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Dr Richard Flook Managing Director
Shinagawa Refractories Australasia Pty Ltd
Refractory evolution- implications for bauxite & alumina
Contents
Economics
Steel
Refractories
Refractory raw materials
Economic transitions & tensions
US quantitative easing (bond buying) winding down
ASEAN & Indian economies, currencies under pressure
Rising global interest rates
Slowdown in BRICS economies
China in economic transition
US in political tension
US, Japan and EU- some green shoots
Global economy at post-crisis crossroads
0
1
2
3
4
5
6
% c
han
ge
2010 2011 2012 2013(f) 2014(f)
World GDP (IMF Oct 2013)
Source: IMF WEO October 2013
World trade trending sideways
Source: RWI
USA – some green shoots
Source: Westpac
Europe improving in 2014
Source: Fortesque August 2013
PMI September 2013
53 53 52 51 50 50 50 49
0%
50%
100%
USA
Japan
Austra
lia
Eurozo
ne
China
Brazil
India
Russia
Direction from August
Expansion
Contraction
Source: Australalian Industry Group, HSBC, Markit
Manufacturing PMI versus reality
Source: NAB Global Markets Research
Steady (2-3% pa) growth ahead
Source: Minerals Council of Australia
Growth in Global Demand 2010 - 2030
3% pa
1.8% pa
0 10 20 30 40 50 60 70 80 90
Coal
Iron ore
Lead
Zinc
Aluminium
Copper
Nickel
Change 2010 - 2030 (%)
Steel consumption 2013
Source: Arcelor Mittal July 2013
Apparent steel consumption growth(%)
3.5-4.5%
3-4%
2.5-3.5%
3%
2-3%
-1.5-0.5%
-2 -1 0 1 2 3 4 5
China
Brazil
CIS
World
USA
EU27
Change 2012 - 2013 (%)
World steel demand
Source: World Steel & IMF
3.2- 4.4 %pa
China steel consumption (kg/capita)
China has reached consumption level of advanced economies
Source: Alumina Limited May 2013
China steel – slower growth
Source: Rio Tinto September 2013
China 12th 5 year Plan
The Plan identifies seven priority industries for public and private sector investment, the aim of which is to move China up the value chain and promote better energy efficiency and sustainable use of resources:
New energy
Energy conservation and environmental protection
Biotechnology
New materials
New IT
High-end equipment manufacturing
Clean energy vehicles
China consolidation 2015
Industry Concentration Objectives
Automobile 90% in top 10 • 3 to 5 international competency
• Cross border M&A
Steel 60% in top 10 • 3 to 5 international competency
• 6 to 7 regional influence
• Cross border M&A
Cement 35% in top 10 • 5 exceeding 100Mtpa
• Cross border M&A, vertical merger
Shipbuilding 70% in top 10 • 5 in world top 10
Aluminium 90% in top 10 • 3 to 5 international competency
Rare Earths State Council Guidelines May 2011
Other Industries: Electronics & Information, Pharmaceuticals & Agriculture
Concentration: % of production in number of Chinese corporations
Refractory Snapshot – 65% rule
65% of the world refractory market of about 42 million tpa are refractory bricks
65% of the worlds refractories are produced by China
65% of refractories are used in steel production
Other markets include mineral processing (alumina and aluminium, copper, nickel, mineral sands etc), cement, glass & petrochemicals
Trend 1-Specific Consumption
Trend 2-Monolithic
0
1,000
2,000
3,000
4,000
1954 1964 1974 1984 1994 2004
Refr
acto
ry p
rod
ucti
on（
×1000ｔ）
0
20
40
60
80
100
% M
on
oli
thic
Total Refractory
Unshaped
Refractory
% Monolithic
Japan
Japan & China comparison
World refractory market
Source: Author estimates
~ 2%pa growth to peak 2017: assumes China reaches target 15Kg refractories/tonne steel by 2018
World refractory market v2
Source: Author estimates
~ 0% pa growth; China peak 2014: assumes China reaches target 15Kg refractories/tonne steel by 2016
China refractory consumption
Refractory Products
(Million MT) 2008 2009 2010 2011 2012
Production 24.2 24.5 28.1 29.5 28.2
Exports 2.6 1.8 2.2 2.4 2.5
Imports 0.1 0.1 0.1 0.1 0.1
Apparent consumption
21.7 22.8 26.0 27.2 25.8
Source: Trademap
China refractory industry
MIIT says Chinese refractory industry is large but not strong
Issues are
– inefficient mining, poor environment & restoration practices
– high consumption (23Kg/Mt steel vs 8Kg/Mt in Japan)
– low industry concentration
– low profitability
Target is to improve industry concentration ratio
– 2 to 3 internationally competent enterprises 2015
– Top 10 companies to have 45% market share by 2020
Source: Technology Metals Research
Energy cost as % of total production cost
0% 10% 20% 30%
Consumer electronics
Automotive
Furniture
Average manufacturing
Wood
Non ferrous
Pharmaceuticals
Glass
Pulp & paper
Iron & steel
Clay products
Cement & lime
Refractory markets and energy
Source: JM Barasso European Council May 2013
Energy priorities
Source: JM Barasso European Council May 2013
Growing import dependence
Source: JM Barasso European Council May 2013
Shale gas could change supply
Source: EIA, BP & Reuters
Refractory raw materials
Refractory materials are based on 6 oxides: Al2O3
SiO2 MgO CaO Cr2O3
ZrO2
their compounds and often in combination with carbon.
