Transcript Slide 1

International Perspective
US$ / Nickel / Coal
ANDI - Colombia Genera
February 2015
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Beijing
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CRU CONSULTING
Presentation topics
• US$ - Continued dollar strength
• Nickel – Indonesia export ban & NPI
• Coal – China still key; Colombia a competitive producer
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CRU CONSULTING
CRU believes nickel has the best short term prospects
2015 annual average price forecast (nominal $ or benchmark) versus 2013
average actual prices
Nickel,
Hot
> 15%
Warm
5% to 15%
Mild
0% to 5%
Cool
0% to -5%
Cold
-5% to 15%
Freezing
< -15%
CRU CONSULTING
Sulphuric Acid, Tin, Palladium, Bauxite, Sulphur, Cobalt
Zinc, Silicon, Molybdenum,
Chrome Ore, Alumina, Aluminium, Phosphate DAP,
Ferrochrome, Metalics Scrap, Silico-Manganese,
Lead, Platinum,
Ammonia, Thermal Coal, Oil,
Met Coal, Urea, Phosphate Rock, Copper, Potash,
Manganese, Gold,
Iron Ore Silver
5
Global economic performance is diverging
USA’s upswing and China’s slowdown are causing currencies to realign
Manuf acturing PMIs
•
Plunging oil prices are net positive for
the outlook
•
Modest economic recovery in 2015 –
US is key
•
The $ is going from strength-tostrength
•
Significant uncertainty and risk
Diffusion index. In theory 50 = no change
US
Eurozone
Japan
China
Other emergers
60
58
56
54
52
50
•
Upside: Oil prices low, US takeoff, Indian strength
•
Downside: China crash, Eurzone
woes & ‘Grexit’, Geo-politics:
Russia, Mid-East, oil stress
48
46
Sep-13 Dec-13
Data: Markit, CRU
CRU CONSULTING
Mar-14
Jun-14 Sep-14
6
The US dollar and commodity prices have
moved inversely over the years
CRU CONSULTING
80
100
150
Dollar Strengthens
100
120
2013
2009
50
2005
pressure on commodity prices’ – FT
60
200
2001
started...expect more downward
40
250
1997
• ‘Dollar rally only just getting
300
1993
fertilizer demand’ – Capital Press
20
Narrow Dollar Index
(Inverted - RHS)
1989
• ‘Strong U.S. Dollar to challenge global
350
1985
strong dollar’ – Reuters
0
CRB Commodity Index
(LHS)
400
1981
• ‘Copper slumps to 5-1/2-year low on
Jan 1973 = 100
450
1977
crushed’ – CNBC
Commodity Prices vs. the US Dollar
1973
• ‘As US dollar soars, commodities get
140
Data: Haver Analytics, US Federal Reserve, CRU
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Why might prices and the USD move inversely?
SUPPLY FACTORS
• Strong dollar makes revenues look
even better against local costs
• Greater profit margin
• Producers see incentive to increase
supply where possible
DEMAND FACTORS
• Foreign demand for
commodities down when
USD is strong
• USD-denominated assets
more expensive
• ‘Imported inflation’ may lead
to tighter monetary policy
CRU CONSULTING
8
Dollar moves are just one factor pushing prices around
Market dynamics differ for each commodity. Dollar impacts on a commodity’s price will vary.
CRU CONSULTING
9
Dollar strength to continue
By broadest measure, US dollar up by > 9% since last summer
Real Broad Dollar Index
March 1973 = 100
140
130
120
110
100
90
80
Broad Dollar Index
70
Pre-2008 average
2013
2009
2005
2001
1997
1993
1989
1985
1981
1977
1973
60
Data: US Federal Reserve, CRU
CRU CONSULTING
10
Nickel
outlook
CRU CONSULTING
11
Nickel market deficits:
Stainless steel growth to outpace nickel supply
Apparent consumption stainless steel flat products, million tonnes
20
‘000 t
Global Ni balance
200
150
18
16
China
World ex China
14
100
12
50
10
0
8
-50
6
-100
4
2
0
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
CRU CONSULTING
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Data: CRU, LME
Will Indonesian ore ban bring NPI boom to an end?
Background
2005-2009 NPI industry emerges
•
RKEFs emerge as lowest cost producers using
high-grade laterite from Indonesia
•
•
2013 Imports >40Mt ore from Indonesia
Philippine exports increase
Millions
•
How has the industry responded?
9.0
Philippines
8.0
7.0
January 2014 Indonesia banned export
unprocessed nickel products (<4% Ni)
6.0
The Future
5.0
•
New ore sources
4.0
•
NPI costs rise in China ; plant closures
3.0
•
Indonesian NPI – lower cost; can volumes be
sustained?
2.0
Can Philippines sustain current ore output?
