The Role and Impact of the International Metals Study...

The Role and Impact of the International Metals Study Groups

Don SmaleSecretary-General ILZSG, ICSG, INSG

JOGMEC/INSTITUTE OF METALS, MINING & METALLURGY

METALS ECONOMY SEMINARTokyo, 27 November 2007

独立行政法人石油天然ガス･金属鉱物資源機構平成19年度（第8回）非鉄金属関連成果発表会

－資源経済シンポジウム「ベースメタル需給展望と価格高騰のゆくえ」－

資料１

Introduction Outline• The Study Groups• Promoting a Forum for Governments and Industry

to meet• How we can make a difference

– Provision of accurate data on production, usage and trade in copper, lead, zinc and nickel

– Directories comparing regulations– Recycling and sustainability

• International discussion on areas of mutual concern

The Study Groups• Three independent intergovernmental

organisations set up within the UN system:– International Lead and Zinc Study Group

(1959) - 28 member countries– International Nickel Study Group (1990) - 15

member countries– International Copper Study Group (1992) - 21

member countries

Study Groups (cont.)

• Located in Lisbon, Portugal since January 2006, with significant cost savings and synergies

• Share one common Secretary-General• Significant role for industry representation• Invite observer countries, industry and observer

organisations such as UNCTAD, World Bank, UNIDO, Common Fund for Commodities and metals associations

A Forum for Discussion

• Markets: forecasts of supply and demand for metals a year ahead

• Trade: monitoring of international trade in metals• Environmental policy: sharing information on

approaches to regulation• Industry Advisory Panel: metals industry

executives provide input to member governments• Study Group Sessions: up to 200 participants at

ILZSG (the largest)

Data Provision• Monthly Bulletins of Statistics on Copper, Lead & Zinc and

Nickel• Biannual/annual reporting on mine, smelter an refinery

start-ups, closures, expansions and planned development • Reporting on smelting and refining capacity and other plant

details• Publication of data on principal end uses of metals• Studies on trends in downstream metals sectors• Interactive data on lead and zinc accessible through internet• Historical data series available on request• Monthly press releases distributed widely

Sharing Policy Approaches• Discussion about national regulatory measures and

market-based incentives • Reporting by member countries on environmental

approaches in their jurisdictions in relation to:– Metals emissions to air, water and soil during

production– Mine closure and remediation– Risk assessment and risk management of metals

• Discussion on multilateral environmental policy (e.g. UNEP, Basel Convention)

Sustainability• Forum to promote sustainable use of metals• Work to develop stewardship of metals

through the life cycle from mine to metal to recycling for re-use, such as Green Lead(www.greenlead.com)

• Work to determine the life cycle of products and the efficiency of recycling activity– End-of-Life Recycling Efficiency Rate (RER)

Recycling Efficiency• Study Groups formed a Recycling Project Team

with the aluminium, copper, lead, nickel, zinc and iron and steel industry associations

• Common methodology on assessing recycling efficiency agreed

• Successful seminar on recycling efficiency held in Lisbon in October 2007 bringing together industry and Study Groups’ member governments– Set of recommendations were reached– Recycling Project Team will take its work forward in

early 2008

Partnership with CFC• The three International Metals Study Groups are

recognised as International Commodity Bodies by the Common Fund for Commodities

• They have a key role in: – Bringing together international commodity

associations and developing country metals industry to apply for CFC funding to promote the development of mining and metals industries in the developing world

– Supervising CFC projects once they are underway– Ensuring that the benefits of metals projects are

shared with other developing countries once they are completed

Attending the Study Group Meetings

• All industry representatives from member countries are welcome to participate in Study Group Sessions

• Industry or government delegates from non-member countries can request participation in Study Group Meetings

• The Study Groups are unique forums where mining ministries can meet their global counterparts and the international metals industry

• Japan is a highly valued member of all 3 Study Groups• We hope that the successful outcome of this seminar will

encourage you to come and join us in Lisbon

International Copper Study Group International Copper Study Group IntroductionIntroduction

Formally established in 1992, following a series of UNCTAD expert meetings on copper.

Headquarters in Lisbon, Portugal.

The Group is a United Nations affiliated intergovernmental organization of 20 member governments plus the European Commission, representing copper producing and using countries.

ICSG ICSG -- MEMBERSHIPMEMBERSHIP

Membership open to any country involved in copper production, usage, or international trade.

