Geography of

steel raw

materials -

policy

implications.

Magnus Ericsson

OECD Workshop on steelmaking raw materials

Paris 2011 12 05

RE

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raw

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: K

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World mining for 150 + years

0

10

20

30

40

50

60

70

1850 1870 1890 1910 1930 1950 1970 1990 2010 2030Europe USA China USSR/CIS Australia/Canada 6 resource rich developing countries

Sources: Raw Materials Data, 2011 and Sames.

% of global mining

Mining:

• Society needs metals

• Global industry

• Iron ore, copper and gold dominates

• Cyclical business

• Long term industry

• Current decade positive – for miners

Background

• Metals are running out

• Mining is not sustainable

• China is holding the world to ransom

Myths

Are metals a

depleting

resource?

Manganese drawing: Kaianders Sempler.

Growth of resource base

Source: Crowson.

Metals are

not

running out !

Manganese drawing: Kaianders Sempler.

Vanadium drawing: Kaianders Sempler.

Is mining

sustainable?

Garpenberg - since 13th c.

Courtesy: Boliden.

Vanadium drawing: Kaianders Sempler.

Mining is for many

countries the only

chance to start

economic

development!

• China

• Structure of iron ore mining.

• Exploration.

• Projects and foreign investments.

• Conclusions.

Outline

The role of China • Exploration

• Foreign Direct Investment

• M&A

061030 Anton Löf

Structure of

Chinese iron

ore mining

Manganese drawing: Kaianders Sempler.

Global iron ore production

061030 Anton Löf

Source: Raw Materials Data Iron ore, 2011.

Chinese iron ore imports

061030 Anton Löf

Source: Raw Materials Data Iron ore, 2011.

Global iron ore grades

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Source: Raw Materials Data Iron ore, 2011.

061030 Anton Löf

Chinese

structure

Manganese drawing: Kaianders Sempler.

• Fragmented

corporate structure.

• Many small mines.

• Low grades, under

ground.

• Vertical integration.

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Chinese

exploration

Nickel drawing: Kaianders Sempler.

0

2

4

6

8

10

12

14

16

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

0

5

10

15

20

25

30

Total world

China

Sources: Total world MEG, China Ministry of Land and Resoruces.

Billion USD

Global exploration 1

Billion RMB

Chinese exploration 1

14%

27%

59% Central gov

Local gov

Private

Year 2009 total 30.30 billion RMB

Source: MOLAR 2010.

Chinese exploration 2

34%

14%

12%

10%

9% 2% 18%1%Coal

Gold

Copper

Iron ore

Pb/Zn

Uranium

Tungsten

Other

Year 2009 total 26.11 billion RMB

Source: MOLAR 2010.

Iron ore 2.55 billion RMB

061030 Anton Löf

Chinese

exploration

• Major exploration efforts.

• World’s largest

exploration spender.

• 400 MUSD iron ore 2009.

• No great results.

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New

projects

Chinese overseas mines

061030

0

5

10

15

20

25

30

35

40

45

50

1990 Year

1995

2000

2005

2011

Chinese foreign operations

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Source: Raw Materials Data 2011. So

urc

e:

Ra

w M

ate

ria

ls D

ata

, 2

011

.

Chinese foreign projects

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So

urc

e:

Raw

Mate

rials

Data

, 2011.

Iron ore projects • Operating mines

Australia 19.3

Peru 7.0

Brazil 1.7

Canada 0.8 28.8

• Projects

Australia 65

Peru 10

Sierra Leone 3 78

Total ~ 110 Mt

061030 Anton Löf

Source: Raw Materials Data, 2011.

Chinese projects in Africa Country Metal Company Share % Type

Awaso Ghana Baux Bosai Min. 80 Oper.

Simandou Guinea Fe Chinalco 45 Project

Forécariah Guinea Fe China Int. F. 50 Project

Bong Liberia Fe China Union 100 Project

Tonkolili Sierra L. Fe Shandong 25 Project

Avantuur South Afr. Mn Baosteel 11 Project

Dilokong South Afr. Cr East Asia Met. 85 Oper.

Weziswe South Afr. PGM JNMC 45 Project

Baluba Zambia Cu CNMC 72 Oper.

Chambishi Zambia Cu CNMC 85 Oper.

Gwabw/Njali Zambia U JNMC 30 Project

Muliashi Zambia Cu CNMC 72 Oper.

Munali Zambia Cu CNMC 50 Oper.

Lalapnazi Zimbabwe Cr Sinosteel 100 Oper.

So

urc

e:

Ra

w M

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ria

ls D

ata

, 2

011

.

061030 Anton Löf

New projects

• Foreign expansion slow -

not continuous.

• Will increase in the future.

• Long term serious problem.

• Control over imports in

focus.

• Not reach internal goals.

Chinese M&A

061030 Anton Löf

0

50

100

150

200

250

300

350

400

450

500

0

20

40

60

80

100

120

140

160

Chinese overseas M & A Word Total RMG Metal Price Index (RHS)

Billion USD

Summary China

061030 Anton Löf

• Engine of demand – reduced growth pace.

• Largest mining country –

many small, high cost mines.

• Largest exploration country since 2010.

• Foreign expansion slow, not continuous.

Policy implications

061030 Anton Löf

• Mineral supply – long term, serious problem.

• But no physical scarcity.

• Asessment of China’s role based on facts.

• Window of opportunity for emerging

economies.

• More proper political focus:

• R&D; Training; Balance mining/environment.

• Rare earths not a problem – Chinese import

dependency iron ore, copper is!

Magnus Ericsson

PO Box 3127

SE-169 03 Solna, Sweden

magnus.ericsson@rmg.se

Tel: +46-8-744 00 65

Fax: +46-8-744 0066

www.rmg.se

Thank you !

REE drawing: Kaianders Sempler.