2000 TO 2015 AN INDUSTRY TRANSFORMED:

Transcription

1 2 TO 215 AN INDUSTRY TRANSFORMED: WHAT HAS CHANGED AND WHAT MIGHT HAPPEN NEXT? Bruce Griffin TZMI.COM

2 About TZMI TZMI is a global, independent consulting and publishing company with offices in Australia, the US, Europe, Africa and China. The strength of TZMI s consulting services stems from extensive practical experience in the mineral sands, titanium dioxide and coatings industries and from a comprehensive database, which has been built up over many years. TZMI has proven expertise gained from our consultants having many years of direct operating experience in the industry in chief executive, senior operational, analytical and marketing roles. TZMI s publications and data services support the consulting activities and ensure up-to-date, high quality and comprehensive data, analysis and information across the mineral sands, zircon and Ti 2 pigment industries. TZMI provides operational and technical expert advice on many areas including: Mergers and acquisitions Market assessments and industry analysis Due diligence Pre-feasibility studies including preliminary capital and operating cost estimation Competitive cost analysis and benchmarking Technical reviews and audits Resource assessments Physical separation testwork Flowsheet development Customised data analysis and reporting TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 2

3 TZMI.COM 2 TO 215: WHAT HAS CHANGED TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 3

4 In 2 China was a small part of the global TiO 2 pigment market Pigment Demand by region: 2 Total 4.5 million tonne China 9% North America 31% 18% Asia Pacific ex China 7% Central & South America 3% Middle East & Africa 32% Europe TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 4

5 China has dominated global pigment demand growth since 2 tonnes Pigment Demand by region: , 4,5 3, 1,5 CAGR 2 to 215 China 9.6% ROW.7% AP ex China 2.3% C&S America 2.5% MEA 5.4% Europe.5% N America (1.6%) China Asia Pacific ex China Central & South America Middle East & Africa Europe North America TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 5

6 China has become the largest market for TiO 2 pigment Pigment Demand by region: 215 Total 5.5 million tonne North America 18% 25% China 25% Europe 6% Middle East & Africa 19% Asia Pacific ex China 7% Central & South America TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 6

7 China emergence occurred in 3 phases China Pigment Trade and Capacity: Trade, tonnes 8 Capacity, tonnes 3, Capacity (RHS) Exports Imports 4 2, 1, Growing import opportunity Local market Growing export threat TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 7

8 Capacity growth has exceeded demand growth in China and the ROW China Pigment Demand and Capacity: Volume, tonnes 5, 4, 3, +2,34 +1,485 +1,38 2, 1, Utilisation 8.3% 87.6% 66.3% 66.4% China capacity China demand China demand plus exports to ROW TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 8

9 Capacity growth has exceeded demand growth in China and the ROW China Pigment Demand and Capacity: ROW Pigment Demand and Capacity: Volume, tonnes -22 5, Volume, tonnes , +1,485 +1,38 5, 4, , +2,34 3, 2, 2, 1, 1, Utilisation 8.3% 87.6% 66.3% 66.4% 85.9% 89.% 89.8% 81.9% China capacity China demand China demand plus exports to ROW ROW capacity ROW demand ROW demand net of China imports TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 9

10 China is now the largest market for and source of TiO 2 pigment Pigment Demand by region: 215 Pigment Production by region: 215 Total 5.5 million tonne Total 5.6 million tonne China Asia Pacific ex China Central & South America 18% 25% Middle East & Africa Europe 25% North America 32% 25% 19% 24% 13% 6% 7% 3% 3% TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 1

11 China was a small part of the feedstock market in 2 Supply of titanium feedstocks: 2 Demand for titanium feedstocks: 2 Total 4.77 million TiO 2 Units Total 4.75 million TiO 2 Units China Australia 12% 7% North America South Africa 16% 9% 8% Western Europe 28% Asia Pacific ROW 13% 33% 22% 24% 29% TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 11

12 China has dominated feedstock demand growth since 2 Global feedstock consumption: China vs RoW TiO 2 units +2% Total RoW China 8, 6, % +12% 4, 2, TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 12

