2015 outlook for base metals. Moderated by: Garry Jones Chief Executive Officer, LME

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Beatrice Chase
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1 20 October, 2014

2 2015 outlook for base metals Moderated by: Garry Jones Chief Executive Officer, LME

3 Zinc market outlook balance of opinion vs balance of material LME metals seminar London 20 October 2014 Duncan Hobbs

4 Zinc market outlook balance of material vs balance of opinion Zinc price performance Latest zinc demand related data Zinc mine and metal output Physical zinc price signals 2015 outlook zinc demand, mine closures Summary and conclusions

5 Zinc market outlook balance of material vs balance of opinion Zinc price performance Latest zinc demand related data Zinc mine and metal output Physical zinc price signals 2015 outlook zinc demand, mine closures Summary and conclusions

6 O 2013 J 2014 A 2014 J 2014 O 2014 O 2013 J 2014 A 2014 J 2014 O 2014 Indices = 100 USD/tonne LME zinc price outperforms, spreads tighter this year to date LME metals prices Zinc C-3M spread Backwardation Zn Ni Al Pb Cu Sn Contango Source: LME, Noble Research, October 2014

7 O 2013 N 2013 D 2013 J 2014 F 2014 M 2014 A 2014 M 2014 J 2014 J 2014 A 2014 S 2014 O 2014 '000 tonnes LME zinc stocks have been drawn down over the last year, promoting perceptions of metal market deficit 1,200 LME zinc stocks 1, Source: LME, Noble Research, October 2014

8 Zinc market outlook balance of material vs balance of opinion Zinc price performance Latest zinc demand related data Zinc mine and metal output Physical zinc price signals 2015 outlook zinc demand, mine closures Summary and conclusions

9 2010 Q Q Q Q Q Q Q Q Q1 m tonnes Zinc s main first use is in galvanising steel world galvanised steel sheet output running at record levels Zinc demand by first use World galv. steel sheet output % 6% 3% Galvanising Brass / bronze 30 16% 52% Zn diecast alloys Zn chemicals 20 17% Zn semis Miscellaneous 10 0 Note: zinc usage data 2007 Source: CRU, ILZSG, Noble Research, October 2014

10 YoY % change Indices 1998 = 100 Changes in zinc demand tend to track changes in galvanised steel sheet output but intensity of zinc use has declined 40% World Title zinc consumption and galvanised steel sheet Title output % % % 0% GS output Zn cons. 150 GS output Zn cons % -20% 50 Source: CRU, ILZSG, Noble Research, October 2014

11 J 2013 J 2013 J 2014 J 2014 YTD YoY % change USD/tonne Zinc consumption and galv. steel output rising at same rate in 2014 but galv. steel sheet prices under pressures World zinc consumption and galvanised steel sheet output HDG steel sheet prices 8% 8% 8% % 850 US MW FOT 4% 800 CHN EXW 2% 750 DEU PP 0% Reported zinc consumption Galvanised steel sheet production 700 Note: prices for hot-dipped galvanised steel coils including size extras. PP is parity point Source: `CRU, ILZSG, Noble Research, October 2014

12 Zinc market outlook balance of material vs balance of opinion Zinc price performance Latest zinc demand related data Zinc mine and metal output Physical zinc price signals 2015 outlook zinc demand, mine closures Summary and conclusions

13 mta zinc mt zinc, 12MMAA Ex-China zinc mine output is on a declining trend but world market for zinc concentrates in surplus Ex-China zinc mine output World zinc mine & metal output Monthly 12MMA 11 Mines Metal Note: zinc mine vs metal output as shown here does not take account of zinc oxides input but nor yield losses, which will net out to some extent at least Source: Noble Research, October 2014

14 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2005 Q Q Q Q Q Q Q Q Q Q2 m tonnes QoQ % change World refined zinc production is running at record levels; Q2 recorded strongest gain in four years 1.3 Title World zinc metal output 10% Title % Y range % % Source: ILZSG, Noble Research, October 2014

