brass and Bronze

Semis

Chemicals

Miscellaneous

77%

1%

6%

2%

3%8%

3%

Batteries

Cable Sheathing

Rolled & Extruded

Shot/Ammunition

Alloys

Pigments & Compounds

Miscellaneous

Industrial Uses of Copper

Power Cable,

Building and

Magnet Wire

40%

Copper Tube,

Rod, Plates

Foil 20%

LV, Auto, Bare

Wires 18%

Brass Mill

Alloys

17%

Foundry

Castings and

Powders 5%

Industrial Uses of Zinc

Industrial Uses of Lead

Stainless Steel63%

Plating9%

Alloy steel8%

Non ferrous alloys

8%

Foundry5%

Batteries & Other

7%

Industrial Uses of Nickel

Lead batteries:

weight vs low cost

recycling. Cars Inc. likes them.

6

Production Fabrication Manufacture End-of-Life

Management

Product Use

(Lifetime)

Copper

Stock in

Use

C&D

INEW

IEW

ELV

WEEE

MSW

Dissipative/

Dispersive

Uses

Wire Rod

Plant &

Wire Mill

Foundry

Chemical/

Powder Plant/

Electroplating

Brass Mill

Ingot

Maker

Direct Melt

(Alloyed/

Unalloyed)

Hydro-

metallur-

gical Plant

New

Scrap Old

Scrap Scrap

Trade

Other

Metal

Recycling

Loops

Disposal

High

Quality

Scrap

Low

Quality

Scrap

Alloy

Scrap

Copper Scrap

& Residues

Construc-

tion

Infra-

structure

Industrial

Equipment

Transport

Household

Appliances

Other

Uses

Mine Smelter Refinery

Solvent-

extraction

Electro-

winning

Semis

Trade

Finished

Product

Trade

End-of-Life

Product

Trade

Ore &

Concen-

trate Trade

Refined

Copper

Trade

Anode &

Blister

Trade

Refined

Copper

Copper

Semis Finished

Products

End-of-

Life

Products

Scrap Recycling

2012 Global Copper Flows 25 Mt = 16.5 Mt Mine Refined+ 3.6 Mt Scrap Refined + 4.9 Mt Direct Scrap.

Mineral

Processing

Slag &

Residues

Alloy

Ingot

Trade

New

Scrap

Abandoned

& Hoarded/

Stored

End-of-Life

Products

New Scrap

C&D: Construction & Demolition Waste, INEW: Industrial Non-Electrical Waste,

IEW: Industrial Electrical Waste, ELV: End-of-Life Vehicles, WEEE: Waste

Electric & Electronic Equipment, MSW: Municipal Solid Waste

7

Industrial use of copper trend 2007-2012: up just in China and a few oil economies.

Country 2007 2012 Oct* Growth SourceMt Mt %

China 6.3 11.31 79.5% ICSG

United States 2.94 2.17 -26.0% ICSG

Germany 1.85 1.52 -17.7% ICSG

Japan 1.75 1.33 -23.9% ICSG

Korean Republic 1.33 1.06 -20.2% ICSG

Italy 1.75 1.03 -41.2% ICSG

Taiwan (China) 0.85 0.71 -16.4% ICSG

Spain 0.34 0.32 -4.7% ICSG

Poland 0.34 0.23 -31.4% ICSG

France 0.54 0.19 -64.5% ICSG

Slovakia 0.02 ICSG

India 0.71 0.64 -9.6% Estimate

Russian Federation 0.80 0.56 -30.2% Estimate

Turkey 0.41 0.27 -34.0% Estimate

Thailand 0.29 0.27 -5.6% Estimate

Brazil 0.37 0.23 -38.4% Estimate

Indonesia 0.20 0.22 8.5% Estimate

United Arab Emirates 0.00 0.21 100% Estimate

Saudi Arabia 0.19 0.21 8.4% Estimate

Iran 0.19 0.20 7.5% Estimate

Sample of Countries 21.1 22.7 7.4%

* 12 months before November 2012

Fabrication of Copper and Copper Alloyed Products: 2012 Versus 2007

million tonnes gross weight, other alloyed metals included

In 2012 the industrial use of copper fell 2% worldwide: falling end uses, mainly in Europe.