13 China has become the largest market for TiO 2 feedstock Demand for titanium feedstocks: 215 Total 6.58 million TiO 2 Units 15% 1% 34% 2% 22% China North America Western Europe Asia-Pacific ROW TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 13

14 Emergence of China drove a resurgence of sulfate feedstock demand Global sulfate feedstock demand: China vs RoW Global chloride feedstock demand: China vs RoW TiO 2 units TiO 2 units 4, 4, +1% 3, +4% 3, 7% 58% 2, 2, 1, 1, China China RoW RoW TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 14

15 Increased China demand was met by domestic and imported ilmenite China demand for sulfate ilmenite: Domestic vs imported TiO 2 units 2, Favourable iron ore and ilmenite price environment Unfavourable iron ore and ilmenite price environment 1,5 +11% 3% 41% 1, 5 9% 91% 2 32% 68% 25 66% 34% 21 7% % 215 Sulfate ilmenite - imported Sulfate ilmenite - domestic supply TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 15

16 China has become the largest market for and source of TiO 2 feedstock Supply of titanium feedstocks: 215 Demand for titanium feedstocks: 215 Total 6.34 million TiO 2 Units Total 6.58 million TiO 2 Units 16% 21% 15% 5% 1% 34% 13% 19% 2% 15% 1% 22% China Australia North America South Africa Other Africa Western Europe Asia Pacific ROW TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 16

17 TZMI.COM 216 TO 225: WHERE TO FROM HERE? TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 17

18 How fast will global pigment demand grow? Demand versus GDP: since 198 Demand Index 4 Old or New World? 215 to 225 Demand =.4 x GDP to 27 Demand =.6 x GDP + 45 R 2 = to 215 Demand =.18 x GDP R 2 = GDP Index TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 18

19 2 Changes 25 Changes 21 Changes 212 Changes 215 How will China consolidate and what industry development model will be pursued? Global capacity changes, tonnes China Development Model 8, 7,5 7, 6,5 6, 5,5 5, 4,5 4, The Aluminium industry model No constraint on exports to reduce environmental impact Capacity exceeds domestic demand Large net exports to ensure domestic market balanced Or A maturing, capital efficient model Import of raw material for re-export is discouraged to reduce environmental impact Capacity matched to domestic demand with small net exports to ensure domestic market balanced Total China shutdown China expansion ROW shut ROW expansion China net gain ROW net gain TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 19

20 Possible Scenarios to 225: Global demand and China development model Panda-monium - Strong demand environment - China continues to capture most/all growth - Some ROW rationalization required China pigment like the Al industry Chapter 33 - Weaker demand environment - China captures all growth - Significant ROW capacity reduction required Return to pre-28 growth Global Resurgence - Strong demand environment - China supply meets domestic demand - China consolidation via small plant and under-performing large plant closure - ROW companies capture ROW growth China operates under capital efficient world New demand paradigm Circa 27 - Weaker demand environment - China supply meets domestic demand - China consolidation via small plant and under-performing large plant closure - Global consolidation - Some ROW rationalization required TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 2

21 Possible Scenarios to 225: Global demand and China development model Panda-monium - Strong demand environment - China continues to capture most/all growth - Some ROW rationalization required China pigment like the Al industry Chapter 33 - Weaker demand environment - China captures all growth - Significant ROW capacity reduction required Return to pre-28 growth What will pigment and feedstock supply and demand look like in these scenarios? Which assets/companies are best positioned to survive and thrive? Global Resurgence - Strong demand environment - China supply meets domestic demand - China consolidation via small plant and under-performing large plant closure - ROW companies capture ROW growth China operates under capital efficient world New demand paradigm Circa 27 - Weaker demand environment - China supply meets domestic demand - China consolidation via small plant and under-performing large plant closure - Global consolidation - Some ROW rationalization required TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 21

22 TZMI.COM TITANIUM FEEDSTOCK MARKET DYNAMICS: REVIEW AND OUTLOOK TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 22