Base material pyramid of refractory materials (according to H.Barthel)
China refractory raw materials
Source: PRE MagMin 2011
China supplies about 75% of the world’s refractory raw materials
World magnesite production
17%32%
71%
0
5
10
15
20
1991 2001 2011
Mill
ion
tp
a
ROW
China
Source: USGS
Magnesite is everywhere!
Source: Ian Wilson Magmin 2013
World Magnesite Reserves 13B tonnes
26%
23%
21%
8%5%
10%
7% China
North Korea
Russia
Slovakia
Brazil
Australia
Other
But China produces 60% of world’s
magnesia
World natural graphite production
37%56%
70%
0.0
0.5
1.0
1.5
1991 2001 2011
Mill
ion
tp
a ROW
China
Source: USGS
Graphite reserves 2012
Source: USGS 2013
World Graphite Reserves 77M tonnes
(2012)
72%
4%
14%
2%China
India
Mexico
0ther
BUT
Graphite- new discoveries
Source: Technology Metals Research
World demand 1 M tpa
natural graphite
• 240 deposits in 32 countries • 800 million tonnes inferred recoverable graphite
Refractory alumina sources
3%4%3%
3%
52%
13%
10%
12%
Calcined alumina
Calcined bauxite
BFA
Kaolin (Refractory)
Tabular alumina
WFA
Mullite
Andalusite, kyanite &silimanite
Source: Author estimates
~ 19.5M tpa
Bauxite and alumina
World Bauxite Reserves 28B tonnes
13%
21%27%
2%3%
3%
3%
3%
7%
9%
8%
ChinaGuineaAustraliaBrazilVietnamJamaciaIndonesiaIndiaGuyanaGreeceOther
Resources
~ 65 B tonnes
Source: USGS 2012
Bauxite production 2012
World Bauxite Production 263M tonnes
18%
28%
4%
7%8%
11%
13%
11%China
Australia
Brazil
Indonesia
India
Guinea
Jamaica
Other
Source: USGS 2012
Refractories & Bauxite/Alumina
Source: Redrawn from Hill & Sehnke 2007
Bauxite Flowchart
Metallurgical 208 M tpa
Source: USGS, IAI 2012
5%
Other products
Bauxite 260 M tpa
Non metallugical 13 M tpa
Smelter grade alumina
95 M tpa
Chemical grade alumina
5.5 M tpa
Aluminium 47.6 M tpa (47% China)
Calcined alumina Fused alumina
Tabular alumina Alumina cement
Alumina chemicals
Brown fused alumina Calcined bauxite Alumina cement
Metallurgical 247 M tpa
95% 5%
95%
China aluminium
Source: Rusal May 2013
China bauxite supply
Source: Rusal May 2013
China bauxite supply
Source: Alumina Limited May 2013
Higher costs should result in increased bauxite or alumina imports
Fused (BFA) & calcined bauxite
43% 39%
24%30%
0.0
1.0
2.0
3.0
Brown fused alumina Calcined bauxite
(>80%Al203)
Mil
lio
n t
pa ROW
China export
China
Source: Refmin & Author estimates
Refractory raw material prices
Source: RHI March 2012
6% CAGR
Sustainable development
Sustainable development is defined as “development that meets the needs of the present without compromising the ability of the future”
“Development of a green and sustainable mining industry” is one major objective in the 12th Five-Year Plan (2011-2015)
Since 1990’s China became the world’s low cost supplier of the majority of refractory raw materials but at a high cost in terms of – highgrading of deposits – poor environmental controls – poor rehabilitation standards
This situation is clearly undersirable & unsustainable
Raw material strategies
Beneficiation
Substitution
New products
New production
Flexibility
Beneficiation
New purification process converts bauxite to refractory grade (11 December 2012)
India’s Central Glass and Ceramic Research Institute has developed a process to convert extremely inferior grade bauxite into refractory grade bauxite. CGCRI says its process removes impurities, such as calcium oxide, titanium oxide and iron oxide, from bauxite. The institute says it uses certain natural materials that selectively absorb these impurities and effectively increases the melting point to 1,600°C.
