global trade minerals.ppt

8/10/2019 global trade minerals.ppt

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Globalization and the rise of the South Trading minerals and metals

The 2007/8 boom and bust and the 2009

recovery Price risk management

Minerals and the international trading system


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Shares of world GDP at purchasing power parities (per cent)

0

10

20

30

40

50

60

70

Advanced economies

Emerging and

developingeconomies

Source: IMF, World Economic Outlook Database


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Country Kg per capita

China 3.5

India 0.4

Japan 9.8

France 6.9

Republic of Korea 17.0

Russia 4.7

United States 6.9Zimbabwe 0.7

Source: International Copper Study Group, 2007 (copper usage),

UNCTAD Handbook of Statistics 2008, table 8 (population).


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Region 1995 2000 2006Exports:Developed countries 61.6 59.5 52.3

Developing countries 29.1 30.6 39.7

China 1.9 2.3 3.7

Imports: Developed countries 69.8 69.1 62.0Developing countries 26.9 27.2 35.4

China 2.5 4.1 9.9

Source: UNCTAD Handbook of Statistics 2008, table 2.2A


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0

2

4

6

810

12

14

16

18

20

Imports

Exports

Source: UNCTAD Handbook of Statistics 2008, table 3.1


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Mineral products that are standardized andtraded on the basis of reference pricesestablished on commodity exchanges Examples: aluminium, copper, gold, lead, platinum,

silver, tin and zinc

Mineral products that are less standardized andsold directly by producers to consumers, withpricing often based on a benchmark or referenceprice Examples: iron ore, chromium, manganese, phosphates

and potash Less standardized minerals that are commonly

marketed through traders, sometimes priced onthe basis of reference prices Examples: cobalt, tungsten


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0

50

100

150

200

250

300

350

400

450

01/2005

04/2005

07/2005

10/2005

01/2006

04/2006

07/2006

10/2006

01/2007

04/2007

07/2007

10/2007

01/2008

04/2008

07/2008

10/2008

01/2009

04/2009

Aluminium

Copper

Nickel

Lead

Zinc

Tin


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Prices were pushed up by fast growing demand,mainly from China and other Asian countries

Eventually this led to price spikes when stocksreached very low levels

For most commodities, the price boom endedbefore the onset of severe recession, but thefinancial crisis in the autumn of 2008exacerbated the situation in three ways: the fall in economic activity led to lower demand

processors everywhere drew down stocks, and the difficulties in obtaining trade finance led to a freeze

in trade.


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-80 -60 -40 -20 0 20 40 60 80

IMF Commodity Price Index

Fuel

Nonfuel

Crude oil

Base metals

Agricultural raw materials

Food

Current Recession

Average of past five

recessions

Current Recovery

Average of past five

recoveries

Source. IMF, World Economic Outlook, October 2009, figure 1.16


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0

20

40

60

80

100

120

140

World

China

Rest of world

Source: World Steel Association


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Minerals demandis inelastic because this demand is derived from the demand for the final

product and the minerals generally account for only asmall part of the total cost of production

in the short run at least, substitutability between raw

materials and other inputs is relatively restricted Supplyis inelastic because

the availability of good mineral deposits is fixed investment in exploring for and developing mineral

deposits is costly and takes time it takes time to change production rates and once

capacity ceilings are reached, increases in supply requireconsiderable time


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0

50

100

150

200

250

300

350

400

1/31/2002

5/31/2002

9/30/2002

1/31/2003

5/30/2003

9/30/2003

1/30/2004

5/31/2004

9/30/2004

1/31/2005

5/31/2005

9/30/2005

1/31/2006

5/31/2006

9/29/2006

1/31/2007

5/31/2007

9/28/2007

1/31/2008

5/30/2008

LME Inventory

Metal Prices

Source. IMF, World Economic Outlook, October 2008, figure 3.19


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Average applied tariffs for iron and steel (HS72) and articles of iron and steel (HS 73),average of tariff lines, %

Tariffs on mineralcommodities are generallylow, although they tend torise with the degree ofprocessing.

