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Base Metals
Base metals are highly reactive and are therefore found in compounds in nature. The ore must be
extracted, crushed, melted, purified, and formed.
Iron Ore: 2,015 million MT/yr with about 27million MT of reserves Price $78 / MT (40 last year)
1350 million MT/yr seagoing trade
Production Imports
China 1300 (low Fe%) China 1000 (70% of all world imports)
Australia 825
Brazil 428 EU 230
India 130 Japan 130
Russia 110 Korea 72
Ukraine 70
Until 2010, prices set annually. Then Chinese demand exploded and led to spot purchases from
India. First Quarterly and now China buys Monthly
Platts Steel Index or Metal Bulletin prices
SGX has iron ore futures. no physical. Settled against montly Steel Index prices
(SMX) has launched the world first global iron ore futures contract, based on the Metal Bulletin Iron
Ore Index (MBIOI) which utilizes daily price data from a broad spectrum of industry participants and
independent Chinese steel consultancy and data provider Shanghai Steelhome's widespread contact base
of steel producers and iron ore traders across China.[10] The futures contract has seen monthly volumes
over 1.5 million tonnes after eight months of trading.[11]
CME, SGX, LCH, NOS and ICEX (India) all clear ore swaps.
Futures market is expanding quickly as market opens.
Base Metals 2
Represents 51 % of global dry bulk shipping (of which 63% went to China)
Consumption 00 million MT
China 31 million MT (20)
USA/Canada 5.9 (5.2)
Europe 8.4 (6.0)
Japan 3.8
Aluminum production requires huge inputs of energy (electricity) which explains why places like
Iceland, Dubai and Bahrain are big aluminum production centers
Price Factors:
Construction and Aviation
Macro-economy
USD
Speculation
Consumption:
Global copper demand is about 23 million tonnes which means about 3 million tons is from
recycling.
Major factor for copper demand: construction.
Every new house in the West has about 200 kg of copper
Every village needs to connected to the grid.
Copper is called Dr. Copper because it is so fundamental. If copper demand is strong, then the
world economy is growing. Copper peaked at about $10 000 before the Credit Crash then repeaked
there in 2010.
Futures:
LME (London Metals Exchange)
Comex (Nymex)
Shanghai Metals Exchange
Production:
China 5 million Mt
Australia 1.6
Peru 1.4
USA 0.85
India 0.83
Europe produced one-third of world nickel (but that includes places like New Caledonia)
Macro-economy: base tend to be cyclical as the follow the underlying global economy.
Base Metals 6
For that reason, copper is called Doctor Copper since it tells the true health of the world
economy better than doctored stats from governments or banks.
USD: as usual
CHINDIA: China consumes 40% of copper . Chindia is responsible for much of demand growth
in base metals. The West is de-industrializing.
Capex: mining and production of base metals is a big business and requires large, long term
investments. Environmental concerns are a new factor
Substitution: medium and long term
Supply interruption: base is less susceptible than oil
Investor demand: new factor as base is touted as alternative investment; hedgies and spec
Level of Economic Development: each stage of economic development has a very different
consumption profile of base metals.