15 Zinc market outlook balance of material vs balance of opinion Zinc price performance Latest zinc demand related data Zinc mine and metal output Physical zinc price signals 2015 outlook zinc demand, mine closures Summary and conclusions

16 J 2012 A 2012 J 2012 O 2012 J 2013 A 2013 J 2013 O 2013 J 2014 A 2014 J 2014 O 2014 USD/tonne Reported physical zinc premiums have dropped in most markets in recent months 250 SHG zinc ingot premiums US MW del. NW Eur EXW CHN CIF 50 0 Source: CRU, MB, Noble Research, October 2014

17 USD/dmt CIF USD/dmt CIF Zinc TCs have been rising i.e. price of concentrates falling. Spot TCs now near five year highs 300 Zinc TCs 50 Zinc TCs: spot - BM BM Spot Note: Spot TCs basis CIF China. BM = benchmark. BM TCs shown on realised basis referencing reported terms of base TC of USD223/dmt at USD2,000/tonne zinc basis price, +8.5% / -3% for the first USD500 above and below zinc basis price, respectively Source: CRU, LME, Noble Research, October 2014

18 Zinc market outlook balance of material vs balance of opinion Zinc price performance Latest zinc demand related data Zinc mine and metal output Physical zinc price signals 2015 outlook zinc demand, mine closures Summary and conclusions

19 YoY % changes Outlook is for steady zinc demand in % Zinc consumption and industrial production 15% 10% 5% 0% Zn cons. IP -5% -10% Note: 2015 data are forecasts Source: CRU, ILZSG, MBL, Noble Research, October 2014

20 '000 zinc contained Whatever zinc market balance emerges, zinc supply chain looks set to become more complex Main closures and expansions of zinc mine output ex-china Closures / depletions 7 mines; 850ktpa zinc New mines / expansions 21 mines; ~670ktpa zinc Small number of large zinc mines closing / declining to be replaced by larger number of on average smaller new mines /expansions This has important implications for market structure, supply chain dynamics and logistics Source: CRU, WM, Noble Research, October 2014

21 Zinc market outlook balance of material vs balance of opinion Zinc price performance Latest zinc demand related data Zinc mine and metal output Physical zinc price signals 2015 outlook zinc demand, mine closures Summary and conclusions

22 Zinc market outlook balance of material vs balance of opinion summary and conclusions LME zinc outperforming prices of other metals Latest zinc demand related data positive but suggest some unreported stock building Latest zinc supply data strong both mine output and metal production Physical market price signals softening Major mine closures coming but starting point more comfortable than anticipated; China the key wild card No deficit in material market balance today, neither zinc metal nor concentrates Nonetheless present balance of opinion on zinc market outlook remains positive

23 noble group global base metals and concentrates sales David Freeland Europe & Africa (based London) T Scott Evans Americas (based Stamford) T Felix Cauro Asia (based Singapore) T felixcauro@thisisnoble.com Kareem Barbir Concentrates (based London) T kareembarbir@thisisnoble.com

24 noble group limited HEAD OFFICE Hong Kong 18th Floor, MassMutual Tower 38 Gloucester Road Hong Kong Tel: Fax: General Enquiries Corporate Affairs Stephen Brown REGIONAL HUBS Singapore #19-01 Mapletree Anson 60 Anson Road Singapore Tel: Fax: Geneva 207 Route de Ferney 1218 Le Grand Saconnex- Geneva Switzerland Tel: Fax: Stamford Four Stamford Plaza 7th Floor, 107 Elm Street Stamford, CT 06902, USA Tel: Fax: London 33 Cavendish Square London W1G 0PW United Kingdom Tel: Fax: São Paulo Eldorado Business Tower Av. das Nações Unidas, 8501, 22 andar Pinheiros, São Paulo, SP CEP , Brazil Tel: Fax:

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