Molybdenum presentation chengdu- march 2011

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Roskill

Molybdenum market outlookChina International Tungsten, Molybdenum & Vanadium

Forum, March 2011

Khayyam JahangirResearch Manager – Steel AlloysRoskill Information Services Ltd.


Roskill

The statements in this presentation represent the considered views of RoskillInformation Services Ltd. It includes certain statements that may be deemed"forward-looking statements." All statements in this presentation, other thanstatements of historical facts, that address future market developments, governmentactions and events, are forward-looking statements. Although Roskill InformationServices Ltd. believes the outcomes expressed in such forward-looking statementsare based on reasonable assumptions, such statements are not guarantees of futureperformance and actual results or developments may differ materially from those inforward-looking statements. Factors that could cause actual results to differmaterially from those in forward-looking statements include changes in miningcosts, the LME molybdenum price and general economic, market or businessconditions.

While Roskill Information Services Ltd has made every reasonable effort to ensurethe veracity of the information presented it cannot expressly guarantee the accuracyand reliability of the estimates, forecasts and conclusions contained herein.Accordingly, the statements in the presentation should be used for general guidanceonly.

Disclaimer


Roskill

• Supply Review of molybdenum production Production by company and mine type Production costs

• Demand Review of molybdenum consumption Consumption by end-use

• Market outlook Forecast molybdenum consumption Forecast molybdenum production Molybdenum price forecast

Outline


Roskill

Molybdenum production


Roskill

World: Molybdenum mine production, 1990-2010, (kt)

Source: Roskill, IMOA


Roskill

World: Molybdenum mine production bycountry, 1990-2010, (kt)



Roskill

World: Annual change in molybdenumproduction, 2002-2010, (kt)



Roskill

World: Molybdenum production by company,2009

Source: Roskill


Roskill

Producers were forced to cut output sharplyduring 2008/9, due to the effects of the globalrecession

Source: Roskill


Roskill

Molybdenum prices fell by 75% betweenAugust 2008 and April 2009

Source: Metal Bulletin


RoskillSource: Roskill: Molybdenum Market Outlook to 2014

The fall in prices saw producers suspend output,cut inventories and delay expansion/construction


Roskill

Rising prices have resulted in production fromprimary molybdenum mines increasing



Roskill

Since falling from record highs, molybdenumprices are closer to the marginal cost

Source: Roskill, Mine Cost


Roskill

Molybdenum consumption


Roskill

As with most other commodities, China is thelargest consumer of molybdenum



Roskill

Molybdenum consumption has correlated closelyto the steel market, while outperformingconsumption of nickel in recent years

Source: Roskill, IMOA, INSG, WBMS, WSANote: 1) 1998 = 100


Roskill

Steel products account for around 70% of worldmolybdenum consumption



Roskill

After a poor performance during 2008 and 2009,stainless production is making a recovery

Source: Roskill, ISSF


Roskill

Molybdenum market outlook


Roskill

Emerging markets are consuming an everhigher quantity of molybdenum



Roskill

Strong economic growth in emerging marketsis driving consumption of a variety ofcommodities

Source: EIU, IMF


Roskill

Steel production in the BRIC countries isexpected to outpace that in the rest of the world

Source: WSA, Roskill

BRIC 2011-2015 CAGR = 8%ROW 2011-2015 CAGR = 5%


RoskillSource: ISSF, Roskill

Chinese output of stainless steel to grow fasterthan the rest of the world

China 2011-2015 CAGR = 8-9%ROW 2011-2015 CAGR = 4-5%


Roskill

How much further will Chinese stainless steelconsumption grow?

Source: Roskill, WBMS, IMF

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Roskill

• Increased use of stainless and other steels containing molybdenum in process, powerand desalination plants

• Greater use of Advanced High Strength Steel (AHSS) in pipelines and motor vehiclecomponents

• The ability of alloy steels containing molybdenum to function in harsh conditions,leading to increasing use of drill rods and bits to access oil & gas reserves deeperunderground

• Growth in nuclear power generation, and replacement of components in existingpower stations, providing significant markets for high grade molybdenum-containingsteels

• Rising demand for Ni-Mo and Co-Mo catalysts in production of ultra-low sulphurdiesel

The principal drivers for future molybdenumdemand are as follows:


RoskillSource: Roskill

Announced future mined molybdenum capacity,2011-2015 (t)



Announced future molybdenum capacity bymine type, 2011-2015



Potential new capacity is evenly spread acrossthe world


RoskillSource: OandaNote: 1) Peruvian Nuevo Sol

Currency fluctuations could have a major impacton future capacity


Roskill

Earnings in local currency have fallen sharply,as the US$ continues to weaken

Price change 2005-2010:US$ = -50%AUS$ = -60%CAD$ = -60%PEN = -58%

Source: Roskill, OandaNote: 1) Peruvian Nuevo Sol



Various factors, including exchange rates andfinancing, are likely to delay some projectsreaching the market place



A slow rise in production should see a marketdeficit open up in 2013/14, or maybe earlier



The market deficit will result in price increases -although unlikely to reach historical highs


Roskill

Steel Alloys – Minor Metals – Industrial Minerals

New reports for 2010:Silicon (Q2)Iron ore (Q3)

Contact:Khayyam Jahangir

Research Manager – Steel Alloys+44 20 8944 0066

[email protected]

Molybdenum presentation chengdu- march 2011

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