Alloy Market: Present Situation & Trends

Metal Bulletin India Ferroalloy Conference

Hyderabad 8-10 February 2004

Introduction

1. BHP Billiton’s position in the carbon steel materials and ferroalloy industry

2. Trends in world steel and ferroalloy demand3. Possible implications for India

Part 1BHP Billiton and Samancor in the

Ferroalloy Industry

Angl

o Am

erica

n

Alco

a

Newm

ont

CVRD

Alca

n

Barri

ck

Noril

sk

Angl

ogol

d

Ampl

ats

Gold

Fiel

ds

Plac

er D

ome

Impa

la

Xstra

ta

Inco

Pech

iney

Phel

ps D

odge

Free

port

Alum

ina

BHPB

Rio

Tint

o

0

5

10

15

20

25

30

35

40

45

Mark

et C

ap. o

n 22

/08/

03 (U

S$Bn

)BHP Billiton - The largest company in a consolidating sector

Source: Datastream

Market value of minerals industry US$306 bnValue of Top Five US$141 bnValue of BHP Billiton US$ 42 bn

A global footprint

Energy CoalDiamonds & Spec Prod

Aluminium

Carbon Steel Materials

Base Metals

Petroleum

Stainless Steel Materials

Carbon Steel Materials – 27% of BHPB EBIT

Data for year ended 30 June 2003

Customer Sector Group EBIT:

Energy Coal5%

Aluminium15%

Diamonds & Spec. Prod.

10%

Carbon Steel Materials

27%

Base Metals8%

Petroleum31%

Stainless Steel Materials

4%

100% nominal production capacity

Carbon Steel Materials Assets

Illawarra Coal (100%)Prod: 7MtpaYears of Life: 45Niche supplier

QLD Coal (50 – 80%)Prod: 52MtpaYears of Life: 50No 1 Seaborne supplier

WA Iron Ore (85-100%)Prod: 77MtpaYears of Life: 35No 3 Seaborne supplier

Boodarie Iron (100%)Prod: 1.7Mtpa

Samarco Iron Ore (50%)Prod: 15MtpaYears of Life: 40Low cost pellet producer

Manganese (60%)Prod: Ore 4.1MtpaAlloy etc 0.7MtpaYears of Life:Aust 25SA 30No 1 Supplier

Samancor Manganese

•Wessels•Mamatwan•Gemco

AlloysMinesAlloys

Samancor

Mines

SamancorManganese

Chrome

BHP Billiton Anglo American

•Metalloys•Temco

South African operations

60% 40%

Hotazel Johannesburg

SaldanhaBay Port Elizabeth

SOUTH AFRICA

Metalloys

GEMCOGroote Eylandt

TEMCOBell Bay

Samancor Managese Operations

AUSTRALIA

INDIA5%

CIS11%

CHINA35%

JAPAN9%

EUROPE14%

AMERICAS6%

OTHER3%

OTH AFRICA5%

SAMANCOR12%

Source: IMnI

Samancor share of world Mn Alloy productionHCFeMn

INDIA6%

CIS29%

CHINA34%

EUROPE12%

AMERICAS9%

OTHER2%

JAPAN1%

OTH AFRICA3%

SAMANCOR4%

SiMn

World Mn Alloy Production 2003 = 8.9Mt

Part 1 Summary• BHP Billiton is the world’s largest supplier of steelmaking

raw materials

• Samancor is the world’s largest producer of manganese units

Part 2Trends in world steel and ferroalloy

demand

Annualised crude steel production

800

840

880

920

960

1000

1040

Janu

aryMarc

h

May July

Septem

ber

Novem

ber

Janu

aryMarc

h

May July

Septem

ber

Novem

ber

(Mt)

Totals2002 903Mt2003 962Mt

Annualised pig iron production

560

580

600

620

640

660

680

Janu

aryMarc

h

May July

Septe

mber

Novem

ber

Janu

aryMarc

h

May July

Septem

ber

Novem

ber

(Mt)