Current members are: Belgium, Chile, China, Finland, France, Germany, Greece, India, Italy, Japan, Luxembourg, Mexico, Netherlands, Peru, Poland, Portugal, Russian Federation, Serbia, Spain, United States and the European Commission.

ICSG ICSG -- MANDATEMANDATE

The mandate of the Study Group provides for enhanced co-operation on issues related to copper and a forum in which governmental consultations on copper can be held.

The Study Group provides a forum for all market participants, both producers and consumers, to examine their common problems and carry out open dialogue and free exchange of information.

Greater market transparency is an important goal of the Group through more complete, reliable and up-to-date statistics, as well as through special research and studies.

ICSG ICSG -- MAIN OBJECTIVES & MAIN OBJECTIVES & FUNCTIONSFUNCTIONS

To conduct consultations and exchanges of information on the international copper economy.

To improve statistics on copper.To increase market transparency.To undertake studies on issues of the Group.To consider special problems or difficulties that exist or may arise,

in the international copper economy.

ICSG endeavours to provide its membership with the most accurate, comprehensive and timely information on capacities, production, usage, trade, stocks, prices, technologies, research development, and in other areas that may influence the supply and demand for copper.

ICSG MAIN PUBLICATIONS/OUTPUTSICSG MAIN PUBLICATIONS/OUTPUTS

Copper Bulletin (monthly): includes annual and monthly statistics, by country, on copper mine, smelter, refined and semis production, copper usage and trade, as well as stocks and exchange prices, providing a global view of supply and demand.

Statistical Yearbook : As above, covering the past 10 years.

Monthly Press Release on the state of the copper market (to be included in the email distribution list please contact mail@icsg.org)

World Copper Market Forecast: Prepared twice a year for the following two years.

Directory of Copper Mines & Plants (semi-annual) : the Directory highlights current capacity and provides a five year outlook of forecasted capacity for over 700 existing and planned copper mines, smelters and refineries on a country by country basis, identified as Operating & Developing or Exploration & Feasibility stages.

Directory of Copper & Copper Alloy Fabricators – First Use (annual): provides a global overview of companies and plants involved in the first use of copper. Covers wire rod plants, ingot makers (for castings), master alloy plants, brass mills, and electrodeposited copper foil mills (over 1200 existing, developing and planned plants.

• “The Indian Copper Market – Focus on recycling” (2003)

• “The China Factor in Global Copper Usage and its Consequences” (June 2007)

• Analysis of the impact of high copper prices (substitution) in the different Chinese industry sectors - complement to the study above (June 2007)

• “The Russian Copper Market” (July 2007)

• “The World Copper Factbook” (November 2007)

ICSG MAJOR NEW WORK ITEMSICSG MAJOR NEW WORK ITEMS

• Scrap Market Project• Improvement of ICSG Historical

Statistics Databases• Expanded coverage of environmental

regulations related to copper• Copper price volatility

Copper Stocks vs. PriceCopper Stocks vs. Price

1970 1975 1980 1985 1990 1995 2000 2005

ric to

$1,500

$2,250

$3,000

$3,750

$4,500

$5,250

$6,000

$6,750

$7,500

End of Year Copper Stocks Average LME Copper Price

2007 is Jan-Aug

World Refined Copper UsageWorld Refined Copper Usage19001900--20062006

(thousand metric tonnes)(thousand metric tonnes)

12,000

15,000

18,000

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

Refined Copper Usage by RegionRefined Copper Usage by Region(thousand metric tonnes)(thousand metric tonnes)

1960 1985 2006

Africa Asia Europe Middle East North America Oceania South America

WORLD COPPER REFINED USAGE

1,0001,5002,0002,5003,0003,5004,0004,5005,0005,5006,0006,5007,0007,5008,0008,5009,0009,500

10,000

2002 2003 2004 2005 2006 2007 2008 2009

AfricaN.AmericaLatin AmericaAsiaEU-27Europe OthersOceania

Intensity of Refined Copper UseIntensity of Refined Copper Use11

Africa

Middle East

North America

OceaniaRussian Fed.

United States

Latin America (excluding Mexico)

0 10,000 20,000 30,000 40,000 50,000

GDP per Capita (2006 US$/person)

ita (k

1/ Note: Refined copper is consumed by semis fabricators or the “first users” of refined copper, including ingot makers, master alloy plants, wire rod plants, brass mills, alloy wire mills, foundries and foil mills. As a result, per capita consumption of refined copper refers to the amount of copper consumed by industry divided by the total domestic population and does not represent consumption of copper in finished products per person.