Even a relatively low tariffon processed metalproducts may provideprotection for the domesticindustry, since rawmaterials often account fora major portion of the costof the metal product

(although not of the price ofthe finished good)0

2

4

6

8

10

12

14

16

18

Iron and steel

Articles of iron

and steel


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Restrictions on exports

WTO anti dumping cases concerningiron and steel, 2000-2009

Measures to restrict exports of raw

materials may introduce a wedgebetween domestic andinternational prices and offerunfair advantage to domesticprocessors.

In June 2009, the EU and theUnited States both filed requestsfor consultations with China. InAugust, they were joined byMexico.

According to the requests, Chinaimposes quantitative restrictionson the export of bauxite, coke,

fluorspar, silicon carbide, and zinc,and it also imposes export dutieson bauxite, coke, fluorspar,magnesium, manganese, siliconmetal, yellow phosphorus, andzinc.

0

2

4

6

8

10

12

2000200120022003200420052006200720082009

Source: www.wto.org


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Worldwide mineral export volume grew by 4.1%

annually from 1950 to 2003 (Maxwell 2006).Production grew at only 2.7%, indicating anincreasing degree of specialization acrosscountries during this period; more production

was traded and less was consumeddomestically as an input to the production ofvalue-added goods. In 1965 minerals andmetals (SITC 27+28+67+68) accounted for

12.4% of the value of global exports (Radetzki2008). By 2005 this had shrunk to 6.6%,though the value of annual mineral


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By 2005 this had shrunk to6.6%, though the value of

annual mineral and metalexports rose from $23

billion to $671 billion overthe period, mainly due toincreases in tonnagesshipped.


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The extreme exporters wereIndonesia, Columbia, Ecuador,

Nigeria, Libya (petroleumproducts), and Canada, Chile,Australia, and Netherlands (raw

materials including ores, metalsand natural gas).


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The extreme importers were theUS, UK, France, Italy, Belgium-

Luxembourg, and Japan.Countries abundant in labor andcapital tended to exportmanufactures, and countriesabundant in natural resources

tended to export raw materials.


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As of 2005, Latin America and theFormer Soviet Union were the mainexporters of minerals and metals. TheOECD (Organization for EconomicCooperation and Development)countries, China, and India were themain importers. Chile is the worlds

dominant copper exporter, Australiacoal, Brazil and Australia iron ore, andIndonesia tin


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Referenceshttp://trade.ec.europa.eu/doclib/docs/2008/october/tradoc_140944.pdfAlexeev, Michael, and Robert Conrad (2008), The elusive curse of oil,forthcoming, Review of Economics and Statistics. Available athttp://mypage.iu.edu/~malexeev/alexeev_conrad_restat_feb_08.pdf.

Anderson, James E. (1987), Review of Sources of InternationalComparative Advantage: Theory and Evidence, Cambridge, MA, MIT P.

Journal of Economic Literature 25, 146-47.

Anderson, Kym (2003), Trade liberalization, agriculture, and poverty in

low-income countries, Discussion Paper No. 2003/25, UNU/WIDER.


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BIAC (2006), Freedom for investment, and the challenges for energyand raw materials security, Discussion Paper for the Consultationwith the OECD Liaison Committee, 12 December, 2006, Paris,

France, Available athttp://www.biac.org/statements/high_level/BIAC_Statement_to_LCM_2006.pdf.

Bowen, Harry P., Edward E. Leamer, and Leo Sveikauskas (1987),

Multicountry, multifactor tests of the factor abundance theory,American Economic Review 77 (5), 791-809.

Boyce John R., and J. C. Herbert Emery (2007), What can exhaustibleresource theory can tell us about per capita income growth andlevels in resource abundant countries?, Working Paper, University of

Calgary.

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