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Base Metals One Year Forecast   November 2009   All Metals
 

Base Metals One Year Forecast November 2009 All Metals

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    Base Metals One Year Forecast   November 2009   All Metals Base Metals One Year Forecast November 2009 All Metals Document Transcript

    • Base Metals One Year Forecast November 2009 Date of release: 6th November 2009 © Copyright GFMS Ltd - November 2009 All rights reserved. This report serves as a single user licence. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means without the prior written permission of the copyright owner. This data is released for general informational purposes only, and is not for use in documents with an explicit commercial purpose such as Initial Public Offerings (IPOs), offers to conduct business, background briefings on the precious metals markets associated with marketing a particular business or business offering, or similar such documents without prior written agreement of GFMS. GFMS retains all intellectual and commercial property rights associated with the data contained herein and any unauthorised use of this data is a violation of applicable international laws and agreements. By continuing to read this document, you agree to the above terms and conditions in their entirety. Published by GFMS Limited Hedges House 153-155 Regent Street London, W1B 4JE tel: +44 (0)20 7478 1777 fax: +44 (0)20 7478 1779 email: info@gfms.co.uk web: www.gfms.co.uk
    • Table of Contents Introduction I1-I3 Economic Indicators E1-E2 Aluminium A1-A7 Copper C1-C8 Lead L1-L7 Nickel & Cobalt N1-N10 Tin T1-T7 Zinc Z1-Z8 Disclaimer Whilst every effort has been made to ensure the accuracy of the information in this document, GFMS Ltd and GFMS Metals Consulting Ltd cannot guarantee such accuracy. Furthermore, the material contained herewith has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient or organisation. It is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any commodities, securities or related financial instruments. No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein. GFMS Ltd and GFMS Metals Consulting Ltd do not accept responsibility for any losses or damages arising directly, or indirectly, from the use of this document.
    • Introduction - November 2009 Introduction ● Boosted by ongoing interest by investors, ● Chinese lead production figures in September base metals prices were resilient throughout were higher than expected, despite concerns October, and currently stand somewhat up on related to the poisoning incidents. the level the started that month on. ● Nickel prices have come off their recent highs ● GFMS’ Base Metals Index averaged 262.8 in of close to $20,000/tonne. Developments in October, up 3% on September and 31% year- the key stainless market where base prices on-year. In early November, our index, at 268, are under pressure suggest weak demand for is more than 90% higher than its February low. nickel in the short term. ● Aluminium production in China reached an all- ● The much discussed dominant position of tin time high in September and production outside has reportedly declined from holding 90% of the country was also up slightly. Demand all warrants to between 50-80%. Coupled with remains muted outside China. ongoing fundamental weakness, this saw tin prices retrace somewhat in October. ● Copper reached a cycle-peak above $6,600/ tonne in late October, underpinned by concerns ● Declining LME stocks as well as a suspension over supply tightness. An ongoing, and of a concentrator at the Century mine protracted, strike at BHP Billiton’s Spence mine boosted zinc prices, resulting in the metal has provided key support to prices. outperforming the other base metals. Base Metals Supply-Demand Overview (000 tonnes) 2003 2004 2005 2006 2007 2008 2009 Aluminium Consumption 27,887 30,285 32,040 34,366 37,953 38,120 35,138 Production 28,001 29,922 32,017 33,969 38,056 39,479 36,828 Metal balance 113 -363 -24 -397 104 1,360 1,690 LME Cash ($/tonne) 1,432 1,717 1,898 2,567 2,645 2,571 1,605 Copper Consumption 15718 16838 16689 17045 18175 18007 18023 Production 15275 15928 16573 17295 17952 18272 18268 Metal balance -442 -910 -116 250 -223 264 245 LME Cash ($/tonne) 1,780 2,868 3,864 6,731 7,126 6,952 5,100 Lead Consumption 6,823 7,295 7,783 8,062 8,181 8,665 8,852 Production 6,762 6,980 7,626 7,922 8,114 8,671 8,943 Metal balance -61 -315 -157 -140 -67 6 91 LME Cash ($/tonne) 516 888 976 1,288 2,600 2,085 1,710 Nickel Consumption 1,248 1,251 1,296 1,366 1,353 1,294 1,232 Production 1,207 1,251 1,288 1,341 1,398 1,364 1,264 Metal balance -41 0 -8 -25 45 70 31 LME Cash ($/tonne) 9,640 13,850 14,733 24,287 37,181 21,029 14,800 Tin Consumption 302 334 345 363 356 337 320 Production 276 343 350 351 349 333 343 Metal balance -26 9 4 -12 -7 -4 24 LME Cash ($/tonne) 4,896 8,513 7,370 8,763 14,580 18,499 13,475 Zinc Consumption 9,851 10,646 10,612 10,972 11,276 11,483 11,108 Production 9,873 10,395 10,220 10,643 11,359 11,665 11,300 Metal balance 22 -251 -392 -329 83 182 192 LME Cash ($/tonne) 1,432 1,717 1,898 2,567 2,645 2,571 1,605 Source: GFMS, WBMS, LME Independent - Informed - International I1
    • Introduction - November 2009 Prices continue to defy fundamentals Base Metals & Other Commodity Prices In the aftermath of the recent LME week, field research has further confirmed GFMS’ view that the recovery of 200 base metal prices has yet to be matched by a material GFMS Base Metals Index Index, 2nd January 2009 = 100 improvement in the underlying fundamentals. Although Dow Jones UBS Index orders have undoubtedly come off the lows seen earlier in 150 the year, a real recovery has yet to emerge and consumption remains far below normal levels in most regions. The long awaited restocking phase in the semis sector has not began. GSCI 100 Coupled with production increases being seen for some of the metals, this suggests no real tightness of material has materialised to-date or is expected in the very near-term. 50 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Despite this fact, most base metals prices in early November Source: GFMS are up on their one month prior levels and anything between 50% and 135% up on their lows earlier in the year. The GFMS Base Metals Index, which is constructed using equal Fundamentals reflected in relative performance weights on the six main LME metals, in early November Despite the aforementioned general mismatch of price stands at 269, up 5% on the 1st October level and 93% performance and supply-demand conditions, the individual compared to this year’s trough. Our index averaged 263 in metals’ fundamentals continued to affect the relative October, 3% up on September and 31% up year-on-year. performance of the six main LME metals. For instance, the exceptional performance of zinc from 1st October concurred Investors remain positive towards the sector with a net decline in LME inventories, supply disruptions The lack of a real improvement in the market’s fundamentals at the Century mine and came against the backdrop of a has continued to be compensated by investor interest market expected to swing to deficit in the last quarter. In in commodities, particularly those related to industrial contrast, aluminium and tin’s relative weakness reflected the production, where much of the current and projected high inventories that weigh on both metals’ prices as well recovery is expected to rely on. Essentially, investors as, in the case of tin, the partial unwinding of a major long are front-running the improvement in the base metals position. fundamentals and in doing so they have brought forward the price recovery. Market outlook In early November, GFMS remain of the view that base GFMS have often noted that the bulk of investor activity metals prices remain at levels exceeding those justified by on base metals tends to be part of a wider commodity their immediate fundamentals. Therefore we are slightly strategy, with base-metal specific players comprising only cautious, at least for the very near-term. Nevertheless, we a small niche portion of the market. By implication, over appreciate the momentum in base metals investment that periods of time, base metals prices tend to trend in a has been in place ever since the trough of last spring and similar trajectory to commodity prices in general, illustrated acknowledge that the potential for what we would see as in the accompanying graph. In October, base metals a long-overdue correction to be avoided, or to be of very underperformed the two main commodity indices we track, limited magnitude. a reflection of the sector’s lacklustre fundamentals as well as strength in energy-related commodities seen over the In the longer term, we remain largely constructive towards month. The chart, however, highlights that GFMS’ Base the wider base metals sector and this is reflected in our Metals Index so far this year has outperformed broader projections outlined in the individual metal sections of commodity indices, such as the GSCI. this report. This is by and large based on expectations of ongoing attention by investors coupled with, eventually, Dollar weakness supports prices a noteworthy improvement in the metals’ demand-side Another factor that has boosted base metals prices since last fundamentals as we progress into next year. This will most spring has been the weakness of the US dollar, particularly probably be augmented in the first and second quarter against the euro, and this continued to support the sector by the restocking cycle we expect will take place in many in October. For instance, looking at the latest data for the relevant end-use industries, although healthy results are also GFMS Base Metals Index constructed using euro prices, and seen in the third and final quarter of next year. Our base making the same comparisons made above, our index is up metals index is forecast to move within a range of 229 and by a more contained 3% on the 1st October level and 65% 337 over the year, peaking some time in the final quarter. compared to this year’s low. I2 Independent - Informed - International
    • Introduction - November 2009 LME Prices Overview Prices US$/tonne % Change y-o-y Al Cu Ni Pb Sn Zn Al Cu Ni Pb Sn Zn Monthly Oct-08 2,121 4,926 12,140 1,480 14,402 1,302 -13.1 -38.5 -60.9 -60.2 -10.4 -56.2 Nov-08 1,852 3,717 10,702 1,291 13,644 1,153 -26.1 -46.6 -65.0 -61.2 -18.3 -54.6 Dec-08 1,490 3,072 9,686 963 11,240 1,101 -37.4 -53.4 -62.7 -62.9 -30.9 -53.2 Jan-09 1,413 3,221 11,307 1,133 11,373 1,187 -42.2 -54.4 -59.2 -56.6 -30.4 -49.3 Feb-09 1,330 3,315 10,409 1,101 11,039 1,112 -52.1 -58.0 -62.8 -64.3 -35.9 -54.4 Mar-09 1,336 3,750 9,696 1,239 10,676 1,217 -55.6 -55.6 -68.9 -58.8 -46.1 -51.6 Apr-09 1,421 4,407 11,166 1,383 11,744 1,379 -52.0 -49.3 -61.2 -51.0 -45.8 -39.1 May-09 1,460 4,569 12,635 1,440 13,793 1,484 -49.7 -45.5 -50.9 -35.6 -42.7 -32.0 Jun-09 1,574 5,014 14,960 1,674 14,986 1,557 -46.8 -39.3 -33.7 -10.1 -32.6 -17.8 Jul-09 1,668 5,216 15,985 1,679 14,039 1,579 -45.7 -38.0 -20.7 -13.7 -39.3 -14.8 Aug-09 1,934 6,165 19,642 1,900 14,870 1,884 -30.0 -19.2 3.7 -1.2 -25.8 9.3 Sep-09 1,834 6,196 17,473 2,205 14,869 1,822 -27.4 -11.4 -1.8 18.0 -19.1 5.0 Oct-09 1,879 6,288 18,525 2,241 15,009 2,072 -11.4 27.7 52.6 51.4 4.2 59.1 Quarterly 2008 Q1 2,729 7,763 28,863 2,891 17,695 2,443 -2.5 30.7 -30.4 61.8 39.1 -29.1 2008 Q2 2,941 8,448 25,730 2,316 22,612 2,143 6.5 10.6 -46.4 6.2 60.3 -41.5 2008 Q3 2,792 7,693 18,987 1,915 20,522 1,773 9.4 -0.3 -37.2 -39.0 37.0 -45.0 2008 Q4 1,830 3,940 10,885 1,251 13,127 1,189 -25.2 -45.6 -63.0 -61.8 -19.7 -55.1 2009 Q1 1,360 3,435 10,459 1,160 11,024 1,174 -50.2 -55.8 -63.8 -59.9 -37.7 -52.0 2009 Q2 1,488 4,676 12,992 1,506 13,551 1,476 -49.4 -44.6 -49.5 -35.0 -40.1 -30.2 2009 Q3 1,806 5,840 17,614 1,925 14,576 1,757 -35.3 -24.1 -7.2 0.5 -29.0 -0.9 Annual 2002 1,432 1,558 6,772 453 4,062 779 -0.8 -76.9 13.9 -4.9 -53.6 -12.1 2003 1,717 1,780 9,640 516 4,896 828 19.9 14.3 42.4 13.9 20.5 6.4 2004 1,717 2,868 13,850 888 8,513 1,048 0.0 61.1 43.7 72.3 73.9 26.5 2005 1,898 3,684 14,733 976 7,370 1,382 10.6 28.5 6.4 9.8 -13.4 31.9 2006 2,567 6,731 24,287 1,288 8,763 3,273 35.2 82.7 64.9 32.0 18.9 136.8 2007 2,639 7,126 37,181 2,595 14,536 3,250 2.6 2.5 76.8 24.5 -21.4 73.8 2008 2,571 6,952 21,029 2,085 18,499 1,870 78.1 3.3 253.5 338.0 111.1 111.1 Source: LME & GFMS LME Inventory Overview End-Period (000 tonnes) No. of weeks consumption Al Cu Ni Pb Sn Zn Al Cu Ni Pb Sn Zn Monthly Oct-08 1,528 238 58 48 4 182 3.3 1.1 3.2 0.5 0.9 1.4 Nov-08 1,533 291 58 48 3 193 3.4 1.3 3.2 0.5 0.8 1.4 Dec-08 2,338 341 79 45 8 253 5.1 1.5 4.3 0.5 2.0 1.9 Jan-09 2,811 491 84 54 9 345 7.2 2.4 5.7 0.5 2.2 2.9 Feb-09 3,227 537 99 60 9 358 8.3 2.6 6.6 0.6 2.1 3.0 Mar-09 3,477 502 108 62 11 344 8.9 2.4 7.3 0.6 2.6 2.9 Apr-09 3,792 399 114 72 13 329 9.7 1.9 7.7 0.7 3.0 2.7 May-09 4,237 312 109 79 14 324 10.8 1.5 7.4 0.8 3.5 2.7 Jun-09 4,395 266 110 92 17 353 11.2 1.3 7.4 0.9 4.1 2.9 Jul-09 4,565 282 106 107 18 408 11.7 1.4 7.1 1.1 4.4 3.4 Aug-09 4,613 300 116 121 20 435 11.8 1.4 7.8 1.2 4.9 3.6 Sep-09 4,585 346 121 128 25 437 11.7 1.7 8.1 1.3 6.1 3.6 Oct-09 4,556 372 130 130 27 429 11.7 1.8 8.7 1.3 6.3 3.6 Annual 2002 1,241 856 22 184 26 651 3.3 3.8 1.1 1.8 6.2 4.8 2003 1,423 431 24 109 14 740 3.6 1.9 1.2 1.1 3.4 5.4 2004 693 49 21 40 8 629 1.7 0.2 1.0 0.4 1.8 4.4 2005 644 92 36 44 17 394 1.5 0.4 1.7 0.4 3.6 2.7 2006 698 191 7 41 13 90 1.6 0.8 0.3 0.4 2.8 0.6 2007 929 199 48 45 12 88 2.2 0.8 2.2 0.4 2.6 0.6 2008 2,338 341 79 45 8 253 5.1 1.5 4.3 0.5 2.0 1.9 Source: LME & GFMS Independent - Informed - International I3
    • Economic Indicators - November 2009 Economic Indicators In spite of the aforementioned lack of material recovery manufacturing Purchasing Managers’ Index (PMI) for the in consumption, in early November, the latest relevant Eurozone breached the important 50 mark, suggesting economic indicators remain by and large upbeat. Starting positive growth in the sector, for the first time in 17 months with the OECD Composite Leading Indicator (CLI), in in October. GFMS’ view the best single gauge of future global industrial production, August marked the sixth consecutive month- Moving to the United States, the ISM PMI rose to 55.7 in on-month increase, with the figure reaching 99.2, a level October, marking the third consecutive month of growth. unseen since July last year. All but a handful of individual Looking at the employment sub-index, this breached the countries’ indicators were up, with the majority of major 50 mark for the first time since July last year. Lagged by developed economies showing clear signs of recovery. one month, the latest data on housing starts in the country saw September starts increase at the margin compared to Confirming these improvements, it is worth noting the latest August. Finally, October vehicle sales kept to levels virtually revision by the European Commission of its forecast for unchanged from the previous month, far below the August growth in the EU-27 region to 0.7% next year, compared figure boosted by the “cash-for-clunkers” scheme. its May projection of 0.1%. Within the region, the latest Main Economic Indicators Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Manufacturing PMI Eurozone 34.4 33.6 33.9 36.8 40.7 42.6 46.3 48.2 49.3 50.7 USA 35.6 35.8 36.3 40.1 42.8 44.8 48.9 52.9 52.6 55.7 China 42.2 45.1 44.8 50.1 51.2 51.8 52.8 55.1 55.0 55.4 Japan 29.6 31.6 33.8 41.4 46.6 48.2 50.4 53.6 54.5 54.3 OECD Composite Leading Indicators OECD 92.6 92.4 92.7 93.5 94.8 96.2 97.7 99.2 Euro zone 93.2 93.4 94.2 95.4 96.9 98.5 100.2 102.0 France 95.5 96.1 97.1 98.3 99.6 101.0 102.4 103.7 Germany 89.9 89.9 90.6 92.0 93.9 96.1 98.4 100.8 Italy UK 94.8 94.6 94.8 95.4 96.4 97.7 99.1 100.7 USA 91.3 90.8 90.9 91.4 92.8 94.3 95.9 97.4 NAFTA 91.8 91.3 91.5 92.1 93.4 94.9 96.5 98.1 Japan 92.4 91.5 91.4 92.0 93.0 94.3 95.7 97.0 Brazil 98.2 97.2 96.7 96.7 96.9 97.2 97.6 98.0 China 91.9 92.5 93.6 94.9 96.4 98.0 99.4 India 94.1 94.2 94.7 95.4 96.2 96.9 97.9 98.8 Russia 89.8 88.7 88.6 89.3 90.5 91.8 93.2 94.3 Industrial Production (m-o-m) Euro-zone -2.7 -2.5 -1.1 -1.6 0.7 -0.2 -0.3 0.9 Germany -6.6 -3.6 0.0 -3.0 5.0 1.1 -1.0 1.5 France -4.3 -0.3 -1.3 -1.4 2.6 0.5 0.3 1.9 Italy -1.2 -4.2 -4.5 1.5 0.1 -0.2 2.4 7.0 UK -2.6 -0.7 -0.2 0.1 -0.6 0.6 0.3 -2.6 1.5 USA -2.2 -0.8 -1.6 -0.6 -1.1 -0.4 0.9 1.2 0.7 Japan -10.1 -9.4 1.6 5.9 5.7 2.3 2.1 1.6 1.4 South Korea (y-o-y) -25.5 -10.0 -10.5 -8.2 -9.0 -1.1 0.7 1.1 11.0 Brazil 3.0 2.3 1.2 1.2 1.4 0.5 2.2 1.2 China (y-o-y) n/a 3.8 8.3 7.3 8.9 10.7 10.8 12.3 13.9 India 0.0 -3.1 10.4 -10.9 4.2 3.8 -0.1 0.5 Consumer/Business Confidence indicators Eurozone Economic Sentiment 67.2 65.3 64.6 67.3 70.2 73.2 76.0 80.8 82.8 86.2 USA Consumer Confidence 37.4 25.3 26.9 40.8 54.8 49.3 47.4 54.5 53.4 47.7 Japan Consumer Confidence 27.0 27.6 29.6 33.2 36.3 38.1 39.7 40.4 40.7 Brazil Consumer Confidence 100.3 96.3 99.2 97.6 102.1 106.4 108.4 110.3 111.5 114.5 China Consumer Confidence 86.8 86.5 86.0 86.1 86.7 86.5 87.5 88.0 88.1 Source: OECD, Thompson Reuters EcoWin, National Statistics, Dismal Scientist & GFMS E1 Independent - Informed - International
