platts steel & ferroalloys conference - 2005

Platts Steel & Ferroalloys Conference - 2005

Presented June 14, 15, 2005 by Zigong International Marketing, LLC421 High Street, Fairport Harbor, OH 44077, USA

China Tungsten

Today

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Zigong International Marketing, LLCZigong International Marketing, LLC JV subsidiary of the Zigong Cemented Carbide

Company (ZCCC)

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Zigong International Marketing, LLCZigong International Marketing, LLC JV subsidiary of the Zigong Cemented Carbide

Company (ZCCC) ZCCC is the second largest producer of

carbide products in China and in the top 15 world wide

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Zigong International Marketing, LLCZigong International Marketing, LLC JV subsidiary of the Zigong Cemented Carbide

Company (ZCCC) ZCCC is the second largest producer of

carbide products in China and in the top 15 world wide

Exports more than 3,000 mt of tungsten products annually

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Zigong International Marketing, LLCZigong International Marketing, LLC JV subsidiary of the Zigong Cemented Carbide

Company (ZCCC) ZCCC is the second largest producer of

carbide products in China and in the top 15 world wide

Exports more than 3,000 mt of tungsten products annually

4,000 mt carbide capacity, over 3,000 employees

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Tungsten in ChinaTungsten in China Considered a National Strategic Material

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Tungsten in ChinaTungsten in China Considered a National Strategic Material Identified as a “State Trading Commodity”

by the WTO

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Tungsten in ChinaTungsten in China Considered a National Strategic Material Identified as a “State Trading Commodity”

by the WTO Exports controlled by licenses starting in

2001/APT/AMT/BTO/YTO/W/WC/Cast/scrap/SW/ CaW/W Acid

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Tungsten in ChinaTungsten in China Considered a National Strategic Material Identified as a “State Trading Commodity”

by the WTO Exports controlled by licenses starting in

2001/APT/AMT/BTO/YTO/W/WC/Cast/scrap/SW/ CaW/W Acid

Majority of world tungsten supply and resources are from or in China (75%)

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

License SituationLicense Situation 17,000 mt in 2001

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

License SituationLicense Situation 17,000 mt in 2001 16,200 mt in 2004

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

License SituationLicense Situation 17,000 mt in 2001 16,200 mt in 2004 Ran out of licenses in October 2004

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

License SituationLicense Situation 17,000 mt in 2001 16,200 mt in 2004 Ran out of licenses in October 2004 First half 2005 12,100 mt vs. 11,500 mt in 2004

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

License SituationLicense Situation 17,000 mt in 2001 16,200 mt in 2004 Ran out of licenses in October 2004 First half 2005 12,100 mt vs. 11,500 mt in 2004 Total 2005 to be slightly lower than 2004

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

License SituationLicense Situation 17,000 mt in 2001 16,200 mt in 2004 Ran out of licenses in October 2004 First half 2005 12,100 mt vs. 11,500 mt in 2004 Total 2005 to be slightly lower than 2004 We expect a license shortage later in 2005

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

License SituationLicense Situation 17,000 mt in 2001 16,200 mt in 2004 Ran out of licenses in October 2004 First half 2005 12,100 mt vs. 11,500 mt in 2004 Total 2005 to be slightly lower than 2004 We expect a license shortage later in 2005 Only a few companies have access to these licenses –

Minmetals/Xiamen/Zhou Zhou/ Zigong/Nanchang are the primary exporters

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Export Statistics: Q1 2004 vs. Q1 2005Export Statistics: Q1 2004 vs. Q1 2005

2004 2005 (mt of material)

APT/AMT/ST 1,502 1,301

YTO/BTO/Acid 2,217 1,921

W/WC/Cast 888 1,071

FeW 1,079 881

Totals 5,686 5,234

(Source: Mr. Fang Jinyun, Minmetals Head Office, Beijing) Thanks Fang.