2012 growth

Industrial Transformers 6.6%

Power Transmission 6.6%

Harnesses, Motors 2.7%

Railroad, Shipping 2.7%

Telecommunication -0.7%

Building Architecture -1.7%

Consumer products, tools -2.8%

Defense, Coinage -3.1%

Building Plumbing -3.5%

Building Power -3.5%

Buildings Phone Wire -4.2%

Industry-No Electric -5.1%

Cooling Equipment -7.8%

Air Con Tube -8.8%

Electronics -9.9%

Vehicle Radiators Tubes -15.5%

Global Use of Copper in 2012 -1.9%Source: ICA/IWCC/ICSG

Global Use of Copper in Fabricated Products

annual growth 2012/2011 Copper and Alloys Gross Semifabrication in Europe

ICSG Reported Annual % Growth

17.2%

0.3%

-5.9%-5.4%

-23.3%

-8.3%-4.9%

-30.0%

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

2007 2008 2009 2010 2011 2012 2013 F

8

In 2012-2013 more mine production caused copper oversupply and reduced prices. But ~840 Kt of these concentrates to stock. China reported +630 Kt of concentrate imported in 2013.

2016 Global Copper Mine Capacity

Forecast, thousand tonnes copper Kt.

25.500

26.000

26.500

27.000

27.500

28.000

2013 (January) 2014 (January)

9

China: Copper Concentrate Available 2010-2013 Kt-Cu

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2010 2011 2012 2013

China: Copper in Concentrate Output

China: Copper in Concentrate Net Imports

It might be not enough stock: 2015-2017 new copper mine capacity plans down 1.5 Mt-Cu on 2013 CAPEX cuts!

2012 2013 2014 2 Years

Chile 171 342 513

China 195 71 266

DRC 104 282 386

USA 55 63 118

Peru 63 78 141

Zambia 31 53 84

Mongolia 4- 75 71

Australia 47- 61 14

Mexico 56 11- 45

Indonesia 144- 110 34-

Canada 10 52 62

Brazil 7 50 57

ROW 124 121 245

World 621 1,347 1,968

Growth 117%

Copper Mine Production: Recent AdditionsKt-Cu

Source: ICSG

10

Observed industrial copper use up ~7.6% in 2013, up just ~2% out of China, partly led by lower prices. So in 2013 the industrial use of refined copper and copper scrap was not far than 27 Mt-Cu worldwide.

2012 2013 Vol Change % Change

KtChina 9,408 10,600 1,192.0 12.7% Jan-DecUnited States 1,748 1,755 7 0.4% ForecastGermany 1,209 1,235 26 2.2% Jan-DecJapan 1,073 1,084 11 1.1% ForecastKorean Rep. 938 975 37 3.9% ForecastItaly 834 845 11 1.3% Jan-DecTaiwan (China) 494 493 (1) -0.2% Jan-DecTurkey 457 485 28 6.2% Jan-DecUnited Arab Emirates 285 375 90 31.4% Jan-Dec

Spain 258 250 (8) -3.0% ForecastIndia Wire Rod 330 306 (25) -7.5% ForecastPoland 263 251 (11) -4.3% Jan-DecSaudi Arabia 204 205 1 0.5% Jan-Dec

France 166 155 (10) -6.2% Jan-DecEgypt 145 155 10 6.9% Jan-DecIran 95 100 6 5.9% Jan-DecOman 14 14 0 0.0% Jan-DecKuwait 9 9 0 0.0% Jan-DecMorocco 1 - (1) Jan-Dec

Reported Ex-China 8,521 8,692 170.8 2.0%

All Reporting 17,929 19,292 1,362.8 7.6%

Copper and Copper Alloy Products Semifabrication Kt-Cu Copper Content, Surveys and Estimates

United Arab Emirates 31.4%

China 12.7%

Egypt 6.9%

Turkey 6.2%

Iran 5.9%

Korean Rep. 3.9%

Germany 2.2%

Italy 1.3%

Japan 1.1%

Saudi Arabia 0.5%

United States 0.4%

Oman 0.0%

Kuwait 0.0%

Taiwan (China) -0.2%

Spain -3.0%

Poland -4.3%

France -6.2%

India Wire Rod -7.5%

2013 Annual Growth %

Recycled copper use <8.5 Mt-Cu in 2013. The global copper scrap shortage deepening in 2014. Why?

