Market analysis. Mines Smelters Zinc Copper. President & CEO Jan Johansson. Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway

Transcription

1 Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway Market analysis President & CEO Jan Johansson Mines Smelters Zinc Copper

2 Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 2 Continued strong growth in China lower growth rate in the rest of the world Global 2006 Q1* - Cu-consumption 5.5 % - Cu-production 7.3 % - Zn-consumption 3.4 % - Zn-production 1.1 % Industrial Production USA - Cu-consumption 9.9 % 10 - Zn-consumption 0.0 % Europe - Cu-consumption 2.6 % 5 - Zn-consumption 0.0 % China - Cu-consumption 10.6 % 0 - Zn-consumption 9.5 % -5 Continued good forecast for Growth % USA W Europe Japan China Q v.s. Q1 2005

3 Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 3 Zinc production and consumption 1995 vs 2005 kton REFINED ZINC PRODUCTION ZINC SLAB CONSUMPTION EU 25 EU USA Japan EU 25 Asia USA Japan China Asia China 33% Others Others % USA EU25 Japan USA Asia Japan Asia 37% China China Others Others %

4 Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 4 Copper production and consumption 1995 vs 2005 kton REFINED COPPER PRODUCTION EU25 USA Japan EU25 Asia USA China Japan Asia 31% China Others Others % COPPER CATHODE CONSUMPTION EU25 USA EU25 Japan USA Asia Japan Asia 38% China China Others Others %

5 Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 5 China and the rest of Asia together represent 43% of global zinc metal production and 48% of consumption NORTH AMERICA L. AMERICA EUROPE AFRICA CIS ASIA CHINA ( 000 tonnes 2005, Brook Hunt) AUSTRALIASIA 1346 Mine Production 9901 Metal Production Metal Consumption

6 Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 6 China and the rest of Asia together represent 43% of global copper metal production but 50% of consumption NORTH AMERICA L. AMERICA AFRICA EUROPE CIS ASIA 3269 CHINA AUSTRALIASIA ( 000 tonnes 2005, Brook Hunt) 4028 Mine Production Metal Production Metal Consumption 16907

7 Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 7 China refined zinc and concentrate trade kt Zinc Zinc in concentrate Source: Brook Hunt

8 Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 8 LME Zinc Price and Stocks USD/t ton jan-03 apr-03 jul-03 okt-03 jan-04 apr-04 jul-04 okt-04 jan-05 apr-05 jul-05 okt-05 jan-06 apr-06

9 Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 9 LME Copper Price and Stocks USD/t ton jan-03 apr-03 jul-03 okt-03 jan-04 apr-04 jul-04 okt-04 jan-05 apr-05 jul-05 okt-05 jan-06 apr-06

10 Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 10 Europe copper and zinc balance 2005 Europe copper balance (kt Cu) Europe zinc balance (kt Zn) Consumption Consumption Refinery production (incl. secondary) Smelter production (incl. secondary) Mine production Mine production Copper balance and market in Europe Depending of import of copper concentrate and copper cathodes. Consumption of copper is far beyond production capability. Zinc balance and market in Europe Depending of import of zinc concentrate. Consumption and production of zinc, balanced by imports mainly from Namibia (Skorpion material) Expected effects from 2005 closures

11 Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 11 Increased demand for zinc import in Europe Production and Consumption in 000 tons Balance in 000 tons Balance Europe Production Total Europe Consumption Total Europe data: CRU Zinc Quarterly, 1st quarter 2006; comparison of forecasted Zn metal production capacity and Zn metal consumption

12 Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 12 Increased copper metal premium US$/t Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sept-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Copper premium Source: Brook hunt

13 Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 13 Increased zinc metal premium US$/t Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sept-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 current US Midwest Delivered Europe ex-works Far East (Western) Source: CRU Monitor Zinc

14 Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 14 The galvanizing industry is the biggest customer of zinc metal Zinc Consumption by first use Western World (2004) Misc Oxides and 3% chem icals 6% Zinc Consumption by end use Western World (2004) Other 10% Die-casting 17% Galvanising 50% Transport 23% Construction 45% Brass Se m is & Casting 18% Rolled Zinc 6% Consumer products 10% Ind. Machinery 10% Source: Brook Hunt

15 Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 15 Boliden s major copper customers are found in the wire rod sector, where a premium is paid for quality. Copper Consumption by First Use 2005 Other 9% Copper Consumption by Market Sector 2005 Consumer Products 10% Cu Alloys 17% Transport 11% Construction 38% Tube 11% Wire Rod 55% Industrial Machinery 13% Sheet/Strip 8% Electronic products 28% Source: Brook Hunt

16 Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 16 Boliden's customers are located in north-western Europe (Nordic Countries, UK, Germany, France) markets with big volumes in construction activity now and in the future Construction Risk Score 5 years Source: Global Insight

17 Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 17 Europe has been and will stay an important player in the automotive industry an important factor for Boliden s customers units World Wide Vehicle Production Total Europe America China Asia excl. China Others Vehicles: passenger + utility cars source: GI, Metal Bulletin s 10th International Galvanizing & Coil Coating Conference, Oct 2005

18 Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 18 Despite many different replacement products, zinc is still very competitive Aluminum, e.g.. in car bodies gives weight reduction (energy savings) and corrosion resistance. But automotive industry can t change fast and demands heavy investments. Minimal risk of substitution in European galvanizing market. Painting could be used instead of galvanizing and is short term financial beneficial. Plastics, e.g. pipes, handles etc. Wood in construction details. No immediate risk of substitution for zinc die-casting, but there is a risk of move to low cost countries.

19 Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 19 Threats to the copper market exist, but there are few real replacement products for Boliden highgrade copper in the coming years Reduced use of copper by the power cable industry in favour of aluminium. Reduced use of copper for tubes in favour of plastic materials. Outsourcing of brass production from EU to Far East will give less raw material supply regarding supply of copper/zinc bearing ashes. Production of wire rod cable outsourced to Far East due to lower labour cost leads to higher freight cost for EU cathode producers. Risk for substitutes in vehicle heat exchanger. To expensive to use as roofing sheets or aesthetic use. According to CRU, less than 1% of copper could be substituted in the next year.

20 Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 20 Price effects on end products are limited Value of zinc and copper content < 1% of price of a new car

21 Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 21 Shortage of zinc concentrate? Zinc: Present production + probable expansions + possible expansions '000 tonnes of Zinc p.a Possible Expansions Probable Expansions Base Case + Highly Probable % Demand Growth 3% Demand Growth % Demand Growth Source: CSFB, Brook hunt

22 Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 22 Shortage of copper concentrate? Copper: Present production + probable expansions + possible expansions '000 tonnes of copper Possible expansions Probable expansions Base Case New Projects and planned expansions 1% growth rate 3 % growth rate 5% growth rate Source: CSFB, Brook hunt