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MKT&IND REPORTS |
 Global metallurgy industry has a potential for a moderate growth in the second half of 2014, however, the existing problems in the global economy, as well as geopolitical tensions, will not allow returning to stable recovery rates. The company will still have problems with sales amid unfavorable prices and weak environment. Lower financial results and weak demand will create conditions for closure of small and medium-sized mining and production companies in China and other countries. At the same time, the continuation of a price decline is unlikely, because most of the products have already reached its bottom, Sogra agency said in a report..
The ferrous metals industry is forecasted to grow positively for large players, while the pressure on small and medium-size business will increase.
IRON
After a significant cheapening in the second quarter, the prices are expected to recover and reach U.S. $105 per tonne by the end of the third quarter. At the same time, the price of $100 per tonne provides suitable profitability rates for the first three to five largest global market players. Average ore price will amount to $100 per tonne in the second half of the year, and $106 for the entire 2014. In 2015, the ore price is forecasted at $103 per tonne. The key companies will not reduce production, but may suspend implementation of some large-scale projects. Global DRI production may reach 110-120 million tonnes per year by 2020.
By 2018, Vale plans to expand ore export by 45% to 450 million tonnes.
Rio Tinto plans to increase iron ore output 12% to 330 million tonnes in 2015.
BHP Billiton plans to produce 255 million tonnes of ore in 2014-2015 financial year.
A consortium of China’s Baosteel and Australia’s Aurizon plan to close acquisition of iron ore company Aquilla Resources.
In the U.S., DRI production capacities may reach 10 million tonnes by 2020.
By 2018, development of the Simandou iron ore deposit in Guinea, which is one of the largest in the world, may be launched.
China plans to increase iron ore output by 5.6% to 1.52 billion tonnes in 2014.
STEEL
The sector is expected to see acceleration in global demand by 3.3% amid the recovery in developed economies (primarily Europe) and a stable growth of demand in the U.S, while the developing countries may see a deceleration, for example in China.
In 2014, global steel production may increase by 2.7% to 1.655 billion tonnes with China being the major driver, while part of the producing regions will demonstrate decreases in production.
Indonesia plans to start licensing imports of alloyed metal rolled stock and semi-finished products.
In the base metals industry, the influence of Indonesian ban on ore exports will be less visible, because some consumers switched to alternative supplies, as well as due to Freeport McMoran regaining approval to export ore from the country.
GOLD
The price of gold, which hovers close to $1,300 per ounce allow a majority of produces to keep, as well as increase production rates. However, investments in new projects are closely depended on a forecasted price of gold, and if gold starts declining, a number of investment projects may be suspended.
Barrick Gold confirms gold production guidance for 2014 at 6.0-6.05 million ounces.
Newcrest plans to produce 2.2-2.4 million ounces of gold in 2014-2015 financial year, flat on year.
Gold production in Burkina Faso may increase by 25% to 40 tonnes by 2016.
In Kazakhstan, Polymetal International may introduce POX technology at Kyzyl project in the fourth quarter of 2015.
In Tajikistan, China’s Zijin Mining plans to increase production at Zarafshon joint venture by 18% to 2 tonnes of gold in 2014.
In China, gold production may increase by 7.4% to 460 tonnes this year. BY 2017, gold demand is forecasted to increase by 20% to 1,350 tonnes.
Even against the backdrop of a global economy, recovery in the global steel industry in 2014 will be constrained by low demand from the steel consuming industries. Geopolitical tensions between Russia and the West, led by the United States, will provide additional negative impact. Leading steelmakers will focus on finding a way out of the difficult economic conditions associated with higher costs and lower prices of finished products.
In China, the decline in economic growth will be a major constraint in the development of mining and metallurgy. In the short term, the authorities' efforts to improve the environmental situation in the country will also put the negative pressure on the national steel industry. At the same time, China will keep its confidence as a leader and its significant impact on the global steel industry by means of production volumes, large-scale measures for further regulations, as well as expansion of production capacities and the mineral resource base, including foreign expansion.
In the steel industry, weak demand will put pressure on companies that produce finished products. Small price increase is likely in the second half of the year amid rising consumption in the construction sector and the shipbuilding industry.
Surplus on the iron ore market will continue through the supplies by the "big three". The world's largest producers of raw materials will have to tighten competition in order the Chinese market remained profitable for them. In this case, the domestic production of iron ore in China in the second half of the year will continue to strengthen, despite the closure of about 20-30% of the enterprises in the framework of the reduction of obsolete facilities and further expected steps in this direction.
In the steel sector a brief rise is expected on the market in late summer - early autumn, but the lack of demand can return the market "to the bottom." Prices for steel products will continue fluctuations in a relatively narrow range and at a low level. China will create strong foundation for expansion of volumes and a range of steel products by updating steelmaking capacity in the near future.
In the ferrous metallurgy, the impact of Indonesian export ban on nickel prices will reduce, which should lead to some reduction in prices and a decrease in the volatility of the sector. Copper quotes will probably demonstrate growth amid strengthening demand from the United States. At the same time, a reduction in the volume of financial transactions with the use of copper might put pressure on the prices amid the concerns related to the investigation following a scandal in China.
In the gold sector, investors may continue to transfer funds to other, higher-yielding assets, following the changes in the monetary policy of the U.S.’ Fed. Improvement in the US economy may affect the gold market. Nevertheless, taking in conjunction the following factors, such as decreased reliance on economic recovery in the US, the geopolitical risks, prospects strengthening of the yuan as an international currency in the near future, the market will be stable in the coming months; gold prices will remain within the corridor, which was formed in the recent months. It is expected that the manufacturers will continue to review their investment and production forecasts for 2014, focusing on reduction of costs, as well as getting rid of the capital-intensive projects, or consider joint implementation with other gold mining companies.
In Russia, the metallurgical industry will continue to evolve under the influence of a number of constraints, including instability in global demand for metals and raw materials, as well as the threat of tougher sanctions from Western countries. The companies will continue to implement measures to reduce costs, increase efficiency, and focus on the implementation of projects in the domestic market and the sale of non-core assets, and in some cases - relevant foreign assets.
End
20.08.2014 10:28
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