If the economic value of the metal is high enough, no much recycling regulation/enforcement needed.

Copper Cathode

Refined from Scrap

2013 = 3.8 Mt-Cu

Scrap Directly Melted

by Fabricators 2013:

4.7 Mt-Cu

World Copper Recycling Input Rate and LME Refined Price

Change

32.4%33.0%

33.4%

36.1%

34.9%

35.6%

32.4%

34.2%33.8%

33.3% 33.2%

30.0%

31.0%

32.0%

33.0%

34.0%

35.0%

36.0%

37.0%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E

-40%

-20%

0%

20%

40%

60%

80%

100%

Recycling Input Rate

LME Refined Price

11

12

Lead Demand Growth China vs Rest of the World 2002-2013

Source: ILZSG

China, 4,479,

43%

Americas,

2,127, 20%

Europe, 1,622,

16%

Africa/

Oceania,

119,

1%

Asia Ex China ,

2,035,

20%

World Refined Lead Demand 2012

World Refined Lead Mined and Recycled - Kt. 2012

Refined Lead

Recycled, 5790,

56%

Refined Lead from

Mines, 4,592,

44%

The global demand for lead critically depends from recycling, mainly lead-acid batteries scrap.

America still #1 lead recycler. In China, vehicles, e-bikes and 4G telcos are driving lead use up fast.

Peru 4.7%

USA 6.9%

China 53.9%

Australia 10.9%

Other 11.0%

Europe 7.1% Canada

1.0%

Mexico 4.5%

0 100 200 300 400 500

Lead Mines

Capacity

Pipeline

New Mines Operational 2012

Commited New Mines + Expansions 2012-2014

Lead supply contraints: slow lead mine capacity expansion, grades down. China remains #1 lead mine producer. 13

14

Zinc Demand Growth China vs Rest of the World 2002-2013

Source: ILZSG

Zinc mines: main source of oversupply. Refined use 13 Mt in 2013. Mine closures 2013-2016: 1 Mt.

World Zinc Mine and Recycled Supply

Kt of Metal Content in 2012

Zinc Mine

Production,

11478,

77%

Recycled Zinc

Refined

Production, 822,

6%

Zinc Scrap

Direct Melt,

2500,

17%

Peru 9.4%

China 36.0% Australia

11.1%

Other 25.6%

Europe 7.7%

Canada 4.5%

India 5.7%

142

125

95

55

54

52

50

0 100 200 300 400 500 600 700

New Zinc

Mine Capacy

2012

Lady Loretta, Australia (new) Cerro Lindo, Peru (40kt expansion)Colquijirca, Peru (35kt expansion) Halfmile Lake, Canada (new)Langlois, Canada (reopening) Tizapa, Mexico (26kt expansion)Neves Corvo, Portugal (reopening)

15

World Refined Nickel Metal Flows 2013 = 1.8 Million Tonnes 68% of world nickel supply from 4 countries.53% of demand from China

Just 22 Kt of refined nickel coming from scrap. Most recycled nickel from stainless steel scrap.

•China still relies on

imports of refined

nickel.

•Asia ex-China use

more refined nickel than all Europe.

16

With high prices pre-2009, recycled nickel scrap provided 33% of world nickel uses.

17

Source: Nickel Institute 2008

0

50

100

150

200

250

300

Indonesia

Russia

the

Phili

ppin

es

Canada

Austr

alia

New

Cale

donia

Bra

zil

Chin

a

Colu

mbia

Cuba

2010 2011

Unit：kt（Nickel Content）

2010-2011

Global Nickel Ore Output

Chinese imports of nickel ore from Indonesia and Philippines ended the shortage in 2009-2012. More nickel in the pipeline, but when? Massive CAPEX requirements and major technical difficulties.

Ferronickel mine projects: Australia, New Caledonia and Brazil.

Nickel mines and smelter projects in PNG, Myanmar + Salomon Islands.

