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15th Global iron ore and steel forecast March 21st 2012 Perth WA

China, India and the world market balance


Magnus Ericsson

Global iron ore production

Source: Raw Materials Data Iron ore, 2011.


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Global iron ore grades

Chinese ore grades Chi d

Source: R S Raw M t i l Data Iron ore, 2011. Materials D t I 2011


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Chinese iron ore imports

Source: Raw Materials Data Iron ore, 2011.


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Global steel growth 2030


Country/Region China India Japan SouthKorea EmergingPacificRim NorthAmerica SouthAmerica Europe C.I.S MENAincl.Turkey MENA i l T k RoW(Africa&Oceania) TotalWorld 2000 127236 26924 26 924 106444 43107 28169 135353 39110 184925 98489 30074 30 074 16690 836521 Av.Growth,% 2010 20002010 625658 17.51 66848 66 848 109600 58453 40304 111798 43775 176982 108425 57413 57 413 16839 1416095 9.96 1.02 3.47 3.91 0.52 1.59 2015 902671 6.00 102854 102 854 9.00 121007 2.00 64853 2.00 49036 4.00 112920 0.20 53259 4.00 176982 0.00 119710 2.00 79020 79 020 5.00 17264 0.50 1799577 2020 1152062 5.00 158254 158 254 9.00 121007 0.00 69518 1.00 62584 5.00 114054 0.20 67973 5.00 176982 0.00 132169 2.00 100851 100 851 5.00 22034 5.00 2177489 2025 1322640 2.80 243493 243 493 9.00 121007 0.00 73064 1.00 79874 5.00 114969 0.00 86753 5.00 176982 0.00 138911 1.00 127489 127 489 4.00 28657 7.00 2513840 2030 1518473 2.80 374644 374 644 9.00 121007 0.00 76791 1.00 112028 7.00 114969 0.00 121676 7.00 176982 0.00 145997 1.00 155109 155 109 4.00 40193 7.00 2957870 av.Growth,% 20102030 4.1 4.05 9.0 9.00 0.5 0.50 1.4 1.38 5.3 5.25 0.1 0.14 5.3 5.25 0.0 0.00 1.5 1.50 5.1 51 5.10 4.5 4.48 3.3

4 % China 0.22 % India 9


1.23 6.65 6 65 0.48 5.47

Source: Raw Materials Data Iron ore, 2011.


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Global iron ore demand


4000 3500 3000 2500 2000 1500 1000 500 0

Mt

Total world

China Chi

Rest of world

Source: Raw Materials Data Iron ore, 2011.


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Raw Materials Group p


Raw Materials Data, Metals/Coal/Iron Ore Strategy development Mining companies, equipment & service providers Mineral policy, investment promotion Governments International organisations Governments, Pre-feasibility/Feasibility studies Financial institutions, companies institutions Merged with Intierra to form IntierraRMG

Outline
India.

China Conclusions Conclusions.

India I di

Rare earths drawing: Kaianders Sempler.

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Indian steel stages g


Peak Point Point of Saturation Singapore
Japa n

EU

USA Point of Inflection


ina
Japan

-0 6

EU 15 Australia Singapore USA

20

Trigger Point

Ch

00

India

China India 0 100 200 300 400 500 600 700 800

Per capita in KG

India steel industry evolution


2009 2020 2030

Steel production (Mt) 56.6 56 6 Iron ore demand (Mt) 142 Iron ore production (Mt) I d ti 257 Population (million) 1 210 Steel use per capita (kg) 47

110 175 411 1 480 74

222 355 832 1 800 123

Indian problems
Sinking ore grades. g g

Increase operation scale. L i ti Logistics. High alumina problems in BF. BF Beneficiation of magnetites. Iron ore exporters vs steel companies.

China
Exploration Structure Production Projects

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Global exploration
16 14 12 10 8 6 4 2 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 5 0 20 15 10
Total world China

Billion USD

30 25

Billion RMB

Sources: Total world MEG, China Ministry of Land and Resoruces.

Chinese exploration 1
Year 2009 total 30.30 billion RMB

Central gov Local gov Private

Source: MOLAR 2010.

Chinese exploration 2
Year 2009 total 26.11 billion RMB

Coal Gold Copper Iron ore Pb/Zn Uranium Tungsten Other


Source: MOLAR 2010.

Chinese exploration
Major exploration efforts efforts.

Worlds largest exploration spender. g p p 400 MUSD iron ore 2009. N great results. No t lt

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Global iron ore production

Source: Raw Materials Data Iron ore, 2011.