    • Economic Indicators - November 2009 October was also upbeat for Japanese manufacturing, and 7.9% in the first and second quarter respectively) and with the country’s PMI remaining comfortably within growth if the trend continues, the country seems set to comfortably territory at 54.3. Housing starts in the country were up at achieve its 8% target for the full year. Moving to industrial the margin in September, although they remained down production, growth accelerated to 13.9% in September notably on and year-on-year basis. Although vehicle (compared to 12.3% in August), and this on a year-on- production in the country was once again down year-on-year year basis. Going forward, conditions seem set to continue in September, the rate of declined slowed further and at 21% improving, as the country’s manufacturing PMI rose further it was the lowest this year-to-date. Industrial production in in October to 55.4, compared to 55 in the previous month. the country was up in September month-on-month, for the seventh consecutive month. Improvements were also noted for two of the other BRIC countries recently, with manufacturing PMIs for both Brazil Looking at China, where base metals consumption has and India, at 52.3 and 54.5 respectively, continuing to grown rapidly so far this year, the latest economic data suggest expansions in October. The index for Russia, in remains uniformly positive. Real GDP growth accelerated contrast, saw a return below the 50 mark, largely as a result in the third quarter, to reach at 8.9% (compared to 6.1% of weak export orders. OECD Leading Indicators & GFMS Base Metals Index US & Eurozone PMI & GFMS Base Metals Index 105 400 65 400 GFMS Base Metals Index GFMS Base Metals Index 60 350 Eurozone PMI 102 350 55 USA PMI 300 300 50 GFMS Index OECD Index 99 GFMS Index PMI Index 250 45 250 96 40 200 200 35 93 OECD Composite Leading Indicators 150 150 30 90 25 100 100 Jan-06 Jan-07 Jan-08 Jan-09 Jan-06 Jan-07 Jan-08 Jan-09 Source: GFMS, Thomson Reuters EcoWin Source: Markit Economics, GFMS Jan-07 Jan-08 Jan-09 Jan-06 China & Japan PMI & GFMS Base Metals Index Chinese IP Growth & GFMS Base Metals Index 65 400 25 400 GFMS Base Metals Index GFMS Base Metals Index 60 350 350 China PMI 20 % year-on-year IP growth 55 300 300 50 GFMS Index GFMS Index 15 PMI Index 45 250 250 10 40 200 200 35 5 150 150 30 Japan PMI 25 100 0 100 Jan-06 Jan-07 Jan-08 Jan-09 Jan-06 Jan-07 Jan-08 Jan-09 Source: Markit Economics, GFMS Source: GFMS, China National Bureau of Statistics Jan-07 Jan-08 Jan-09 Jan-06 Note: The GFMS Basel Metals Index is an average of the six base metals indexed prices with equal weights. This is in contrast to the LME index, which is heavily weighted towards aluminium and copper. Independent - Informed - International E2
    • Aluminium - November 2009 Aluminium Recent developments Outlook for the next 12 months ● In dollar terms, aluminium prices strengthened ● The price outlook remains muted by the rapid slightly during October. However, this was restart of Chinese capacity in the past six more a reflection of dollar weakness than any months and the record overhang of stocks. improvement in the underlying fundamentals. In particular, the dollar fell by 3% against the ● Providing some comfort for the market at euro between the start of the month and the present is the tied nature of much of the LME low point on 23rd October. stocks, which are in financing deals. ● Chinese output soared higher in data for ● Overall, our base case scenario foresees the September from the CNI-A. This showed counterveiling forces of investment strength output reaching a new all-time annualised high and restocking in the OECD being largely offset of 14.8 million tonnes. Output on a daily basis by the prospects for a continued, surplus during was 43% up from the March low. the next year. Given our expected 900,000 tonne surplus prices under the base case prices ● Indicators of Chinese demand continue to are averaging $1,850/tonne in 2010. provide support to the market, with the latest industrial production data showing an increase ● Our alternative scenarios see substantially of 13.9% year-on-year. different balances, but due to the overhang of stocks the price outlooks do not vary as ● Outside China, demand remains generally much as other LME metals. Scenario B expects muted but signs of improvement are emerging. prices to average $1,975 and in Scenario C the Indeed, Japanese aluminium shipments were average is $1,525 for the next year. up 13.1% month-on-month in September. ● Production excluding China registered the second consecutive month-on-month increase, GFMS’ Forecast Scenarios although by still modest amounts. Aided by Base Case, 40% Probability rising output in India and Bosnia. Represents what GFMS consider the most likely outcome for the markets. Scenario B, 35% Probability Faster recovery than under our Base Case in the near-term and stronger growth thereafter. Scenario C, 25% Probability Anaemic recovery extends well into 2010 for mature economies while growth in China eventually slows, as the impact of the stimulus package wears off. Aluminium Supply-Demand & Price Forecast Quarterly Aluminium Price & Forecast 2010 2200 Q1 Q2 Q3 Q4 Scenario B Supply/Demand Forecast (Base Case) 2000 Consumption 9,787 9,750 9,850 10,000 1800 US$/tonne Production 9,946 10,050 10,100 10,200 Base Case Balance 159 300 250 200 Stocks 6,303 6,603 6,853 7,053 1600 Scenario C Price Forecast ($/tonne) 1400 Base Case 1,850 1,800 1,850 1,900 Scenario B 1,950 2,000 2,050 2,100 1200 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Scenario C 1,550 1,500 1,450 1,400 Source: GFMS Source: GFMS A1 Independent - Informed - International
    • Aluminium - November 2009 Market background industrial production data, which recorded 13.9% year-on- October started with aluminium prices drifting lower and year growth for September. testing lows, of just above $1,750/tonne, which had not been seen since July. However, a broad based rally took Tentative improvement in the mature economies place across the base metals in the immediate lead up Our discussions during LME week merely reinforced our to LME week before gently correcting during that period. belief that, with the noteworthy exception of China, demand Thereafter, the price headed higher during much of the rest is improving but remains lacklustre through the developed of the month largely fuelled by a rapidly falling US dollar. economies. Indeed, the hope of a rapid rebound in mature Indeed, as the dollar plumbed to levels not seen since economies in the fourth quarter, in large part to be fuelled by pre-Lehman Brothers collapse with the dollar going below restocking, has receded to the New Year with more modest $1.50/euro, this pushed aluminium towards $2,000/tonne. gains likely before that date. However, as the dollar strengthened prices ended the month a touch softer, at around $1900/tonne. This was further highlighted by cautious outlooks this month from a number of the major integrated aluminium producers Overall though, October’s average LME cash price of with downstream operations in the latest quarterly results. $1,879/tonne was only 2% higher in dollar terms, and was For example, Hydro stated that “underlying demand for actually down in some producer countries currencies such as metal products (extrusion ingot, sheet ingot, foundry alloys Australia and Canada. and wire rod) in Europe and North America improved slightly during the third quarter 2009 compared to the previous Strong macroeconomic background fails to inspire quarter but there is still uncertainty regarding the timing of aluminium any significant recovery.” Indeed, when compared to a year Even the official news that the US had exited recession, ago demand levels are still very poor, with latest Japanese with an above consensus growth of 0.9% for the July - vehicle production still showing a 21.6% year-on-year fall for September period compared to the prior quarter, caused only September. a minor rally above the prior trading range. This followed US industrial production rising 0.7% in September, the More specifically for aluminium, Japanese shipments of the third straight month of improvement, although production light metal are down 18.3% year-on-year in September remained down 6.1% compared to a year before. However, according to the Japan Aluminium Association. the troubles of the US housing sector remain, with new home sales dropping 3.6% in September, from a downwardly On a brighter note, this did however, represent a double- revised 417,000 units in August. A brighter spot came digit increase on the prior month and extruded shipments from durable goods orders, which are a leading indicator of were up particularly strongly. In part the latest data is aided industrial activity which climbed 0.8% on the prior month. by government incentives over the past couple of months, which aided sales of hybrid cars in particular. Earlier in the month, Chinese economic data had also been positive for its implications for aluminium demand, even More encouragingly, Taiwan’s biggest flat-rolled aluminium though the 8.9% year-on-year growth in GDP was marginally products mill, C.S. Aluminium, is reportedly getting close below market expectations. This marginal disappointment to full production of 180,000 tpy of flat-rolled products. was in contrast to the strong growth in the more important This contrasts starkly with operating at only 40% in the Aluminium Premiums Chinese Primary Aluminium Imports 200 400 150 99.7% ingot duty Paid 300 tonnes 000s US$/tonne 100 200 Cif Japan 50 100 99.7% ingot duty Unpaid 0 0 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Source: GFMS Source: Chinese Customs, GFMS Independent - Informed - International A2
    • Aluminium - November 2009 first quarter and 70% in the second quarter as a result of China for these purposes). The chief cause of this is the the economic downturn. This improvement in utilisation is commissioning of the last portion of a delayed 115,000 aided by increased orders, mainly from Asia, in the second tonne expansion at Nalco’s Angul smelter. Additionally in the half of this year as that region bounces back more robustly, region the Indonesian smelter has marginally raised output and earlier, than elsewhere. However, for 2009 as a whole and while it is not captured by IAI statistics increased output utilisation is only expected to be around two-thirds. is also believed to be occurring in Iran. All time record Chinese production Elsewhere, the Eastern Europe region is also showing Crucial to the underlying weakness of the fundamentals increased production in the latest data. This is chiefly due in the market at present is the continuing and dramatic to the restart of 30,000 tonnes of capacity at the Mostar rebound in Chinese primary output since the spring lows. smelter in Bosnia since the start of September. Meanwhile Chinese production data continues to support the view that in Western Europe, output fell in the latest data due to the the vast majority of the capacity in China has restarted, closure of the 145,000 tonne Anglesey smelter in Wales at or is in the process of reaching full production. This is the end of September. Accordingly another decline is likely unsurprising given the profitability of these operations and in the October data for this region. the lower restart costs compared to the rest of the world, largely due to lower labour costs. There are also signs that US production may have hit the bottom. Output rose, admittedly slightly, in September, Output in September rose month-on-month by an annualised which was the first rise since May last year. Thereafter 1.25 million tonnes to a new all-time record of over 14.8 Noranda’s restart of the third and final potline at its New million. In fact, this is more than 500,000 tonnes greater Madrid smelter from early October, which had been down than the prior record, set in June last year. Indeed, GFMS since an ice storm back in January, should trigger continued believe that while further growth in output is expected the increases in US output over the remainder of this year. In rate of increases is set to slow considerably over the next aggregate, announcements of non-Chinese restarts though six months as the restarts stop and only a relatively limited remain few and far between, while typically being in very amount of new capacity comes on stream. Predominantly small tonnages but closures are almost non-existent. due to these restarts global output is up 11% compared to the April lows, although still 5% short of equalling world Market surplus shifts from LME and IAI to SHFE and highs set back in mid-2008. unreported Given the previously mentioned restarts and only limited Rest of the world raises supply, slowly for now upturn in non-Chinese demand the market remains Outside China, the level of production has started to rise, in surplus. Despite this LME stocks are drifting lower, albeit marginally and remaining well below prior highs (it although very slowly when compared to the overall total. is still below levels achieved as far back as 2005). The Furthermore, IAI unwrought aluminium stocks fell to 1.191 International Aluminium Association (IAI) figures show world million tonnes in September, compared with a revised 1.236 (excl. China) output rose compared to the prior month for million in August. Compared to a year earlier these producer the second consecutive month in September, but remains stocks are almost half a million tonnes lower. The change is 10% down year-on-year. The growth that is occurring partly reflected by rising stocks on the SHFE, particularly at is chiefly due to just one region - Asia (which excludes its Zhongchu Dachang warehouse in Shanghai. Aluminium LME Stocks & Price LME Stocks vs Spot Price Aluminium Daily Stocks vs Price 3500 5000 3500 3000 4000 Spot Price 3000 tonnes 000s 3000 US$/tonne 2500 US$/tonne 2500 Oct 09 2000 2000 2000 1500 1000 1500 Stocks 0 1000 1000 0 2 4 6 8 10 12 Jan 02 Jan 04 Jan 06 Jan 08 Stocks (No. of Weeks Consumption) Source: Thomson Reuters EcoWin, LME Source: GFMS, LME A3 Independent - Informed - International Jan 03 Jan 05 Jan 07 Jan 09
    • Aluminium - November 2009 The overall balance in China indicates a surplus at present Chinese imports hold up but at lower level given the huge volume of restarts and in some cases the The balance in the domestic Chinese market has ensured inaugural commissioning of capacity that had remained idled that Chinese imports have slowed substantially of late. since completion. Further surplus is also being absorbed by Imports in the past two months slowed to an average of just invisible stocks at present, especially from the arrangement above 120,000 tonnes compared to an average of almost between UC RusAl and Glencore. Consequently, little 300,000 tonnes per month over the prior quarter. This is comfort for the price can be drawn from the relative a clear sign that the market in China is becoming more improvement in the LME stocks data in recent times, as it balanced. Indeed current import levels now largely reflect merely reflects a change in the location of stocks rather than longer term deals, sometimes of an annual duration. The a fundamental switch from surplus to deficit in our view. reduced level of imports however now means more of the surplus in the rest of the world needs to find a home in other regions. Aluminium Supply-Demand Balance 2004-2010 (000 tonnes) 2004 2005 2006 2007 2008 2009 2010 Global Production 29,922 32,017 33,969 38,056 39,479 36,828 40,296 % change y-o-y 6.9 7.0 6.1 12.0 3.7 -6.7 9.4 Consumption Europe 7,560 7,554 7,945 8,297 7,912 5,849 6,664 Japan 2,319 2,276 2,323 2,197 2,250 1,485 1,770 USA 5,800 6,114 6,150 5,580 5,615 4,503 5,130 Total Mature 15,679 15,945 16,418 16,074 15,777 11,837 13,564 % change y-o-y 3.3 1.7 3.0 -2.1 -1.8 -25.0 14.6 Brazil 651 759 773 854 932 810 965 China 6,043 7,119 8,648 12,347 12,413 14,081 15,420 India 861 958 1,080 1,207 1,323 1,343 1,550 Russia 1,020 1,020 1,047 1,020 1,020 847 950 Total BRICs 8,575 9,856 11,548 15,428 15,687 17,080 18,885 % change y-o-y 16.4 14.9 17.2 33.6 1.7 8.9 10.6 ASEAN 917 964 1,063 1,070 1,155 1,028 1,167 % change y-o-y 15.0 5.2 10.2 0.7 7.9 -11.0 13.5 South Korea 1,118 1,201 1,153 1,081 965 869 1,065 Taiwan 497 412 422 368 362 286 385 Others 3,499 3,663 3,762 3,933 4,174 4,038 4,321 Global Consumption 30,285 32,040 34,366 37,953 38,120 35,138 39,387 % change y-o-y 8.6 5.8 7.3 10.4 0.4 -7.8 12.1 Metal balance -363 -24 -397 104 1,360 1,690 909 Reported stock change -639 -23 -245 197 1747 Reported stocks Producer stocks 1,788 1,797 1,621 1,554 1,676 German 37 37 37 37 37 Japanese 421 422 362 327 442 Exchange stocks Comex 28 62 21 15 10 Shanghai Exchange 60 46 19 98 203 Tokyo Exchange 6 2 6 1 3 LME 693 644 698 929 2,338 Total Stocks 3,033 3,010 2,764 2,961 4,709 6,398 7,307 Total as no. weeks consumption 5.2 4.9 4.2 4.1 6.4 9.5 9.6 LME as no. weeks consumption 1.2 1.0 1.1 1.3 3.2 LME cash ($/tonne) 1,717 1,898 2,567 2,645 2,571 1,605 1,850 % change y-o-y 19.9 10.5 35.2 3.0 -2.8 -37.6 15.3 Source: GFMS, WBMS, LME Independent - Informed - International A4
    • Aluminium - November 2009 Market outlook Aluminium Price & Forecast Trading Range Our projections, as updated in our recently released Three 2500 Year Forecast*, show that the aluminium market is set to remain in a 900,000 tonne surplus over the next year. Given this backdrop, it is difficult to be overtly bullish on the price. Indeed given the latest record production data from 2000 China and indications of still further increases in output to come, it is hard to envisage a scenario whereby global stocks (including unreported) are falling, no matter how positive we 1500 project demand. It is in this light that the three scenarios should be viewed, especially when supported by the massive stock overhang and excess capacity outside of China. 1000 Jan-09 Jul-09 Jan-10 Jul-10 Consequently we expect prices to average $1,850/tonne next Source: Thomson Reuters EcoWin, GFMS year, as the aluminium market is dragged higher in the wake of the wider commodities complex and copper in particular. If restocking does not take place in the New Year it Further support however, is likely from restocking in the is likely that the surplus in the aluminium market will New Year. We had expected this trend to emerge in the become increasingly visible again and that stocks will rise fourth quarter of 2009. However, the anecdotal evidence to over 5 million tonnes on the LME alone. Alternatively, suggests that this did not take place. However, relatively low if the dramatic growth in Chinese output does not slow inventories at consumers (semis producers) suggest that a substantially in the near future then we doubt whether other restocking cycle should boost demand in early 2010. markets will pick up the “slack”. Under this outlook prices are set to head gradually lower through the next year and Turning to the most bullish scenario, this is predicated on could approach marginal costs by the end of the forecast investor flows largely ignoring the lack of tightness in the period. Consequently, Scenario C foresees prices averaging physical market and alternatively following the wider rally $1,475/tonne in 2010. of the base metals complex, which is essentially what has happened so far in 2009. However, even under this scenario it is still difficult to expect a return to anywhere near prior highs. This is due to the initially higher prices leading to restarts of more idle capacity in Europe, USA and Russia as prices are sustained at over $2,000/tonne. Consequently, we expect prices to average $2,025/tonne on average under this scenario. Quarterly Aluminium Supply-Demand Balance - Base Case 2009 2010 (000 tonnes) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Global production 8,760 8,838 9,430 9,800 9,946 10,050 10,100 10,200 % change y-o-y -9.3 -12.0 -7.1 1.9 13.5 13.7 7.1 4.1 Global consumption 7,748 8,600 9,200 9,590 9,787 9,750 9,850 10,000 % change y-o-y -20.9 -13.2 -3.3 7.8 26.3 13.4 7.1 4.3 Market Balance 1012 238 230 210 159 300 250 200 Reported Stocks 5,083 5,685 5,934 6,144 6,303 6,603 6,853 7,053 As no. weeks consumption 8.5 8.6 8.4 8.3 8.4 8.8 9.0 9.2 LME Cash $/tonne 1,360 1,488 1,806 1,770 1,850 1,800 1,850 1,900 % change y-o-y -50.2 -49.4 -35.3 -3.3 36.0 20.9 2.4 7.3 Trading Range High 1,575 1,647 2,035 2,050 2,200 2,100 2,200 2,300 Low 1,254 1,337 1,532 1,650 1,700 1,600 1,700 1,700 Source: GFMS, WBMS, LME * In order to receive more information about GFMS’ Quarterly 3-Year Forecast on the aluminium market, please contact: charles.demeester@gfms.co.uk A5 Independent - Informed - International