23 Current Market: Key Themes China Largest producer and consumer of feedstock 11% feedstock demand growth since 2 vs flat for ROW The influence of iron ore pricing on sulfate ilmenite production Environmental regulation influencing sulfate slag vs ilmenite feedstock choices The ramp up of chloride capacity and chloride feedstock preferences New capacity investment Life extensions for several feedstock assets required to sustain current production Greenfields projects dependent on securing third party capital Supply side discipline Installed capacity exceeds current production and demand for several feedstocks Low operating rates reflect a disciplined approach to match supply to weaker demand When and how fast idled capacity will be restarted Sulfate versus chloride China drove the renaissance of sulfate pigment Cost competitiveness of chloride vs sulfate improved with increased sulfate ilmenite prices TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 23

24 Supply to decline further in 216; growth to resume in 217 TiO 2 units Global titanium feedstock production by product: , -5.4% +13.6% -4.9% 6, 4, 2, f 217f 218f 219f 22f Leucoxene UGS Chloride ilmenite Rutile Sulfate ilmenite Chloride fines Sulfate slag Synthetic rutile Chloride slag Note: Supply profile only reflects existing operations TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 24

25 The average R/C ratio declined for the third year running in 215 R/C Ratio Industry revenue-to-cash cost curve: st quartile 2 nd quartile 3 rd quartile 4 th quartile 2. TZMI - NOT FOR REPRODUCTION Industry weighted average: 214 Industry weighted average: 215-8%.5. % 25% 5% 75% 1% Cumulative TiO 2 units TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 25

26 216 was the lowest average R/C since analysis started in 2 Annual weighted average R/C ratio 2.5 Industry weighted average R/C ratio: TZMI : NOT FOR REPRODUCTION TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 26

27 Prices not yet at levels required to induce new projects Sulfate Ilmenite ( US$/t) 4 TiO 2 Inducement (IRR=15% / 25%) % IRR 15% IRR TZMI - NOT FOR REPRODUCTION Cumulative TiO 2 Units ( tonnes) Note: Inducement analysis assumes Q3 216 long term price and FX forecasts TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 27

28 After 5 flat years demand growth resumed in 216 Global titanium feedstock demand by product: TiO 2 units +2.7% 8, -.2% 7,463 7,219 7,116 7, 6,696 6,894 6,525 6,64 6,843 6,277 6, 7,262 7,588 5, 4, 3, 2, 1, f 217f 218f 219f 22f Leucoxene Chloride fines UGS Chloride ilmenite Synthetic rutile Rutile Sulfate slag Chloride slag Sulfate ilmenite TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 28

29 Sulfate market moving from surplus to deficit Sulfate feedstock supply/demand balance to 22 TiO 2 units 5, 4, 3, 2, TZMI - NOT FOR REPRODUCTION 1, f 217f 218f 219f 22f Existing and approved production Underlying demand Note: Supply for a given year does not take into account stock build from previous years, nor allow for supply from unapproved new projects or mine expansions. TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 29

30 Chloride market in balance; capacity exceeds forecast demand Chloride feedstock supply/demand balance to 22 TiO 2 units 5, 4, 3, 2, 1, TZMI - NOT FOR REPRODUCTION f 217f 218f 219f 22f Existing and approved production Underlying demand Effective capacity Note: Supply for a given year does not take into account stock build from previous years, nor allow for supply from unapproved new projects or mine expansions. TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 3

31 Surplus inventory clearing, new supply required Overall supply/demand balance to 22 Surplus/deficit ( TiO 2 units) 1, Inventory ( TiO 2 units) 4, 5 2, -5-2, -1, -4, f 217f 218f 219f 22f Normal inventory (RHS) Total inventory (RHS) With new supply (LHS) Without new supply (LHS) Forecast inventory position includes new supply, where relevant TZMI CONGRESS TO 215 AN INDUSTRY TRANSFORMED 31

32 TZ MINERALS INTERNATIONAL PTY LTD TZMI.COM