39th Annual Conference Istanbul, Turkey 2013 Overview of the Manganese Industry International Manganese Institute Alberto Saavedra Market Research Manager June, 2013
Introduction Global Production Supply, Demand and Trade Flow Ore Supply, Demand, Trade Flow EMM Trade Flow Conclusion 2
At last year s 38 th II Annual Conference In your opinion, what will be the most important challenge for the Manganese industry in the coming year? 1. Sustainability and Environmental Issues 24% 2. Social Responsibility 6% 3. World oversupply 69% Sources: 38th II s Annual Conference Live Poll 3
Period of challenges World oversupply is not welcome in any market Much less if it comes along with challenges on the demand side due to The bad economic performance in Europe, the slow recovery in USA, sluggish growth in China, among others 4
000 Tonnes Introduction 1 800 000 1 600 000 1 400 000 1 200 000 1 000 000 800 000 600 000 400 000 200 000 Sources: World Association - World Crude Production by Year 2007 2008 2009 2010 2011 2012 World 1 346 577 1 329 178 1 232 338 1 418 656 1 529 236 1 546 836 The World Production in 2012 was 1.2% higher than in 2011 2012 World Crude Production by Region Region 2012 % 2012 Change y-o-y European Union (27) 168 935 11% -5% Other Europe 39 923 3% 2% C.I.S. 110 956 7% -2% North America 121 839 8% 3% South America 46 929 3% -3% Africa 15 803 1% 1% Middle East 24 226 2% 5% China 716 542 46% 3% Asia (excluding 295 878 19% 1% China) Oceania 5 805 0% -20% World 1 546 836 100% 1% China was the most important country in terms of production and its growth contributed to the world s annual increase. 5
Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 000 s Metric Tonnes Introduction 140 000 135 000 World Crude Production by Month January 2011-April 2013 2011 2012 2013 130 000 125 000 120 000 115 000 110 000 105 000 World Production in the first four months of 2013 has increased 2.7% vs. the same period in 2012 and 4.1% vs. 2011. China continues to be the most important player with the 49% of steel production (46% in the first four months of 2012). China also represented an increase of 9% in the first four months of 2013 compared to the same period in 2012 (257,395 thousand tons -- 2013 period). India showed an increase of 4% in the first four months of 2013 vs. the same period in 2012, while most of the European countries showed a decrease in their steel output (a decrease of almost 1% vs. the same period in 2012). Sources: World Association 6
000 Tonnes Introduction 20 000 18 000 16 000 14 000 12 000 10 000 8 000 6 000 4 000 2 000 Over Supply Production and Real Consumption Over Supply Production Decrease Production increase Flat Production Decrease??? Industry must beware once again of oversupply - 2007 2008 2009 2010 2011 2012 Consumption 13 264 13 578 12 769 14 020 18 142 18 114 Production 14 032 14 196 11 720 14 644 17 883 17 473 2013 It appears that after a decrease in production, the market exceed consumption in the following year. In 2012 some Ferroalloy plants closed operations or reduced their output because of the bad economic climate (low demand) and increases in electricity tariffs. Sources: II 7
Production and Real Consumption Si Cons HC Fe Cons MC Fe Cons Si Prod HC Fe Prod MC Fe Prod 20 000 18 000 16 000 14 000 12 000 10 000 8 000 6 000 4 000 2 000-9% 9% 10% 10% 10% 25% 24% 30% 9% 30% 28% 30% 67% 67% 60% 59% 63% 60% 2007 2008 2009 2010 2011 2012 Si is the most produced and consumed ferroalloy As Si is becoming more and more popular on global scale, the proportional requirements for high-grade ore would grow more slowly vs mid-grade in the near term, Global MC Fe production and consumption has shown an increase of 12% over the past six years (2007-2012) in terms of volume but continues to be the least produced and consumed ferroalloy. HC Fe production is practically the same between 2007 & 2012 (4 215 vs. 4 217 thousand metric tons in 2007 and 2012 respectively). Sources: II 8
January 2011 = 1 Introduction, and Ore Production Index January 2011 = 1 This chart compares the changes in production for the three levels of the value chain During the past two years production variations for and Ore have been much higher than the movements in the production market. Sources: II 9