Nickel Projects: Global Pipeline in 2013

Nickel Content Kt

-

200

400

600

800

1,000

1,200

Ore & Concentrate Intermediate Products Refined products

Potential Project Developments

Likely Project Developments

Committed Developments

Changes In Trade Regulations Cause Price Volatility And Can Reduce Global Non Ferrous Metals Mine/Scrap Supply

Indonesia - Local Content for Mineral Exports *

January - 2014

nickel pig iron 4%;

ferro-nickel 10%;

Copper concentrate 15%;

manganese concentrate 49%;

lateritic iron 51%;

zinc concentrate 52%;

lead concentrate 57%;

ferro-manganese 60%;

manganese silica 60%;

chromium alloy 60%.

alumina; iron ore concentrate 62%;

nickel matte 70%;

sponge iron 75%;

bauxite – 90% chemical

pig iron 90%;

alumina, 98% smelter

gold 99%;

silver 99%;

chromium 99%;

tin metal 99.9%;

* A progressive export tax will be implemented

Is China stainless steel production

vulnerable in 2014? Or enough stocks? 18

Export Taxes Can Induce Investments for Exports, But Not Develop Domestic Markets. Russian Federation: from scrap and refined exporter to wire rod exporter. WTO 2015 to affect flows.

19

Refined Export Tax:

Operational Suspended Operational

Many opportunities to

develop the Russian

market for copper

products in different

sectors. Source: Metal Bulletin Copper

Conference - Elkat

February 2014 Kazakhstan extended ban on export of scrap and ferrous metals waste to prevent a critical domestic shortage.

Russian Federation: Net Exports of Copper

Scrap , Refined and Fabricated Products Kt.

-100

0

100

200

300

400

500

600

700

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Net Refined Exports

Net Scrap Exports

Net Semifabricate Exports

Year 2000 ->

10% Refined Export Tax 50% Scrap Export Tax

IMO: some metal ores cargo can be

harmful to marine environment now.

Air quality and lead recycling: Mexico: 15 ug/dL . US EPA: 1.5 ug/dl.

USA ->Mexico scrap battery exports: +500%

Some Environmental Regulations Can Reduce World Metal Supply More than Others

Effective 12/December/2013

SO2 As SO2

Chuquicamata 49,700 476 96,500

Potrerillos 24,400 157 89,500

Caletones 47,680 130 80,000

Altonorte 24,000 126

Ventanas 14,650 48 16,500

Chagres 14,400 35 13,950

Hernan Videla Lira 12,880 17 24,500

Chile 187,710 989 320,950

Existing SO2 As PM Hg

H2SO4 Plants 400 ppm 1 Mg/Nm3

Regional Authority Law 193

Law Published: 12/December/2013

Maximum Emission Levels

On Existing Sources

Tonnes / Year*

Chile: New Emission Standard for Copper Smelters

And Sources of Arsenic Emissions (H2SO4 Plants).

At the End of the Transition Period*

Maximum Emission Limits

On Existing Sources

Tonnes / Year*

20

Top Global Mining Companies

2012 Tax Payments as % Of Operational Revenues

0% 2% 4% 6% 8% 10% 12% 14% 16%

Codelco

BHP Billiton Group

Newmonth Mining Corp

Freeport-McMoran

Norilsk Nickel

Barrick Gold Corp

Anglo American Plc

Rio Tinto Group

Vale SA

Source: Joint Study Groups Report “The Impact of Fiscal Instruments on the Non-Ferrous Metals Industry” 2014

2012 Global Contribution of the Metals Industry to

Government Revenues by Instrument %

Corporate Income

Tax, 40%Production taxes,

11%

Royalties, Fees

and Rents, 16%People Tax, 20%

Mining Taxes, 5% Other, 8%

Public Sector Rent from NF Minerals: Not All Taxes Equal, Not All Companies Equal

21

In 2002 China was still an exporter of refined lead and zinc. In 2014 is the main importer of refined, ore and scrap copper, nickel, lead and zinc.

China: Net Imports of Copper Raw Materials - Kt-Cu.

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2009 2010 2011 2012 2013

China Net Copper Scrap Imports Kt-CuChina Net Copper Blister Imports Kt-CuChina Net Refined Copper Imports Kt-CuChina Net Copper Ore Imports Kt-Cu

22

Instead of a rent from mineral exports, China invest in value added products using refined metal

Export taxes to raw materials and VAT tax rebates support valuable exports or inputs in short supply China Average Import Price Paid in USD per Tonne:

Reported, January-June 2013.