Totals2002 610Mt2003 655Mt

Seasonal Trends

2003

Annualised steel and pig iron production trends

Seasonal Trends

Seasonal Trends

Seasonal Trends

2003

Source: IISI

Seasonal Trends

Divergent trends emerged during the yearMonthly YOY % Change Crude Steel

-16-12-8-4048

1216202428

December

Januar

yFeb

ruary

Mar

ch

April

May June

July

August

Septem

berOctob

erNove

mberDece

mber

Global EU China Japan US India

Monthly YOY % Change Pig Iron

-24

-16

-8

0

8

16

24

December

Januar

yFeb

ruary

Marc

h

April

May

June

July

August

Septem

berOctob

erNovem

berDece

mber

Global EU China Japan US India

1998 1999 2000 2001 2002

Crude Steel 12 month running totals

Pig Iron 12 month running totals

Source: IISI

560

580

600

620

640

660

2001 2002 200344

46

48

50

52

54

56

58

60

12 months running total actual monthly data

de-seasonalised monthly data

820

840

860

880

900

920

940

960

2001 2002 200362

66

70

74

78

82

86

90

12 months running total actual monthly data

de-seasonalised monthly data

600

650

700

750

800

850

900

950

1000

95 96 97 98 99 '00 '01 '02 '034.0

5.0

6.0

7.0

8.0

9.0

Crude steel Mn alloy demand

Crude steel (Mmt) Mn Alloy Demand (Mmt)

Source:IISI, IMnI

World Mn Alloy Demand

3.9

4.1

4.3

4.5

4.7

4.9

94 95 96 97 98 99 '00 '01 '02 '03 '040.6

0.65

0.7

0.75

0.8

0.85

0.9

0.95

1

1.05

World Mn Alloy Consumption Trends

Source: IISI, IMnI

HC,SiMn (Kg Aly/ ton steel) MC/LCFeMn(Kg Aly/ ton steel)

MC/LCFeMn (3%pa)

HCFeMn (-1.4%pa)

SiMn (0.4%pa)

Steel industry/technological trends Manganese consumption

?

World Mn Alloy Capacity History

9,628

12,100

0

2,000

4,000

6,000

8,000

10,000

12,000

1975

1985

1989

1991

1993

1995

1997

1999

2001

2003

'000 Mt Thyssen,BS closures

Huta Pokojclosure

SFPO closureMoi Rana start-up

Source:- IMnI

$400

$450

$500

$550

$600

$650

$700

$750

$800

$850

Jan-

02

Feb-

02

Mar

-02

Apr

-02

May

-02

Jun-

02

Jul-0

2

Aug-

02

Sep

-02

Oct

-02

Nov

-02

Dec

-02

Jan-

03

Feb-

03

Mar

-03

Apr

-03

May

-03

Jun-

03

Jul-0

3

Aug-

03

Sep

-03

Oct

-03

Nov

-03

Dec

-03

Jan-

04

HCFeMn SiMn

MN Alloy Pricing trends – US monthly$/t (Fob Warehouse)

Source: CRU

€400

€450

€500

€550

€600

€650

€700

€750

€800

Jan-

02

Feb-

02

Mar

-02

Apr

-02

May

-02

Jun-

02

Jul-0

2

Aug-

02

Sep

-02

Oct

-02

Nov

-02

Dec

-02

Jan-

03

Feb-

03

Mar

-03

Apr

-03

May

-03

Jun-

03

Jul-0

3

Aug-

03

Sep

-03

Oct

-03

Nov

-03

Dec

-03

Jan-

04

HCFeMnSiMnHC$Si$

Euro/t (Del)