    • Aluminium - November 2009 Statistical appendix Refined Aluminium Production 2004-2010 (000 tonnes) 2004 2005 2006 2007 2008 2009 2010 South Africa 864 851 887 898 810 802 790 Mozambique 547 554 563 560 530 538 530 Other Africa 302 344 416 358 369 350 388 Africa 1,713 1,748 1,867 1,816 1,709 1,690 1,708 Bahrain 524 708 872 860 865 864 864 China 6,689 7,150 9,358 12,559 13,176 12,775 15,611 India 861 942 1,105 1,222 1,308 1,485 1,656 UAE 683 850 789 890 940 913 1170 Other Asia 901 1,617 966 983 1,212 1,415 1,837 Asia Total 9,657 11,268 13,091 16,513 17,501 17,452 21,138 Germany 668 648 516 551 606 302 284 Norway 1,322 1,376 1,427 1,357 1,359 1,126 1,085 Russia 3,594 3,647 3,718 3,955 4,187 3,724 3,655 Other Europe 3,253 3,311 3,257 3,348 3,355 3,059 3,005 Total Europe 8,837 8,982 8,917 9,211 9,507 8,211 8,029 Brazil 1,457 1,498 1,605 1,655 1,662 1,539 1,534 Canada 2,592 2,894 3,051 3,083 3,118 3,005 2,982 USA 2,517 2,480 2,281 2,560 2,660 1,724 1,652 Other Americas 903 895 890 903 1008 979 982 Total Americas 7,470 7,767 7,826 8,200 8,448 7,246 7,151 Australia 1,895 1,903 1,929 1,959 1,974 1,951 1,960 Total Oceania 2,245 2,252 2,267 2,317 2,314 2,228 2,270 Global Total 29,922 32,017 33,969 38,056 39,479 36,828 40,296 Western World 18,674 19,583 19,898 20,513 21,148 19,668 20,420 Former Socialist 11,218 12,434 14,071 17,544 18,332 17,121 18,640 Source: GFMS, WBMS, LME Independent - Informed - International A6
    • Aluminium - November 2009 Refined Aluminium Consumption 2004-2010 (000 tonnes) 2004 2005 2006 2007 2008 2009 2010 Africa/Oceania 840 877 840 887 1026 943 1022 China 6,043 7,119 8,648 12,347 12,413 14,081 15,420 India 861 958 1,080 1,207 1,323 1,343 1,550 Japan 2,319 2,276 2,323 2,197 2,250 1,485 1,770 South Korea 1,118 1,201 1,153 1,081 965 869 1,065 Other Asia 2,627 2,662 2,807 2,940 3,050 2,778 3,109 Total Asia 12,967 14,216 16,010 19,772 20,000 20,556 22,914 France 749 719 713 737 689 530 615 Germany 1,795 1,758 1,823 2,008 1,950 1,170 1,420 Italy 987 977 1,021 1,087 951 590 750 Russia 1,020 1,020 1,047 1,020 1,020 847 950 Spain 603 624 620 642 603 482 530 UK 439 353 362 364 350 263 300 Other Europe 2,988 3,122 3,406 3,459 3,370 2,814 3,049 Total Europe 8,580 8,574 8,992 9,317 8,932 6,696 7,614 Brazil 651 759 773 854 932 810 965 Canada 755 801 846 718 714 603 665 USA 5,800 6,114 6,150 5,580 5,615 4,503 5,130 Other Americas 691 699 754 825 901 1,028 1,077 Total Americas 7,897 8,374 8,524 7,977 8,161 6,944 7,837 Oceania 437 451 374 396 385 382 396 Global Total 30,285 32,040 34,366 37,953 38,120 35,138 39,387 Western World 22,392 22,964 23,617 23,544 23,729 19,404 22,116 Former Socialist 7,892 9,077 10,749 14,408 14,391 15,734 17,271 Source: GFMS, WBMS, LME A7 Independent - Informed - International
    • Copper - November 2009 Copper Recent developments Outlook for the next 12 months ● Copper prices rose through the psychologically ● Supply disruptions (actual and potential) important $6,600/tonne ($3/lb) barrier during may provide some support to this market. October, aided by a series of supply problems. However, the potential upward effect on prices However, they have subsequently retraced is capped however by the poor demand outlook back below that level. between now and the end of the year. This is particularly the case given major restocking in ● An accident at Olympic Dam has led to developed economies is not set to take place production at this mine being cut to just 25% until the first quarter of 2010. of capacity until the first quarter of 2010. ● The prospects for prices in 2010 however are ● An ongoing, and protracted, strike at BHP strong, as demand is set to grow robustly, Billiton’s Spence mine has underpinned the finally supported by restocking in the early part copper price throughout the second half of the of the year and continuing supply problems. past month. Importantly, there is the potential for further industrial action in the coming ● Our alternatives (see below) suggest fairly months. limited downside from current inflated levels. Given the price performance of copper so far ● Demand concerns were a crucial drag on the in 2009, we expect that buyers (both physical price, as discussions in LME week reinforced and speculative) will be encouraged back into the view that demand outside Asia still shows the market on any correction. Our high case few tangible signs of restocking. scenario, given the on-going supply tightness, suggests a fairly swift return towards the levels ● LME inventories continued their recent upward seen in the recent bull market. trend and Shanghai stocks are also edging higher as China continues to import in large volumes. GFMS’ Forecast Scenarios Base Case, 40% Probability Represents what GFMS consider the most likely outcome for the markets. Scenario B, 35% Probability Faster recovery than under our Base Case in the near-term and stronger growth thereafter. Scenario C, 25% Probability Anaemic recovery extends well into 2010 for mature economies while growth in China eventually slows, as the impact of the stimulus package wears off. Copper Supply-Demand & Price Forecast Quarterly Copper Price & Forecast 2010 8000 (000 tonnes) Q1 Q2 Q3 Q4 Scenario B Supply/Demand Forecast (Base Case) 7000 Production 4,700 4,785 4,865 4,969 Base Case Consumption 4,700 4,800 4,850 5,057 6000 US$/tonne Balance 0 -15 15 -88 Scenario C Stocks 1,262 1,247 1,262 1,174 5000 Price Forecast ($/tonne) 4000 Base Case 6,600 6,800 7,000 7,300 Scenario B 7,000 7,250 7,500 7,800 3000 Scenario C 5,750 5,800 5,600 5,400 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Source: GFMS Source: GFMS Independent - Informed - International C1
    • Copper - November 2009 Market background is continuing at the secondary Whenan Shaft, but at this After slipping below $6,000/tonne in early October prices stage, we expect ore hoisting will be at approximately 25% picked up strongly fuelled by the combination of a weakening of capacity until full production resumes in the first quarter US dollar and a strike at the BHP Billiton operated Spence of 2010. Olympic Dam produced 194,000 tonnes of copper mine. This led to prices breaking through the psychologically in the year ended June 30, 2009. This is therefore expected important $6,600/tonne ($3/lb) level on October 24th, to cause a loss of approximately 60,000 tonnes of production to new 2009 highs. Overall though, the monthly average over the next six months. Meanwhile Escondida, majority- price was only up 1% on the prior month and if the effect owned by BHP Billiton, said in a statement it produced of the dollar depreciation is stripped out, the price received 540,740 tonnes of copper in concentrates during the first by many producers actually dropped, despite the supply nine months of 2009, down from 812,605 tonnes in the problems. same period last year. Strike takes centre stage However, the company has officially confirmed that As highlighted in our earlier research the potential for strikes the repairs to Escondida’s Laguna Seca SAG mill were to occur and consequently to impact the copper supply chain successfully completed in August 2009. Consequently, is substantial in the last third of this year. This potential has Escondida’s production in the July 2009 to June 2010 period become a reality. On 13th October workers at the Spence is expected to increase by approximately 5-10% due to the mine in Chile went out on strike, which is still on-going in successful repairs to the SAG mill and higher average ore early November. Unavoidable therefore, this fairly rapidly grade. Additionally, Escondida produced 247,386 tonnes of led to the majority of all production at the operation having copper cathodes compared with 184,396 tonnes in the year to cease. In 2008 it produced 165,000 tonnes of copper earlier period due to an increase in the level of activity and cathode. Two questions naturally remain; how much longer ore accumulation in the process stockpiles. will it last and will strike action become more widespread? Despite a recent successful conclusion of negotiations at Chile produced 464,560 tonnes of copper in September, up Escondida, there are other operations in Chile and Peru from 428,280 tonnes in September last year. In the first which have not reached any conclusions regarding labour nine months of the year, copper production was down 1.1% contracts and both these countries exhibit a long track from a year earlier at 3.94 million tonnes. Codelco was record of strikes at mines. It is worth bearing in mind that critical to this, as its copper production rose 16% to 1.21 while disruptions are likely it is our opinion that a minor level million tonnes. The increase over last year’s output was of disruption from such an event is already factored into the chiefly due to higher production at its Gaby and Codelco price as the market has been apprehensive about such a Norte operation. The former was only starting production scenario for a long time. during this period last year, while the latter raised output by 11% year-on-year (although it still produced less than in Technical problems contribute to supply tightness the same period of 2007). Slightly higher output was also Even ignoring the strike, and further potential labour recorded at Salvador and El Teniente, while output at Andina disputes, there have also been other supply disruptions. was unchanged. In fact, overall Codelco’s production was Most significantly the haulage system in the Clark Shaft at their highest since their record year of 2004. BHP Billiton’s Olympic Dam mine was damaged. Hoisting Copper Premiums Jan 05 - to Present Chinese Copper Imports 250 400 High grade cathode 200 300 tonnes 000s 150 US$/tonne 200 100 100 50 Grade A European 0 0 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Source: GFMS Source: Chinese Customs, GFMS C2 Independent - Informed - International
    • Copper - November 2009 Higher prices start to lead to higher output Asian demand bounces back... The sustained strength of prices in the past couple of months The past month has seen a degree of conflict between some has led to a market response. Most clearly this came from strong macroeconomic indicators and anecdotal evidence still Freeport McMoRan which is resuming work at its Miami indicating weak copper demand across all of the developed operation in Arizona. This project, was initially expected to economies. Indeed, our discussions confirmed our thesis require a $100 million investment, and was deferred in late that substantial restocking in the copper industry is not 2008. These activities will improve efficiencies of ongoing set to take place until the start of next year as consumers reclamation projects associated with historical mining remain wary of end use demand and the price increase in operations at the site. During the approximate five-year recent months. This has represented a key barrier in the mine life the company expects to ramp up production to price sustaining levels above $6,600/tonne. approximately 145,000 tonnes of copper per year by the second half of 2011. Elsewhere, the Zambian central bank That said, Asian economies - especially outside Japan has raised its projected output due to restarts of some - continue to rebound particularly strongly from the sharp operations due to higher prices. downturn experienced at the start of this year. This has led the IMF to recently upgrade their projected growth rates for these countries in both 2009 and 2010. Naturally Chinese imports surprise market the strength of the Chinese economy is having an impact China’s imports of refined copper bounced back in across the region and industrial production surged higher September, surprising many in the market. China’s imports in the latest release to be up 13.9% year-on-year. More of refined copper increased by 28.7% compared to August specifically impacting copper, Chinese property market floor at 282,828 tonnes, after declining for two straight months space completed was up by 25% year-on-year in the year following a record high of 378,943 tonnes in June. Average to September 2009. In fact, copper semis output is now monthly imports of refined copper were just over 120,000 up 28% year-to-date. This is substantially quicker than the tonnes in 2008, as opposed to 286,000 tonnes this year. 7.6% growth in refined production and is enabled by the Therefore, the increase in September took imports back to increase in imports so far this year. The production of power marginally below the average level achieved this year. High cables increased by 14.6% over the same period of last year. import prices are expected to have curbed further growth in The production of power generating equipment is aided by copper imports in October. Indeed, with SRB and national the government’s investment in the power sector. grid purchases completed, it is expected that imports will average less than 200,000 tonnes per month for the In Japan, output of rolled copper product rose for the sixth final quarter of the year. This will largely reflect ongoing consecutive month in September aided by the recovery in contracts, particularly those that have regular monthly automobile and semiconductor sectors. The figure from amounts set to be delivered per month for the entire year. preliminary data released by the Japan Copper and Brass Association were up 4.7% from August to 66,145 tonnes. However, it was down 17.4% compared to a year earlier. Copper LME Stocks & Price LME Stocks vs Spot Price Jan 03 - July 09 Copper Daily Stocks vs Price 10000 1200 9000 8000 Oct 09 1000 7000 US$/tonne 6000 Spot Price 800 tonnes 000s US$/tonne 4000 600 5000 400 2000 3000 200 Stocks 0 0 1 2 3 4 0 1000 Stocks (No. of Weeks Consumption) Jan 02 Jan 04 Jan 06 Jan 08 Sources: GFMS, LME Source: LME Jan 03 Jan 07 Jan 09 Independent - Informed - International C3
    • Copper - November 2009 ...but mature economies are still weak Meanwhile, in the US and Europe demand remains weak. This was highlighted by General Cable stating for the USA that “we expect continuing declines in non-residential construction spending as well as a residential construction market that will recover slowly.” The company further highlighted the weakness of the Spanish market and especially the troubled construction sector and hence the knock on impact for copper use. Copper Supply-Demand Balance 2004-2010 (000 tonnes) 2004 2005 2006 2007 2008 2009 2010 Global Production 15,928 16,573 17,295 17,952 18,272 18,268 19,319 % change y-o-y 4.3 4.1 4.4 3.8 1.8 0.0 5.8 Consumption Europe 4,170 3,877 4,254 4,111 3,901 3,460 3,750 Japan 1,279 1,223 1,282 1,252 1,184 900 1,015 USA 2,415 2,274 2,130 2,137 1,952 1,740 1,900 Total Mature 7,864 7,374 7,666 7,500 7,038 6,100 6,665 % change y-o-y 4.1 -6.2 4.0 -2.2 -6.2 -13.3 9.3 Brazil 332 334 339 330 386 332 365 China 3,381 3,652 3,604 4,957 5,199 6,330 6,819 India 350 415 440 475 500 530 565 Russia 588 635 692 671 650 595 635 Total BRICs 4,651 5,036 5,075 6,434 6,735 7,787 8,384 % change y-o-y 11.9 8.3 0.8 26.8 4.7 15.6 7.7 ASEAN 707 731 780 772 758 742 770 % change y-o-y 10.7 3.4 6.7 -1.0 -1.8 -2.1 3.8 South Korea 937 864 812 821 780 795 820 Taiwan 690 638 639 603 582 470 500 Others 1,989 2,045 2,073 2,045 2,115 2,130 2,268 Global Consumption 16,838 16,689 17,045 18,175 18,007 18,023 19,407 % change y-o-y 7.1 -0.9 2.1 6.6 -0.9 0.1 7.7 Metal balance -910 -116 250 -223 264 245 -88 Reported stock change -862 -22 264 -109 132 Reported stocks Producer stocks 614 596 745 630 595 Consumer stocks 135 104 122 134 140 Merchant stocks 11 6 6 15 25 Exchange stocks Comex 44 6 31 14 31 Shanghai Exchange 32 58 31 26 18 LME 49 92 191 199 341 Total Stocks 884 862 1,126 1,017 1,149 1,394 1,307 Total as No. weeks con 2.7 2.7 3.4 2.9 3.3 4.0 3.5 LME as No. weeks con 0.2 0.3 0.6 0.6 1.0 0.0 0.0 LME cash ($/tonne) 2,868 3,864 6,731 7,126 6,952 5,100 6,925 % change y-o-y 61.1 34.7 74.2 5.9 -2.4 -26.6 35.8 Source: GFMS, ICSG, LME C4 Independent - Informed - International
    • Copper - November 2009 Market outlook Copper Price & Forecast Trading Range Our projections for copper over the remainder of the year 10000 are cautious since the uncertainty created by the labour disputes rumbles on. The latest news is that discussions have broken down again at Spence and the strike could 8000 continue for some considerable time and if action were also to take place at other major mines this would be very 6000 supportive and is key to prices exceeding $7,000/tonne this year. Indeed, under our most positive scenario for demand, we see prices average over $7,000/tonne for every quarter 4000 next year and average $7,800/tonne in the last 3 months of the year. 2000 Jan-09 Jul-09 Jan-10 Jul-10 Under our base case in 2010, the market appears set to be Source: Thomson Reuters EcoWin, GFMS tight and potentially tightening as the year progresses. This is partly due to the restocking that is set to occur in North America and much of Western Europe from the first quarter of the year. Further support though is likely to come from On the flip side, with work commencing at Miami and the continued lack of supply growth. This will be aided by restocking not likely to occur in either North America or relatively little in the way of new mine capacity set to come Europe this year, the upward trend of copper stocks that has on stream and compared to many other base metals, and been occurring for some weeks now could accelerate further. aluminium in particular, very little in the way of idle capacity. If this is coupled with a speedy resolution at Spence then Under this base case the market is in a deficit of 88,000 the prospect of a marked correction in the price could well tonnes, weighted to the end of that year. Consequently, we become a reality in the short term. Under scenario C then expect prices to rise during the forecast period to average prices are set to remain below $6,000/tonne on average for in excess of $7,000/tonne for the second half of 2010 under each of the quarters next year as the market is in surplus the base case. during that year. Quarterly Copper Supply-Demand Balance - Base Case 2009 2010 (000 tonnes) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Global production 4,382 4,551 4,692 4,643 4,700 4,785 4,865 4,969 % change y-o-y -1.2 -0.1 0.4 0.8 7.3 5.1 3.7 7.0 Global consumption 4,270 4,550 4,615 4,588 4,700 4,800 4,850 5,057 % change y-o-y -5.4 -2.8 3.0 5.9 10.1 5.5 5.1 10.2 Market Balance 112 1 77 55 0 -15 15 -88 Reported Stocks 1,129 1,130 1,207 1,262 1,262 1,247 1,262 1,174 No. of weeks’ con 3.4 3.2 3.4 3.6 3.5 3.4 3.4 3.0 LME Cash $/tonne 3,435 4,676 5,840 6,465 6,600 6,800 7,000 7,300 % change y-o-y -55.8 -44.6 -24.1 64.1 92.1 45.4 19.9 12.9 Trading Range High 4,078 5,266 6,490 7,000 7,000 7,750 8,000 8,800 Low 3,051 3,964 4,821 5,856 5,800 5,800 6,250 6,500 Source: GFMS, ICSG, LME Independent - Informed - International C5
