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presentation about the trade opportunities for different building materials
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GLOBAL CEMTRADER CONFERENCE���London���
May 10 - 11, 2012
“TRENDS IN SCM SUPPLY & DEMAND”
Visit us at www.zaginternational.com
ZAG INTERNATIONAL FOUNDED IN 2001 AS A SOURCING, SALES/MARKETING & STRATEGIC SERVICES COMPANY FOCUSED ON THE CEMENT INDUSTRY EARLY EMPHASIS ON CEMENTITIOUS MATERIALS 2012 EXPANDED INVOLVEMENT WITH CONSTRUCTION, POWER, STEEL, INDUSTRIAL PROCESS & ABRASIVES INDUSTRIES CONTINUED/EXPANDED FOCUS ON SCM’S & FINDING SOLUTIONS FOR MATERIAL SHORTAGES GLOBAL PRESENCE, KNOWLEDGE & PERSPECTIVE
SERVICES & PROJECTS • Strategic Planning • Feasibility Studies • Market Surveys • Purchasing & Sourcing • Supply Chain Management • Contract Negotiations • Ocean Freight Movements • Land Logistics Expansion • Storage & Distribution Terminals • Grinding Plants • Co-Product & Waste Stream
Optimization • Coal Regeneration • Inventory/Spare Parts Management
PRODUCTS • Cement & Clinker • Limestone & Lime • GBFS (Slag Granules) • GGBFS (Slag Powder) • Fly Ash (Conditioned & Dry) • Natural & Synthetic Gypsum • Pozzolans & Silica Fume • Pumice • Mill Scale • Iron Silicate Granules & Powder • Bauxite • Alumina Powders • Clays • Coals & Fuels
GLOBAL CEMENT INDUSTRY TRENDS
• SHIPBUILDING • CARGOS • BUNKER FUEL
• COAL • ALTERNATIVES
• GBFS • FLY ASH • OTHER
• SUPPLY & DEMAND SHIFTS
• REGULATIONS • TRADE FLOWS
CEMENT
&
CLINKER SCM’s
FREIGHT RATES FUELS
GLOBAL CEMENT INDUSTRY TRENDS
• GLOBAL CEMENT USAGE = 3.5 BILLION GROWING 5% P/ YEAR • BASIC TECHNOLOGY UNCHANGED – EMISSIONS INCREASING • GLOBAL SUPPLY & DEMAND AND TRADE PATTERN SHIFTS • KEY STRATEGIC DRIVERS – FREIGHT & MATERIAL AVAILABILITY
WHAT WE KNOW
• BENEFITS OF SCM’s • IMPENDING & SOMETIMES SUDDEN SHIFTS IN SUPPLY • SUPPLY DICTATED BY EXTERNAL FACTORS • STRATEGIC ISSUE – SHORT TERM VIEW IS DANGEROUS
WHAT WE DON’T KNOW
• IF/WHEN THIS WILL HAPPEN • TO WHAT DEGREE • IMPACT & COST • COMPETITIVE ACTIONS & REACTIONS
GLOBAL CEMENT DEMAND 2012 ���(YEAR TO YEAR % CHANGE)
Region 2006 2007 2008 2009 2010 2011 2012E
N. America - 0.8% - 7% -15% - 25% - 0.9% +2.5% +3.5%
S. America +8.9% + 7.5% + 6% - 3.0 +4.4% +5.6% +5%
W. Europe + 4.0% + 0.7% - 1.4% -18.5% - 6.2% +1.0% +2%
E. Europe + 12% + 13.% + 11% - 23.7% +5.4% +8.5% +4.5%
Africa + 9% + 9.5% + 10% +7.7% +5.3% +5.2% +4.5%
Middle East + 10% + 11% + 8% +3.5% +7.4% +5.1% +6%
N Asia (Excl. China)
+ 1.8% + 4% + 2% - 2.4% +1.1% +3.4% +2.4%
China + 18% +12% + 10% +17.4% +15.6% +10.5% +8%
SE Asia + 2% + 4% + 5% +2.1% +5.5% +7.5% +6%
Oceania +1.3% + 1.6% + 4.3% -1.5% +1.2% +4% +2%
TOTAL WORLD
+ 11% + 8.4% + 7.3% +5.8% +9.1% +7.1% +5.2%
Page number 7
GLOBAL CEMENT TRADE CIRCA 2006
36
6
10
26
1112
23
79 4
8
= Imports
= Exports
75
5
35
3
33
5
2006 global cement consumption reached 2.2 billion metric tonnes
Seaborne trading =120 million Mt = 5% of total cement volumes
Housing bubble led to higher US imports which reached 38 million MT
The high oil price led to surging Middle East demand
China emerged as the world’s leading exporter
Page number 8
GLOBAL CEMENT TRADE CIRCA 2011
6
4
9
13
1910
1215 5
12
= Imports
= Exports
54
10
1
48
42
53
2
2011 global cement consumption reached 3.3 billion tonnes;
Seaborne trading = 90 million MT = 2.7% of total cement volumes
Chinese less keen to export due to very strong domestic demand and high prices
US market down nearly 50% in five years imports are sharply down to 5 million MT
Page number 9
SHIPPING TRENDS
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
1990 1993 1996 1999 2002 2005 2008 2011
SHIPPING RATES REMAIN DEPRESSED FACING NEW DELIVERIES FOR THE NEXT 2 YEARS
BUNKER PRICES ARE A BIG WORRY
CEMENT INDUSTRY IS STILL A RELATIVELY SMALL PLAYER IN TERMS OF TONNAGE
SCM’S WOULD BE ADVERSELY AFFECTED BY FREIGHT RATE SPIKE
STRATEGIC IMPLICATIONS – NEED TO MAKE INFORMED DECISIONS
50
70
90
110
130
150
170
190
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
USA CEMENT CONSUMPTION FORECAST (SOURCE: PCA)
RECOVERY WILL HAPPEN – INHERENT DEMAND DRIVERS ARE IN PLACE – QUESTION IS WHEN?