0.0
Jan-12
•
Indonesia
1.0
Aug-12
Mar-13
Oct-13
May-14
13
CRU CONSULTING
Data: CRU, LME
Ore key driver of NPI costs
Business cost breakdown by technology type, 2014, %
100%
90%
80%
Other
70%
60%
50%
Energy
40%
30%
20%
Raw Materials
10%
0%
RKEF
Hydromet
CuNiSulphide
Pyro
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CRU CONSULTING
Data: CRU
Ore prices have risen with the ban; NPI prices have not
Monthly average prices, September 2012 = 100
250
LME Nickel
10% NPI/t
200
1.7-1.8% Ni ore
150
1.4-1.6% Ni ore
100
50
0
Sep 12
Dec 12
Mar 13
Jun 13
Sep 13
Dec 13
Mar 14
Jun 14
Sep 14
15
CRU CONSULTING
Data: CRU, LME
Chinese NPI producers occupy upper end of the cost
curve in 2014 due to higher ore costs
VBC Business Costs, $/t nickel
Cost curve for the nickel industry (business costs), 2014, US$/tonne
Cerro Matoso
Cumulative production, ‘000 tonnes
CRU CONSULTING
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Data: CRU
Coal
outlook
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CRU CONSULTING
A changing thermal coal industry
Newcastle, 6,000 kcal/kg spot
US$/t FOB
Thermal coal export volumes, Mt
100
90
80
70
450
60
400
Australian exports
Russian exports
Columbian exports
South African exports
US exports
350
Q4 14
Q3 14
Q2 14
Q1 14
Q4 13
Q3 13
Q2 13
Q1 13
50
Indonesian exports
300
250
Thermal coal consumption
400
350
300
250
200
150
100
50
0
yoy
change
(mt)
200
8%
7%
6%
5%
4%
3%
2%
1%
0%
150
100
50
0
2011
2012
2013
2014
Data: CRU Analysis.
2007 2009 2011 2013 2015 2017 2019
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CRU CONSULTING
Data: CRU Thermal Coal Market Outlook
Seaborne thermal markets integrated w/ China’s SE provinces
Provincial analysis highlights both opportunities & threats for seaborne
The South-East coastal area:
•
consumes ~40% of China's total power
•
generates ~35% of China’s total power
•
produces 4% of China's total coal
400
300
200
100
0
-100
-200
-300
-400
-500
-600
Power surplus/(deficit) by Region Bn Kwh
East
West
North East
Middle
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Coastal coal trade influenced by:
HEILONGJIANG
Demand factors:
– Interprovincial transmission
–
Substitution & generation mix
–
Underlying demand intensities
Supply factors:
–
Local provincial production and inland supply
–
Seaborne imports
–
Domestic north-south coastal trade
JILIN
XINJIANG
HEBEI
INNER
MONGOLIA
SHANXI
NINGXIA
QINGHAI
SHANDONG
GANSU
SHAANXI HENAN
XIZANG
JIANGSU
SICHUAN
HUBEI
ANHUI
CHONGQIN
G
HUNAN
JIANGXI
SHANGHAI
ZHEJIANG
GUIZHOU
FUJIAN
YUNNAN
GUANGXI
GUANGDONG
MACAU
CRU CONSULTING
LIAONING
HAINAN
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Data: CRU
India set to overtake China as world’s largest importer
Seaborne imports, Mt
350
China
300
India
250
200
150
100
50
0
2010
2011
Data: CRU Analysis.
CRU CONSULTING
2012
2013
2014
2015
2016
2017
2018
2019
20
Colombian coal production:
Above average quality & below average costs
kcal/kg – exported coal average energy content
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2014 Business Costs (CFR US$/t, nominal)
90
80
70
60
50
40
30
20
10
0
CRU CONSULTING
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Data: CRU Thermal Coal Cost Model
Indonesian & Colombian supply fill most of bottom half – Russian,
US & some Australian supply occupy high end of cost curve
Seaborne CFR Business Costs – 2014 (US$/tonne)
Cumulative Production (Mt)
CRU CONSULTING
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Data: CRU Thermal Coal Cost Model
Industry margins down from 2012 despite cost decreases.
Colombia & Indonesia: only 2 major exporters with margins
above global average
Weighted global and regional US$/t margins, 2012-2014
50
Australia
40
Colombia
30
Indonesia
20
10
Mozambiqu
e
Russia
0
South Africa
-10
United
States
Vietnam
-20
-30
2012
CRU CONSULTING
2013
2014
World
average
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Data: CRU Thermal Coal Cost Model
Nearly 40% of seaborne production sold at a loss in 2014
Margins by operation US$/t, 2014
(+) margins
(-) margins
Cumulative Production (Mt)
CRU CONSULTING
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Data: CRU Thermal Coal Cost Model
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Nickel & Thermal Coal set for strong price increases over
medium term
2018 annual average price forecast over 2013 average actual prices
Hot
> 15%
Zinc, Nickel, Tin, Palladium, Sulphuric Acid, Cobalt, Bauxite, Alumina,
Aluminium, Molybdenum, Thermal Coal, Chrome Ore, Platinum,
silicon,
Warm
5% to 15%
Ferrochrome, Silico-Manganese, Lead, Manganese, Urea, Met Coal,
Mild
0% to 5%
Oil
Cool
0% to -5%
Phosphate DAP, Copper,
Cold
-5% to 15%
Freezing
< -15%
CRU CONSULTING
Metalics, Scrap, Potash, Ammonia,
Phosphate Rock, Sulphur
Gold, Iron Ore, Silver
Thank You
Taylor Shively – CRU Base Metals Consulting Manager
[email protected]
+56 2 2231 3900
Marcio Goto – CRU Gerente Regional América Latina y el
Caribe
[email protected]
+55 11 5051 8124 / cel.: +55 11 997 264 466
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