    • Copper - November 2009 Statistical appendix Copper Mine Production 2004-2010 (000 tonnes) 2004 2005 2006 2007 2008 2009 2010 South Africa 87 89 90 97 109 109 112 Zambia 402 433 474 509 545 590 620 Other Africa 122 149 175 217 297 418 531 Total Africa 612 671 739 823 951 1,116 1,263 China 754 777 889 946 1,023 1,025 1,080 Indonesia 843 1,065 816 789 651 710 770 Iran 146 164 216 244 248 250 260 Kazakhstan 462 402 434 407 420 375 405 Mongolia 132 129 132 133 129 135 135 Philippines 16 16 18 22 18 45 75 Other Asia 172 203 228 241 279 299 315 Total Asia 2,526 2,756 2,733 2,781 2,767 2,839 3,040 Bulgaria 94 95 110 110 105 105 108 Poland 531 512 497 452 429 430 428 Portugal 100 100 100 100 100 100 100 Russia 510 510 510 510 510 510 510 Sweden 71 71 71 71 71 71 71 Other Europe 257 271 285 324 337 334 414 Total Europe 1,563 1,558 1,573 1,566 1,552 1,550 1,631 Argentina 176 187 180 180 157 180 185 Canada 563 596 603 596 607 600 615 Chile 5,413 5,321 5,361 5,557 5,331 5,100 5,250 Mexico 406 429 334 338 247 270 360 Peru 1,036 1,010 1,049 1,190 1,268 1,220 1,275 USA 1,174 1,157 1,222 1,194 1,328 1,160 1,050 Other Americas 101 133 144 200 212 217 224 Total Americas 8,868 8,832 8,893 9,255 9,149 8,747 8,959 Australia 854 916 859 871 885 800 860 New Caledonia 173 193 194 169 160 165 170 Oceania 1,028 1,109 1,053 1,040 1,045 965 1,030 Global Total 14,595 14,925 14,991 15,465 15,463 15,217 15,923 Western World 11,850 12,237 12,122 12,603 12,525 12,308 12,915 Former Socialist 2,745 2,687 2,869 2,863 2,938 2,909 3,008 Source: GFMS, ICSG, LME C6 Independent - Informed - International
    • Copper - November 2009 Refined Copper Production 2004-2010 (000 tonnes) (000 tonnes) 2004 2005 2006 2007 2008 2009 2010 South Africa 87 99 100 111 93 107 110 Zambia 410 399 418 431 416 595 700 Other Africa 31 31 35 47 75 181 261 Total Africa 528 529 553 589 583 883 1,071 China 2,030 2,600 3,003 3,499 3,791 3,850 4,080 India 405 493 625 715 675 655 725 Indonesia 211 263 218 277 255 265 275 Japan 1,380 1,395 1,532 1,577 1,540 1,430 1,470 Kazakhstan 445 419 428 406 398 360 415 Philippines 176 172 181 160 175 180 185 South Korea 496 519 576 582 537 542 560 Other Asia 519 415 436 421 425 441 449 Total Asia 5,662 6,277 6,998 7,637 7,795 7,723 8,159 Belgium 393 386 391 394 396 280 270 Germany 653 638 662 666 691 682 705 Poland 550 560 557 533 521 510 550 Russia 919 935 951 949 862 800 860 Scandinavia 407 394 407 358 396 380 385 Spain 258 309 299 308 319 330 370 Other Europe 285 331 364 352 422 449 463 Total Europe 3,465 3,553 3,631 3,560 3,607 3,431 3,603 Brazil 208 199 220 218 226 225 235 Canada 527 515 501 454 444 450 465 Chile 2,837 2,824 2,811 2,936 3,061 3,070 3,130 Mexico 373 415 369 357 295 300 320 Peru 505 510 508 414 464 430 460 USA 1,306 1,255 1,250 1,319 1,270 1,240 1,350 Other Americas 26 26 26 26 26 26 26 Total Americas 5,782 5,745 5,684 5,724 5,785 5,741 5,986 Oceania 490 469 429 442 502 490 500 Global Total 15,928 16,573 17,295 17,952 18,272 18,268 19,319 Western World 11,594 11,825 12,139 12,350 12,425 12,448 13,109 Former Socialist 4,334 4,748 5,156 5,602 5,846 5,820 6,210 Source: GFMS, ICSG, LME Independent - Informed - International C7
    • Copper - November 2009 Refined Copper Consumption 2004-2010 (000 tonnes) 2004 2005 2006 2007 2008 2009 2010 Africa 200 228 235 265 284 320 351 China 3,381 3,652 3,604 4,957 5,199 6,330 6,819 India 350 415 440 475 500 530 565 Japan 1,279 1,223 1,282 1,252 1,184 900 1,015 Malaysia 175 180 189 184 177 175 179 South Korea 937 864 812 821 780 795 820 Taiwan 690 638 639 603 582 470 500 Thailand 240 241 254 250 245 242 250 Turkey 281 316 320 358 360 358 382 Other Asia 720 731 838 859 930 955 995 Asia Total 8,053 8,261 8,378 9,759 9,958 10,755 11,525 Belgium 300 269 291 309 285 245 265 France 550 505 540 440 410 332 365 Germany 1,121 1,180 1,398 1,392 1,365 1,200 1,320 Italy 719 681 801 764 635 552 600 Poland 267 275 275 297 267 245 260 Russia 588 635 692 671 650 595 635 Scandinavia 297 255 266 259 237 211 230 Spain 331 321 319 330 354 332 350 UK 242 200 180 55 54 53 55 Other Europe 624 507 504 624 654 -3,765 -4,080 Total Europe 5,039 4,828 5,265 5,141 4,911 0 0 Brazil 332 334 339 330 386 332 365 Canada 297 290 301 206 195 177 193 Mexico 406 430 360 340 325 305 330 USA 2,415 2,274 2,130 2,137 1,952 1,740 1,900 Other Americas 206 202 208 205 203 200 206 Total Americas 3,657 3,530 3,339 3,218 3,061 2,754 2,994 Oceania 167 155 143 148 151 138 150 Global Total 16,838 16,689 17,045 18,175 18,007 18,023 19,407 Western World 12,361 11,886 12,161 11,862 11,473 10,446 11,268 Former Socialist 4,477 4,802 4,884 6,313 6,534 7,577 8,139 Source: GFMS, ICSG, LME C8 Independent - Informed - International
    • Lead - November 2009 Lead ● Under our base case, GFMS is projecting Recent developments a surplus of 60,000 tonnes in 2010. This is a slightly smaller surplus than ILZSG is ● Chinese production was stronger than expected forecasting. in September despite the poisoning scares. Shutdowns are continuing to have an effect on ● Although we believe that prices may have a individual operations, with Henan Yuguang correction in the short term, we expect that Gold & Lead Co, reportedly shutting 4,000 tpm prices will trend higher in 2010, projecting an of crude lead capacity. average of $2,500/tonne in Q4. We forecast an average price of $2,245/tonne in 2010, up by ● China continues to drive global demand, just over 30% from this year’s likely outturn of buoyed by a strong auto sector. Imports have $1,710/tonne. however dipped. ● Our high case forecast implies that any ● Elsewhere demand is weak, although should correction in the lead market will be viewed as improve on strong replacement battery demand a buying opportunity and any price weakness over Q4 . will be short-lived. The tight concentrate position and on-going investment interest in Outlook for the next 12 months the market could see prices exceed $3,000/ tonne next year and average $2,550/tonne. ● We are positive on the fundamentals of lead going into the closing months of the year, but ● Even under our low case scenario, the this may not filter through to higher prices downside is fairly limited and we do not from current inflated levels. envisage a return to the sub $1,500/tonne level that prevailed for much of the first half ● Nevertheless Chinese supply disruptions will of this year. Our low case forecast for 2010 is continue to support the price level (i.e. above $1,790/tonne. $2,000/tonne) in the short term. GFMS’ Forecast Scenarios ● Further forward, much will depend on the Base Case, 40% Probability willingness of the Chinese government to cut Represents what GFMS consider the most likely outcome for the markets. production to contain pollution from smelters. Scenario B, 35% Probability Recent developments suggest that any Faster recovery than under our Base Case in the near-term and reduction in Chinese output on environmental stronger growth thereafter. grounds will prove to be temporary. Scenario C, 25% Probability Anaemic recovery extends well into 2010 for mature economies while growth in China eventually slows, as the impact of the stimulus package wears off. Lead Supply-Demand & Price Forecast Quarterly Lead Price & Forecast 2010 3000 (000 tonnes) Q1 Q2 Q3 Q4 Supply/Demand Forecast (Base Case) Scenario B Production 2,330 2,355 2,365 2,447 2500 Consumption 2,300 2,325 2,325 2,487 US$/tonne Balance 30 30 40 -40 Base Case 2000 Stocks 394 424 464 424 Price Forecast ($/tonne) Scenario C 1500 Base Case 2,175 2,000 2,300 2,500 Scenario B 2,400 2,500 2,600 2,700 Scenario C 1,850 1,800 1,700 1,800 1000 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Source: GFMS Source: GFMS Independent - Informed - International L1
    • Lead - November 2009 Market background restart until 2010. The cause of the delay is unknown. As Prices have continued their upward trend, rising for the a result, the Peruvian government is weighing whether to eighth consecutive month to $2,241/tonne in September. eliminate the 9% import tariff on lead as the country’s only Prices in late October have been buoyed by the sector wide smelter that processes the metal is shut, squeezing local bounce and further concerns over Chinese production, rising supplies. to $2,411/tonne on October 22. The pace of inventory accumulation has slowed significantly, rising to 129,600 …with the poisoning scares leading to only limited losses tonnes on the last day of October, up a marginal 1.6% over output in September the month. In early November, LME stocks have barely Chinese production experienced a less severe decline than changed and prices remain close to recent highs. expected in September, down just 5% month-on-month to 335,153 tonnes from August’s record high of 352,797 The latest ILZSG data shows the global lead market in tonnes. A much larger decline was anticipated by many as surplus by 57,000 tonnes in the first eight months of 2009. numerous operations were believed to have closed in the From both a historical perspective and compared to other face of growing local protests over a spate of lead poisoning metals, LME inventories remain low and still only represent cases. Likewise, GFMS anticipated losses to materialise 1.3 weeks of consumption. ILZSG expects the lead market in the immediate aftermath of the protests, although we to be in an 80,000 tonnes surplus in 2009, up significantly highlighted our perception that the rally in early September from its 37,000 tonne projection made in April. It also had overdone the scale of the expected cutbacks in supply. believes that the surplus will widen to over 100,000 tonnes The figures have nevertheless prompted speculation that next year as an expected 7.2% increase in demand is some of the smelters ordered to shut down last month outweighed by a 7.4% increase in production. As detailed continued to operate. Cumulative production was up 20.2% on page L4, GFMS projects a surplus of 91,000 tonnes in over the first nine months to 2.760m tonnes. 2009 followed by a surplus of 60,000 tonnes next year. We stated in our last report that we expected October Global production supported by China… production to also be lower than the August peak, and recent ILZSG expects global production to rise by 3.4% to 9.0 developments have done little to suggest otherwise. In million tonnes in 2009. Production is currently up 1.6% year- addition to reportedly shutting some production through on-year over the first eight months to 5.784m tonnes as September, Henan Yuguang Gold & Lead Co, China’s largest production cutbacks in the “West” this year have been offset producer, is believed to have shut 4,000 tpm of crude by rising output in China (prior to the poisoning related lead capacity (located in Jiyuan, Henan province) as local cutbacks). protests against lead poisoning continue. Also in Jiyuan, Wanyang Lead and Jinli Lead also previously closed some As noted in previous reports, announcements of restarts sintering smelting capacity, in addition to more than 30 outside of China remain limited. We noted in our last smaller smelters in the same area. With Chinese authorities monthly that Doe Run was optimistic over a restart of La desperate to keep the operations running, there have Oroya in “the next few weeks”. However, it has now been been plans to relocate 15,000 residents of Jiyuan in Henan revealed that operations at the smelter, stopped since June province away from the plants. because of financial and environmental troubles, might not Lead Premiums Chinese Lead Imports 50 250 40 US high grade ingot 200 tonnes 000s 30 150 US$/tonne 20 100 European warehouse Rotterdam 10 50 0 0 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Source: Chinese Customs; GFMS Source: GFMS L2 Independent - Informed - International
    • Lead - November 2009 Increased Chinese concentrate availability restricts Chinese apparent consumption was up 22% over the first decline on refined side nine months of the year, to 2.805m tonnes according to China’s spot treatment charges for imported lead the latest CNI-A data. In looking at underlying demand concentrates have surged to $120/tonne, from $90 before conditions, significant strength from the auto sector remains the Chinese holidays, as domestic mines raise operating a key driver, as total automotive production over the first rates in response to higher prices. We noted in our last nine months was up 32% to 9.612m units. Positive news monthly that concentrate production had been improving, was carried through September as car production for the and September production continued this trend reaching month totalled a record 1.362m units, up 19.4% year-on- a record 132,266 tonnes, up over a quarter year-on-year. year. Total vehicle sales also posted similar gains, up 17% Chinese concentrate production was up 8.3% over the first year-on-year for September leaving the cumulative figure up nine months to 915,422 tonnes. As a result of this greater 34.2%. availability of local concentrate, the demand for imported concentrate has dipped thus pushing up treatment charges. However, we do believe that the apparent consumption We noted that concentrate availability could have previously figure does overestimate the strength of underlying demand restricted operating rates at smelters, and this increase and believe that a stockpile has been built in the country. in availability could be one reason for the smaller than Cumulative net imports over the first nine months totalled expected drop in refined lead output that was experienced in 134,191 tonnes, a sharp reversal from the net export September. position of 12,646 tonnes over the corresponding position of 2008. Net imports have however dipped from the 36,202 On a global basis mine production was down by a marginal tonnes level seen in April, to 3,336 tonnes in September 1.8% over the first eight months to 2.533m tonnes on - down 12.6% month-on-month and 44.9% year-on-year. weakness in Australia, Peru and the USA. Over the year as The strength of domestic production figures of late have a whole, ILZSG expects global lead mine output to rise by however compensated by-and-large for the recent fall in 1.3% to 3.94m tonnes and by 5.8% in 2010 to 4.17 million imports, keeping the Chinese market well supplied and in tonnes. turn boosting the apparent consumption figure. Chinese auto strength continues to support global Demand elsewhere is weak, but hopes of improvement demand into Q4 The latest ILZSG statistics show global consumption up 0.1% Elsewhere, US demand is down 10.6% over the first eight over the first eight months to 5.727m tonnes. The statistics months, and European demand was down 19.7%, and these highlight the extent to which China has supported the rest of countries continued to struggle over the traditionally weak the world, as excluding China demand is down a significant summer months. US auto sales picked up from the 9.2m 14.2%. A bounce in demand is expected over the latter part annualised rate recorded units in September, to 10.4m units of the year as sales of replacement batteries rise over the in October. However, as expected the annualised rate was winter months. For the year as a whole, ILZSG is expecting still down notably on the 14 million rate seen in August, a 3% rise in lead usage to 8.9 million tonnes. which was inspired by the cash for clunkers scheme. Lead LME Stcosk & Price LME Stocks vs Spot Price Lead Daily Stocks vs Price 4000 250 4000 3500 3000 Spot Price Oct 09 200 3000 2500 US$/tonne tonnes 000s 150 US$/tonne 2000 2000 1500 100 1000 1000 50 500 Stocks 0 0 0.0 0.5 1.0 1.5 2.0 0 Stocks (No.of Weeks Consumption) Jan 02 Jan 04 Jan 06 Jan 08 Source: GFMS, LME Source: LME Independent - Informed - International Jan 03 Jan 05 Jan 07 Jan 09 L3
    • Lead - November 2009 This highlights the fact that consumers are still putting off distributor restocking and a slight improvement in economic purchases of big-ticket items like new cars in light of a slow conditions. economic recovery. European demand for lead usually picks up from the battery In addition, August replacement battery shipments were sector in winter, which should combine with restocking to down 1.4% on the July figure according to Battery Council provide some positive outlook for demand in the region. International, which does not bode well for the market. This ILZSG expects European demand to decline by 15.6% this is particularly the case as August is typically a strong month year to its lowest level in more than 50 years. Premiums for the replacement battery sales as hot weather takes a remain in the region of $35-50/tonne. The mature toll on car batteries. Having said this, shipments in August economies of Asia also showed weakness, with Japan in 2009 were up 8.5% year-on-year to 8.3 million units, on particular suffering a notable 34.6% decline. Lead Supply-Demand Balance 2004-2010 (000 tonnes) 2004 2005 2006 2007 2008 2009 2010 Global Production 6,980 7,626 7,922 8,114 8,671 8,943 9,497 % change y-o-y 3.2 9.3 3.9 2.4 6.9 3.1 6.2 Consumption Europe 1,920 1,920 1,893 1,877 1,778 1,519 1,602 Japan 292 291 303 279 261 200 210 USA 1,502 1,587 1,622 1,510 1,515 1,450 1,480 Total Mature 3,714 3,798 3,818 3,666 3,554 3,169 3,292 % change y-o-y 1.9 2.3 0.5 -4.0 -3.1 -10.8 3.9 Brazil 102 119 114 102 129 123 128 China 1,510 1,973 2,213 2,573 3,211 3,900 4,250 India 150 160 170 175 181 190 200 Russia 84 80 79 76 85 70 75 Total BRICs 1,846 2,332 2,576 2,926 3,606 4,283 4,653 % change y-o-y 19.9 26.3 10.5 13.6 23.2 18.8 8.6 ASEAN 376 347 375 356 359 324 341 % change y-o-y 8.0 -7.7 8.1 -5.1 0.8 -9.7 5.2 South Korea 376 384 337 342 312 290 305 Taiwan 162 115 123 93 70 80 90 Others 821 807 833 798 764 706 756 Global Consumption 7,295 7,783 8,062 8,181 8,665 8,852 9,437 % change y-o-y 6.9 6.7 3.6 1.5 5.9 2.2 6.6 Metal balance -315 -157 -140 -67 6 91 60 Reported stock change -114 -5 -18 -4 40 Reported stocks Producers 122 138 121 114 146 Consumers 130 104 106 106 114 Merchants 1 2 2 1 1 LME 40 44 41 45 45 Total Stocks 293 288 270 266 306 397 457 Total as No. weeks con 2.1 1.9 1.7 1.7 1.8 2.3 2.5 LME as No. weeks con 0.3 0.3 0.3 0.3 0.3 LME cash ($/tonne) 888 976 1,288 2,600 2,085 1,710 2,245 % change y-o-y 72.1 9.9 32.0 101.9 -19.8 -18.0 31.3 Source: GFMS, ILZSG, LME L4 Independent - Informed - International