USA PCA FORECAST: WORST CASE SCENARIO���NO NEW CAPACITY, WET KILNS SHUTDOWN &
NESHAP
Cement Consumption Cement Production v.s MMT
Supply Gap of 112 MMT
KEY IMPLICATIONS FOR SCM’S
BENEFITS OF SCM’s BETTER ECONOMICS
IMPROVED PROPERTIES, PERFORMANCE & ESTHETICS
LOWER CO² EMISSIONS
LESS ENERGY CONSUMED
REDUCED RAW MATERIAL USAGE
EXTENDED QUARRY LIFE
BENEFICIAL RECYCLING OF WASTES & BY PRODUCTS
SCM GLOBAL SUPPLY & DEMAND
SOME KEY DISTINCTIONS
GBFS IS GLOBALLY TRADED – EASIER TO HANDLE AND TRANSPORTABLE IN BULK CCP’s ARE LOCAL/REGIONAL – MORE CHALLENGING TO HANDLE
– TYPICALLY REQUIRE SILOS AND SPECIAL LOADING AND UNLOADING EQUIPMENT AND OFTEN SPECIAL VESSELS
GBFS IS TODAY ESSENTIALLY CONSIDERED A PRODUCT WHEREAS
FLY ASH IS STILL LABELED AS WASTE – MAJOR IMPLICATIONS ON TRANSPORT, APPROVALS & CERTIFICATIONS
GBF SLAG GLOBAL SUPPLY & DEMAND
MACRO VIEW: THE SIMPLE VIEW
“PLENTIFUL SUPPLY”
MICRO VIEW: REQUIRES DETAILED ANALYSIS & UNDERSTANDING
“SUPPLY IS NOT SO PLENTIFUL”
o STEEL INDUSTRY DYNAMICS o SUPPLY & DEMAND o QUALITY (CHEMISTRY/GLASS CONTENT) o GRANULATION TECHNOLOGY o OWNERSHIP/CONTROL o LOCATION/LOGISTICS o SUPPLY PHILOSOPHY & LONG TERM RELIABILITY o ENVIRONMENTAL PRESSURES
7
10.7 12.2
14
16.5
16.9
13.6
15.5
0
2
4
6
8
10
12
14
16
18
2002 2004 2005 2006 2007 2008 2009 2011
GBFS GLOBAL TRADE (MMT)
DUAL IMPACT OF GLOBAL DOWNTURN STEEL PRODUCTION REDUCTION AND EXCESS CLINKER CAPACITY
\
2007 2008 2009 2010 2011
CHINA 494.9 500.5 567 626.7 703
E.U. 209.7 198 139 172.9 186
JAPAN 120.2 118.7 87.5 109.6 108.5
USA 98.1 91.4 58.1 80.6 85
RUSSIA 72.4 68.5 59.9 66.9 69
INDIA 53.1 55.2 56.6 66.8 70.3
S. KOREA 51.5 53.6 48.6 58.4 68
R.O.W. 251.4 245 202.3 232 225
WORLD 1,351.3 1,330 1,219 1,414 1514
GBFS SUPPLY:STEEL PRODUCTION(MMT) SOURCE: WORLD STEEL ASSOCIATION
2006 2007 2008 2009 2010 2015 EST
PRODUCTION (IRON & STEEL
SLAGS)
20.3
19.6
18.8
12.5
15.0
12.5
IMPORTS
(GBFS)
1.6
1.9
1.3
1.3
1.5
5 - 8
SLAG - USA (MMT) Source: USGS
Active Blast Furnaces
United States
Active Blast Furnaces
Sault Ste. Marie
Toronto, Canada
Cleveland
Pittsburgh
Weirton
Baltimore
Charleston
Tampa
Miami
N. Orleans
Minneapolis
DetroitPhiladelphia
Birmingham
Nanticoke
U.S. COAL INDUSTRY CHALLENGES NEW STRINGENT EPA REGULATIONS
COSTLY ANTI-POLLUTION UPGRADES FOR OLD PLANTS NEW RESTRICTIVE AIR QUALITY STANDARDS FOR MERCURY,
NITROGEN OXIDE, AND SULFUR DIOXIDE HIGHER POLLUTANT PROFILE VERSUS NATURAL GAS
COST TRENDS FOR ALTERNATIVE ENERGY NATURAL GAS IS ABUNDANT AND INEXPENSIVE COAL PRICING INCREASING ON AVERAGE 6.7% P/A CHINA ( AND NOW JAPAN/GERMANY) INCREASING
DEMAND WILL CAUSE FUTURE PRICE PRESSURES
HOW DOES THIS IMPACT CCP SUPPLY?
