Transcript RYANS NOTES CONFERENCE

TUCSON 2008
China
0.5%
MT 0.142 millions
S. Africa
9%
Venezuela
18%
Ukraine
11%
Others
6%
Canada
5%
Kazakh./Lith.
13%
Russia
2%
Norway/
Iceland
35%
CANADA
13,049
CHINA
125,728
VENEZUELA
43,141
RUSSIA
57,389
CANADA
5%
VENEZUELA
7%
CHINA
50%
RUSSIA
37%
2008 IMPORTS OF FESI INTO N. AMERICA: Jan-May 2008
COUNTRY
2008 IMPORTS (MT)
AVG PER MONTH
ICELAND
10
2
GERMANY
245
49
FRANCE
245
49
BRAZIL
306
51
NORWAY
309
62
CANADA
5626
1125
4.8%
VENEZUELA
8500
1700
7%
RUSSIA
33425
8685
36.7%
CHINA
59532
11906
57.3%
108,198
23,629
TOTAL
%
CHINESE MARKET SHARE OF FESI
into NORTH AMERICA
YEAR
IMPORTS
(MT)
2001
1%
2002
4%
2003
23%
2004
27%
2005
46%
2007
53%
100
50
0
CHINA
2008
57%
REST OF WORLD
Crude Steel Production
600
1300
400
1000
China
900
300
800
200
700
600
100
2006
2004
2002
2000
1998
1996
1994
1992
0
500
400
World - Mt millions
1100
USA
1990
USA/China - Mt millions
500
1200
World
MT000s
280
60%
267
249
260
235
227
240
220
261
205
200
Volume
40%
China
30%
180
167
160
140
50%
Norway/Iceland
20%
142
10%
120
100
0%
2001 2002 2003 2004 2005 2006 2007 2008
Venezuela
Russia
Others
China FeSi Production vs. Exports
MT000s
5,000
4,500
4,500
4,000
3,320
3,500
Exports
2,940
3,000
2,500
2,000
1,996
2,165
1,315
1,500
1,000
500
Production
3,750
809
908
1,550
917
514
2002
2003
2004
2005
2006
2007
MT000s
2008
2007
2007
2006
2006
2005
2005
2003
2002
2003
2001
2000
Origin
1400
China
1200
Norway
2004
2004
2002
1600
2001
1000
800
600
400
1999
200
1998
0
Iceland
Russia
South
Africa
Brazil
Poland
China is the “Big Daddy”!
1600
1400
CIF Costs
$/Mt FeSi 75
1200
Export
Duty
FOB
Costs
Materials
1000
800
600
400
Power
200
0
CHINA
WITH
DUTY
 PRODUCTION:
Approx 4.5 million tons annual total
production by the end of 2007
 LOCATIONS:
Mongolia, Ningxia, Gansu, Sichuan, Guizhou, Shanxi
 PRODUCERS:
Over 1,000 FESI producers
 CAPACITY:
Only 3 Chinese FeSi producers with annual
capacity of approximately 100,000MT
 GOVERNMENT:
Pressured smaller-furnace ferroalloy producers to
close for environmental/energy reasons
 2005:
• Producing….
 Ferrosilicon – 550,000 MT
 Silicomanganese - 150,000 MT
 Silicon Metal – 30,000 MT
 Silicon Carbide – 10,000 MT
• Approximately 50% of production is exported
• Main production is at the ERDOS Industrial Park in Qipanjing
 Furnaces - 37 (22-25 MVA) and 15 (15-12.5 MVA)
 Power - Capacity of approximately 1060 MW,
supported by 7,000,000 T/Y of coal from 6 coal mines
MEDIMA is a North American agent for
Importing approximately 36,000 MT of their FeSi per year
(The next biggest producers are Ningxia and Northwest , at approximately 100, 000 MT)
Short term…..
WEAKENING FERROSILICON
TREND TO CONTINUE!
During 2008, we have seen a 100 year high
in the price of Ferrosilicon.
Unfortunately, the ferroalloys all move in-sync!
The recent weakness in commodity pricing
will be reflected in FeSi as well.
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One particular commodity can not buck the trend unless there
are highly unusual circumstances, such as explosions,
government duties etc.
The market is weakening! In this phase of the market - cost
becomes less of a factor in determining the price
The major important factor here is …
“What is the market price?”
Supply and demand set this price
The choice of whether to sell or not is made by each individual
producer
As the price comes down, cost will become more important.
But we believe we have a way to go on this!
Factors That Will Determine 2009 FeSi Price
 Over 65% of world production of FESI Production occurs in China
 China and Russia are the dominant importers into North America
Negative Factors
SCENARIO: Global economic slowdown leads to drop in demand for FeSi and
potentially a drop in Chinese export duties.
SCENARIO: Economic slowdown in China slows steel production in China and
unleashes a flood of FeSi into the world market.
Fact
China has dumping duties into EU.
They have to go somewhere and therefore, North America becomes more
important !
Positive
Factors
SCENARIO: Energy costs continue to escalate.
SCENARIO: Chinese authorities increase export duties.
Consider…..
 Chinese domestic FESI market dwarfs rest of
the world
 Chinese consume over 2 million tons FeSi per year
 In comparison, North America (including domestic
production) is approximately 400,000 MT and
any overflow from a slowing China would have
enormous negative consequences on the price
 With over 90% market share in Asia, Chinese have
no where else to go in the event of a slowdown
 Consequently - no new “greenfield sites” or
substantial production increases in the West