    • Lead - November 2009 Market outlook Lead Price & Forecast Trading Range With continued investment buying and the disruptions to 3000 Chinese output, we expected prices to hold on to much of the recent gains in the short term. Going forward, the 2500 relatively low level of LME inventories is tested by recovering demand from the “West” with the onset of the battery 2000 season. Also, on the supply side prices will benefit in the near term from the reduction (or at least stalling) in Chinese 1500 output which has been met with limited restarts elsewhere across the globe. 1000 Much will be reliant on whether significant capacity is 500 restarted in light of the higher prices and the extent to Jan-09 Jul-09 Jan-10 Jul-10 which Chinese production is affected by the recent poisoning Source: Thomson Reuters EcoWin, GFMS scares. As the rise is more driven by investment buying rather than overly positive fundamentals, any capacity increase at this point would be detrimental to the market. remarkably low. Therefore, any improvement in the We forecast an average Q4 price of $2,250/tonne, leading to fundamentals will quickly filter through to further price an average 2009 price of $1,710/tonne. increases. The stimulus is more likely to come from the supply than demand side either through continued tightness In 2010, we expect prices will run out of steam over the at the concentrate stage of cutbacks at teh refined stage on first half of the year, with a moderate declining trend being environmental grounds. Our high case scenario projects an in place and a second quarter average of $2,000/tonne. average annual price of $2,550/tonne in 2010. Subsequently, as the market gradually moves to deficit, we forecast prices to recover materially, averaging $2,300/tonne Even under our low case scenario, prices are forecast to and $2,500/tonne in the third and fourth quarter and we remain high from a historical perspective and in relation to would not be surprised to see prices above $2,700/tonne marginal production costs. The most likely trigger for low before the end of the year. GFMS’ forecast for the full-year prices is continued gains in Chinese production (both primary average in 2010 is $2,245/tonne. and secondary output is rising sharply). This in turn would lead to further declines in Chinese imports. We forecast lead Given the extent of the economic downturn the level of prices retreating to around $1,800/tonne in our low case LME inventories at this stage of the economic cycle are scenario. Quarterly Lead Supply-Demand Balance - Base Case 2009 2010 (000 tonnes) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Global production 2,175 2,200 2,260 2,308 2,330 2,355 2,365 2,447 % change y-o-y -0.7 0.1 6.2 5.0 7.1 7.0 4.6 6.0 Global consumption 2,125 2,177 2,225 2,325 2,300 2,325 2,325 2,487 % change y-o-y -3.1 2.1 7.2 10.1 8.2 6.8 4.5 7.0 Market Balance 50 23 35 -17 30 30 40 -40 Reported Stocks 335 346 381 364 394 424 464 424 No. of weeks’ con 2.0 2.1 2.2 2.0 2.2 2.4 2.6 2.2 LME Cash $/tonne 1,160 1,506 1,925 2,250 2,175 2,000 2,300 2,500 % change y-o-y -59.9 -35.0 0.5 79.8 87.6 32.8 19.5 11.1 Range High 1,341 1,797 2,400 2,450 2,350 2,300 2,500 2,750 Low 992 1,242 1,567 1,900 1,900 1,800 2,000 2,150 Source: GFMS, ILZSG, LME Independent - Informed - International L5
    • Lead - November 2009 Statistical appendix Lead Mine Production 2004-2010 (000 tonnes) 2004 2005 2006 2007 2008 2009 2010 Total Africa 117 112 114 90 95 93 93 China 997 1,142 1,331 1,402 1,543 1,625 1,700 Other Asia 169 168 190 193 210 222 230 Total Asia 1,166 1,310 1,521 1,595 1,753 1,847 1,930 Ireland 64 72 62 57 50 50 50 Sweden 54 60 56 63 77 75 78 Other Europe 111 123 127 164 187 184 184 Total Europe 229 255 245 284 314 309 312 Mexico 118 135 135 137 141 145 150 Peru 306 319 313 329 345 315 325 USA 439 436 429 444 410 410 425 Other Americas 122 128 137 133 225 205 215 Total Americas 985 1,018 1,014 1,043 1,121 1,075 1,115 Oceania 642 715 621 589 594 535 600 Global Total 3,139 3,410 3,515 3,601 3,877 3,859 4,050 Western World 1,972 2,103 2,009 2,012 2,138 2,038 2,154 Former Socialist 1,167 1,307 1,506 1,589 1,739 1,821 1,896 Source: GFMS, ILZSG Refined Lead Production 2004-2010 (000 tonnes) 2004 2005 2006 2007 2008 2009 2010 Total Africa 100 130 122 118 115 98 103 China 1,934 2,391 2,715 2,788 3,206 3,800 4,100 Japan 283 275 280 276 279 240 270 South Korea 243 256 240 260 270 280 290 Other Asia 542 541 573 574 644 649 664 Total Asia 3,002 3,463 3,808 3,898 4,399 4,969 5,324 Germany 411 418 379 405 415 360 400 Italy 202 211 191 212 200 175 200 UK 243 304 298 275 303 300 300 Other Europe 736 774 792 887 897 842 869 Total Europe 1,592 1,707 1,660 1,779 1,815 1,677 1,769 Canada 241 230 250 237 259 260 260 Mexico 242 256 253 255 255 240 255 USA 1,262 1,293 1,303 1,303 1,280 1,245 1,275 Other Americas 260 270 273 272 278 194 241 Total Americas 2,005 2,049 2,079 2,067 2,072 1,939 2,031 Oceania 281 277 253 252 270 260 270 Global Total 6,980 7,626 7,922 8,114 8,671 8,943 9,497 Western World 4,616 4,785 4,780 4,817 4,910 4,613 4,852 Former Socialist 2,364 2,841 3,142 3,297 3,761 4,330 4,645 Source: GFMS, ILZSG L6 Independent - Informed - International
    • Lead - November 2009 Refined Lead Consumption 2004-2010 (000 tonnes) 2004 2005 2006 2007 2008 2009 2010 Africa/Oceania 154 141 136 128 134 122 130 China 1,510 1,973 2,213 2,573 3,211 3,900 4,250 Japan 292 291 303 279 261 200 210 South Korea 376 384 337 342 312 290 305 Other Asia 917 865 929 899 872 842 901 Total Asia 3,095 3,513 3,782 4,093 4,656 5,232 5,666 Belgium 60 42 55 53 54 50 50 France 215 215 210 210 190 165 175 Germany 395 407 387 409 369 310 320 Italy 272 269 285 269 276 225 245 Spain 246 270 272 260 248 205 215 UK 295 271 270 239 236 205 210 Other Europe 521 526 493 513 490 429 462 Total Europe 2,004 2,000 1,972 1,953 1,863 1,589 1,677 Mexico 262 267 271 235 215 185 200 USA 1,502 1,587 1,622 1,510 1,515 1,450 1,480 Other Americas 278 275 279 262 282 274 284 Total Americas 2,042 2,129 2,172 2,007 2,012 1,909 1,964 Oceania 41 31 30 27 26 23 26 Global Total 7,295 7,783 8,062 8,181 8,665 8,852 9,437 Western World 5,439 5,443 5,512 5,246 5,100 4,639 4,850 Former Socialist 1,856 2,340 2,550 2,935 3,565 4,213 4,587 Source: GFMS, ILZSG Independent - Informed - International L7
    • Nickel & Cobalt - November 2009 Nickel Recent developments ● In terms of prices, we believe that the nickel market will cling on to the bulk of the ● Nickel prices in October rallied back close to recent gains despite little support from the $20,000/tonne despite LME stocks setting new fundamentals due to the general buoyancy of records, and some bearish signals from the the sector. stainless steel sector. ● There will eventually be support from firmer ● Stainless steel prices have increased sharply so demand growth as the year progresses, which far this year but this is almost solely down to should enable the cash price to average increases in the alloy surcharge rather than the $18,700/tonne in 2010. underlying base price. As alloy surcharges are essentially fixed, this means that base prices ● If greenfield projects come onstream on have come under pressure. schedule, there is the potential for the oversupply suggested by the INSG. Our low ● A number of stainless producers in Europe and case average for 2010 is $16,250/tonne. North America have recently announced their results for the third quarter. Generally they ● The restocking phase in both the nickel and are fairly cautious about short-term demand stainless steel sector has yet to emerge. If prospects. this “kicks in” during 2010, then there is the potential for further gains in prices. However, ● Vale Inco has confirmed that the long-awaited even under our high case, the stock overhang Goro project will be commissioned in January. will cap the increase, and our forecast for next This provides an unwelcome remainder of the year is $21,000/tonne. fairly long list of new projects that the nickel market will have to absorb. Outlook for the next 12 months GFMS’ Forecast Scenarios ● The latest bi-annual projections from INSG Base Case, 40% Probability paint a bearish scenario for the fundamentals Represents what GFMS consider the most likely outcome for the in 2010, forecasting a surplus of around markets. 90,000 tonnes. Our analysis points to a much Scenario B, 35% Probability smaller surplus next year of 20,000 tonnes (our Faster recovery than under our Base Case in the near-term and stronger growth thereafter. estimate of the surplus in 2009 is also below Scenario C, 25% Probability that of the INSG). Anaemic recovery extends well into 2010 for mature economies while growth in China eventually slows, as the impact of the stimulus package wears off. Nickel Supply-Demand & Price Forecast Quarterly Nickel Price & Forecast 2010 25000 (000 tonnes) Q1 Q2 Q3 Q4 Scenario B Supply/Demand Forecast (Base Case) Consumption 320 330 340 371 20000 Production 340 345 330 365 US$/tonne Balance 20 15 -10 -6 Base Case Stocks 207 222 212 206 15000 Price Forecast ($/tonne) Scenario C Base Case 17,750 18,000 19,000 20,000 Scenario B 20,000 20,000 21,000 23,000 Scenario C 15,000 16,000 16,500 17,000 10000 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Source: GFMS Source: GFMS N1 Independent - Informed - International
    • Nickel & Cobalt - November 2009 Market background ...as greenfield capacity starts to come onstream Nickel prices performed surprisingly strongly in October with However, most other recent supply side developments have the cash quote at one stage approaching $20,000/tonne tended to be bearish. The high level of nickel prices is despite a fairly lacklustre fundamental background. The encouraging higher production even if many of the projects average price in October at $18,525/tonne was the second that were closed, when prices were around $10,000/tonne, highest recorded so far year. Prices have traded around remain idled. The commissioning of the Vale Inco’s Goro $18,000/tonne in early November as stocks on the LME project in early 2010 provides an unwelcome reminder to the remain around 130,000 tonnes. backlog of nickel projects that could potentially boost supply. Also the market is having to absorb higher levels of Vale Inco has announced it will start operations in January production, particularly in China, and the long-awaited Goro and that production next year will be 20,000 tonnes. The project looks set to start output in early 2010. Although the ramp up to full capacity of 60,000 tpy is a slow one, and demand side of the nickel market has benefited from the may not be complete until 2013. This should be followed by recent rise in stainless output, these increases are putting the company’s Onca Puma project in 2011, which will have a the stainless market under some pressure, which could contained capacity of 58,000 tpy of ferro-nickel. constrain further increases to production and hence nickel demand. Output of ferro-nickel at PT Aneka Tambang should increase by 42% next year with the restart of a 15,000 tpy smelter. Lower output, now the exception rather than the Production should increase from this year’s target of 12,000 rule... tonnes to 17,000 tonnes. Refined production up to August was about 3.4% down on year earlier levels. However, with prices now comfortably Of more immediate concern is the potential for further above marginal costs, the focus of the market is generally gains in the Chinese nickel pig iron production. Chinese shifting towards the prospects for higher, rather than lower, nickel ore imports more than doubled month-on-month in output moving forward. Nevertheless, Norilsk has recently September and were over 300% higher year-on-year at 2.81 announced that its nickel output in 2009 should be 284,000 million tonnes. According to the CNI-A, domestic nickel- tonnes, just below the bottom end of its previous guidance in-concentrate rose by 23.9% to end September to 62,425 of 285,000-300,000 tonnes. tonnes. Refined output rose by 21.4% to 118,213 tonnes. In the first nine months of this year, the company produced Market largely unaffected by lower Chinese imports 207,454 tonnes of nickel compared to 218,474 tonnes a year In common with most of the base metals, Chinese imports earlier. Output in the third quarter was 66,703 tonnes, down of refined nickel have fallen sharply from the record levels from 75,067 tonnes in the same period in 2008. in the summer months. However, they are still running at a rate (in August and September) of around 20,000 tonnes Nickel Premiums Chinese Nickel Imports 2500 50 US melting premium 2000 40 tonnes 000s 1500 30 US$/tonne Briquettes 1000 20 4*4 cathode 500 10 99.7% uncut cathode 0 0 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Source: GFMS Source: Chinese Customs, GFMS Independent - Informed - International N2
    • Nickel & Cobalt - November 2009 per month. Given the weakness in the stainless steel market The downside of these artificial incentive schemes i.e. they and high nickel stocks for both concentrate and refined metal merely bring forward purchases rather than create new within the country, we expect refined metal imports to fall demand may not be felt until 2010. There has also been further in the final quarter of the year. some slight improvement in offtake from the consumer goods sector, but capital goods and construction remain Strength in stainless proves to be short-lived… weak. A number of stainless mills have released their third quarter results. They highlight a number of features, which on …as some mills cut output balance are not particularly positive for the fundamentals In response to weak demand conditions, some stainless of the nickel market. In our earlier research, we noted the mills have been forced to reduce output. Tang Eng reduced 24.5% quarter-on-quarter increase to global stainless output operating rates by 20% in October and the company raised in the second quarter. the possibility of extending these cuts. The company has the capacity to produce around 30,000 tpm. Elsewhere in East Figures from Acerinox detail the on-going turnaround Asia, Posco has stated that it will keep domestic stainless in stainless output. Although cumulative output up to prices unchanged in November and will, importantly from a September was down 21% at 1.385 million tonnes, output nickel perspective, cut stainless output by 16% in November in the third quarter was up 40% from the second at 610,900 to 15,100 tonnes. tonnes. Again we understand that demand for stainless in the The company stated that the improvement in demand seen region is weak with some inventory build having taken place in the third quarter is likely to ease during the remainder of following the increases in stainless output in the second the year. Nevertheless for 2010, it projects demand growth and third quarters. Stainless producers in China have also in the range of 6-10%. Outokumpu is possibly even more been forced to trim output. A number of mills implemented cautious about demand prospects. Underlying demand maintenance programmes in October and lower production is reported to be weak, and purchasing by distributors is rates could remain in place in the last two months of the being dictated by changes in the alloy surcharge rather than year. stronger consumption. Trends in stainless prices encapsulate the relatively weak In North America, AK Steel reports that buying activity has conditions in that market. Base prices for 304 CR material picked up; however it is mainly in ferritic grades going to have barely changed so far this year, although the range has the auto sector. This trend is repeated in a number of other widened. They are currently trading in a range of €1,180- regional markets. The various vehicle scrappage schemes 1,350/tonne compared to €1,180-1-270/tonne in August. have been successful in slashing vehicle inventories, which The alloy surcharge of this period has increased from €875/ has in turn enabled manufacturers to raise output (and tonne to €1,050. hence boost metal demand). Nickel LME Stocks & Price LME Stocks vs Spot Price Nickel Daily Stocks vs Price 60000 150 60000 Spot Price 50000 50000 120 40000 40000 tonnes 000s US$/tonne 90 US$/tonne 30000 Oct 09 30000 60 20000 20000 30 10000 10000 Stocks 0 0 0 0 2 4 6 8 10 Jan 02 Jan 04 Jan 06 Jan 08 Stocks (No.of Weeks Consumption) Sources: Thomson Reuters Ecowin, LME Source: GFMS, LME N3 Independent - Informed - International Jan 03 Jan 05 Jan 07 Jan 09
    • Nickel & Cobalt - November 2009 Market outlook On supply side there are a large number of unknowns. In The latest bi-annual projections from the International the short term, there is uncertainty concerning the length Nickel Study Group (INSG) paint a bearish scenario for the of the strike at Vale Inco’s Sudbury and Voisey’s Bay fundamentals in 2010. It forecasts consumption at 1.38 operations. The future of the next generation of PAL projects million tonnes (up 11.5% from 1.21 million tonnes in 2009), will be put to the test with the commissioning of the Goro while nickel production will be 4.3% higher at 1.44 million project. At this stage, we are assuming that Vale Inco’s tonnes, implying a surplus of around 90,000 tonnes. fairly conservative target of 20,000 tonnes next year will be achieved. However, experience not only of the dire history of Our analysis points to a much smaller surplus next year of the PAL projects but also the commissioning of new capacity 20,000 tonnes (our estimate of the surplus in 2009 is also generally highlights the potential for lower than expected below that of the INSG). Although the stainless steel sector output. Another potential contributor to higher nickel supply is ending 2009 on a relatively weak note, GFMS believe that in 2010 is the Ramu nickel project. demand will respond to the improving economic climate in 2010 given that pipeline inventories of stainless steel are still low. Nickel Supply-Demand Balance 2004-2010 (000 tonnes) 2004 2005 2006 2007 2008 2009 2010 Global Production 1,251 1,288 1,341 1,398 1,364 1,264 1,380 % change y-o-y 3.6 2.9 4.1 4.2 -2.4 -7.4 9.2 Consumption Europe 428 441 458 427 395 264 303 Japan 195 180 181 196 185 155 165 USA 128 135 145 119 121 96 110 Total Mature 751 756 784 742 702 515 578 % change y-o-y -2.5 0.6 3.7 -5.4 -5.4 -26.7 12.3 Brazil 24 26 25 22 25 24 25 China 144 195 234 328 305 460 500 India 16 16 18 19 21 15 20 Russia 27 26 26 26 26 28 30 Total BRICs 210 263 303 395 378 527 575 % change y-o-y -0.8 25.0 15.3 30.3 -4.4 39.5 9.1 South Korea 123 118 93 71 73 67 70 Taiwan 91 84 107 76 69 62 65 Others 29,109 30,820 33,079 36,669 36,898 33,969 38,099 Global Consumption 1,251 1,296 1,366 1,353 1,294 1,232 1,361 % change y-o-y 0.2 3.6 5.4 -0.9 -4.3 -4.8 10.4 Metal balance 0 -8 -25 45 70 31 20 Reported stock change 0 14 -25 38 30 Reported stocks Country stocks 77 76 80 77 76 LME 21 36 7 48 79 Total Stocks 98 112 87 125 155 186 206 Total as no. weeks consumption 4.1 4.5 3.3 4.8 6.2 7.9 7.9 LME as no. weeks consumption 0.9 1.4 0.3 1.8 3.2 LME cash ($/tonne) 13,850 14,733 24,287 37,181 21,029 14,800 18,700 % change y-o-y 43.7 6.4 64.9 53.1 -43.4 -29.6 26.4 Source: GFMS, WBMS, LME Independent - Informed - International N4