World Copper Usage and ProductionWorld Copper Usage and Production19601960--20062006

12,000

15,000

18,000

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Usage Mine Production Refinery Production

Copper Mine Production by RegionCopper Mine Production by Region(thousand metric tonnes)(thousand metric tonnes)

1960 1985 2006

Trends in Mining Capacity, 1980Trends in Mining Capacity, 1980--20062006(thousand metric tonnes)(thousand metric tonnes)

12,000

15,000

18,000

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

Concentrates SX-EW Total

WORLD MINE PRODUCTION

1,0001,5002,0002,5003,0003,5004,0004,5005,0005,5006,0006,5007,0007,5008,000

2002 2003 2004 2005 2006 2007 2008 2009

u AfricaN.AmericaLatin AmericaAsiaEU-27Europe OthersOceania

Leading Exporters and Importers ofLeading Exporters and Importers ofCopper Ores and Concentrates, 2006Copper Ores and Concentrates, 2006

Importers

ChinaIndia

Korean Rep.

Germany

Finland

Brazil

Canada

Philippines

Others

Exporters

IndonesiaPeru

Australia

Canada

Argentina

Papua New Guinea

Mongolia UnitedStates Brazil

Others

Refined Copper Production by RegionRefined Copper Production by Region(thousand metric tonnes)(thousand metric tonnes)

1960 1985 2006

Trends in Refining Capacity, 1980Trends in Refining Capacity, 1980--20062006(thousand metric tonnes)(thousand metric tonnes)

12,000

15,000

18,000

21,000

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

Electrolytic Electrowinning Fire Refining Total

WORLD COPPER REFINED PRODUCTION

1,0001,5002,0002,5003,0003,5004,0004,5005,0005,5006,0006,5007,0007,5008,0008,5009,000

2002 2003 2004 2005 2006 2007 2008 2009

AfricaN.AmericaLatin AmericaAsiaEU-27Europe OthersOceania

Leading Exporters and Importers of Leading Exporters and Importers of Refined Copper, 2006Refined Copper, 2006

Importers

United States

Germany

ChinaItalyTaiwanFrance

Thailand

Turkey

Brazil Others

KoreanRep.

Exporters

ZambiaPeruKazakhstanJapan

Others

AustraliaPoland

CanadaRussian Fed.

Global Copper Recyclables Use Global Copper Recyclables Use 20002000--20052005

2000 2001 2002 2003 2004 2005Americas 1,563 1,352 1,344 1,242 1,313 1,373Asia 2,867 2,765 2,828 3,154 3,518 3,676Middle East 143 172 208 215 190 184Europe 3,189 2,752 2,652 2,452 2,582 2,459Africa & Oceania 121 101 91 73 70 75World Total 7,744 6,975 6,921 6,926 7,488 7,591

Total scrap use year-on-year -10% -1% 0% 8% 1%Secondary refined production 2,090 1,846 1,862 1,759 2,037 2,130Cu content of Direct Melt 5,654 5,129 5,059 5,167 5,451 5,461Refined Usage 15,148 14,927 15,192 15,668 16,786 16,664Total copper usage 20,802 20,056 20,251 20,836 22,237 22,125Recycling Input Rate (RIR) 37.2% 34.8% 34.2% 33.2% 33.7% 34.3%

Recycling Input Rate by Region 2000 2001 2002 2003 2004 2005Asia 34.7% 33.0% 31.0% 31.9% 32.9% 33.5%Europe 48.8% 43.8% 43.9% 40.9% 41.2% 41.4%North America 29.3% 29.0% 29.8% 28.4% 27.7% 29.5%Rest of the World 22.1% 18.2% 21.8% 19.6% 21.1% 21.8%Total World 37.2% 34.8% 34.2% 33.2% 33.7% 34.3%

Copper Semis and Casting Production Copper Semis and Casting Production 19801980--20052005

12,000

15,000

18,000

21,000

24,000

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

Copper Semis Copper Alloy Semis Other Semis Foundry Castings

Copper Semis and Casting Production Copper Semis and Casting Production By RegionBy Region

10,000

1980 2005

Africa Asia Europe North America Oceania South America

Leading Exporters and Importers ofLeading Exporters and Importers ofSemiSemi--Fabricated Copper Products, 2006Fabricated Copper Products, 2006

Exporters

Others

Canada

TaiwanJapanKorean Rep.

United States

Hong Kong

Russian Fed.