Source: CRU

MN Alloy Pricing trends – Europe monthly

Part 2 - Summary• Global Steel production has grown dramatically over the last 2

years, driven by Asia, and in particular China and India• The fall in HCFeMn consumption per ton of steel has now

stopped• Alloy Capacity has fallen consistently over the last few years• Prices have increased as supply has failed to keep up with

demand

Part 3Implications for India

0

500

1000

1500

2000

Mt

World Manganese Alloy Supply – 2003

0

500

1000

1500

2000

Mt

North America

South America0

500

1000

1500

2000

Mt

0

500

1000

1500

2000

Mt

China

Japan& Korea

0

500

1000

1500

2000

Mt Australia

Europe

India

Source:- CRU, Reuters, Interfax

0

500

1000

1500

2000

Mt

HCFeMn

0

500

1000

1500

2000

Mt

RSA

0

500

1000

1500

2000

Mt

FUSSR

SiMn

0

500

1000

1500

2000

Mt

0

500

1000

1500

Mt

World Manganese Alloy Demand – 2003

0

500

1000

1500

Mt

North America

South America0

500

1000

1500

Mt

0

500

1000

1500

Mt

China

Asia excl China

Europe

India

Source:- CRU, Reuters, Interfax

0

500

1000

1500

Mt

HCFeMn

0

500

1000

1500

Mt

Africa

0

500

1000

1500

Mt

FUSSR

SiMn

0

500

1000

1500

Mt

500

1,500

2,500

3,500

4,500

5,500

6,500

7,500

95 96 97 98 99 '00 '01 '02 '030

500

1000

1500

2000

2500

3000

Mn ore imports Domestic ore Mn alloy apparent cons

Mn ore (‘000mt)

Source:IISI, China trade statistics, IMnI

Manganese supply:demand in China

Mn alloy (‘000mt)

2003 Domestic alloy apparent consumption increase ±500Kt met by imported ore

0

500

1000

1500

2000

2500

3000

3500

95 96 97 98 99 '00 '01 '02 '030

50

100

150

200

250

Mn alloy apparent cons Mn alloy export Crude steel

Crude steel (Mmt)Mn Alloy (‘000mt)

Source:IISI, China trade statistics, IMnI

MN Alloy exports from ChinaMn alloy exports showing signs of slowing down from Q4 2003

050

100150200250

Q1 Q2 Q3 Q4

Kt China exports Mn alloy - 2003

Indian Mn Alloy Industry 2003

CAPACITY PRODUCTION APPARENT

CONSUMPTN

EXPORT6m annualised

IMPORT6m annualised

‘000 Mt

TOTAL

432

570

15

230

309

0

172

258

13

10

42

1

1

2

7

HCFeMn

SiMn

Refined

1 017 539 443 53 10

Source:CRU, India trade statistics

10

20

30

40

95 96 97 98 99 '00 '01 '02 '03200

300

400

500

Crude steel Mn alloy apparent cons

Crude steel (Mmt) Mn Alloy (‘000mt)

Source:IISI, IMnI

Mn Alloy consumption in India

10

110

210

310

410

510

95 96 97 98 99 '00 '01 '02 '03

Mn alloy production Mn alloy exports Mn alloy demand

Mt Alloy (‘000)

Source:IMnI, India trade statistics

MN Alloy supply and demand in India

Mn Industry issues for India

CRUDE STEEL

• Production fcst to increase to 33-35 mt in 2004 +5 mt on 2003, and reach 47 mt by 2007 Majority of this increase will be via BOF capacity expansions (Source: CRU)

MANGANESE

• Power availability and cost

• Coke availability and cost

• Steady increase in Mn ore production in next few years

• Transport logistics for both ore and alloys

• Reduction of import duties on ferroalloys from 25% to 15% could in the long run induce imports into India

Part 3 - Summary

• India is in the unique position, similar to China, of being both a large user and a large producer and exporter of ferroalloys

• As steel production takes off, India will quickly need to make decisions about:

– whether to continue exporting ferroalloys– whether sufficient high quality ore can be sourced in India to make

HCFeMn in particular– If not, whether the best option is to buy HCFeMn or high quality Mn Ore

– depending on factors such as power, coke and transport logistics

Summary1. BHP Billiton is importantly placed to meet demand for all carbon

steel materials.2. Samancor is well placed to supply not only Mn ore and also high

quality HCFeMn and SiMn3. Demand for these products is growing sharply as the steel

industry grows and makes more steel via the BOF route4. India will soon need to make decisions about where to source

Mn units in the futureWe look forward to discussing the options!

Thank You

Brett.Suann@BHPBilliton.com