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Top 10 Reasons Top 10 Reasons Tungsten Price Has IncreasedTungsten Price Has Increased

1. Demand (oil/coal/global/China growth)/ Supply Balance

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Top 10 Reasons Top 10 Reasons Tungsten Price Has IncreasedTungsten Price Has Increased

1. Demand (oil/coal/global/China growth)/ Supply Balance

Mines:2. Shut for Environmental Adjustment

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Top 10 Reasons Top 10 Reasons Tungsten Price Has IncreasedTungsten Price Has Increased

1. Demand (oil/coal/global/China growth)/ Supply Balance

Mines:2. Shut for Environmental Adjustment3. Purchased by new owners (Minmetals)

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Top 10 Reasons Top 10 Reasons Tungsten Price Has IncreasedTungsten Price Has Increased

1. Demand (oil/coal/global/China growth)/ Supply Balance

Mines:2. Shut for Environmental Adjustment3. Purchased by new owners (Minmetals)4. Miners realized they really control the market

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Top 10 Reasons Top 10 Reasons Tungsten Price Has IncreasedTungsten Price Has Increased

1. Demand (oil/coal/global/China growth)/ Supply Balance

Mines:2. Shut for Environmental Adjustment3. Purchased by new owners (Minmetals)4. Miners realized they really control the market5. Need to make money after years of suffering

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Top 10 Reasons Top 10 Reasons Tungsten Price Has IncreasedTungsten Price Has Increased

1. Demand (oil/coal/global/China growth)/ Supply Balance

Mines:2. Shut for Environmental Adjustment3. Purchased by new owners (Minmetals)4. Miners realized they really control the market5. Need to make money after years of suffering6. Lack of Water

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Top 10 Reasons Top 10 Reasons Tungsten Price Has IncreasedTungsten Price Has Increased

1. Demand (oil/coal/global/China growth)/ Supply Balance

Mines:2. Shut for Environmental Adjustment3. Purchased by new owners (Minmetals)4. Miners realized they really control the market5. Need to make money after years of suffering6. Lack of Water7. Lack of Electricity

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Top 10 Reasons Top 10 Reasons Tungsten Price Has IncreasedTungsten Price Has Increased

(continued)

8. Few new resources being developed

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Top 10 Reasons Top 10 Reasons Tungsten Price Has IncreasedTungsten Price Has Increased

(continued)

8. Few new resources being developed

9. No one believed the warning signs (lean craze)

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Top 10 Reasons Top 10 Reasons Tungsten Price Has IncreasedTungsten Price Has Increased

(continued)

8. Few new resources being developed

9. No one believed the warning signs (lean craze)

10. Speculators, greed

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Current Supply and Price SituationCurrent Supply and Price Situation Supply chain from China to west is empty

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Current Supply and Price SituationCurrent Supply and Price Situation Supply chain from China to west is empty Consumer inventories are in general, low

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Current Supply and Price SituationCurrent Supply and Price Situation Supply chain from China to west is empty Consumer inventories are in general, low Speculators still active/traders reenter

the market

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Current Supply and Price SituationCurrent Supply and Price Situation Supply chain from China to west is empty Consumer inventories are in general, low Speculators still active/traders reenter

the market Prices for YTO/BTO over $300 per MTU

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Current Supply and Price SituationCurrent Supply and Price Situation Supply chain from China to west is empty Consumer inventories are in general, low Speculators still active/traders reenter

the market Prices for YTO/BTO over $300 per MTU Near by shortage situation should remain

until the fall

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Current Supply and Price SituationCurrent Supply and Price Situation Supply chain from China to west is empty Consumer inventories are in general, low Speculators still active/traders reenter

the market Prices for YTO/BTO over $300 per MTU Near term shortage situation should remain

until the fall No near term reason for prices to decline

significantly

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

The DLA & Chinese National StockpileThe DLA & Chinese National Stockpile The US DLA stockpile of tungsten,

while huge, is of declining quality and of little benefit to most global tungsten concentrate consumers.

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

The DLA & Chinese National StockpileThe DLA & Chinese National Stockpile The US DLA stockpile of tungsten,

while huge, is of declining quality and of little benefit to most global tungsten concentrate consumers.

Releasing more material from the DLA is not a solution. Few can use it/time to market/no price relief.

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

The DLA & Chinese National StockpileThe DLA & Chinese National Stockpile The US DLA stockpile of tungsten,

while huge, is of declining quality and of little benefit to most global tungsten concentrate consumers.

Releasing more material from the DLA is not a solution. Few can use it/time to market/no price relief.