    • Nickel & Cobalt - November 2009 The market will also have to absorb higher production in Nickel Price & Forecast Trading Range Brazil from the move to full capacity at the 26,000 tpy Santa 25000 Rita project, which was commissioned in August 2009. Votorantim plans to commission its Niquelandia project in late 2010. Our supply projections are based upon continued 20000 supply restraint by existing producers together with a slower US$/tonne than expected ramp up at new facilities. We have also 15000 assumed that the rapid revival in Chinese nickel pig-iron production will begin to slow. 10000 Our quarterly supply-demand balance points to the market being in surplus in the first half of next year. Not all the 5000 surplus will end up on the LME and we believe that LME Jan-09 Jul-09 Jan-10 Jul-10 Source: Thomson Reuters EcoWin, GFMS stocks are at, or close, to their peaks, and that there will be a build of unreported stocks in China, and a rise in consumer inventories as stainless mills raise output. A small deficit demand from the stainless sector weakens. However, even could emerge in the latter part of next year. under this scenario we believe that prices on a quarterly average basis will not slip below $15,000/tonne. We believe In terms of prices, we believe that the nickel market will that the high cost Chinese nickel pig iron will provide a floor cling onto recent gains despite little support from the for the market. fundamentals. In this regard, we view the nickel market in similar vein to the aluminium market in that prices will be Our high case forecast next year of $21,000/tonne is supported by the general buoyancy of the sector rather than predicated on a sharp recovery in demand from the stainless necessarily by the individual fundamentals. There will be sector. Although inventories will still remain relatively high support nevertheless from firmer demand growth as the year from a historical perspective, it should be noted that nickel progresses, which should enable the cash price to average prices have already briefly exceeded $20,000/tonne so far $18,700/tonne in 2010 compared to this year’s likely outturn this year. of around $14,800/tonne. Over the course of the cycle, nickel typically displays much greater volatility than the other base metals. However given the massive stock overhang on the LME we expect that our alternative projections will be fairly close to our base case. The driver of our low case scenario is the potential inability of the nickel market to absorb new projects (such as Goro) if Quarterly Nickel Supply-Demand Balance - Base Case 2009 2010 (000 tonnes) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Global production 290 324 320 330 340 345 330 365 % change y-o-y -17.2 -7.6 -3.8 -0.2 17.2 6.5 3.1 10.6 Global consumption 265 320 320 327 320 330 340 371 % change y-o-y -23.1 -7.2 1.6 12.8 20.8 3.1 6.3 13.5 Market Balance 25 4 0 3 20 15 -10 -6 Reported Stocks 180 184 184 187 207 222 212 206 As no. weeks consumption 8.8 7.5 7.5 7.4 8.4 8.7 8.1 7.2 LME Cash $/tonne 10,459 12,992 17,614 18,100 17,750 18,000 19,000 20,000 % change y-o-y -63.8 -49.5 -7.2 66.3 69.7 38.5 7.9 10.5 Trading Range High 13,420 16,010 21,070 20,000 20,000 20,000 21,000 23,000 Low 9,405 9,555 14,360 15,500 15,000 16,000 16,500 17,000 Source: GFMS, WBMS, LME N5 Independent - Informed - International
    • Nickel & Cobalt - November 2009 Cobalt Cobalt Supply-Demand & Price Forecast 2010 Market background (tonnes) Q1 Q2 Q3 Q4 The LME is already beginning to influence the cobalt even Supply/Demand Forecast (Base Case) before the end February 2010 launch of the contract. Consumption 14,250 14,550 14,000 14,758 Demand for Russian material (99.3%) has been strong Supply 13,850 14,000 14,500 14,930 Balance -400 -550 500 172 ahead of the launch. Russian material will be among the lowest grade cobalt that will be deliverable into bonded Price Forecast (99.8%, $/lb) warehouses. So far, only Vale Inco has registered its brand Base Case 24.00 25.00 26.00 21.00 with the exchange, although Norilsk, Sumitomo, Jinchuan Scenario B 26.00 28.00 29.00 30.00 and Votorantim are likely to register their brands in the near Scenario C 19.00 18.00 18.00 17.00 future. Source: GFMS The market has been supported by a number of financial the superalloys sector has a greater share of consumption, institutions that have been in the market for physical demand conditions are less buoyant. material prior to the LME launch. The price of 99.3% material has increased from $15/lb at the beginning of The market will have to absorb higher supply October to close to $20/lb in early November, while over Chambishi Metals is in the process of restarting operations, the same period 99.8% cobalt has gone up from $16.5 to which were suspended in December 2008 due to low prices, $21.5/lb. having secured sufficient concentrates. Initially the plant had been expected to produce 3,400 tonnes of cobalt in The market has also been supported by the on-going strike 2009 compared to 2,500 tonnes in 2008. at Vale Inco’s Sudbury and Voisey’s Bay operations. At this stage, there is no resolution in sight to the dispute that The cobalt market will also have to absorb the much delayed began in July. The latest financial report for the third quarter opening of the Goro project, which Vale Inco has now from Vale Inco highlighting the impact of the strike on confirmed for January of next year. Other projects, which production levels. According to the company, cobalt output are scheduled for late 2010 including Ramu and (possibly) up to September fell to 1,442 tonnes from 2,036 tonnes a Ambatovey. year earlier. There is still a huge amount of uncertainty concerning both The sharp bounce in the cobalt price has in itself created future levels of production in the DRC and the ownership its own demand in the short-term. Consumers have been of the mining assets. Freeport McMoRan is reported to taken surprise by the rally given still fairly lacklustre nature be still producing metal from its Tenke Fungurume project of end use demand. We have noted buying interest from despite the dispute over the mining permit. The project Japanese and Chinese consumers in particular. In the Far was commissioned in March last year and may eventually East, most of the improvement in demand is emanating from produce 8,000 tpy of cobalt. the battery market. In Europe and North America, where Cobalt Supply-Demand Balance 2004-2010 (tonnes) 2004 2005 2006 2007 2008 2009 2010 Global Consumption 48,561 50,892 52,602 54,817 55,454 53,171 57,558 % change y-o-y 6.0 4.8 3.4 4.2 1.2 -4.1 8.3 Global Production 48,154 50,647 52,064 53,013 57,340 52,940 57,280 % change y-o-y 12.2 5.2 2.8 1.8 8.2 -7.7 8.2 DLA Stockpile Sales 1,632 1,199 294 617 100 150 0 % change y-o-y -17.9 -26.5 -75.5 109.9 -83.8 50.0 -100.0 Global Supply 49,786 51,846 52,358 53,630 57,440 53,090 57,280 Market balance 1,225 954 -244 -1,187 1,986 -81 -278 Cobalt 99.8% $/lb 24.3 16.1 16.7 29.2 39.2 17.3 24.0 % change y-o-y 131.0 -33.8 4.0 75.0 34.1 -55.9 38.7 Cobalt 99.3% $/lb 23.2 14.8 15.7 28.0 36.7 15.8 22.0 % change y-o-y 151.9 -36.1 6.1 78.3 31.1 -56.9 39.2 Source: GFMS, CDI, WBMS, Metal-Pages Independent - Informed - International N6
    • Nickel & Cobalt - November 2009 Quarterly Cobalt Price & Forecast (99.8%) Cobalt Price & Forecast Trading Range (99.8%) 30 30 Scenario B 25 25 Base Case US$/lb US$/lb 20 20 15 Scenario C 15 10 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Jan-09 Jul-09 Jan-10 Jul-10 Source: GFMS Source: GFMS Market outlook GFMS forecasts that prices will peak in the third quarter We have amended our supply-demand balance and price at around $29/lb. However, the higher output as the year projections for 2009 and have extended them out to 2010. progresses will eventually weigh on the market and we Despite sharply lower demand in 2009 there was a quick expect that prices will slip back below $20/lb by year end. supply response. Not all of this was market related, given the crackdown on cobalt mining activities in Congo, which In terms of alternative scenarios, we believe that there in turn curbed Chinese metal production. Lower supply in is greater upside than downside from current levels. The 2009 saw the market return to a slight deficit, hence the introduction of trading on the LME should provide a boost sharp rebound in prices. Although the market will have to given the influence of funds elsewhere in base metals sector. absorb the commissioning of Goro, and a number of other Also there are big question marks concerning the timing large scale projects further down the line, we also expect a about the new projects that are coming onstream, both the sharp rebound in demand (+8.3% in 2009). As such, the HPAL projects and those in the African cobalt-belt. Under market should remain in a deficit position. In common with high case scenario, prices could average $30/lb in the final most of the other non-ferrous metals markets, an improving quarter of next year. The downside should be fairly limited physical balance may not necessarily see significant given that stocks are currently low. On a quarterly average advances in prices. For 2010 as a whole, we forecast an basis, GFMS does not expect prices to fall below $17/lb next average price for 99.8% of $24/lb. year. Quarterly Cobalt Supply-Demand Balance - Base Case 2009 2010 (tonnes) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Consumption 12,950 13,200 13,250 13,771 14,250 14,550 14,000 14,758 % change y-o-y -6.5 -5.7 -2.9 -1.3 10.0 10.2 5.7 7.2 Production 13,200 13,100 13,000 13,640 13,850 14,000 14,500 14,930 % change y-o-y -4.7 -6.4 -7.7 -5.2 4.9 6.9 11.5 9.5 DLA Stockpile Sales 40 50 50 10 0 0 0 0 Global Supply 13,240 13,150 13,050 13,650 13,850 14,000 14,500 14,930 Market Balance 290 -50 -200 -121 -400 -550 500 172 Cobalt 99.8% $/lb 15.40 15.30 17.90 20.50 24.00 25.00 26.00 21.00 % change y-o-y -68.4 -68.0 -49.1 -14.6 55.8 63.4 45.3 2.4 Cobalt 99.3% $/lb 13.30 14.40 16.50 19.00 22.00 23.00 24.00 19.00 % change y-o-y -71.3 -68.8 -49.5 -7.3 65.4 59.7 45.5 0.0 Source: GFMS, CDI, WBMS, Metal-Pages N7 Independent - Informed - International
    • Nickel & Cobalt - November 2009 Statistical appendix Refined Nickel Production 2004-2010 (000 tonnes) (000 tonnes) 2004 2005 2006 2007 2008 2009 2010 South Africa 40 42 42 38 32 32 32 Total Africa 56 58 55 52 43 42 43 China 76 95 132 160 160 180 195 Japan 169 164 152 161 156 145 148 Other Asia 8 7 15 19 20 35 38 Total Asia 253 267 299 340 337 360 381 Finland 50 39 47 55 51 55 55 Norway 71 85 82 88 89 86 96 CIS 266 281 290 288 285 260 265 UK 39 38 37 34 39 25 30 Other Europe 36 40 42 51 52 41 44 Total Europe 461 482 498 515 516 467 490 Brazil 26 30 31 32 31 32 38 Canada 152 140 154 163 176 145 150 Colombia 49 53 51 49 42 55 55 Cuba 42 44 42 44 44 44 44 Dominican Republic 29 29 30 29 20 0 0 Total Americas 316 312 324 332 323 288 305 Australia 122 122 116 114 108 112 112 New Caledonia 43 47 49 45 37 45 55 Oceania 165 169 165 159 145 157 167 Global Total 1251 1288 1341 1398 1364 1264 1361 Western World 867 869 877 906 875 780 857 Former Socialist 384 420 464 491 489 484 504 Source: GFMS, WBMS, INSG Independent - Informed - International N8
    • Nickel & Cobalt - November 2009 Refined Nickel Consumption 2004-2010 (000 tonnes) 2004 2005 2006 2007 2008 2009 2010 Total Africa 46 48 55 45 45 39 46 China 144 195 234 328 305 460 500 India 16 16 18 19 21 15 20 Japan 195 180 181 196 185 155 165 South Korea 123 118 93 71 73 67 70 Taiwan 91 84 107 76 69 62 65 Other Asia 15 17 14 13 17 15 16 Total Asia 583 609 647 703 670 773 836 Belgium 43 49 58 55 47 25 32 Finland 59 49 51 40 41 23 29 Germany 94 116 106 110 90 65 72 Italy 62 60 68 64 68 49 55 Spain 48 48 53 42 41 30 33 Other Europe 148 145 149 142 135 100 112 Total Europe 455 468 484 454 422 292 333 USA 128 135 145 119 121 96 110 Other Americas 37 35 33 31 34 31 33 Total Americas 165 170 178 149 156 127 143 Global Total 1251 1296 1366 1353 1294 1232 1361 Western World 1059 1055 1085 978 943 724 810 Former Socialist 192 240 281 374 352 508 550 Source: GFMS, WBMS, INSG N9 Independent - Informed - International
    • Nickel & Cobalt - November 2009 Cobalt Supply 2004-2010 (000 tonnes) 2004 2005 2006 2007 2008 2009 2010 Morocco 1,593 1,613 1,405 1,591 1,600 1,610 1,610 South Africa 300 214 257 275 280 280 260 Uganda 457 600 600 600 600 650 660 DRC 735 600 550 606 850 2,000 2,500 Zambia 5,791 5,422 4,665 4,435 4,600 3,000 4,000 Total Africa 8,876 8,449 7,477 7,507 7,930 7,540 9,030 China 8,250 9,750 11,500 13,250 17,000 14,000 15,500 India 545 1,220 1,184 980 1,000 1,050 1,100 Japan 429 471 920 1,084 1,100 1,050 1,000 Total Asia 9,224 11,441 13,604 15,314 19,100 16,100 17,600 Belgium 2,947 3,298 2,840 2,825 3,000 2,400 2,550 Finland 7,893 8,170 8,580 9,100 9,200 8,800 9,000 France 199 280 256 305 310 400 400 Norway 4,670 5,021 4,927 3,939 3,800 3,500 4,100 Russia 4,524 4,748 4,759 3,587 3,200 3,300 3,500 Total Europe 20,233 21,517 21,362 19,756 19,510 18,400 19,550 Brazil 1,155 1,136 902 1,148 1,100 1,000 1,100 Canada 4,787 4,954 5,023 5,604 5,700 6,000 6,200 Total Americas 5,942 6,090 5,925 6,752 6,800 7,000 7,300 Oceania 3,879 3,150 3,696 3,684 4,000 3,900 3,800 DLA Deliveries 1,632 1,199 294 617 100 150 0 Global Total 49,786 51,846 52,358 53,630 57,440 53,090 57,280 Source: GFMS, CDI, WBMS, Metal-Pages Cobalt Consumption 2004-2010 (000 tonnes) 2004 2005 2006 2007 2008 2009 2010 Africa 83 184 186 189 191 189 192 China 9,500 11,000 12,200 13,900 15,250 16,750 19,250 India 580 600 615 635 650 700 800 Japan 13,191 13,200 13,250 13,100 12,900 11,000 12,000 South Korea 665 685 700 725 730 650 700 Taiwan 1,050 1,100 1,150 1,160 1,000 800 900 Thailand 230 240 240 250 260 260 260 Other Asia 1,468 1,471 1,493 1,523 1,568 1,488 1,508 Total Asia 26,684 28,296 29,648 31,293 32,358 31,648 35,418 Benelux 815 835 860 875 875 810 850 France 1,330 1,375 1,400 1,460 1,475 1,350 1,400 Germany 1,610 1,650 1,665 1,700 1,650 1,500 1,550 Italy 1,200 1,250 1,275 1,315 1,300 1,200 1,250 Russia 700 725 760 790 840 800 800 Spain 1,400 1,400 1,400 1,420 1,400 1,325 1,350 UK 2,200 2,300 2,315 2,400 2,350 2,000 2,100 Other Europe 1,880 1,913 1,935 1,935 1,945 1,759 1,828 Total Europe 11,135 11,448 11,610 11,895 11,835 10,744 11,128 USA 8,250 8,350 8,500 8,750 8,400 8,000 8,200 Other America 1,780 1,805 1,849 1,885 1,865 1,790 1,820 Total Americas 10,030 10,155 10,349 10,635 10,265 9,790 10,020 Oceania 91 96 96 96 96 96 96 Global Total 48,561 50,892 52,602 54,817 55,454 53,171 57,558 Source: GFMS, CDI, WBMS, Metal-Pages Independent - Informed - International N10
    • Tin - November 2009 Tin Recent developments ● Restarts at operations in Indonesia will likely be limited over the short term with the onset ● Tin prices have largely fluctuated around of the rainy season. From a fundamental $15,000/tonne, although increased volatility standpoint, this is factor providing the majority was seen as October came to a close. of the upside. ● The much discussed dominant tin position fell ● Over the longer term tin’s prospects are to 50-80% of the warrants on the LME, from positive. A recovery in demand will likely be over 90% previously. This has been reflected coupled with continued supply problems and a by easing spot prices, to as low as $14,700/ fundamental underinvestment in new capacity. tonne, and a narrowing of the cash-to-threes, to $55 from $570 at the start of October. ● GFMS project an average annual price of $15,625/tonne in 2010. By year-end, prices ● Weak demand has resulted in continued could be close to $20,000/tonne. increase to inventories, although they have increased at a slower rate than last month. ● In our alternative scenarios, risks are skewed to the upside. The key feature is the limited ● Indonesian production continued to struggle in amount of new capacity, particularly at the the face of the police crackdown and expected concentrate stage, being developed. If there restarts have been hampered by bad weather. are further problems in China and Indonesia, other producers will struggle to fill the gap. Outlook for the next 12 months ● Our low case forecast, dubbed Scenario C, for ● Over the short term, the focus will be on the next year is $1,400/tonne, while our high case future intentions of the dominant warrant Scenario B average is 1,815/tonne. holder. If the dominant position is sustained, prices will find support; in contrast, a continued unwinding of positions would put prices under GFMS’ Forecast Scenarios considerable pressure. Base Case, 40% Probability Represents what GFMS consider the most likely outcome for the ● Although set to improve, demand in the mature markets. economies will remain weak by historical levels Scenario B, 35% Probability over the fourth quarter. China will continue to Faster recovery than under our Base Case in the near-term and stronger growth thereafter. provide much of the support to demand. Scenario C, 25% Probability Anaemic recovery extends well into 2010 for mature economies ● Next year GFMS expects a sharp rebound in while growth in China eventually slows, as the impact of the demand, after three consecutive declines. stimulus package wears off. Tin Supply-Demand & Price Forecast Quarterly Tin Price & Forecast 2010 20000 (000 tonnes) Q1 Q2 Q3 Q4 Scenario B Supply/Demand Forecast (Base Case) 18000 Production 80 90 93 97 Base Case Consumption 85 88 90 98 16000 US$/tonne Balance -5 2 3 -1 Stocks 50 52 55 54 14000 Scenario C Price Forecast ($/tonne) 12000 Base Case 14,500 15,000 16,000 17,000 Scenario B 16,000 17,000 19,500 20,000 10000 Scenario C 14,000 13,500 13,500 14,750 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Source: GFMS Source: GFMS T1 Independent - Informed - International