CCP SUPPLY – USA EXAMPLE
SHALE GAS IMPACT ACCELERATED SHUTDOWN SCHEDULE
PRESSURE ON FLY ASH NESHAP & TENNESSEE
SPILL IMPACT HANDLING & TRANSPORTATION CHALLENGES
USA CCP UTILIZATION
US CCP UTILIZATION���(BY MARKET APPLICATION)
(M
ill
ion
to
ns
)
Use/Production Rate: 40% 44% 82% 50% 6% 98%
2009 ACCA Survey
Monticello Steam Station
Welsh Power Station
J.T. Deely Station
CCP PRODUCTION & SALES TEXAS COAL POWER PLANTS SCHEDULED FOR CLOSURE
COAL FIRED POWER PLANT PRODUCT PRODUCTION SALES YEAR OF CLOSURE
(Tons on 000's)
Monticello Steam Station
Fly ash from standard boiler/PCD units 2009 584 259
2012
2010 574 215
FGD Gypsum 2009 92 0
2010 84 0
Bottom ash from standard boiler units 2009 275 3
2010 270 0
Welsh Power Plant
Fly ash from standard boiler/PCD units 2009 220 150
2014 2010 225 202
Bottom ash from standard boiler units 2009 90 1
2010 97 16
J.T. Deely Station
Fly ash from standard boiler/PCD units 2009 107 89
2018 2010 97 94
Bottom ash from standard boiler units 2009 44 44
2010 43 43
0
50
100
150
200
250
300
Monticello Steam Station
Welsh Power Plant J.T. Deely Station
259
150
89
215 202
94
FLY ASH SALES TEXAS POWER PLANTS
(Tons in 000's)
2009
2010
0
5
10
15
20
25
30
35
40
45
Monticello Steam Station
Welsh Power Plant J.T. Deely Station
3 1
44
0
16
43
BOTTOM ASH SALES TEXAS POWER PLANTS
(Tons in 000's)
2009
2010
5
!"#"$%&'"() %*+,,-+&.%/01)2%( 2(+30.%&"+435+678+*.%' 699:+)%+;<<=
>?+@ *$A BCDE+F?+@ G%))%' BCDE+FH+@ G%2$". C$BIE+>F,+@ >F,+BCDE+H!?+@ H!?+&.%/01)E+>J!+@ >J!+IA&C0'
1993 1995 1997 1999 2001 2003 2005 2007
FA BA BS FBC SDA FGDC
CP
pro
duction in m
illion t
onnes
60
50
40
30
20
10
70
;K+-.%/01)2%( %*+,,-C+2(+30.%&"+
SCM SUPPLY
NUCLEAR PLANT
SHUTDOWNS
USA SHALE GAS, NESHAP & RECOVERY
STEEL INDUSTRY CUTBACKS
W.EUROPE RECESSION
CHINA TURNS OUTWARD
AGAIN
FREIGHT RECOVERY
CONCLUDING REMARKS
OVERALL INDUSTRY PROSPECTS ARE GOOD
SCM NEED & USAGE WILL INCREASE
REGIONAL DIFFERENCES
MANY EXTERNAL VARIABLES
SOME UNPREDICTABLE POSSIBILITIES
NEED FOR CLEAR ANALYSIS & CAREFUL DECISIONS
