Paul Jourdan Independant SA Mineral Policy Analyst


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Paul Jourdan Independant SA Mineral Policy Analyst

  1. 1. SA Ferrous Mineral Value Chains (MVCs) Strategies (beneficiation) Iron Ore Beneficiation Africa Paul Jourdan Indaba Hotel, Joburg, March 2014 Note: This ppt is based on the DTI/IDC Ferrous MVC report (2013)
  2. 2. Mining: Concentration, smelting, refining => metal/alloy Forward Linkages: Intermediate products => Manufacturing; Logistics; other sectors (agriculture , forestry, fisheries, etc.) Backward Linkages Inputs: Capital goods Consumables Services Knowledge Linkages HRD: skills formation R&D: tech development Geo-knowledge (survey) Spatial Linkages: Infrastructure (transport, power, ICT) and LED Fiscal linkages: Resource rent capture & deployment: long-term human & physical infrastructure development Knowledge linkages are a prerequisite for developing the crucial back/forward beneficiation linkages!
  3. 3. Ferrous MVC and backward linkages for all MVCs •“Continuous SOC engagement on supplier development and localisation has led to embedding localisation policies and programmes at Eskom and Transnet with high localisation thresholds •An Intra-Departmental Task Team Report on Iron Ore and Steel adopted by Cabinet, mandating the DMR, DTI and EDD to secure a developmental steel price; amending the Competition Act, measures to restrict exports of scrap metals and create competition in steel production •The National Tooling Initiative created to increase and strengthen the human capacity and competitiveness of the tooling industry. R200 million provided by the NSF •DTI instrumental in the opening of R1 bn Safal Steel metal coating plant •National Foundry Technology Network established to facilitate the development of the foundry industry through appropriate skills training, technology transfer and diffusion of state-of-the-art technologies •DTI facilitated an iron ore interim supply agreement in December 2012 between Sishen Iron Ore Company and AMSA”
  4. 4. IPAP Iron and Steel Value Chain (IDTT) Cabinet signed off on proposals of the Inter-Departmental Task Team (IDTT) on iron and steel. Work in progress includes : – Finalisation of the Regulations, after public consultation, under the provision of the International Trade Administration Act and Second Hand Goods Act, to limit the unencumbered export of scrap metal and to support domestic producers. Export of scrap closely associated with highly deleterious cable and metal theft and masking of illegal export of precious metals. Work led by EDD – Amendments to the Competition Act, to limit the abuse of dominant market position in key value chains especially iron and steel and plastics and polymers and to lower the cost of strategic inputs into manufacturing. Work led by EDD. – Build competition in the iron and steel sector by the introduction of at least one more steel producer. Work led by the IDC is advanced to include a foreign investor; new technology and strong conditionality's to ensure developmental ore prices are passed through as a competitive advantage to manufacturing sector
  5. 5. •Haematite – iron oxide (Fe2O3), mainly mined from the Transvaal Supergroup; •Magnetite – iron oxide (Fe3O4), but often containing economic amounts of titanium and vanadium, mainly mined from the BC (Bushveld Complex); •Ilmenite – Ti & Fe oxide (TiFeO3), mainly mined in HMS (coastal sands), however this MVC will be covered in the titanium MVC report; •Chromite – Cr & Fe oxide (FeCr2O4), mined from the BC; •Manganese ores (kutnahorite and braunite) – the Mn ores of the Kalahari Basin (Ghaap Group of the Transvaal Supergroup,) contain roughly ~42% to 48% Mn and ~ 15% Fe.