HC Fe Production and Real Consumption Some Important HC Fe Producers 2011 2012 Change YOY Country 000 Tonnes % 000 Tonnes % % India 418 10% 422 10% 1% South Africa 419 10% 384 9% -8% Some production regions in China were affected by production cuts due to increases in costs and slow demand (mainly). India was the second most important producer of HC Fe and showed a 1% of increase in production in 2012 compared to 2011, despite the world output decrease of 4% in 2012 vs. 2011. Most of the world changes in the production and consumption side are explained by China. HC Fe production has been at almost the same production level during the past 6 years. Sources: II 10
HC Fe Top 10 Importers and Deduced Exporters in 2012 Importers Deduced Exporters Number Country Tons % of Imports 1 United States 300 22% 2 Germany 137 10% 3 Japan 122 9% 4 Netherlands 115 8% 5 Taiwan 72 5% 6 Belgium 57 4% 7 Italy 50 4% 8 Russia 45 3% United 9 Kingdom 36 3% 10 Ukraine 35 3% Others 405 29% Total 1 373 100% Number Country Tons % of Imports 1 South Africa 453 33% 2 Norway 122 9% 3 Korea, South 118 9% 4 Australia 107 8% 5 Netherlands 102 7% 6 France 102 7% 7 India 87 6% 8 Ukraine 80 6% 9 Spain 53 4% 10 Russia 50 4% Others 101 7% Total 1 373 100% USA was the most important importer of HC Fe despite the slow economic recovery in 2012. Germany, as the leading steel producer in Europe, which reflects the level of HC Fe imports in 2012. Sources: GTIS South Africa, the third most important HC Fe producer in 2012 was the most important deduced exporter of this Ferroalloy by almost three times. 11
Ref Fe Production and Real Consumption Some important Ref Fe Producers 2011 2012 Change YOY Country 000 Tonnes % 000 Tonnes % % Norway 198 12% 212 13% 7% South Korea 163 10% 140 9% -14% Norway, one of the most important producer of Refined Fe increased its production 7% in 2012 vs. 2011, while South Korea, one of the leading countries in this market, decreased production from 163 thousand metric tons in 2011 to 140 thousand metric tons in 2012. Both, production and consumption were balanced in 2012. The increase of more specialized steels has permitted an increase in the consumption of this market. Sources: III 12
Refined Fe Top 10 Importers and Deduced Exporters in 2012 Importers Number Country Tons % of Imports 1 United States 105 16% 2 Netherlands 83 13% 3 Germany 56 9% 4 Canada 35 5% 5 Italy 32 5% 6 Brazil 30 5% 7 India 28 4% 8 Japan 26 4% 9 Australia 25 4% 10 Turkey 24 4% Others 201 31% Total 644 100% Deduced Exporters Number Country Tons % of Imports 1 Norway 201 31% 2 South Africa 138 21% 3 Korea, South 107 17% 4 Netherlands 58 9% 5 India 21 3% 6 Spain 20 3% 7 Mexico 18 3% 8 China 12 2% 9 France 12 2% 10 Vietnam 8 1% Others 47 7% Total 644 100% As in the case of HC Fe, USA was the most relevant importer or Refined Fe in 2012. Sources: GTIS Four countries held 78% of the deduced export market. Norway s deduced exports were 45% higher than the second most important player. 13
Si Production and Real Consumption India Si Production Figures 2011 2012 Change YOY Country 000 Tonnes % 000 Tonnes % % India 1 434 12% 1 478 13% 3% This chart shows a clear positive trend in both, production and consumption in the Si market in recent years. Si usually requires (depending of the production method) more electricity when produced Will other South African producers also shut down Si, can India sustain the level of exports of Si given their high power cost and high raw material cost? Sources: II India is the second most important producer of Si in the world and is the most important exporter of this Ferroalloy. Indian Ferroalloy industry faced increases in the industrial electricity rates in some production regions, that affected the production, however, it is important to see how the Indian Ferroalloy industry, and specially the Si producers increase the production. Other East European companies faced production adjustments (specially the CIS region), however, after an electricity price adjustments, CIS s production cost will be more competitive. 14