France

Germany

Belgium

Importers

Austria

Switzerland

Canada

United Kingdom

Mexico

FranceItalyGermany

Hong Kong

United States

End Use Patterns in End Use Patterns in Selected Countries and Regions, 2001Selected Countries and Regions, 2001

Sources: Beijing General Research Institute of Mining and Metallurgy, TIFAC, Copper Development Association, European Copper Institute, International Wrought Copper Council, Ministry of Economy, Trade and Industry (Japan), and Sindicel – ABC (Brazil).

0%10%20%30%40%50%60%70%80%90%

WesternEurope

USA Japan China India Brazil

Building & Construction Electrical & Electronic products Industrial Machinery & Equipment

Transportation Equipment Consumer & General Products

2007 in Review2007 in Review

World production below expectations due to supply disruptions

Recovering from minor growth in 2006, mine production is expected to increase from 15.0 Mt in 2006 to 15.8 MT in 2007

Allowing for supply disruptions adjustments refined production is expected to increase from 17.4 to 18.1 MT

• World mine and refined production growth revised downwards from 6.3% at May 07 meeting to 5.1% and from 8.4% to 4.4%, respectively

• Labor disputes, strikes, unusual weather conditions, accidents, lower then anticipated ore grades, delays in start-up of new projects continued to affect mine and refined production in several countries (detailed information in next slide).

• During 1H07, mine and refinery capacity utilization rates were below 2006 rates with mine capacity utilization at the lowest for more than 10 years.

• Expected strong growth in India and China refined production and an expected recovery in Chile and Mexico from weak 2006 levels are supporting world growth in 2007

Main supply disruptions in 2007

• Chile: Andina rock slide in May, Codelco operations affected by sub-contractors strike (Jun-Jul), unusual cold weather affected mining operations, Collahuasi strike in July.

• Mexico: Grupo Mexico strike at Cananea & San Martin mines• Peru: labor disputes in Southern Copper Cuajone and Toquepala mines

and Ilo smelter/refinery.• Canada: one month strike at CCR refinery• Indonesia: lower production at Grazberg and Batu Hijau• Zambia: strikes at Mopani, Konkola and Kansanshi mines• PNG: low production at Ok Tedi due to high levels of fluorine in the ore• Congo: Heavy rain affected production and project development• Australia: accident at the Olympic Dam smelter

2007 in Review2007 in Review

World usage growth driven by Chinese growth:• World growth in 1H07 at 8.7% but world growth excluding China at 1%• Chinese apparent usage up by 37% in Jan-Aug 07 supported by a 208% increase in

net imports. Growth was also supported by strong performance of copper using sectors

• United States was down by 2.7% in 1H07 affected by weak auto and construction sectors and substitution.

• Japan usage down by 1.9% in 1H07 affected by substitution, weak auto and construction sectors

• EU usage seems to readjust after a 11% growth in 2006 (apparent usage was down by 4% in 1H07)

• India and Russia usages are robust reflecting development of the copper sector in these countries.

• World refined usage growth revised upwards from 4.7% at May 07 meeting to 5.3% mainly due to strong growth in Chinese apparent usage in 1H07.

Recovering from a growth of 2.2% in 2006, copper refined usage is expected to increase from 17.1 Mt in 2006 to 18.0 MT in 2007

ICSG Copper Mines and Plants ICSG Copper Mines and Plants Capacity ProjectionsCapacity Projections

WORLD COPPER PRODUCTION CAPACITY EVOLUTION

000’s metric tonnes Cu 2006 2007 2008 2009 2010 2011% change 2006-2011

SX-EW 3,320 3,673 4,131 4,587 4,734 4,954 49.2%Concentrates 13,639 13,986 14,467 14,970 15,629 16,234 19.0%Mines Total 16,958 17,659 18,598 19,557 20,363 21,188 24.9%Smelters 16,514 17,161 17,595 18,250 18,662 18,798 13.8%Electrolytic Refineries 16,579 17,502 18,128 18,523 18,882 18,921 14.1%Refineries Total 20,641 21,859 22,949 23,794 24,242 24,425 18.3%

Year on Year Changes (tonnage) 2006/07 2007/08 2008/09 2009/10 2010/11 Accumulated 2006-2011

SX-EW 354 458 456 147 220 1,635Concentrates 348 481 503 659 605 2,595Mines Total 701 939 959 806 825 4,230Smelters 647 434 655 412 136 2,284Electrolytic Refineries 923 626 395 359 39 2,342Refineries Total 1,218 1,090 845 448 183 3,784

Data Source: ICSG Mines and Plants Directory – March 2007.