One clear goal is to help India’s industries reduce the amount of refractory-grade bauxite it must import from China and other countries
Source: IM magazine
Substitutes include - tabular alumina (>99% Al2O3)
- white fused alumina (>99% Al2O3)
- andalusite (56-59% Al2O3)
- mullite (70% Al2O3)
- chamotte with alumina (60-70% Al2O3)
- others - eg Almatis BSA 96 (>96% Al2O3)
Estimated potential 45% substitution in Europe (200Ktpa of 450K tpa BFA & calcined bauxite imports)
Substitution
Source: Refractories World Forum 5 2013
New products
Industrial Production of Bauxite Based Synthesized Grog (BSG) and its application in High Alumina Castables – BSG can replace high grade bauxite clinker to be used in
high alumina castables as aggregates, showing better performance than that using high grade bauxite clinker as aggregates
Development of Tabular Alumina in China – First production was at Zibo Taibeilier Aluminium and
Magnesium Co Ltd in 2002 leading to nine producers with over 250k tpa capacity in China by 2012.
Source: 2nd China International Refractory Production & Application Conference May 2013
Chinese Tabular alumina
Manufacturer Capacity (‘000tpa)
Production (‘000tpa)
Almatis (Qingdao) 50 50
Zibo Taibeilier Aluminium & Magnesium 50 50
Jiangsu Jinghui Refractories 50 40
Zhejiang Zili 40 →90 40
Shandong Kunpeng Technology 25 →50 15
Pingxiang Huangguan Chemical Material 15 →30 12
Zhonglu Group Jinlu Refractory Material 15 12
HanZhong Qinyuan New Material 12 10
Zhengzhou Lucheng Sanxing 10 10
Total 267 → 357 239
Source: Refmin & 2nd China International Refractory Production & Application Conference May 2013
World tabular alumina capacity
43%
38%
19% Almatis
China
Other
Source: T Dickson Refractories World Forum 2012, Refmin & 2nd China International Refractory Production & Application Conference May 2013
Total world capacity
~780 tpa
Zhejiang Zili Corporation
Zhejiang Zili Corporation
Zhejiang Zili Corporation
New production
First Bauxite to raise $12m for Guyana bauxite project (25 May 2012)
Imerys revives MSL refractory grade bauxite deposit from Vale (5 November 2012)
Guinean mining code courts investors to unlock mineral wealth. Development could pave the way for non-metallurgical bauxite production (12 June 2013)
RHI poised to secure magnesite mining rights in Turkey (20 August 2013)
Nedmag estimate 85% of new capacity by 2014 for DBM & EFM will be outside China (January 2013)
Source: IM magazine & Refractories World Forun
Raw material strategy
Some refractory companies (eg RHI and Magnesita) have a strategy of maximising self sufficiency in raw materials
RHI strategy is to have 80% self sufficiency in DB and fused magnesia
Magnesita have strategy of expanding their industrial mineral base & have developed a portfolio of mineral deposits including non refractory minerals
RHI raw material strategy
Source: RHI August 2013
Magnesita raw material strategy
Source: Magnesita December 2012
Flexibility
The global refractory industry has gone through two decades of significant changes – 1990’s & the arrival of cheap Chinese refractory minerals
– 2000’s & the dramatic expansion of Chinese steel and refractory production
The 2010’s will also be a decade of major changes – Increasing cost of energy and increased sustainable mining costs in China
– A decrease in steel growth and refractory specific consumption in China
– Increased refractory raw material prices (particularly from China) due to both cost increases and the trend to higher performance materials
For most refractory companies & their supply of raw materials, flexibility will be essential – geographic flexibility
– material flexibility
– formulation flexibility
Opportunity
風向轉變時, 有人築 牆, 有人造風 車
Fēng xiàng zhuàn biàn shí, yǒu rén zhú qiáng, yǒu rén zào fēng chē. Traditional: 風向轉變時,有人築牆,有人造風車
Simplified: 风向转变时,有人筑墙,有人造风车
Literally: When the wind of change blows, some build walls, while others build windmills
English equivalent: When one door closes, another opens
Profile
Dr Richard Flook is the Managing Director of Shinagawa Refractories Australasia Pty Ltd and was previously the CEO of Omya in Australia and New Zealand. Richard has also been involved in the development of minerals businesses with ACI, Steetley Industries, Anglo American and Normandy Mining
Richard has specialised in new business opportunities including strategic planning, trading, market development and acquisitions and has been involved in managing and developing minerals operations and businesses in Australasia and Asia
Richard is a Fellow of the Australasian Institute of Mining & Metallurgy, the Australian Institute of Company Directors and the Australian Institute of Energy. He is a graduate of Sydney University (PhD) and the University of NSW (Master of Commerce)
