Future Supply Demand Ferronickel

An overview of the future production and demand of

ferronickel

Robert Cartman – Hatch

2

�Hatch

�Overview of FeNi market

�Demand analysis

�Supply analysis

�Conclusions

Contents

INFORMA MINING & METALS 2ND EURO NICKEL CONFERENCE, 18-19TH MARCH 2010

SERVICES

SECTORS

HATCH

Hatch services and sectors

© Hatch Associates Limited, 2009

HATCH

Global reach and resources

Canada• Calgary, Alberta• Hamilton, Ontario• Montreal, Quebec• Sorel-Tracy, Quebec• Sudbury, Ontario• Mississauga, Ontario• Niagara Falls, Ontario• Vancouver, British ColumbiaUSA

• Boston, Massachusetts• Buffalo, New York• Millburn, New Jersey• Monroeville, Pennsylvania• New York, New York• Pittsburgh, Pennsylvania• Pleasanton, California• San Francisco, California• Seattle, Washington

3400

South America• Antofagasta, Chile• Santiago, Chile• Lima, Peru• São Paulo, Brazil• Belo Horizonte, Brazil• Vitoria, Brazil

700

Europe• London, England• Moscow, Russia

170

South Africa• Johannesburg• Richards Bay

600

India• Delhi

China• Beijing• Shanghai

120

Australia• Brisbane• Gladstone• Mackay• Melbourne• Newcastle

• Perth• Sydney• Townsville• Whyalla• Wollongong

2300(Yellow indicates regional hub)

8000 people

© Hatch Associates Limited, 2009

5

Hatch counts many of the world’s major mining and steelmaking companies

and financial institutions among its core client base

Mining

Alcan

Alcoa

Anglo American

Assmang

BHP Billiton

De Beers

ENRC

Falconbridge

Impala Platinum

Lonmin

Newmont Mining

Norilsk

Placer Dome

QIT

Rio Tinto

SUAL

Vale Inco

Xstrata

Steel

ArcelorMittal

BlueScope Steel

Celsa

CMC

Tata/Corus Group

Evraz Group

Gerdau Group

Mechel

Metalloinvest

Metinvest

Nucor

POSCO

Ruukki

Severstal

Shougang

TMK

U.S. Steel

voestalpine

Financial institutions

ADB

Bank of America

Bear Stearns

CIBC

Citibank

Commonwealth Bank

Credit Lyonnais

CSFB

Deutsche Bank

EBRD

HSBC

IFC

JP Morgan Chase

Mellon Bank

NM Rothschild & Sons

RBS

UBS Warburg

World Bank


6

�Hatch


�Demand analysis

�Supply analysis

�Conclusions

Contents


7

Annual FeNi production is typically ~250kt, with BHP and Eramet the

largest producers in 2009

Source: ISSF, Hatch

Global FeNi production by producer


0

200

400

600

800

1,000

1,200

1,400

1,600

2006 2007 2008 2009

FeNi Other

Global primary Ni production by type

kt

5.9%

2.7%

-0.4%

-13%

-3.5%

-7%

0

200

400

600

800

1,000

1,200

1,400

1,600

2006 2007 2008 2009

FeNi Other

Global primary Ni production by type

kt

5.9%

2.7%

-0.4%

-13%

-3.5%

-7%

Others

19%

Antam

5%

BHP

21%

Eramet

17%

Pamco

13%

SMM

8%

Anglo

American

8%

Posco

9%

2009

240kt

Others

19%

Antam

5%

BHP

21%

Eramet

17%

Pamco

13%

SMM

8%

Anglo

American

8%

Posco

9%

2009

240kt

8

Alloy steel

2%

Stainless steel

98%

Ni demand is dominated by stainless steel production, particularly in the

case of FeNi. Stainless steel production has fallen since 2006

Source: ISSF, Hatch

Ni demand by end-use

FeNi demand by end-use

Stainless steel

57%

Alloy steel

8%

Non-ferrous

14%

Other

6%

Foundry

3%

Plating

12%

Global stainless steel productionby series (2004-09)


2.31 2.38 2.67 3.23 2.95 2.60

16.09 15.35

18.5816.23

15.3914.47

6.03 6.44

6.958.18

7.28

6.60

0

5

10

15

20

25

30

2004 2005 2006 2007 2008 2009

200 300 400 Other

9

�Hatch


�Demand analysis

�Supply analysis

�Conclusions

Contents


10

0

5

10

15

20

25

30

2001 2002 2003 2004 2005 2006 2007 2008 2009

300 400 200 Other

0

5,000

10,000

15,000

20,000

25,000

30,000

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

2005

2009

Long-term stainless steel production has risen at a CAGR of 4.5% since

1965

Source: Vale, ISSF, Hatch

Stainless steel production Stainless steel productionby series, 2001-09kt Mt


11

0

10

20

30

40

50

0 10 20 30 40 50 60

Stainless steel production is forecast to continue rising in order to meet

the expected growth in consumption by the developing world

Source: Vale, IMF, Hatch

Per capita consumption of stainless steel vsincome per capita for selected countries, 1997-2008

China Malaysia

SouthKorea

Taiwan

Japan

$’000 per capita, 2008 (PPP)

Kg

pe

r ca

pit

a


12

40%

60%

80%

2001 2003 2005 2007 2009

% 300-series

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2020

Long-term stainless steel production will move toward 40Mt by 2020.

Further substitution is possible but most of this has already taken place

Source: ISSF, Hatch

Stainless steel production

5-10%

1-5%

10-15%

5-10%

0-1%

2020

300-series ratio

Percentage point shift from 300-serieskt

-40

-20

0

Appliances

& Catering

Industrial

applications ABC Tubemaking Transport

Change 2001 - 2008 Potential future change


?

