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Magnesia 2011: Macro and micro economic factors

Magnesia 2011: Macro and micro economic factors. Industrial Minerals MagMin 2011 Vasili Nicoletopoulos. Magnesia 2011: Macro and micro economic factors. Contents The global and European situation: economics, finance, politics & policies The Magnesia market today

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Magnesia 2011: Macro and micro economic factors

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

  2. Magnesia 2011: Macro and micro economic factors Contents • The global and European situation: economics, finance, politics & policies • The Magnesia market today • Environmental issues facing the magnesia industry • New opportunities and growth in the magnesite sector • Conclusions V.Nicoletopoulos MagMin 2011 version May 12

  3. 1. Review of the global and European situation – 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 V.Nicoletopoulos MagMin 2011 version May 12

  4. …1. Review of the global and European 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 V.Nicoletopoulos MagMin 2011 version May 12

  5. …1. Review of the global and European 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? V.Nicoletopoulos MagMin 2011 version May 12

  6. …1. Review of the global and European situation – 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" V.Nicoletopoulos MagMin 2011 version May 12

  7. 1. Review of the global and European situation - 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 V.Nicoletopoulos MagMin 2011 version May 12

  8. 1. Review of the global and European situation – 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 V.Nicoletopoulos MagMin 2011 version May 12

  9. 1. Review of the global and European situation - 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 V.Nicoletopoulos MagMin 2011 version May 12

  10. …1. Review of the global and European situation - 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 V.Nicoletopoulos MagMin 2011 version May 12

  11. 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 V.Nicoletopoulos MagMin 2011 version May 12

  12. 2. Review of the Magnesia market situation, 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’ V.Nicoletopoulos MagMin 2011 version May 12

  13. …2. Review of the Magnesia market 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 V.Nicoletopoulos MagMin 2011 version May 12

  14. …2. Review of the Magnesia market situation, steel, mi. mt V.Nicoletopoulos MagMin 2011 version May 12

  15. 2. Review of the Magnesia market situation, cement, mi. mt V.Nicoletopoulos MagMin 2011 version May 12

  16. …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 V.Nicoletopoulos MagMin 2011 version May 12

  17. …2. Review of the Magnesia market situation CCM • Good market Brucite • Chinese export market keeps active Trade 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 V.Nicoletopoulos MagMin 2011 version May 12

  18. 3. Environmental issues facing the magnesia 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 V.Nicoletopoulos MagMin 2011 version May 12

  19. …3. Environmental issues facing the magnesia industry • 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 V.Nicoletopoulos MagMin 2011 version May 12

  20. 4. New opportunities and growth in the 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,…’ V.Nicoletopoulos MagMin 2011 version May 12

  21. …4. New opportunities and growth in the magnesite 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 V.Nicoletopoulos MagMin 2011 version May 12

  22. Closing Remarks - ‘Take home’ - 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 V.Nicoletopoulos MagMin 2011 version May 12

  23. …Closing Remarks - ‘Take home’ - 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?] V.Nicoletopoulos MagMin 2011 version May 12

  24. Thank you very much Vasili Nicoletopoulos V.Nicoletopoulos MagMin 2011 version May 12

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