    • Tin - November 2009 Market background Global tin production down as Indonesian problems Tin prices have largely been fluctuating around the $15,000/ worsen tonne mark since our last report. The monthly average The WBMS sees tin production down 3.6% at 213,800 tonnes totalled $15,009/tonne in October, up a marginal 0.9% over the first eight months of the year, with Indonesian month-on-month. Tin has found some support from the production accounting for much of this downside. Chinese supply side as Indonesian production continues to struggle. refined tin production has however recovered from problems However, the demand environment remains weak and this is earlier in the year and is up 3.4% over the first nine months reflected by the fact that LME stock levels continued to post to 93,079 tonnes. Recent weakness has nevertheless gains, with the end-October level of 26,575 being up 3.7% materialised in the country in September, with output down month-on-month. 15.5% month-on-month to 10,334 tonnes according to the CNI-A as a result of a tight supply of raw material. Significantly, the concentration of warrants to the dominant holder has slipped to 50-80% over the past days, from over In Indonesia, bad weather and continued police activity have 90% at points over the past weeks. We had noted that held back plans by the Bangka Belitung Tin Consortium to the future intentions of this warrant holder would be key to resume production. The group, consisting of seven smelters future price movements, demonstrated by the increasing with a combined capacity of 2,800 tpm, had stated their volatility in prices as this warrant holder has unwound some intentions to reopen in mid-October at around 20-30% of of its positions. After a sector wide bounce boosted the tin capacity after shutting in late August due to a lack of ore. price to $15,510/tonne on 27 October, prices slipped back This announcement came after Indonesia’s South Bangka and are now recorded at $15,010/tonne on 5th November. government, one of the main tin-mining areas in Bangka- In addition, the backwardation has narrowed to $55, which is Belitung islands, allowed some mining activities to resume its lowest level since July and is down from $570 at the start after a one-day strike by miners. of the month. As a result of the heavy rains, restarts have been delayed From a longer term fundamental standpoint, the WBMS and it is now thought that the group will operate at closer reported a 8,400 tonne surplus over the first eight months to 10% capacity for the final quarter. At this stage last year on a significant 9% decline in demand, to 225,900 tonnes. BBTS halted operations completely, citing weather problems Production was also down 3.6% on problems in major and the additional difficulty of low tin prices. producers China and Indonesia. As detailed later in this report, GFMS project a 24,000 tonne surplus this year. Tin Premiums Tin Open Interest & Price 600 50 30000 25000 500 40 Spot Price US Grade A contracts 000s 20000 400 30 US$/tonne US$/tonne European 3-month 15000 300 20 European Spot 10000 200 10 5000 Open Interest 100 0 0 2005 2006 2007 2008 2009 Jan 02 Jan 04 Jan 06 Jan 08 Source: GFMS Source: LME Independent - Informed - International Jan 03 Jan 05 Jan 07 Jan 09 T2
    • Tin - November 2009 Production falls at PT Timah Demand weakness in Europe and Japan drives global The larger producers, including PT Timah and PT Koba total down Tin have continued to operate in the face of the police As noted earlier, tin demand was down 9% over the first crackdown. Police are now reportedly planning to question eight months according to the WBMS, but has remained executives at PT Timah, the world’s biggest integrated tin steady for the last three months at around 28,000 tonnes. miner, over allegations that a small miner sent illegally Much of the weakness has materialised in Europe and Japan, mined ore to the firm. Timah’s refined tin output fell 11.4% as highlighted in the latest WBMS data. In Japan, demand over the first nine months to 33,765 tonnes, from 38,106 was down 34.8% over the first eight months to 14,400 tonnes in the same period last year. tonnes. Some improvement has been seen in the country of late on recovering demand from the country’s electronics Sales volume rose by 7% to 36,453 tonnes in the first nine sector. months of this year and the company is maintaining its 2009 sales target at 45,000 tonnes due to steady demand from A similar picture can be seen in Europe, with demand down its traditional buyers. Production at the major smelters may 27.4% over the first eight months. Consumption remained also be affected during the rainy season, although to a lesser down considerably year-on-year in August, although a rising extent than the smaller independent operations, and this has trend can be observed when looking from a month-on-month already been factored in to production targets. basis. In looking at end-use sectors, European tinplate producers reacted quickly to the dip in demand for its final As a result of the crackdown, the country’s refined tin products, including Corus who reduced output by 300,000 exports were estimated to have fallen 30% year-on-year tonnes at its Bergen plant in Norway and Rova Group’s in September to 7,755 tonnes. This level was the lowest 150,000 tonne output reduction. ArcelorMittal also reduced seen since April, and was down 8% from the 8,444 tonnes production. shipped out in August. Having said this, the extent of the decline could have been far larger considering the extent Tin plate demand is usually strong in recessionary of the disruptions and it is believed that some private tin environments, and less volatile than the end-use sectors smelters may have exported from their stockpile. of many of the other base metals such as stainless and galvanised steel. Having said this, the tinplate market has Only 16 smelters exported the metal in September, as not been immune from the adverse effects of the downturn, against 22 smelters in the previous month. Cumulative tin although the quick response by producers has helped to exports to September were however up marginally to 75,553 prevent a collapse in prices. As a result of the swift action, tonnes, compared with 75,535 tonnes in the same period European tinplate producers are set for a strong 2010. last year. Tin LME Stocks vs Price LME Stocks vs Spot Price Tin Daily Stocks vs Price 25000 50 30000 25000 20000 Oct 09 40 Spot Price 20000 tonnes 000s 30 US$/tonne US$/tonne 15000 15000 20 10000 10000 10 5000 5000 Stocks 0 0 0 0 1 2 3 4 5 6 7 8 Jan 02 Jan 04 Jan 06 Jan 08 Stocks (No.of weeks consumption) Source: LME Source: GFMS, LME T3 Independent - Informed - International
    • Tin - November 2009 Apparent consumption strong in China with further the high LME price. This may be reflective of the fact that underlying strength expected for Q4 Chinese buyers expect the LME price to continue to rise The decline in global consumption occurred despite strength and thus continue to stockpile the metal, but also reflects in China, where apparent consumption totalled 110,115 improving underlying demand in the country which is likely tonnes over the first nine months of the year, up 14% on the to see further growth in Q4. Some of the major electronics previous year according to the CNI-A. sectors in the country do remain lacklustre, although the majority of the electronic product markets are showing China was a considerable importer of 17,643 tonnes over improvement. Tin plate demand is reportedly faring even the first nine months, up around 150% year-on-year. This better, with a strong quarter anticipated for Q4. was largely due to the arbitrage opportunities offered by the differences between the local and LME prices earlier in the year. Although dipping from the highs earlier in the year, imports have remained strong on a historical basis despite Tin Supply-Demand Balance 2004-2010 (000 tonnes) 2004 2005 2006 2007 2008 2009 2010 Global Production 343 350 351 349 333 343 360 % change y-o-y 24.2 1.9 0.5 -0.6 -4.8 3.2 5.0 Consumption Europe 64 62 68 66 63 53 59 Japan 33 33 39 34 32 24 30 USA 54 42 47 33 26 26 30 Total Mature 150 137 153 133 121 103 119 % change y-o-y 7.6 -8.5 11.6 -13.1 -8.9 -15.6 15.9 Brazil 9 6 6 6 6 6 7 China 93 116 115 134 128 142 155 India 5.9 8.4 8 8.5 8.8 9 10 Russia 3 3 3 3 3 2 3 Total BRICs 111 132 132 151 145 159 174 % change y-o-y 21.0 19.1 -0.6 14.7 -4.0 9.7 9.6 ASEAN 13 11 11 11 11 9 11 % change y-o-y 12.9 -13.2 1.8 0.0 -4.4 -14.7 16.1 South Korea 16 18 17 16 16 14 16 Taiwan 13 14 18 13 12 9 11 Others 612 631 659 655 618 596 670 Global Consumption 334 345 363 356 337 320 361 % change y-o-y 10.8 3.2 5.2 -1.9 -5.4 -5.1 12.8 Metal balance 9 4 -12 -7 -4 24 0 Reported stock change -10 10 -3 0 -3 Reported stocks Country Stocks 19.8 21.6 22.8 23.2 24.7 LME 8.2 16.7 13.0 12.1 7.8 Total Stocks 28.0 38.3 35.8 35.3 32.5 56.0 55.5 Total as No. weeks con 4.4 5.8 5.1 5.2 5.0 9.1 8.0 LME as No. weeks con 1.3 2.5 1.9 1.8 1.2 LME cash ($/tonne) 8,513 7,370 8,763 14,580 18,499 13,475 15,625 % ch. y-o-y 73.9 -13.4 18.9 66.4 26.9 -27.2 16.0 Source: GFMS, WBMS, LME Independent - Informed - International T4
    • Tin - November 2009 Market outlook Tin Price & Forecast Trading Range Our outlook is largely unchanged from our last report. We 21000 continue to believe that recent prices are above those justified by current fundamentals, highlighted by a continued 19000 rise in LME inventories (although the increase slowed from September). The correlation between prices and inventory 17000 levels had become considerably weaker due to one holder 15000 controlling such a large portion of total warrants. We have noted that the warrant holdings have become less 13000 concentrated recently and, if this trend continues, then 11000 investors could switch to the fundamentals for direction. 9000 Consequently, the fragility of demand in the mature Jan-09 Jul-09 Jan-10 Jul-10 economies, combined with declining Chinese import demand, Source: Thomson Reuters EcoWin, GFMS will point to easing prices over Q4. However, the continued weakness in Indonesian production will restrict significant Given the ongoing supply problems and the lack of new gains to LME inventories and Chinese production has also capacity in the pipeline, we believe that the downside in the pulled back from the high seen in July, and this should limit tin market is relatively limited. Our low case Scenario C sees any downside prices fluctuating in a narrow band based on $14,000/tonne. Also, the relatively tight supply position can leave the market In addition, funds should continue to be attracted to the base vulnerable to sudden spikes in prices. We note that recently metals in general and tin will continue to benefit from this. a shortage of concentrate has held back Chinese output. Consequently, this will provide a base to prices, and for the Under our high case Scenario B, we expect that prices will last quarter we expect they will average at $14,750/tonne, exceed $20,000/tonne in the second half of next year. resulting in a full-year 2009 average of $ 13,475/tonne, compared to $18,499/tonne in 2008. In terms of the market balance, GFMS forecast that following a surplus of 24,000 tonnes in 2009, the market will return to balance in 2010. After three consecutive declines, we project a double-digit rebound in consumption. However, it should be noted that our forecast for global consumption in 2010 of 361,000 tonnes is still below the 2006 peak. Strong demand growth should support steady gains in prices and GFMS forecast an average of $17,000/tonne in the fourth quarter of 2010. For the year as a whole, we forecast an average of $15,625/tonne. Quarterly Tin Supply-Demand Balance - Base Case 2009 2010 (000 tonnes) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Global production 76 85 90 92 80 90 93 97 % change y-o-y -11.9 -1.5 11.1 16.5 5.3 5.9 3.3 5.4 Global consumption 75 76 80 89 85 88 90 98 % change y-o-y -16.2 -15.0 -2.4 17.1 13.3 15.8 12.5 10.1 Market Balance 1 9 10 3 -5 2 3 -1 Reported Stocks 33 42 52 55 50 52 55 54 No. of weeks’ con 5.8 7.3 8.5 8.1 7.7 7.8 8.0 7.2 LME Cash $/tonne 11,024 13,551 14,576 14,750 14,500 15,000 16,000 17,000 % change y-o-y -37.7 -40.1 -29.0 12.4 31.5 10.7 9.8 15.3 Range High 12,200 15,850 15,700 16,000 16,000 17,000 18,000 19,500 Low 10,055 10,650 12,450 14,000 13,500 14,000 14,500 15,000 Source: GFMS, WBMS, LME T5 Independent - Informed - International
    • Tin - November 2009 Statistical appendix Tin Mine Production 2004-2010 (000 tonnes) 2004 2005 2006 2007 2008 2009 2010 Total Africa 6.8 13.0 11.9 19.0 16.2 15.0 16.0 China 118.2 121.6 126.3 147.3 121.2 130.0 145.0 Indonesia 78.4 120.0 117.5 102.0 96.0 90.0 100.0 Malaysia 2.7 2.9 2.4 2.3 3.4 3.5 3.5 Thailand 0.7 0.2 0.2 0.2 0.2 0.2 0.2 Vietnam 3.5 5.4 5.4 5.4 5.5 5.8 6.0 Other Asia 1.6 1.4 1.3 1.3 1.2 1.2 1.2 Total Asia 205.1 251.5 253.1 258.5 227.5 230.7 255.9 Russia 3.0 2.8 2.8 2.4 1.1 1.0 1.0 Total Europe 3.2 3.0 2.8 2.4 1.1 1.0 1.0 Bolivia 18.1 18.6 17.7 16.0 17.3 18.0 18.5 Brazil 12.2 11.7 9.5 12.6 13.0 14.0 14.0 Peru 41.6 42.1 38.5 39.0 39.0 39.0 40.0 Total Americas 71.9 72.6 65.7 67.6 69.3 71.0 72.5 Oceania 1.3 2.7 1.5 2.1 1.8 4.0 5.0 Global Total 288.3 342.8 335.0 349.6 315.9 321.7 350.4 Western World 162.4 211.8 199.2 192.9 186.5 183.3 196.8 Former Socialist 126.3 131.0 135.8 156.7 129.4 138.4 153.6 Source: GFMS, WBMS Refined Tin Production 2004-2010 (000 tonnes) 2004 2005 2006 2007 2008 2009 2010 Total Africa 0.6 0.6 0.6 0.6 0.6 0.6 0.6 China 115.3 121.8 132.1 148.8 129.1 135.0 142.0 Indonesia 86.9 78.0 77.4 77.6 69.5 69.0 75.0 Malaysia 33.9 39.2 23.0 25.5 31.6 33.0 35.0 Singapore 0.0 0.0 8.7 2.3 0.0 0.0 0.0 Thailand 20.7 29.4 25.8 17.9 21.7 22.0 23.0 Others 6.7 6.1 7.1 7.3 8.5 8.5 8.5 Total Asia 263.5 274.5 274.1 279.4 260.4 267.5 283.5 Belgium 8.9 7.7 8.0 8.4 9.2 9.0 9.0 Russia 3.7 3.2 3.2 2.5 1.4 2.0 2.0 Other Europe 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Europe 12.6 10.9 11.2 10.9 10.6 11.0 11.0 Bolivia 13.8 15.6 15.0 12.3 12.1 14.0 15.0 Brazil 11.5 9.0 8.8 10.0 10.8 11.0 11.0 Peru 40.6 38.3 41.0 35.9 38.0 39.0 39.0 Other Americas 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Total Americas 66.0 63.0 64.9 58.3 61.0 64.1 65.1 Oceania 0.5 0.6 0.6 0.1 0.0 0.0 0.0 Global Total 343.2 349.6 351.4 349.3 332.6 343.2 360.2 Western World 220.7 222.1 213.7 194.5 198.6 202.7 345.2 Former Socialist 122.5 127.5 137.7 154.8 134.0 140.5 15.0 Source: GFMS, WBMS Independent - Informed - International T6
    • Tin - November 2009 Refined Tin Consumption 2004-2010 2004 2005 2006 2007 2008 2009 2010 Africa/Oceania 4.5 4.3 3.9 3.3 2.7 1.8 2.0 China 92.9 115.5 114.8 133.9 127.7 142.0 155.0 Japan 33.1 33.2 38.5 34.2 32.2 24.0 30.0 South Korea 16.2 17.9 17.0 16.1 16.3 14.0 16.0 Taiwan 12.9 13.5 17.6 12.7 11.9 8.5 10.5 Other Asia 35.1 37.8 36.0 37.4 37.2 34.3 38.3 Total Asia 190.2 217.9 223.9 234.3 225.3 222.8 249.8 France 8.7 7.0 7.8 7.2 6.1 5.5 6.0 Germany 20.3 19.1 20.6 22.7 20.5 15.0 18.0 Russia 3.4 2.8 3.0 2.5 2.8 2.3 2.5 Other Europe 34.5 35.8 39.1 36.5 36.6 32.0 34.8 Total Europe 66.9 64.7 70.5 68.9 66.0 54.8 61.3 Brazil 9.0 5.7 5.8 6.0 5.5 5.5 6.5 USA 53.6 42.3 47.4 32.7 26.0 26.0 30.0 Other Americas 10.2 10.3 11.5 10.9 11.4 8.1 10.4 Total Americas 72.8 58.3 64.7 49.6 42.9 39.6 46.9 Global Total 334.4 345.2 363.0 356.1 336.9 319.0 360.0 Western World 232.9 221.5 233.7 207.7 194.7 162.5 190.5 Former Socialist 101.5 123.7 129.3 148.4 142.2 156.5 169.5 Source: GFMS, WBMS T7 Independent - Informed - International
    • Zinc - November 2009 Zinc Recent developments ● GFMS expect a number of production restarts as we enter the New Year. However, the ● ILZSG reports a 327,000 tonne surplus in problem for zinc supply going forward is the first eight months of the year propelled tightness at the concentrate stage. primarily by the still subdued demand-side. ● This, coupled with strong demand should steer ● Chinese refined production continues its prices higher. GFMS is forecasting a quarterly upward trend in September, breaking yet average price of $2,110/tonne in Q4 2009, another record. while $2,165/tonne for next year as a whole. ● Global consumption remains weak despite ● Both our estimate of the surplus in 2009 and the strong growth in China. This strength will our forecast for 2010 is below those of ILZSG. continue to be buoyed by an increase in the Therefore if demand does not pick up as galvanised steel sector once consumers start expected the price could fall sharply from the restocking. levels seen in early November. Outlook for the next 12 months ● Our low case forecast suggests a quick return to around $1,700/tonne. GFMS has taken a ● In our Quarterly Supply-Demand balance GFMS fairly positive stance on prices in our base case. have highlighted a demand-side recovery at the Therefore our high case price scenario based on end of this year, which should strengthen in the a sharp rebound in demand from the galvanised first quarter of 2010. steel sector is only slightly up on the base case at $2,600/tonne in 2010. ● The bulk of the recovery will come from the mature economies as end-use sectors, notably the non-residential construction and autos sectors pick up. GFMS’ Forecast Scenarios ● Our Annual Supply-Demand balance highlights Base Case, 40% Probability a 7.5% rebound in global zinc production in Represents what GFMS consider the most likely outcome for the markets. 2010, following a 3.1% decline in 2009. Scenario B, 35% Probability Faster recovery than under our Base Case in the near-term and stronger growth thereafter. Scenario C, 25% Probability Anaemic recovery extends well into 2010 for mature economies while growth in China eventually slows, as the impact of the stimulus package wears off. Zinc Supply-Demand & Price Forecast Quarterly Zinc Price & Forecast 2010 3000 Q1 Q2 Q3 Q4 Supply/Demand Forecast (Base Case) Scenario B 2500 Production 2,980 3,006 3,050 3,110 Consumption 2,900 3,000 2,995 3,150 US$/tonne Balance 80 6 55 -40 2000 Base Case Stocks 925 931 986 946 Scenario C 1500 Price Forecast ($/tonne) Base Case 2,100 2,100 2,150 2,300 Scenario B 2,300 2,400 2,500 2,600 1000 Scenario C 1,750 1,650 1,700 1,700 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Source: GFMS Source: GFMS Independent - Informed - International Z1