13

FeNi faces substitution threats from other refined nickel products and

secondary sources of nickel i.e. scrap

Source: ISSF, Hatch

Breakdown of nickel consumptionby stainless steel mills

Breakdown of scrap ratiosby regions


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Nickel units by source Primary nickel units by

source

Primary

Scrap

NickelMetal

FeNi

NPI

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Nickel units by source Primary nickel units by

source

Primary

Scrap

NickelMetal

FeNi

NPI

0%

10%

20%

30%

40%

50%

60%

70%

80%

2001 2002 2003 2004 2005 2006 2007

Global USA Europe China

14

�Hatch


�Demand analysis

�Supply analysis

�Conclusions

Contents


15

Long-term Ni supply fluctuates between waves of investment, followed by

exploitation

Source: INSG, USGS, LME, Hatch

Ni production, mined

Investmentphase

Investmentphase

Investmentphase

Investmentphase

Investmentphase

Investmentphase

Long-term real Ni prices (2008 $)$’000/tonneMt

0

10

20

30

40

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

2005

2009


0.0

0.5

1.0

1.5

2.0

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

2005

2009

16

The next wave of investment could add another ~500kt of capacity

Source: Company reports, Hatch

63ktLaterite – HPALGladstone (?)

46ktLaterite – HPALVermelho (?)

22kt

23kt

Laterite – Heap

Laterite – RKEF

Shevchenko

Tagaung Taung

31ktLaterite – HPALRamu

10kt (?)SulphideEagle (?)

Laterite – HPAL

Laterite – RKEF

Sulphide

Laterite - HPAL

Laterite – RKEF

Laterite – HPAL

Laterite – RKEF

Laterite – RKEF

Laterite – HPAL

Ore type and process

60kt

52kt

12kt

40kt (?)

60kt

60kt

23kt

36kt

60kt

Capacity

Koniambo

Ambatovy

Barro Alto

Fenix (?)

Goro

Nonoc (?)

Nunavik

Onca Puma

Weda Bay (?)

2013+201220112010


17

0%

20%

40%

60%

80%

100%

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006200

7200

820

09

Sulphides Laterites

Nickel is increasingly being extracted from lateritic ores

Source: Hatch

Nickel production by ore type Nickel resources by ore type

Sulphides

27%

Laterites

73%

Sulphides Lateri tes


18

Laterite resources are mainly found in countries that require large

spending on infrastructure

Source: BGS, Hatch


19

Lateritic ores need to be subdivided into limonites or saprolites in order

to understand the respective mining and processing costs

Source: Mick Elias, Hatch

5.5m

10m

Depth

% content

35 – 4550.010.3Bedrock

15 – 3510 – 250.02 – 0.11.8 – 3Saprolite

5 – 1525 – 400.02 – 0.11.5 – 4Transition

zone

0.5 – 540 – 500.1 – 0.20.8 – 1.5Limonite

MgOFeCoNi

Oxides

High Fe, low MgO, low SiO2

Processing – Dependent onpresence of clay minerals.Typically hydrometallurgy

(HPAL, Heap, Caron)

Silicates

Low Fe, high MgO, high SiO2

Processing – Pyrometallurgy.End product (FeNi, matte)dependent on mineralogy


20

Summary of nickel ores and their pros and cons

Source: Hatch

Nickel ore

LateritesSulphides

• High mining costs

• Underground mining

• Low processing costs

• Proven technology

• Often associated with valuable by-products (Cu / Pd / Pt)

Limonites Saprolites

• Low mining costs

• Surface mining

• High processing costs

• Unproven technology

• Protracted startup

• Expensive materials of construction

• High acid consumption

• Low mining costs

• Surface mining

• Falling processing costs

• Proven technology

• Large-scale operations

• Vulnerable to energy costs

• Slag disposal


21

Mining and processing costs will depend on a variety of factors. It is

too simplistic to categorise as laterites vs. sulphides

Source: Hatch

Resource

Higher grade = better

>1.5% ≈ saprolite

Saprolite = provenprocessing technology

Larger size = better

Lower capex per tonne

Ore mineralogy

Content of clay mineralsLower = better

Magnesium contentLower = less acid consumption

in hydrometallurgy

SiO2 / MgO ratioImpacts on choice of end-product

Inputs

Merchant vs. captive

Hydroelectricity vs. fossil fuels

Hydrocarbons

Labour availability / skills

Infrastructure

Power / Acid / Lime plants

TransportationRoad / Sea / Air

Conveyors / Pipelines

Difficulty of terrain / climate

Accommodation

Permits / Compensation

Project management

Project phasing

Project team continuity

New technologies


22

�Hatch


�Demand analysis

�Supply analysis

�Conclusions

Contents


23

Conclusions


Demand

• Stainless steel production to increase

• Approaching 40Mt by 2020

• Production increase will offset effects of substitution

• China/India + other EMs to drive consumption growth

• Beneficial for local laterite-based suppliers

• FeNi likely to supersede NPI

• Increase in scrap ratio a key threat

• Development of collection networks in EMs

Supply

• New supplies to arrive from lateritic ores

• Not just FeNi though

• FeNi to account for 20-25% of refined Ni production

• Compared with 15-20% at present

• Other things being equal, production costs will rise

• Increased spend on infrastructure

• Unproven technologies

• Technological advance likely to minimise LT real price rises

24

Hatch London office

Hatch is a member of the HATCH GROUP of companies

�

+44 7813808240Mobile

+44 20 7963 0972Fax

+44 20 7906 5119�

Consultant

Robert Cartman

+44 20 7906 5100 (switchboard)�

9 Floor, Portland House, Bressenden Place, London SW1E 5BH�

[email protected]

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Documents

Future Supply Demand Ferronickel