molybdenum presentation chengdu- march 2011
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Roskill
Molybdenum market outlookChina International Tungsten, Molybdenum & Vanadium
Forum, March 2011
Khayyam JahangirResearch Manager – Steel AlloysRoskill Information Services Ltd.
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Roskill
The statements in this presentation represent the considered views of RoskillInformation Services Ltd. It includes certain statements that may be deemed"forward-looking statements." All statements in this presentation, other thanstatements of historical facts, that address future market developments, governmentactions and events, are forward-looking statements. Although Roskill InformationServices Ltd. believes the outcomes expressed in such forward-looking statementsare based on reasonable assumptions, such statements are not guarantees of futureperformance and actual results or developments may differ materially from those inforward-looking statements. Factors that could cause actual results to differmaterially from those in forward-looking statements include changes in miningcosts, the LME molybdenum price and general economic, market or businessconditions.
While Roskill Information Services Ltd has made every reasonable effort to ensurethe veracity of the information presented it cannot expressly guarantee the accuracyand reliability of the estimates, forecasts and conclusions contained herein.Accordingly, the statements in the presentation should be used for general guidanceonly.
Disclaimer
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Roskill
• Supply Review of molybdenum production Production by company and mine type Production costs
• Demand Review of molybdenum consumption Consumption by end-use
• Market outlook Forecast molybdenum consumption Forecast molybdenum production Molybdenum price forecast
Outline
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Roskill
Molybdenum production
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Roskill
World: Molybdenum mine production, 1990-2010, (kt)
Source: Roskill, IMOA
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Roskill
World: Molybdenum mine production bycountry, 1990-2010, (kt)
Source: Roskill, IMOA
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Roskill
World: Annual change in molybdenumproduction, 2002-2010, (kt)
Source: Roskill, IMOA
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Roskill
World: Molybdenum production by company,2009
Source: Roskill
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Roskill
Producers were forced to cut output sharplyduring 2008/9, due to the effects of the globalrecession
Source: Roskill
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Roskill
Molybdenum prices fell by 75% betweenAugust 2008 and April 2009
Source: Metal Bulletin
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RoskillSource: Roskill: Molybdenum Market Outlook to 2014
The fall in prices saw producers suspend output,cut inventories and delay expansion/construction
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Roskill
Rising prices have resulted in production fromprimary molybdenum mines increasing
Source: Roskill, IMOA
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Roskill
Since falling from record highs, molybdenumprices are closer to the marginal cost
Source: Roskill, Mine Cost
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Roskill
Molybdenum consumption
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Roskill
As with most other commodities, China is thelargest consumer of molybdenum
Source: Roskill, IMOA
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Roskill
Molybdenum consumption has correlated closelyto the steel market, while outperformingconsumption of nickel in recent years
Source: Roskill, IMOA, INSG, WBMS, WSANote: 1) 1998 = 100
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Roskill
Steel products account for around 70% of worldmolybdenum consumption
Source: Roskill, IMOA
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Roskill
After a poor performance during 2008 and 2009,stainless production is making a recovery
Source: Roskill, ISSF
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Roskill
Molybdenum market outlook
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Roskill
Emerging markets are consuming an everhigher quantity of molybdenum
Source: Roskill, IMOA
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Roskill
Strong economic growth in emerging marketsis driving consumption of a variety ofcommodities
Source: EIU, IMF
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Roskill
Steel production in the BRIC countries isexpected to outpace that in the rest of the world
Source: WSA, Roskill
BRIC 2011-2015 CAGR = 8%ROW 2011-2015 CAGR = 5%
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RoskillSource: ISSF, Roskill
Chinese output of stainless steel to grow fasterthan the rest of the world
China 2011-2015 CAGR = 8-9%ROW 2011-2015 CAGR = 4-5%
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Roskill
How much further will Chinese stainless steelconsumption grow?
Source: Roskill, WBMS, IMF
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• Increased use of stainless and other steels containing molybdenum in process, powerand desalination plants
• Greater use of Advanced High Strength Steel (AHSS) in pipelines and motor vehiclecomponents
• The ability of alloy steels containing molybdenum to function in harsh conditions,leading to increasing use of drill rods and bits to access oil & gas reserves deeperunderground
• Growth in nuclear power generation, and replacement of components in existingpower stations, providing significant markets for high grade molybdenum-containingsteels
• Rising demand for Ni-Mo and Co-Mo catalysts in production of ultra-low sulphurdiesel
The principal drivers for future molybdenumdemand are as follows:
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RoskillSource: Roskill
Announced future mined molybdenum capacity,2011-2015 (t)
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RoskillSource: Roskill
Announced future molybdenum capacity bymine type, 2011-2015
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RoskillSource: Roskill
Potential new capacity is evenly spread acrossthe world
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RoskillSource: OandaNote: 1) Peruvian Nuevo Sol
Currency fluctuations could have a major impacton future capacity
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Roskill
Earnings in local currency have fallen sharply,as the US$ continues to weaken
Price change 2005-2010:US$ = -50%AUS$ = -60%CAD$ = -60%PEN = -58%
Source: Roskill, OandaNote: 1) Peruvian Nuevo Sol
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RoskillSource: Roskill
Various factors, including exchange rates andfinancing, are likely to delay some projectsreaching the market place
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RoskillSource: Roskill
A slow rise in production should see a marketdeficit open up in 2013/14, or maybe earlier
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RoskillSource: Roskill
The market deficit will result in price increases -although unlikely to reach historical highs
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Roskill
Steel Alloys – Minor Metals – Industrial Minerals
New reports for 2010:Silicon (Q2)Iron ore (Q3)
Contact:Khayyam Jahangir
Research Manager – Steel Alloys+44 20 8944 0066