    • Zinc - November 2009 Market background of last year. The total was however up marginally month-on- Zinc was the best performer amongst the base metals over month. Cumulative net imports over the first nine months October, with the average monthly price for the month up totalled a significant 592,686 tonnes. 10% on September to $2,072/tonne. Since mid-October, prices have found strength above $2,000/tonne with prices Having said this, apparent consumption rose in September in early November of around $2,200/tonne despite demand for the second consecutive month on rising production, outside of China remaining weak. The $2,331/tonne level indicating that producers could be reacting to a pick-up in seen on October 26 was the highest level seen since April underlying demand. We believe that underlying demand will 2008. continue to improve, supported by an expected increase in galvanised steel output as consumers restock, and as the Similar to the other base metals, investment buying has lent sector benefits from the stimulus package and the sharp a large amount of support to prices. However, the recent gains in vehicle output. supply disruptions at Century have added some upside to zinc which has seen it outperform the other base metals Underlying demand in Europe and the US remains over the past few weeks. In addition, it seems that some uninspiring restocking amongst consumers may be beginning to take More recently, conditions have been improving tentatively place as LME inventories have fallen from the 438,050 in Europe and the US although we await a considerable tonne high on September 1 to around 426,500 tonnes in pick up in underlying demand. In the US, although the early November, despite Chinese import demand waning. August consumption level weakened 8% month-on-month Future movements will be driven by the battle between the as seasonal weakness kicked in, the year-on-year decline expected pick-up in demand and the significant production narrowed significantly. Housing starts were up a marginal restarts that have emerged both inside and, more recently, 0.5% month-on-month in September but remained down a outside of China. The market was in a 327,000 tonne surplus considerable 28.2% year-on-year. New home sales showed over the first eight months according to the latest ILZSG weakness after registering five months of previous gains, figures. down 3.6% on an annualised basis to 402,000 tonnes, which was far lower than widely anticipated. Finally, vehicle sales, Chinese stimulus package supports global demand on at 10.4m units annualised, were up at the margin but still weakness elsewhere historically low in October. Global consumption was down 10.5% over the first eight months, to 6.912m tonnes, according to the latest ILZSG This was reflected in US premiums which previously figures. This decline took place despite strength from China, strengthened above 3c/lb on a perceived increase in which saw its apparent consumption up 22% year-on-year market tightness and steel demand over the third quarter. over the first nine months. Government stimulus packages However, demand has shown little further encouraging signs have encouraged the rise, however as we have consistently into Q4 as industrial activity remains slack, and the elevated mentioned we believe that this rise overstates the rise in price levels mean that US consumers are not in any hurry to underlying demand in the country. Indicative of this fact start buying large quantities of zinc for inventory purposes. is the easing of net imports, which in September totalled This has been reflected in movements in the US spot zinc 33,667 tonnes, down 72% on the March peak and are now premiums, which are believed to have softened to a range of up only marginally on the 29,127 tonnes seen in September 2.5-3.5 c/lb from 3-3.5 c/lb. Zinc Premiums Chinese Refined Zinc Imports 300 125 250 100 200 tonnes 000s 75 US$/tonne 150 US high grade 50 100 25 50 LME warehouse Singapore 0 0 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Source: GFMS Source: Chinese Customs; GFMS Z2 Independent - Informed - International
    • Zinc - November 2009 In Europe, the August consumption figure remained down Whilst many producers are boosting output, it seems that considerably year-on-year, although the 156,900 tonnes operations at Doe Run Peru’s smelter, stopped since June does represent the fourth consecutive monthly increase. because of financial and environmental troubles, might not Premiums are around $100-120/tonne for duty-paid zinc in restart until 2010. The company had said in September that Rotterdam, up from $90-115/tonne in early September. We work at its La Oroya smelter would likely resume within “a note that mills which use the metal to galvanise steel have few weeks.” The case of the delay is unknown. begun to boost production, however, November is generally a very busy month for orders as customers stock up ahead Domestic mine production in China has been substituted of the December holidays. Thus the pick-up in zinc demand by rising imports could be due to restocking rather than due to a genuine pick- On a global scale, concentrate production was down up in underlying demand from end-users. 6.4% year-on-year over the first eight months of the year according to ILZSG. Within China, domestic concentrate Production improving at major producers production is down 12% year-on-year over the first nine Global production was 7.239m tonnes over the first eight months to 2.038 million tonnes. Outside of China, the months, down 6.9%, however the improvement in prices has decline in refined output has been far larger than the fall meant that many producers have been tempted to restart in mine production, which has facilitated considerable production. This trend has been occurring in China for concentrate imports into China, up 62.5% year-on-year at some time, which has led to a recovery in the global total of 2.776m tonnes. late. Almost all of China’s previously idled smelting capacity is believed to have been restarted, and we have noted in Refined production in China has however been recovering, previous reports the addition of considerable new capacity to 298,670 tonnes in September, up 10.9% month-on- over 2009. Indicative of this, Chinese production hit another month but is down slightly year-on-year. However, despite new record in September at 410,413 tonnes, up over 20% the rise, spot zinc treatment charges have fallen in China year-on-year. Cumulative Chinese production was up 6.4% ahead of annual talks due to start this month. Zinc TCs over the first nine months at 3.109m tonnes. Elsewhere, dropped to $180-200 per tonne, down $10-20 per tonne Nyrstar and Boliden are both in the process of bringing from mid-October, partly on an expected decline in domestic considerable capacity back on stream. concentrate output over the winter months. Russia’s largest zinc producer, Chelyabinsk Zinc, saw its Problems at Century highlight fragility of concentrate output for the first nine months at 83,200 tonnes, down supply 29.6% on the 118,100 tonnes produced in January to We anticipate that as refined production outside of China September 2008. However, it did see third quarter output continues to come back on stream, the focus will shift to a rise 15.5% to 31,000 tonnes from the second quarter. A shortage of concentrate. This is especially true as further similar trend was seen at Nyrstar, which saw its zinc metal problems have materialised at mines outside of China. The production rise 6% in the third quarter to 207,000 tonnes concentrator at Minmetals’ Century zinc mine, capable of from the previous three months. However, cumulative producing 500,000 tpy of zinc in concentrate, has been production over the first nine months was down 26%. suspended since October 5 due to a fault in the connected Zinc LME Stocks & Price LME Stocks vs Spot Price Zinc Daily Stocks vs Price 5000 800 5000 Spot Price 4000 4000 600 tonnes 000s US$/tonne 3000 3000 US$/tonne Oct 09 400 Stocks 2000 2000 200 1000 1000 0 0 0 0 1 2 3 4 5 6 Jan 02 Jan 04 Jan 06 Jan 08 Stocks (No.of Weeks Consumption) Source: Thomson Reuters Ecowin, LME Source: GFMS, LME Independent - Informed - International Z3 Jan 03 Jan 05 Jan 07 Jan 09
    • Zinc - November 2009 slurry pipeline. Repairs to the burst concentrate pipeline will Third quarter production from Century, the world’s second extend into next month as it awaits installation of a section biggest zinc mine, reportedly fell 9% year-on-year to of piping. Mining has so far been unaffected, with ore being 158,603 tonnes of zinc in concentrate. The drop was due to stored at the mine until concentrating resumes. a change in the mine plan to better access ore and reduce costs, and did not take into account any lost production that The pipeline carries wet concentrate from the mine to a might result from damage to the pipeline, which occurred storage shed in the port of Karumba, and consequently the after the numbers were compiled. port stockpile has been shrinking, now at 30,000-35,000 tonnes from 70,000 tonnes prior to the incident. Much of Contrasting news comes from Hudbay’s Chisel North mine the concentrate produced at Century is shipped to European and Snow Lake concentrator, where operations are to be smelters, including Belgium’s Nyrstar SA, the world’s biggest restarted with immediate effect after being on care and refiner of zinc concentrate into metal. maintenance since the first quarter of 2009. Hudbay expects the restart to provide about 30,000 tonnes of zinc concentrate feed to its Manitoba-based Flin Flon zinc plant annually, and is expecting full production from the mine to be achieved by the second quarter. Zinc Supply-Demand Balance 2004-2010 (000 tonnes) 2004 2005 2006 2007 2008 2009 2010 Global Production 10,395 10,220 10,643 11,359 11,665 11,300 12,146 % change y-o-y 5.3 -1.7 4.1 6.7 2.7 -3.1 7.5 Consumption Europe 2,670 2,513 2,586 2,643 2,426 2,043 2,194 Japan 623 602 594 588 564 425 440 USA 1,247 1,078 1,153 1,016 1,003 930 980 Total Mature 4,540 4,193 4,333 4,247 3,992 3,398 3,614 % change y-o-y 3.8 -7.6 3.3 -2.0 -6.0 -14.9 6.4 Brazil 242 222 238 248 259 196 225 China 2,690 3,041 3,115 3,563 4,015 4,600 5,100 India 347 388 430 455 485 515 550 Russia 163 171 199 207 195 147 170 Total BRICs 3,442 3,822 3,982 4,473 4,953 5,458 6,045 % change y-o-y 18.5 11.0 4.2 12.3 10.7 10.2 10.8 ASEAN 1,156 1,123 1,136 1,079 1,095 962 1,012 % change y-o-y 0.0 -2.9 1.2 -5.0 1.5 -12.1 5.2 South Korea 446 476 534 512 504 435 460 Taiwan 342 306 282 226 220 200 205 Others 720 692 705 739 719 655 709 Global Consumption 10,646 10,612 10,972 11,276 11,483 11,108 12,045 % change y-o-y 8.1 -0.3 3.4 2.8 1.8 -3.3 8.4 Metal balance -251 -392 -329 83 182 192 101 Reported stock change -118 -210 -280 31 185 Reported stocks Producers 280 308 332 350 366 Consumers 116 111 114 125 128 Merchants 13 15 12 16 17 LME 629 394 90 88 253 Total Stocks 1,038 828 548 579 764 956 1,056 Total as no. weeks consumption 5.1 4.1 2.6 2.7 3.5 4.5 4.6 LME as no. weeks consumption 3.1 1.9 0.4 0.4 1.1 LME cash ($/tonne) 1,717 1,898 2,567 2,645 2,571 1,630 2,165 % change y-o-y 19.9 10.5 35.2 3.0 -2.8 -36.6 32.8 Source: GFMS, ILZSG, LME Z4 Independent - Informed - International
    • Zinc - November 2009 Market outlook Zinc Price & Forecast Trading Range Zinc stands to benefit significantly over the medium-long 3000 term from any sustained economic recovery, due to its close association to both the automobile and construction sectors. However, with any significant recovery outside China over 2500 the remainder of the year being tenuous, we believe that immediate risks to the downside remain significant, as 2000 a result of the still substantial stockpile weighing on the market and, importantly, the fact that prices have already posted significant gains this year-to-date. 1500 The major concern over the very short term is the fact that 1000 producers have been quick in bringing significant amounts Jan-09 Jul-09 Jan-10 Jul-10 of capacity back on stream. Despite this fact, boosted Source: Thomson Reuters EcoWin, GFMS by Chinese demand, GFMS expect the market to swing to deficit in the final quarter of the year. We would expect this to be short lived and oversupply to return in the first The sharp improvement in prices seen so far in 2009 has quarter of 2010, prompted by seasonal weakness in Chinese come about despite a large increase in LME stocks. Higher consumption, and remain in place until the last quarter, prices have also encouraged the restart of previously idled when demand finally catches up and exceeds production. capacity. Therefore if demand growth does not improve, Overall, GFMS expect a global surplus of 101,000 tonnes then the market could be liable to a correction. Under a over the full year. low case scenario, we forecast an average price of around $1,700/tonne next year. Although we expect the zinc market to be in surplus again next year, we believe that investor interest will provide a The high case scenario is predicted on a combination of solid floor to prices. We thus see prices average around concentrate tightness and on-going investment interest. $2,100/tonne over the first half of the year, only a little less The closure of the large Brunswick mine in last 2010 and than current levels of $2,200/tonne. Later in the year, as the change in the mining plan at Antamina will support the the market gradually moves to deficit, we see prices trend market. Our high case forecast is $2,450/tonne for next upwards, peaking at $2,600/tonne before the end of the last year. quarter, with an average of $2,300/tonne in that period. For 2010 as a whole GFMS projects an average of $2,165/tonne. Quarterly Zinc Supply-Demand Balance - Base Case 2009 2010 (000 tonnes) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Global production 2,550 2,850 2,930 2,970 2,980 3,006 3,050 3,110 % change y-o-y -10.6 -4.9 -0.1 3.1 16.9 5.4 4.1 4.7 Global consumption 2,405 2,775 2,890 3,038 2,900 3,000 2,995 3,150 % change y-o-y -12.9 -7.3 -4.2 12.0 20.6 8.1 3.6 3.7 Market Balance 145 75 40 -68 80 6 55 -40 Reported Stocks 878 876 913 845 925 931 986 946 As no. weeks consumption 4.7 4.1 4.1 3.6 4.1 4.0 4.3 3.9 LME Cash $/tonne 1,174 1,476 1,757 2,110 2,100 2,100 2,150 2,300 % change y-o-y -52.0 -30.2 -0.9 77.4 78.9 42.3 22.4 9.0 Trading Range High 1,309 1,673 1,967 2,335 2,350 2,400 2,450 2,600 Low 1,060 1,261 1,461 1,850 1,800 1,825 1,825 2,000 Source: GFMS, ILZSG, LME Independent - Informed - International Z5
    • Zinc - November 2009 Statistical appendix Zinc Mine Production 2004-2010 (000 tonnes) 2004 2005 2006 2007 2008 2009 2010 Total Africa 352 411 340 281 285 292 299 China 2,391 2,547 2,844 3,048 3,186 3,200 3,625 India 355 472 503 558 616 655 685 Kazakhstan 361 364 410 446 482 490 505 Other Asia 366 440 478 437 393 471 502 Total Asia 3,473 3,823 4,235 4,489 4,677 4,816 5,317 Ireland 438 445 426 401 398 360 340 Russia 162 186 178 177 205 200 205 Sweden 197 216 210 214 201 205 220 Other Europe 216 210 208 242 262 238 303 Total Europe 1,013 1,057 1,022 1,034 1,066 1,003 1,068 Canada 791 667 638 630 716 700 720 Mexico 426 476 481 452 464 500 525 Peru 1,209 1,202 1,202 1,444 1,603 1,530 1,555 USA 739 748 727 803 779 755 775 Other Americas 411 436 455 503 679 725 791 Total Americas 3,576 3,529 3,503 3,832 4,241 4,210 4,366 Oceania 1,298 1,329 1,338 1,498 1,479 1,250 1,260 Global Total 9,712 10,149 10,438 11,134 11,748 11,571 12,310 Western World 6,515 6,774 6,740 7,184 7,626 7,431 7,717 Former Socialist 3,197 3,375 3,698 3,950 4,122 4,140 4,593 Source: GFMS, ILZSG Z6 Independent - Informed - International
    • Zinc - November 2009 Refined Zinc Production 2004-2010 (000 tonnes) 2004 2005 2006 2007 2008 2009 2010 Total Africa 259 274 257 279 262 267 279 China 2,720 2,776 3,163 3,743 3,913 4,200 4,560 India 272 302 415 459 606 660 675 Japan 635 638 614 598 616 530 595 Kazakhstan 317 357 365 358 366 340 365 South Korea 669 647 667 691 739 730 740 Other Asia 336 332 331 342 338 333 345 Total Asia 4,949 5,052 5,555 6,191 6,578 6,793 7,280 Belgium 257 222 238 240 239 60 120 Finland 285 282 282 306 298 292 300 Germany 358 335 317 295 292 170 170 Spain 523 500 507 509 466 500 500 Other Europe 1,297 1,220 1,170 1,166 1,176 1,045 1,095 Total Europe 2,720 2,559 2,514 2,516 2,471 2,067 2,185 Brazil 266 267 272 265 260 245 300 Canada 805 724 824 802 764 665 710 Mexico 337 336 285 320 320 320 350 USA 354 350 252 279 285 240 265 Other Americas 231 201 218 205 226 195 265 Total Americas 1,993 1,878 1,851 1,871 1,855 1,665 1,890 Oceania 474 457 466 502 499 508 512 Global Total 10,395 10,220 10,643 11,359 11,665 11,300 12,146 Western World 6,682 6,499 6,490 6,587 6,712 6,194 6,636 Former Socialist 3,713 3,721 4,153 4,772 4,953 5,106 5,510 Source: GFMS, ILZSG Independent - Informed - International Z7
    • Zinc - November 2009 Refined Zinc Consumption 2004-2010 (000 tonnes) 2004 2005 2006 2007 2008 2009 2010 Africa 194 203 199 210 197 179 189 China 2,690 3,041 3,115 3,563 4,015 4,600 5,100 India 347 388 430 455 485 515 550 Japan 623 602 594 588 564 425 440 South Korea 446 476 534 512 504 435 460 Taiwan 342 306 282 226 220 200 205 Other Asia 786 758 744 775 801 721 763 Total Asia 5,234 5,571 5,699 6,119 6,588 6,897 7,518 Belgium 365 345 360 387 382 345 375 France 298 275 285 275 244 206 220 Germany 514 511 564 535 527 430 470 Italy 389 395 313 398 323 260 273 Spain 248 216 225 225 210 173 185 UK 185 175 172 174 158 125 130 Other W. Europe 335 314 343 344 319 286 303 Western Europe 2,334 2,231 2,262 2,338 2,161 1,826 1,956 Poland 103 79 100 103 86 71 77 Russia 163 171 199 207 195 147 170 Ukraine 57 44 44 45 44 39 42 Other E. Europe 175 167 167 145 124 93 104 Eastern Europe 498 461 510 500 449 350 393 Total Europe 2,833 2,684 2,785 2,850 2,620 2,190 2,364 Brazil 242 222 238 248 259 196 225 Mexico 240 244 250 250 247 222 240 Other Lat. Am. 204 182 200 196 198 170 184 Canada 189 175 181 173 164 134 145 USA 1,247 1,078 1,153 1,016 1,003 930 980 Other Americas 393 357 381 369 362 304 329 Total Americas 2,122 1,901 2,022 1,883 1,871 1,652 1,774 Oceania 263 253 267 214 207 191 200 Global Total 10,646 10,612 10,972 11,276 11,483 11,108 12,045 Western World 7,426 7,076 7,311 7,163 6,955 6,091 6,484 Former Socialist 3,220 3,536 3,661 4,113 4,528 5,017 5,562 Source: GFMS, ILZSG Z8 Independent - Informed - International