Number Country Tons % of Imports 1 United States 354 13% 2 Turkey 253 9% 3 Japan 248 9% 4 Netherlands 244 9% 5 Russia 206 8% 6 Germany 198 7% 7 Italy 167 6% 8 Taiwan 114 4% 9 South Korea 92 3% 10 Ukraine 81 3% Sources: GTIS Si Top 10 Importers and Deduced Exporters in 2012 Importers Deduced Exporters Others 747 28% Total 2 703 100% USA was the most relevant importer of Si in 2012, while Turkey and Japan became second and third place. Number Country Tons % of Imports 1 India 744 28% 2 Ukraine 495 18% 3 Georgia 191 7% 4 Norway 172 6% 5 Netherlands 154 6% Non-EU 6 Suppression 144 5% 7 South Africa 135 5% 8 Kazakhstan 69 3% 9 France 65 2% 10 Vietnam 57 2% Others 48 18% Total 2 703 100% India ranked no 1 in terms of deduced exports of Si while Ukraine (despite some production cuts in 2012) ranked 2 nd. 15
production has been growing Ore Production and Consumption in Content (in Million metric tonnes) Even if the difference between production and consumption has reduced, at II s 2012 conference, the audience said that oversupply would be the most important challenge for the industry Sources: II 16
Million mt Content Introduction production has been growing 2012 Ore Production in Content (Million Metric Tons) These 7 countries, plus the region of CIS, accounted for 94% of global output in units CIS Gabon Ghana Sources: II % Content of Ore 17
Ore Top 10 Importers and Exporters in 2012 Importers Deduced Exporters Number Country Tons % of Imports 1 China 12.38 57% 2 India 2.37 11% 3 South Korea 1.27 6% 4 Japan 1.15 5% 5 Norway 1.07 5% 6 Ukraine 0.73 3% 7 France 0.56 3% 8 United States 0.51 2% 9 Spain 0.41 2% 10 Russia 0.41 2% Others 0.85 4% Total 21.71 100% Even if China was the most important producer of Ore in 2012, it required more ore in order to feed its alloy needs. With India s increasing Ferroalloy production, it became the second largest importer in the world. Sources: GTIS Number Country Tons % of Imports 1 South Africa 7.12 33% 2 Australia 6.29 29% 3 Gabon 2.76 13% 4 Brazil 1.66 8% 5 Ghana 1.54 7% 6 Malaysia 0.91 4% 7 Myanmar 0.29 1% 8 Namibia 0.18 1% 9 France 0.11 1% 10 Kazakhstan 0.10 0% Others 0.77 4% Total 21.71 100% 75% of the world s deduced exports in 2012 were made by South Africa, Australia and Gabon. 18
Tonnes Introduction China Chinese Port Inventory as months of Reserve Stock # of Months # of Months The Chinese market has seen a continuous decrease in its port inventory since May 2011 the inventory port stocks represent 2.3 months of Consumption. Will the port inventory increase in the second half of 2013? Sources: II 19
EMM Introduction Chinese EMM Monthly Exports (January 2012-April 2013) It appears that the EMM exports increased after the abolition of the export tax, however II understands that illegal exports (to avoid the export tax) are not needed since the abolition, The official figures are higher, but the real export volume of EMM seems to be the same. Sources: GTIS 20
Feroalloys Ore EMM The increase in output during the first four months of 2013 was led by China and the rest of the year looks challenging in terms of production because of the recent decrease in Chinese utilization rates Europe is the most affected region of the world and seems to be continuing with this trend during 2013. Other important regions like America and Asia have seen difficulties on the demand side. Production: China leads the world output, and it is focus on the local market. Imports: USA is the most important Ferroalloy importer (HC, Refined and Si), despite that its production utilization rate is below 80%. Exports: India is becoming the most important country in terms of Si Exports and its role in the industry will be increasingly important because of the export market and Ore requirements. The market has been oversupplied in the last 6 years. Imports: China leads the consumption of Ore and Chinese port stocks have decreased since May 2011 7 countries, plus the region of CIS, accounted for 90% of global output in units. Chinese exports of EMM have increased considerably since the abolition of the export tax. Are the Chinese mines ready to meet the needs of the EMM industry currently? 21
Contact information alberto.saavedra@manganese.org 22