0

2,000

4,000

6,000

8,000

10,000

12,000

Semifabricated

Products

Refined Copper

Imports

"Copper Scrap" Copper

Concentrate

China Copper and Alloy Semis Capacity ex Wire Mills

2012-2016 Kt

0

100

200

300

400

500

600

700

800

2013-2015 Project Pipeline New 2012 Capacity

Not Classified

Ingots for Castings

Foil

Alloy Wire

RBS

PSS

Tubes

Chinese export measures along the copper value chain: 2010

HS 2603 ores 10% export tax

HS 2620 residues 10% export tax

HS 7401 matte 15% export tax

HS 7402 blister 15% export tax

no VAT rebate

HS 7404 scrap 15% export tax

no VAT rebate

HS 7403 refined Cu 5 to 10% export tax

no VAT rebate

HS 7405 master alloys 10% export tax

no VAT rebate

HS 7406 powders no VAT rebate

HS 7407 bars, rods profiles 5 percentage point VAT rebate

HS 7408 wires 5 percentage point VAT rebate

HS 7409 plates, sheets, strips 9 percentage point VAT rebate

HS 7410 foil full VAT rebate

HS 7411 tubes 5 to 13 percentage point VAT rebate

China,March 2014: refined copper cheaper than scrap: 40% rebate on 17% VAT to China scrap processors (MOF) 23

Rapid urbanization and industrialization in China: key driver of

non ferrous metal use growth globally in the past 10 years...

World Non Ferrous Metal Usage 2002-2012.

Thousand Tonnes of Metal Kt

1,175

6,829

9,381

20,260

1,659

10,382

12,300

25,356

0 5,000 10,000 15,000 20,000 25,000 30,000

Nickel Usage

Lead Usage

Zinc Usage

Copper Usage

2012

2002

...and reason behind 4 base metals use up >12 million tonnes in 2002-2012

24

World Usage Volume Growth 2002-2012

Key Non Ferrous Metals Kt.

0

1,000

2,000

3,000

4,000

5,000

6,000

Nickel Usage Zinc Usage Lead Usage Copper Usage

Global non ferrous use expansion is driven by copper, lead, zinc, and less by nickel.

World Mine Production 2002-2012 Cu, Ni, Zn and Pb.

Kt. Metal Content.

2,868

1,248

9,174

13,577

4,994

2,178

13,149

16,697

- 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000

Lead Mine Production

Nickel Mine Production

Zinc Mine Production

Copper Mine

Production

2012

2002

Global mine supply response to higher Chinese demand: >10 million tonnes in 10 years.

World Mine Output Growth 2002 - 2012

in Thosand Tonnes of Metal Content (Kt)

930

2,126

3,120

3,975

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Nickel Mine Output

Growth

Lead Mine Output

Growth

Copper Mine Output

Growth

Zinc Mine Output

Growth 25

The world uses more of the 4 metals, but less copper and nickel use outside China.

7,338 8,008

1,560

5,400

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2002 2012

China Zinc Demand

World Ex-China Zinc Demand

958

4,479

5,9035,871

-

2,000

4,000

6,000

8,000

10,000

12,000

2002 2012

World Ex-China Lead Demand China Lead Demand

2002-2012: the growth of lead and zinc used out of China was really marginal. 26

27

0

100 000

200 000

300 000

400 000

500 000

Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

LM E (t) Shanghai (t)

More stocks in metal exchanges now, but copper and nickel stocks very volatile. In 2013 copper left LME-COMEX and moved from Chinese refineries to Shanghai ports, sold-off in 2014.

Copper Exchange Stocks

0

200 000

400 000

600 000

800 000

1 000 000

1 200 000

1 400 000

1 600 000

Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

LM E (t) Shanghai (t)

Zinc Exchange Stocks

Lead Exchange Stocks

0

50 000

100 000

150 000

200 000

Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

tonnes

Source: LME, SHFE, Comex. Citi @ Joint ICSG/INSG/ILSG

Nickel Exchange Stocks (LME)

Feb 2014: >126 Kt of nickel on warrant in LME

Feb 2014:

>582 Kt of

Zinc on

warrant in LME

Feb 2014: >171 Kt

of lead on warrant in LME

February 2014:

just 126 Kt on warrant in LME.