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Chinese structure
F Fragmented structure. t d t t Many small mines. Low grades, under ground. Vertical integration.

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Iron ore production costs


Type of mining Costs (USD/t) Type of ore Costs (USD/t) Total range FOB (USD/t) O ( S /) Freight to China (USD/t) Cost CFR China Efficient open pit 5-12 5 12 High grade DSO 5-12 Difficult open pit 10-20 10 20 High grade DSO 5-12 Efficient open pit Difficult open pit 5-12 5 12 10-20 10 20 Beneficiation Beneficiation necessary necessary 15-20 15-20

10-24

15-32

30-56 *

60-105 **

20 30 20-30 30-55

20 30 20-30 35-65

20 30 20-30 50-85

20 30 20-30 80-135

Source:JacquesAstier,MineralEconomics2011,forthcoming.

Chinese production volumes


USD/t

Sources: J. Astier, RMG.


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Chinese cost curves


USD/t

Sources: J. Astier, RMG.


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Chinese production costs


Small mines most < 0.5-1 Mt. Max total volume 300- 400 Mt. Mt Marginal cost of production >140-150 USD/t Deeper underground.
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Chinese foreign expansion


FerroChrome
124 5 0.1 0.5 World production 17 24 Chinese production Planned Chinese foreign expansion

Bauxite Iron ore Copper


0%
Source: BGR 2007.

1048

370

102

14 50%

0.64

0.27 100%

Chinese foreign projects

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Source: Raw Materials Data, 2011. R s

Iron ore projects


Operating mines Australia Peru Brazil Canada Projects Australia Peru Sierra Leone Total
Source: Raw Materials Data, 2011. ,

19.3 7.0 1.7 0.8 65 10 3 ~ 110 Mt

28.8

78

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Chinese projects in Africa


Country Metal Company Share % Type
Awaso Ghana Simandou Guinea Forcariah Guinea Bong Liberia Tonkolili Sierra L. Avantuur South Afr. Afr Dilokong South Afr. Weziswe South Afr. Baluba Zambia Chambishi Zambia Gwabw/Njali Zambia Muliashi Zambia Munali Zambia Lalapnazi p Zimbabwe Baux Fe Fe Fe Fe Mn Cr PGM Cu Cu U Cu Cu Cr Bosai Min. Chinalco China Int F. Int. F China Union Shandong Baosteel East Asia Met. JNMC CNMC CNMC JNMC CNMC CNMC Sinosteel 80 45 50 100 25 11 85 45 72 85 30 72 50 100 Oper. Project Project Project Project Project Oper. Project Oper. Oper Oper. Project Oper. Oper. Oper. p

S Source: Raw Materials Data, 2011. w D

Chinese FDI
Foreign expansion slow - not continuous. Will increase in the future. Long term serious problem for China. Focus control over imports . Not reach internal goals of control over imports.

China
Largest miner many small, high cost mines. Engine of demand reduced growth pace pace. Largest explorer since 2010. Poor results. Foreign expansion slow, not continuous. g q y Continued high demand for quality ore.
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Selenium drawing: Kaianders Sempler.

World market

Crude steel growth pattern

China and India steelproduction


tonnes
1600000 1400000

China

1200000

1000000

800000

600000

400000

India

200000

0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Source: Raw Materials Data Iron ore, 2011.


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Steel: two key questions


Where will China end up?
S. Korea: 974 kg/cap USA: 203 kg/cap

How fast will India grow?


As China 21 % /year (2000 2007) Slower - faster

Restrictions in iron ore trade


Exercisedexportduties
India:10%lump,20%fines India: 10 % lump 20 % fines China:10% VietNam:20% Viet Nam: 20 % Argentina:10%

Exercised quantitative restrictions: Exercisedquantitativerestrictions:


India:statetradingenterprises Malaysia non automatic export licence Malaysia:nonautomaticexportlicence
Source:UniversittBonn

Conclusions
Demand outlook still strong. China, later India will drive demand. Supply constraints increasing increasing. India reduced exports. Chi overseas expansion. China i Prices will fall but remain on a high level. Rare earths not a problem Chinese import dependency for iron ore and copper is! p y pp
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Thank you ! y
MagnusEricsson POBox3127 PO B 3127 SE16903Solna,Sweden magnus.ericsson@rmg.se Tel:+4687440065 Fax:+4687440066

www.rmg.se
REE drawing: Kaianders Sempler.

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Metals first isolated in Sweden/Finland Please visit www.rmg.se