  6. 6. Steel Steel/coke 2nd largest feedstock into global economy, after crude oil
  7. 7. Vehicles, cap goods, construction, metal products
  8. 8. •Mineral deposits have huge differences in richness/grade (rents) •Need competitive tender to get max VA •Need to tender known assets against % VA bid •Only issue prospecting rights over ground with no known resources 1. Competitive Tender to Maximise Ferrous Minerals VA
  9. 9. •Need to capture resource rents for reinvestment in skills & infrastructure •Resource Rent Tax (RRT) of 50% on ROI > long-bond +7% (“normal ROI”) •Reduce RRT rate against VA (e.g. 1% for every 10% new VA 2. Mineral Rents (RRT-VA Offset)
  10. 10. •Need to reserve a portion of select “strategic” resources for local VA at cost+ •Problem of retrospective application! •At least then: •Need to stipulate local competitive pricing (EPP) with EPP on-obligation on all local VA customers 3. State “Access” to Minerals Resources for >VA
  11. 11. •Need to raise crude ore export tariffs and lower VA products tariffs (income neutral) •Need to apply to all state utilities (SOEs): rail, road, power, ports & finance on mineral exports 4. State Utility Tariffs to Enhance VA NPA Proposed Future Tariff Structure TNPA‟s Port tariffs proposal: discount >VA
  12. 12. Mineral Percentage Precious Metals 60% Ferrous Metals 19% Energy Minerals 15% Base Metals 3% Industrials* 2% Precious Stones 1% Total 100% Proportion of SA’s Minerals by Value
  13. 13. •Kalahari Basin (Kathu, ~3Gt, Transvaal Supergroup) •Bushveld Complex magnetites (~25Gt, with Ti & V) •Zandrivierspoort (~500Mt, Polokwane Greenstone Belt) •Cascades (~1Gt, Mozaan Group of Pongola Supergroup) •Rooiwater (>100Mt (Fe/Ti), Rooiwater Complex – edge of the Murchison Greenstone Belt) •Moonlight (~300Mt, Beit Bridge Complex in the Limpopo Belt) •Delft (~300Mt, Mozaan Group of Pongola Supergroup) •Phalaborwa (300Mt stockpile, Phalaborwa carbonatite pipe) •De Loskop (~300Mt, Polokwane Greenstone Belt) •Kraaipan (~200Mt, Kraaipan Greenstone Belt) •Kromdraai (~180Mt, Lebowa Granite Suite of the BC) •Penge/Thabazimbi (~100Mt, Chuniespoort Group of Transvaal Supergroup)
  14. 14. SA Iron ore Production 2002-2011 (Mt) Iron Ore Mining in SA, 2008
  15. 15. SA Steel sales, local Consumption, Exports & Imports No growth since „74!
  16. 16. Plus stainless steel (Columbus 1Mtpa) in Middleburg Entity Flat Steel Products Long Steel Products AMSA 80% 52% Evraz Highveld 20% (incl exports) 15% SCAW - 15% Cape Gate - 12% Cisco - 6% Current Producers Market Share Steel Market Share 2010
  17. 17. Impact of state infrastructure spend on steel consumption
  18. 18. Domestic Steel Consumption
  19. 19. Steel flows in South Africa in 2008
  20. 20. Forecast Regional Steel Demand- 2020 0 100 200 300 400 500 600 700 800 900 1000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 SADC GDP (PPP - million of international dollars)
  21. 21. Forecast Regional Steel Demand- 2020
  22. 22. Monopoly pricing (IPP) of steel severely curtails manufacturing jobs 0 100 200 300 400 500 600 700 Importparityprice Transportto Gauteng 5%hasselfactor Offloadingand admin Importduty ShippingtoDurban Wharfage, commissionand… Importduties Shippingtoexport destination Transport(to Durban) Ex-worksexport price Hot rolled coil steel prices, US$/t Value received on exports (EPP) Value received on local sales (IPP) Amount that local customers pay above exports World export price Transport costs might be as high as 47% of the cost of importing flat steel!
  23. 23. Between March 2004 and March 2013 the SA price for HRC was 41% above the price in China and 15% above the price in both South Korea and Taiwan.
  24. 24. Coastal (“steel-for-ore” deals) •E.Cape Integrated Plant based •Richards Bay Integrated Plant (Cascades) •MISP Inland (primarily domestic & regional markets) •Scaw Expansion for long products (IDC •Middleburg Plant for flats (Masorini-IDC •HS&V expansion for flats (alternative Masorini •Kathu Integrated Plant based •BC high Ti magnetites (steel mill & pigment plant) Possible new plants
  25. 25. Thank You