Major Copper Development and Major Copper Development and Expansion ProjectsExpansion Projects

MiningAustralia Prominent Hill Oxiana ResourcesChile Codelco Norte CodelcoChile Gaby Sur CodelcoChile Los Bronces Anglo AmericanCongo Kamoto Katanga MiningU.S. Safford Freeport McMoranZambia Lumwana Equinox Mineralis

Smelters and RefineriesChile Codelco Norte CodelcoChile Gaby Sur CodelcoChina Guixi Jiangxi CopperChina Shandong Fengxiang Xiangguang CopperCongo Luilu Katanga MiningZambia Nkana Konkola Copper Mines

ICSG 2007ICSG 2007--2008 Forecasts2008 Forecasts(published 1 October 2007)(published 1 October 2007)

1/ Based on a formula for the difference between the projected copper availability in concentrates and the projected use in primary refined production;

2/ Based on capacity utilization of mines and refineries.

REGIONS

('000T) 2005 2006 2007 2008 2005 2006 2007 2008 2005 2006 2007 2008

Africa 670 740 845 1,133 509 529 618 801 229 236 252 304N.America 2,182 2,166 2,224 2,433 2,186 2,096 2,152 2,338 2,984 2,761 2,696 2,808Latin America 6,650 6,735 7,310 7,598 3,559 3,565 3,778 4,141 530 548 556 583Asean-10 1,147 919 894 954 514 504 542 585 761 794 821 851Asia ex Asean/CIS 1,127 1,300 1,344 1,418 5,251 5,979 6,533 6,978 7,171 7,204 8,169 8,521Asia-CIS 510 544 569 622 534 543 548 565 60 116 121 124EU-27 821 809 758 792 2,446 2,505 2,474 2,629 3,835 4,223 4,112 4,180Europe Others 707 748 766 798 1,120 1,204 1,232 1,217 1,006 1,098 1,141 1,185Oceania 1,109 1,053 1,074 1,243 469 429 510 593 155 143 140 145TOTAL 14,923 15,015 15,786 16,991 16,588 17,353 18,387 19,846 16,731 17,123 18,009 18,701

Adjustment for Primary Feed Shortage 1/ 0 -472Allowance for Disruptions 2/ -268 -423

World 14,923 15,015 15,786 16,991 16,588 17,353 18,119 18,951 16,731 17,123 18,009 18,701% change 0.6% 5.1% 7.6% 4.6% 4.4% 4.6% 2.3% 5.2% 3.8%

Refined Production - Usage Balance -143 230 111 249

FORECAST TO 2008MINE PRODUCTION REFINED PRODUCTION COPPER USAGE

2008 Indicative Forecast2008 Indicative ForecastMain results:

– Including a 16% jump in SX-EW output, mine production expected to grow by 7.6% on higher output in virtually all majorproducing regions. – Refined production is forecast to increase by around 4% due to solid gains in primary and electrowon production. Refined production growth rates are expected to be highest in Africa, Oceania and Latin America. – Despite flat usage in Japan and minimal growth in the EU, refined usage is expected to increase by around 3.8% on increased demand in China, India, the Middle East and Mexico. – As production growth is expected to outstrip the increase in usage, the market surplus is expected to more than double to nearly 250 thousand metric tonnes.

2009 Indicative Forecast2009 Indicative ForecastMain results:

– Mine production expected to grow by 7-8% with a significant growth of 14% in SX-EW output. Growth to be supported by the start-up of new projects in Africa, America and Oceania.– Refined production foreseen to increase by around 5-6% mainly driven by growth in electrowining production. Growth driven by new SX-EW projects in Africa and America and expansions of capacity at electrolytic refineries in Brazil, China, Bulgaria, India and Sweden among others. Electrolytic refined production to continue being constrained however by a shortage of concentrates.– Refined usage is expected to increase by around 4.5%. China to remain robust, significant growth to continue in the Middle East region, usage in the EU and United States expected to increase but usage in Japan should remain depressed. – Growth in copper usage not sufficient to absorb the expected increase in refined production, leading to bigger market surplus.

World Copper ForecastWorld Copper Forecast

2006 2007 2008 2009

('000T) p/

World Mine Production 15,015 15,786 16,991

Total Refined Production 17,353 18,387 19,846

World Usage 17,123 18,009 18,701

Adjustment for Primary Feed Shortage 0 -472

Allowance for Disruptions -268 -423

Refined Surplus/Deficit 231 111 249

Note: 2007-2008 ICSG Forecast published 1 October 2007.

