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Posts Tagged ‘tin’

Mining week 26/’12: Resource nationalism & slowdown worries

June 24, 2012 Comments off

Top Stories of the Week:

  • Glencore mine in Bolivia nationalized
    • Bolivia nationalizes the Colquiri zinc and tin mine, one of 5 of Glencore’s assets in the country. The government promises to give a ‘fair compensation for equipment.
    • The nationalization comes after several weeks of labor conflicts between Colquiri’s workers and Glencore’s local subsidiary
    • Sources: Wall Street Journal; Glencore press release; La Prensa Bolivia
  • Rio Tinto invests $4bln more in Pilbara region
    • Rio Tinto has decided to spend an additional $3.7bln in the Pilbara region as part of its long-term investment plan.
    • $2.0bln of the funds will be used for infrastructure enhancements to allow the company to meet its output targets. The other $1.7bln will be used to extend the life of one of the largest mines in the area.
    • Sources: Rio Tinto press release; Financial Times; Fox Business
  • Media stress commodity price uncertainty

    • The disparity between performance of global mining stocks and metal prices is triggering debate in banking world and media about the potential impact of a further slowdown of the global economy.
    • Sources: Mining Weekly; Financial Times

    Trends & Implications:

    • The uncertainty about short-term economic developments in both OECD countries and developing economies, most notably China, is causing share prices across the mining industry to lag the current performance of both metal prices. The uncertainty for short-term prospects apparently also affects the long-term outlook for the industry, making investors believe price and profit levels can’t be sustained. As a result, Price/Earnings (PE) ratios are dropping, causing market capitalization to go down despite good company performance.

    ©2012 | Wilfred Visser | thebusinessofmining.com

The Rise of China in Mining

October 4, 2010 4 comments

China is rising as a global superpower in the mining industry. Ore from mining companies all around the world is shipped to Chinese ports to fuel the growth of the economy. Building relationships with Chinese government and customers is a top priority for many business leaders. However, few people in the industry know that China itself is a major producer of many minerals. This article explores the Chinese rise of production, the rise of demand, the rise of Chinese mining firms and the rise of investment and sketches the implications for the mining industry of the changing role of the country.

 

1. The Rise of Production

China’s mining industry is the world’s largest in many aspects: the country has 200,000 collectively owned mines1, employing over 10 million miners; it is the world’s major producer of coal, lead, zinc, tin and rare earth minerals and also ranks high in output of iron ore, gold, bauxite and other minerals.

The country has been a major producer for decades, but the enormous demand, the opening of the market to private investors and the introduction of modern mining techniques has boosted the productivity and production of the industry. Significant reserves of most minerals allowed China to grow the market share of mining output for all major minerals in the past 15 years (Figure 1). The growth of the iron metal content output share is even more remarkable when considering that Chinese iron ore typically has a very low metal content: while share of iron content grew from 14% to 15% since 1995, the share of gross weight grew from 24% to 37%2.

Figure 1 - Chinese share of world mining output

The largest part of worldwide reserves of rare earths, titanium, tungsten & molybdenum are in China. These minerals are crucial in the production of many high tech products, giving China a powerful position in international trade. Recently the country has demonstrated this power by implementing export quota for rare earth minerals, favoring the domestic high tech industry.


2. The Rise of Demand

China hardly exports any minerals; all domestic mine production is absorbed by the domestic. Value of total mineral exports in 2009 was a mere $0.2bln, 60% of which was molybdenum3. Until a few years ago the country was a net coal exporter, but the growing demand from the utility and steel industry has turned it into an importer. Though the country does not export ores, it has been building a large iron and steel industry, exporting at a total value of $53bln in 2008. In the same year the production of 500Mt of crude steel accounted for 38% of the world production2. In 2009 the imports exceeded exports, as steel companies responded to the crisis by cutting production. Stepping up production will turn the country into a net exporter of steel again.

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Tin poised for record on supply shortfall

September 17, 2010 Comments off

“Tin prices rose to a two-year high, less than 10 per cent below the metal’s all-time high set in mid-2008, as production problems in Indonesia, the world’s top exporter, continued to tighten the market.
Tin prices have surged because of a drop in supplies from Indonesia. The country’s exports of refined tin, which account for a third of the global market, dropped 14.5 per cent to 43,263 tonnes in the first half of the year compared with the same period of 2009.

The drop comes on the back of a crackdown on illegal mining in Bangka-Belitug, off Sumatra island, and the depletion of the easily mined reserves. Small and medium-sized smelters, which depend on supplies from rudimentary family-owned mines in the island, have reduced output or shut down because of the lack of tin ore supplies and credit strains, analysts said.”

Source: Financial Times, September 15, 2010

Observations:

  • Tin is mainly used for solder, alloys and chemical applications. Demand is strong in China, which is building its own production capacity.
  • PT Timah, Indonesia’s main producer, mines alluvial tin using dredgers and floating plants. Although PT Timah manages to increase output, the reduction of output of small and unorganized onshore mines results in lower Indonesian output.

Implications:

  • If Indonesia wants to have a sustainable position as a producer of tin, it will have to organize small scale miners and processing of the ore. Many small scale miners don’t have the scale to compete with international corporate competition.
  • Technological improvements for the small Indonesian miners could reduce production costs by as much as 50%, thus making deposits feasible that are currently not considered for production.

©2010 | Wilfred Visser | thebusinessofmining.com

Price of tin hits highest level in two years

July 27, 2010 Comments off

“Falling supplies and rising demand from manufacturers in Europe and Asia are pushing tin prices to their highest levels in two years.

The price of the metal, a raw material in soldering and food packaging, has doubled since early 2009 and analysts believe it will soon rise above a key $20,000 a tonne barrier because of falling production in Indonesia, the world’s largest supplier, and strong demand from the manufacturing industry in Japan, South Korea and Europe.

The Sucden brokerage says: ‘It is hard to escape the conclusion that the tin market is tightening quite considerably and may continue to do so in 2011.’ The cost of tin rose nearly 9 per cent last week and on Tuesday it gained 2.5 per cent to $19,670 a tonne at the London Metal Exchange, the highest price in two years.”

Source: Financial Times, July 26, 2010

Observations:

  • Shortage of tin is expected as demand is increasing and no major new production is scheduled to start in the next year.
  • Over two-thirds of both production and demand of tin are in China and Indonesia. However, as national production in China does not keep up with demand, international trade is picking up.
  • The leading tin producing companies are Yannan Tin (China), PT Timah (Indonesia), Malaysian Smelting Corp. and MinSur (Peru)

Implications:

  • None of the diversified international mining houses is active in tin production (as core product). Diversification into this space is unlikely, as tin mining methods are very specific. As efficiency gains could be achieved versus the incumbents, junior niche players are likely to enter the base metal market.
  • Peru, Brazil and Bolivia have significant tin reserves, providing a potential for a surge of the tin market in Latin America. Solder, packaging and chemical applications would be the most likely demand source for the market.

©2010 | Wilfred Visser | thebusinessofmining.com