China has a stockpile. Is strategic in nature and not for market interventions.

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

The DLA & Chinese National StockpileThe DLA & Chinese National Stockpile The US DLA stockpile of tungsten,

while huge, is of declining quality and of little benefit to most global tungsten concentrate consumers.

Releasing more material from the DLA is not a solution. Few can use it/time to market/no price relief.

China has a stockpile. Is strategic in nature and not for market interventions.

Stockpiles are really bad for markets and producers.

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Results and ImplicationsResults and Implications The costs of doing business has tripled. A container of Blue

Oxide used to cost $200k, it now cost $600k.

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Results and ImplicationsResults and Implications The costs of doing business has tripled. A container of Blue

Oxide used to cost $200k, it now cost $600k. Carbide companies failed to translate increasing raw material

prices into higher finished goods prices. A major increase incemented carbide prices needs to take place.

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Results and ImplicationsResults and Implications The costs of doing business has tripled. A container of Blue

Oxide used to cost $200k, it now cost $600k. Carbide companies failed to translate increasing raw material

prices into higher finished goods prices. A major increase in cemented carbide prices needs to take place.

Some companies could run out of material. However, where there is a high price, there is a way.

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Results and ImplicationsResults and Implications The costs of doing business has tripled. A container of Blue

Oxide used to cost $200k, it now cost $600k. Carbide companies failed to translate increasing raw material

prices into higher finished goods prices. A major increase in cemented carbide prices needs to take place.

Some companies could run out of material. However, where there is a high price, there is a way.

As the supply and demand remain close to balanced, price volatility will exists.

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Results and ImplicationsResults and Implications The costs of doing business has tripled. A container of Blue

Oxide used to cost $200k, it now cost $600k. Carbide companies failed to translate increasing raw material

prices into higher finished goods prices. A major increase in cemented carbide prices needs to take place.

Some companies could run out of material. However, where there is a high price, there is a way.

As the supply and demand remain close to balanced, price volatility will exists.

What goes up must come down- the bubble will burst.

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Results and ImplicationsResults and Implications The costs of doing business has tripled. A container of Blue

Oxide used to cost $200k, it now cost $600k. Carbide companies failed to translate increasing raw material

prices into higher finished goods prices. A major increase incemented carbide prices needs to take place.

Some companies could run out of material. However, where there is a high price, there is a way.

As the supply and demand remain close to balanced, price volatility will exists.

What goes up must come down- the bubble will burst. License situation will be critical later in the year.

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

Results and ImplicationsResults and Implications The costs of doing business has tripled. A container of Blue

Oxide used to cost $200k, it now cost $600k. Carbide companies failed to translate increasing raw material

prices into higher finished goods prices. A major increase in cemented carbide prices needs to take place.

Some companies could run out of material. However, where there is a high price, there is a way.

As the supply and demand remain close to balanced, price volatility will exists.

What goes up must come down- the bubble will burst. License situation will be critical later in the year. LMB and other publications no longer reliable indicators of price.

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

SolutionsSolutions

1. Ore prices which justify future resource development.

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

SolutionsSolutions

1. Ore prices which justify future resource development.

2. Better Supplier / Consumer relationships.

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

SolutionsSolutions

1. Ore prices which justify future resource development.

2. Better Supplier / Consumer relationships.

3. Pricing structures which allow profitability at all levels.

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

SolutionsSolutions

1. Ore prices which justify future resource development.

2. Better Supplier / Consumer relationships.

3. Pricing structures which allow profitability at all levels.

4. More accurate mechanism for material pricing besides publication reports.

Platts Steel & Ferroalloys Conference - June 2005

Zigong International Marketing, LLC

SolutionsSolutions

1. Ore prices which justify future resource development.

2. Better Supplier / Consumer relationships.

3. Pricing structures which allow profitability at all levels.

4. More accurate mechanism for material pricing besides publication reports.

5. As the cemented carbide industry consolidates into a few huge global companies and a smattering of regional companies, change will have to come in the supply chain.

Platts Steel & Ferroalloys Conference - 2005

Presented June 14, 15, 2005 by Zigong International Marketing, LLC421 High Street, Fairport Harbor, OH 44077, USA

Thank You!