WORLD COPPER BALANCE

02,5005,0007,500

10,00012,50015,00017,50020,00022,500

2000 2001 2002 2003 2004 2005 2006 2007 2008

'000MT

-1,000-800-600-400-2000200400600800

'000MT

Balance (after ajustments) World Refined Production (adjusted)World Usage

CONCLUSIONSCONCLUSIONS

• World copper mine production is expected to increase by 5% in 2007 to nearly 15.8 million tonnes and is forecast to jump another 8% in 2008.

• Refined copper production is expected to increase by 4.4% and 4.6% in 2007 and 2008, respectively.

• Although world copper usage is also expected to grow by 5% this year, the rate of growth is forecast to slow to 4% in 2008.

• As a result, the refined surplus is expected to drop by almost 120,000 tonnes in 2007 but is forecast to rebound by nearly 140,000 tonnes in 2008 to approach 250,000 tonnes.

CONCLUSIONSCONCLUSIONS

• High copper prices by historical levels and high price volatility

• Low stock levels• Supply constraints caused by strikes,

operational failures, falling ore grades, delays in expansions and start-ups

• Strong Chinese demand in 2007 as the main driver of world usage

• Increasing use of copper scrap• Continued substitution concerns

International NickelStudy Group Members

Australia Greece Norway Germany(Assoc. Member)

Cuba Portugal Finland

EC Italy Russian Federation

Japan Sweden Netherlands

France Brazil United Kingdom

Why an IntergovernmentalGroup?

In 1960s to 1980s the quality of Nickel statistics had declinedA 1970s attempt to form a producer association did not succeedPrivate organizations helped to fill the gaps, but the leverage was limitedBecause of its recognized neutrality, the Group can get easier access to certain information that would otherwise be kept confidential.

INSG Objectives (1/2)

to collect and publish improved statistics monthly on nickel markets (including production, consumption, trade, stocks, prices and other statistics such as recycling)

to publish other information on nickel, such as data on industry facilities and environmental regulations

INSG Objectives (2 /2)

to undertake and publish economic analysis of nickel markets and related topics

to provide a forum for discussions on nickel issues of interest to nickel producing and consuming countries and their industries, including environmental issues

INSG Statistics

Extensive range of statistics produced monthlyCoverage includes mine production, primary nickel, nickel-bearing scrapProduction, usage (consumption), stocks, tradeUsage (consumption) data is particularly well regardedthe data facilitates transparency and efficient operation of global nickel markets

INSG publications

World Nickel Statistics BulletinEleven monthly issues focused on the latest available monthly data.Special issue published once a year in November; annual data for the latest available 11-year period.

World Directory of Nickel Production FacilitiesNickel Mines, Nickel Smelters and Refineries, New Nickel Industry Developments (Committed Developments, Likely Project Developments, Potential Project Developments) and Contact details.Published each year in September.

Economic and Environmental issues

Legislative: advising governments on impact of existing and new legislation on the nickel marketNickel Recycling

environmental impact: waste, primary resources economic (market) impact: supply of nickel units from scrap

Economic: studies on nickel supply and demand; country studies; trade issues; potential Common Fund for Commodities projects to promote nickel

Nickel Recycling

Compiling time series on nickel recycling to assessenvironmental impact: developed a coherent set

of recycling indicators in conjunction with industry associations and other Study Groups through Recycling Project Teammarket impact: provide information on future

supply of Ni units in scrap

Nickel Recycling

Recently more attention at INSG on secondary nickel:Bulletin: trade statistics on stainless steel scrapMeetings: overview of primary market is

followed by presentation on (stainless) scrap Historical time series for recycling ratesBut: no hard data on Ni in scrap (except trade

Nickel Industry Environmental and Regulatory Issues

Nickel Risk AssessmentEU Risk Assessment – finalized 1st half 2007OECD Risk Assessment – will start early 2007; finalized 2nd

half 2007REACH EU Program – registration obligations for Nickel imported/produced in EU“Read-across” of nickel compounds in EUGlobally Harmonized System – new classification of chemicals – impact on nickel.