888 Kt-Cu in Shanghai warehouses

World Refined

Production 2013 *

Copper 20,991

Lead 11,022

Zinc 13,013

Nickel 1,806

* preliminary

Refined Stocks On Warrant in LME

in January 2014 as a % of Output:

Copper 0.6%

Lead 1.6%

Zinc 4.5%

Nickel 7.0%

Official export data not always matching import data.

Refined Copper Exports Reported from China in 2012. Kt-Cu

0

50

100

150

200

250

300

Refined Exports Reported by China Importers: Refined from ChinaKorean Republic Malaysia Singapore Saudi Arabia Taiwan UAE

Others Hong Kong Vietnam Thailand Belgium Netherlands

Japan Egypt Brazil India Turkey Indonesia

United Kingdom China South Africa United States

Small % of copper inventories in metal exchanges now.

recently.

28

If we account changes in Shanghai port inventories: global copper deficit 2011-2013

No more global surplus of lead and zinc. Small nickel surplus ...to end in 2014?

-100

-50

0

50

100

150

2005 2006 2007 2008 2009 2010 2011 2012 2013

World refined nickel balance.

World refined zinc balance.

World refined copper balance

World refined lead balance.

29

With a growing world economy in 2013, recyclers and miners struggled

to supply metal at low prices, so copper, zinc and lead markets in deficit.

0.0

1.0

2.0

3.0

4.0

2012 2013 2014F 2015F

USA

7.0

7.2

7.4

7.6

7.8

2012 2013 2014F 2015F

China

0.0

0.5

1.0

1.5

2.0

2012 2013 2014F 2015F

Japan

-1.0

0.0

1.0

2.0

2012 2013 2014F 2015F

Euro Area

GDP: IMF, EU

2013 2013 2013

Output Usage Balance

Copper* 21 21.3 -0.536

Zinc 12.9 13 -0.100

Lead 11.2 11.2 -0.040

Nickel 2 1.8 0.200

4 NFM 2013 47.1 47.3 -0.476

2014 F 2014 F 2014 F

Output Usage Balance

Copper 22.3 21.9 0.435

Zinc 13.5 13.6 -0.040

Lead 11.7 11.7 -0.050

Nickel 1.93 1.89 0.047

4 NFM Forecast 49.43 49.09 0.392

ICSG, INSG, ILZSG 2013 World Balance

and 2014 Refined Metals ForecastMillion Tonnes of Refined Metal

* Change in Shanghai bonded cathode stocks included

•Will copper mine oversupply deepen in 2014? •Will the global copper scrap shortage end in 2014?

•Will Indonesia ore ban allow a refined nickel surplus in 2014?

•Or ore stocks in Chinese ports, users and exchanges are enough?

•Will lead recycling flows allow a perfect global balance again?

•Will the expected zinc mine closures restrict supply? Or be delayed? 30

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China urbanization rate >70% just in 4 regions. Below 50% in Central and West China

The plan: urbanize ~100 million people 2014-2020 = high metal end uses to continue

Source: UNICEF, China National Bureau of Statistics, Wood Mackenzie, China Academy of Sciences.

Urbanized population %

by country as of 2006.

China Future Power Grid

2012 Data 55% of Population In Rural Areas in 2010 (TWB)

Copper and nickel cheaper now than 100 years ago:

in “constant US dollars” and in gold

1966-1973 >one kg of gold per tonne of copper. 1974-2014, < 200 grams of gold per tonne of copper.

Opportunity Sovereign Funds Investments in Metals

Can Reduce Price Super-Cycle Volatility:

Buying the Oversupply

and Selling the Shortages. WWI

WWII:

LME Closed

Korean War

Vietnam

War

Chile Coup

China +ZIRP

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International Copper, Lead, Zinc and Nickel Study Groups Next Refined Markets Forecast 2014-2015: October 2014.

Next Sessions

Copper and Nickel: 13-14 October 2014

Lead and Zinc: 16-17 October 2014

Join Metals Recycling Seminar: 15 October 2014

in Lisbon, Portugal

For more information please visit our websites:

www.icsg www.ilzsg.org www.insg.org

For information about how governments can joint the study groups: mail@icsg.org

Comments on this presentation to: risopatron@icsg.org

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