BASE METALS: Mr. Sandeep Daga, Director, Regsus Consulting Private Limited

1. Interesting times, un-interesting prices
Base Metals’ fundamentals
REGSUS CONSULTING PRIVATE LIMITED

2. The big picture
Medium Term
Short-term

3. The big picture
Slowing growth and rising debt
2017 2018 2019
World GDP 3.2% 3.0% 2.4%
US 2.4% 2.9% 2.3%
China 6.8% 6.6% 6.1%
India 7.2% 6.8% 5.0%
2001-2011-2023

4. From super-cycle to mid-cycle
Slowing growth and rising debt
China: Growth in Fixed-asset investment
Peak
Stimulus
#1
Stimulus
#2
Stimulus
#3
Stimulus
#4
The big picture
2001-2011-2023

5. From super-cycle to mid-cycle
Slowing growth and rising debt
The big picture
2001-2011-2023
Demand without zing
Supply side adjustments

6. The big picture
Medium Term
Short-term

7. US Dollar deserves a (last) flare up
Medium Term
US is the most resilient economy
Dec 2019 repo will be unwound; will reduce money
Unknown risks to invite demand for USD
Historic cycle pattern suggests one last flare up in 2020-21
2020-2021

8. US Dollar deserves a (last) flare up
Chinese stimulus could make a mark,
but quite small
Negative arb, low premium
Inventories: Now you see, now you not
Medium Term
2020-2021

9. The big picture
Medium Term
Short-term

10. Short-term
Cyclical recovery or restocking?
Surplus, after long
Metal Copper Aluminiu Zinc Lead
Deficit for
last
10 years 7 years 4 years 3 years
Forecast
for 2020
+280kt +304kt +192kt +55kt
Tons; ICSG, ILZSG, Alcoa
Chinese supply surprise; can demand catch up?
Metal Copper Aluminium Zinc Lead
Production growth
(yoy) in H2 2019
12.2% 3.2% 16.8% 15.5%
2020
Excitement > recovery

11. 2019 2020
Mine production -0.4% +2.0%
Chinese smelter capacity
addition (Antaike)
900kt (10%) 350kt
TCRC 8 year low To improve
Premium 3 year low To stay low
Metal balance (ICSG) -393kt +281kt
Price positive event VAT cut by 3% in China Infra spending creating demand in
wire and cable sector
Price negative event Trade-war Trade-war; financial market
instability
Copper
China added massive smelting capacity last year

12. 2019 2020
Chinese production yoy -1.8% (1st in a decade) 3-4%
World production yoy -1.1% 2-3%
World demand yoy -0.5% 1-2%
Metal balance -600 to -800kt +500-700kt
Financing deals Minimal Could rise
MJP Premium (latest) $83 (3Y low) Could rise somewhat
Price positive event Supply disruptions Chinese stimulus to power
sector
Price negative event Trade war Trade war; financial market
vulnerability
Aluminium
Disruptions over; supply could rise

13. 2019 2020
Chinese production yoy +4.9% (-8.9% in 2018) +5.1%
World production yoy +2% +3.7%
World demand yoy - +0.9%
Metal balance (ILZSG) -152k (-523k in 2018) +192k
TCRC (latest) $260-300 (Highest in 4 years) $300-325
Price positive event Chinese construction industry
outperformance
Chinese infrastructure
spending push
Price negative event Trade war Trade war; financial market
vulnerability
Zinc
Ore as well as metal to remain in surplus

14. 2019 2020
Chinese production yoy +1.5% +2.1%
World production yoy -0.7% +1.7%
World demand yoy -0.4% +0.8%
Metal balance (ILZSG) -81k +55k
Price positive event Disruptions in several
e.g. Port Pirie
Recovery in automotive
Price negative event Global automotive slowdown Oversupply from China;
financial market vulnerability
Lead
Oversupply, especially in Asia

15. Look out for rising supplies!

16. Disclaimer
This material does not constitute an offer, or the solicitation of an offer, for the sale or purchase of any investment or security. Whilst
every care has been taken in preparing this document, no representation, warranty, or undertaking (express or implied) is given and no
responsibility or liability is accepted by any member of the Regsus Consulting Private Limited, or any of its employees as to the
completeness or accuracy of the information contained herein, nor that the information remains unchanged. This document does not
constitute an offer to buy or sell the commodities referred to herein or a recommendation or invitation by Regsus Consulting Private
Limited to the recipient to buy or sell. In deciding whether to buy or sell, or take or not take any other action in respect of or in
connection with the commodities discussed in this report, the recipient should make its own investigation of all the relevant parties and
commodities and should not rely on anything stated herein. All opinions and estimates in this document may be changed after
publication at any time without notice. Any member of Regsus Consulting Private Limited may have a long or a short position in the
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