Nickel Risk Assessment

Nickel Risk AssessmentHuman Health finalised in 2007Environment assessment to be finalised in 2008

Risk reduction strategies for nickel now being developedRegulators have accepted important scientific concepts of bioavailability of nickel in water, soils and sediments

REACH – The new EU Chemicals Policy

REACH (Registration, Evaluation, Authorisation Restriction of Chemicals) entered into force in the European Union on 1 June 2007All importers and manufacturers of nickel compounds will have to register with the new EU Chemicals Agency

Nickel ore is exempt from registrationREACH will be fully operational from June 2008Nickel industry launched a consortium in January 2007 to prepare for the 3 year REACH registration processREACH Implementation Projects (RIPs) to guide industry, the European Commission and Chemicals Agency on their responsibilities are being prepared and should be finalised by end 2007

“Read-across” of Nickel Compounds

“Read-across” is a Danish suggestion to group classify 150 compounds for authorisation within REACHAll nickel compounds would be classified as Category 1 (proven) carcinogens without the need for corroborating data Full implementation of read-across could have a significant impact on the nickel industry well beyond the nickel chemicals specifically targetedNickel metal could face substantial damage to its image and reputation. In turn this could damage its usage as an alloy in stainless steel“Read-across” is being raised by members of the World Trade Organisation as a possible Technical Barrier to Trade

Globally Harmonized System

Globally Harmonized System – new classification of chemicals sponsored within UN frameworkFocuses on hazard classification and labelingNickel is the first metal to be reviewed under GHSIndustry is keen to ensure latest science is used globally and has worries about the effect of Denmark’s “Read-across”proposalsAn independent consultant has been asked to look at nickel metal and compound hazard data sets

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

World Nickel Ore Production (1/2)

in 1000 tonnes

World Nickel Ore Production (2/2)

Africa5.4%

America33.6%

Asia19.0%

Europe23.4%

Oceania18.5%

2006(1,469.6)

Africa6.6%

America31.0%

Asia14.3%

Europe25.5%

Oceania22.6%

1996(1,051.2)

in 1000 tonnes

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

World Primary Nickel Production (1/3)

in 1000 tonnes

Africa4.1%

America23.8% Asia

Europe37.6%

Oceania12.2%

2006(1,362.0)

Africa5.2%

America25.3% Asia

Europe38.1%

Oceania12.2%

1996(956.2)

in 1000 tonnes

% change

1569.2

% change

1470.1

1362.0

% change

1296.7

Oceania

Europe

America

Africa

Areain 1000 tonnes

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

World Primary Nickel Usage (1/3)

in 1000 tonnes

Africa3.0%

America12.9%

Asia48.7%

Europe35.2%

Oceania0.2%

2006(1,399.1)

Africa2.6%

America19.7%

Asia38.5%

Europe39.0%

Oceania0.2%

1996(942.5)

in 1000 tonnes

% change

1466.5

% change

1335.3

1399.1

% change

1246.9

Oceania

Europe

America

Africa

Areain 1000 tonnes

33 58 9124

-41 -59

14 1 32

-58 -40

-2 0 0

1 0 0 0

1 2 0 0

1 4 0 0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

B A LA NCE P RIM A RY NICK E L P RO DUCTIO N P RIM A RY NICK E L US A G E

World Primary Nickel Balance (1/2)

in 1000 tonnes

World Primary Nickel Balance (2/2)

% change

1466.5

1569.2

% change

1335.3

1470.1

1399.1

1362.0

% change

1246.9

1296.7

Balance

Production

Areain 1000 tonnes

LME prices and stocks

J FMA M J JA SO ND J FMA M J J A S OND J FMA M J J A SOND J FMA M J JA SOND J FMA M J J A SOND J F MA M J JA SOND J FMA M J J A SON D J FMA M J JA S

2000 2001 2002 2003 2004 2005 2006 2007

Prices (Cash, US$/tonne)Stocks (tonnes)

Principal End Uses of Primary Nickel in 2006

NF Products (incl. Castings)

Stainless Steel66%

Other alloy steels

Plating7%

Other uses6%

Steel castings (alloyed)

World Stainless Crude Steel Production

10,000

15,000

20,000

25,000

30,000

2001 2002 2003 2004 2005 2006 2007(f1) 2007(f2)

Asia W.Europe/Africa Americas Central+Eastern Europe

19,167(-1.0%)

20,663(+7.8%)

22,861(+10.6%)

24,583(+7.5%)

24,320(-1.0%)

28,358(+16.7%)

29,800(+5.1%)

28,700(+1.1%)

Source: ISSF

Stainless Steel by Categories

Source: ISSF

2001 2002 2003 2004 2005 2006 qu1 07 qu2 07

CrNi CrMn Cr

EuroAfrica Americas Asia Global

Cr CrMn CrNi

World Stainless Crude Steel Production - 2006 by grades

Source: ISSF

Stainless Steel Sector

High volatility in primary nickel usage is due to the

Stainless Steel sector:

2005: 63.7% ≈ 790 000t

2006: 66.3% ≈ 925 000t

2007: down

+ 135 000t, +17%

Stainless Steel Outlook in 2008

Real fabrication increases in 2008 by about 6.5%, slightly lower than in 2007Stocks declining by 0.75 million tons in 2007 Expected re-stocking in 2008 of 0.7 to 1 million tonsCrude steel production in 2007: 28.7 million tonsCrude steel production in 2008 estimated at30.6 to 31.6 million tons, around +10% growth compared with 2007

Source: ISSF

New World Primary Refined Nickel Capacity in 2006

World nickel refined capacity in 2006 increased by over 77 000 tpa, or over 5%, compared with 2005’s figure, according to INSG dataMost were brown-field expansionsWorld total refined capacity was over 1.53 Mtpa in 2006World capacity utilization was over 88%The figures above exclude nickel pig iron production capacity in China, which could be considerable

Nickel projects

One can see from the following listings that there are no shortage of nickel projectsDifficulty to find “rich deposits”, most have a low to medium nickel content and limited quantity To obtain sufficient financing is a problemActual timing to a possible realization of a deposit is virtually impossible to accurately forecast

Nickel projects2007 Directory

147 000

83 400

Intermediate Products

300 000

189 000

496 600

Refined products

184 800

111 900

157 370

Ore & Concentrate

Potential Project Developments

Likely Project Developments

Committed Developments

Capacity (Ni content, t/y)

Refined Nickel Capacity by Country

2006: ≈ 1.5Mt New committed developments: ≈ 0.5Mt

AUSTRALIA15%

CANADA3%

NEW CALEDONIA

RUSSIAN FED.4%

SOUTH AFRICA2%

BRAZIL31%

MADAGASCAR12%

JAPAN7%

CHINA P.R.6%

FYROM2%

KOREA REP.6%

BRAZIL2%

UKRAINE1%

SOUTH AFRICA2%

SERBIA & MONTENEGRO

VENEZUELA1%

AUSTRALIA9%ZIMBABWE

JAPAN11%

GREECE2%

CUBA3%

CHINA P.R.9%CANADA

COLOMBIA4%

DOM. REP.2%

NORWAY6%

NEW CALEDONIA

INDONESIA2%

RUSSIAN FED.22%

AUSTRIA0%

FYROM1%

FRANCE1%

FINLAND4%

New producing

country

New producing

country

New committed developments –main projects

Australia: Yabulu Refinery (BHP Billiton)Brazil: Níquel do Vermelho, Onça Puma (CVRD Inco), Barro Alto (Anglo American)China P.R.: JinchuanJapan: Niihama (Sumitomo) Korea, Rep. of: Posco (Posco / SMSP)Madagascar: Ambatovy (Sherritt / Sumitomo)New Caledonia (France): Goro (Goro Nickel)

Nickel Market - Key Issues (1 / 2)

The nickel market has become very volatilePrimary nickel usage down by 5% in 2007, but could increase by 10% in 2008Primary nickel projects are starting to come into production and up to 0.5Mt have been identified as committedPrimary nickel production is estimated to be steadily increase, by 8% in 2007 and a further 7% in 2008

Nickel Market - Key Issues (2 / 2)

The nickel market is experiencing a stock build upSufficient primary nickel units should be available in, at least, the short to medium termChina will remain the most important marketChina is increasing the production of "Ferro-Nickel/Pig Iron”, targeting the stainless steel producers, from low grade nickel ores, from The Philippines, Indonesia and New CaledoniaDevelopments in nickel pig iron might become a surprise factor in the future.

The Study Groups:

play important roles in the global industry helping governments to help their industries

need the continued support of governments and industry to perform their roles

Conclusions

Next Meetings in Lisbon, Portugal

INSG 21-22 April 2008

ILZSG 23 April 2008

ICSG 24-25 April 2008

Subsequent meetings during week beginningMonday 6 October 2008

To learn more about the International Metals Study Groups:

www.icsg.orgwww.ilzsg.orgwww.insg.org

The Role and Impact of the International Metals Study Groups

Don SmaleSecretary-General ILZSG, ICSG, INSG

JOGMEC/INSTITUTE OF METALS, MINING & METALLURGY

METALS ECONOMY SEMINARTokyo, 27 November 2007

The Role and Impact of the International Metals Study...

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