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Platts Steel & Ferroalloys Conference - 2005

Platts Steel & Ferroalloys Conference - 2005. China Tungsten Today. Presented June 14, 15, 2005 by Zigong International Marketing, LLC 421 High Street, Fairport Harbor, OH 44077, USA. Zigong International Marketing, LLC. JV subsidiary of the Zigong Cemented Carbide Company (ZCCC).

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Platts Steel & Ferroalloys Conference - 2005

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  1. Platts Steel & Ferroalloys Conference - 2005 China Tungsten Today Presented June 14, 15, 2005by Zigong International Marketing, LLC 421 High Street, Fairport Harbor, OH 44077, USA

  2. Zigong International Marketing, LLC • JV subsidiary of the Zigong Cemented Carbide Company (ZCCC)

  3. Zigong International Marketing, LLC • JV subsidiary of the Zigong Cemented Carbide Company (ZCCC) • ZCCC is the second largest producer of carbide products in China and in the top 15 world wide

  4. Zigong International Marketing, LLC • JV subsidiary of the Zigong Cemented Carbide Company (ZCCC) • ZCCC is the second largest producer of carbide products in China and in the top 15 world wide • Exports more than 3,000 mt of tungsten products annually

  5. Zigong International Marketing, LLC • JV subsidiary of the Zigong Cemented Carbide Company (ZCCC) • ZCCC is the second largest producer of carbide products in China and in the top 15 world wide • Exports more than 3,000 mt of tungsten products annually • 4,000 mt carbide capacity, over 3,000 employees

  6. Tungsten in China • Considered a National Strategic Material

  7. Tungsten in China • Considered a National Strategic Material • Identified as a “State Trading Commodity” by the WTO

  8. Tungsten in China • Considered a National Strategic Material • Identified as a “State Trading Commodity” by the WTO • Exports controlled by licenses starting in 2001/APT/AMT/BTO/YTO/W/WC/Cast/scrap/SW/ CaW/W Acid

  9. Tungsten in China • Considered a National Strategic Material • Identified as a “State Trading Commodity” by the WTO • Exports controlled by licenses starting in 2001/APT/AMT/BTO/YTO/W/WC/Cast/scrap/SW/ CaW/W Acid • Majority of world tungsten supply and resources are from or in China (75%)

  10. License Situation • 17,000 mt in 2001

  11. License Situation • 17,000 mt in 2001 • 16,200 mt in 2004

  12. License Situation • 17,000 mt in 2001 • 16,200 mt in 2004 • Ran out of licenses in October 2004

  13. License Situation • 17,000 mt in 2001 • 16,200 mt in 2004 • Ran out of licenses in October 2004 • First half 2005 12,100 mt vs. 11,500 mt in 2004

  14. License Situation • 17,000 mt in 2001 • 16,200 mt in 2004 • Ran out of licenses in October 2004 • First half 2005 12,100 mt vs. 11,500 mt in 2004 • Total 2005 to be slightly lower than 2004

  15. License Situation • 17,000 mt in 2001 • 16,200 mt in 2004 • Ran out of licenses in October 2004 • First half 2005 12,100 mt vs. 11,500 mt in 2004 • Total 2005 to be slightly lower than 2004 • We expect a license shortage later in 2005

  16. License Situation • 17,000 mt in 2001 • 16,200 mt in 2004 • Ran out of licenses in October 2004 • First half 2005 12,100 mt vs. 11,500 mt in 2004 • Total 2005 to be slightly lower than 2004 • We expect a license shortage later in 2005 • Only a few companies have access to these licenses – Minmetals/Xiamen/Zhou Zhou/ Zigong/Nanchang are the primary exporters

  17. Export Statistics: Q1 2004 vs. Q1 2005 20042005 (mt of material) APT/AMT/ST 1,502 1,301 YTO/BTO/Acid 2,217 1,921 W/WC/Cast 888 1,071 FeW 1,079 881 Totals 5,686 5,234 (Source: Mr. Fang Jinyun, Minmetals Head Office, Beijing) Thanks Fang.

  18. Top 10 Reasons Tungsten Price Has Increased 1. Demand (oil/coal/global/China growth)/ Supply Balance

  19. Top 10 Reasons Tungsten Price Has Increased 1. Demand (oil/coal/global/China growth)/ Supply Balance Mines: 2. Shut for Environmental Adjustment

  20. Top 10 Reasons Tungsten Price Has Increased 1. Demand (oil/coal/global/China growth)/ Supply Balance Mines: 2. Shut for Environmental Adjustment 3. Purchased by new owners (Minmetals)

  21. Top 10 Reasons Tungsten Price Has Increased 1. Demand (oil/coal/global/China growth)/ Supply Balance Mines: 2. Shut for Environmental Adjustment 3. Purchased by new owners (Minmetals) 4. Miners realized they really control the market

  22. Top 10 Reasons Tungsten Price Has Increased 1. Demand (oil/coal/global/China growth)/ Supply Balance Mines: 2. Shut for Environmental Adjustment 3. Purchased by new owners (Minmetals) 4. Miners realized they really control the market 5. Need to make money after years of suffering

  23. Top 10 Reasons Tungsten Price Has Increased 1. Demand (oil/coal/global/China growth)/ Supply Balance Mines: 2. Shut for Environmental Adjustment 3. Purchased by new owners (Minmetals) 4. Miners realized they really control the market 5. Need to make money after years of suffering 6. Lack of Water

  24. Top 10 Reasons Tungsten Price Has Increased 1. Demand (oil/coal/global/China growth)/ Supply Balance Mines: 2. Shut for Environmental Adjustment 3. Purchased by new owners (Minmetals) 4. Miners realized they really control the market 5. Need to make money after years of suffering 6. Lack of Water 7. Lack of Electricity

  25. Top 10 Reasons Tungsten Price Has Increased (continued) 8. Few new resources being developed

  26. Top 10 Reasons Tungsten Price Has Increased (continued) 8. Few new resources being developed 9. No one believed the warning signs (lean craze)

  27. Top 10 Reasons Tungsten Price Has Increased (continued) 8. Few new resources being developed 9. No one believed the warning signs (lean craze) 10. Speculators, greed

  28. Current Supply and Price Situation • Supply chain from China to west is empty

  29. Current Supply and Price Situation • Supply chain from China to west is empty • Consumer inventories are in general, low

  30. Current Supply and Price Situation • Supply chain from China to west is empty • Consumer inventories are in general, low • Speculators still active/traders reenter the market

  31. Current Supply and Price Situation • Supply chain from China to west is empty • Consumer inventories are in general, low • Speculators still active/traders reenter the market • Prices for YTO/BTO over $300 per MTU

  32. Current Supply and Price Situation • Supply chain from China to west is empty • Consumer inventories are in general, low • Speculators still active/traders reenter the market • Prices for YTO/BTO over $300 per MTU • Near by shortage situation should remain until the fall

  33. Current Supply and Price Situation • Supply chain from China to west is empty • Consumer inventories are in general, low • Speculators still active/traders reenter the market • Prices for YTO/BTO over $300 per MTU • Near term shortage situation should remain until the fall • No near term reason for prices to decline significantly

  34. The DLA & Chinese National Stockpile • The US DLA stockpile of tungsten, while huge, is of declining quality and of little benefit to most global tungsten concentrate consumers.

  35. The DLA & Chinese National Stockpile • The US DLA stockpile of tungsten, while huge, is of declining quality and of little benefit to most global tungsten concentrate consumers. • Releasing more material from the DLA is not a solution. Few can use it/time to market/no price relief.

  36. The DLA & Chinese National Stockpile • The US DLA stockpile of tungsten, while huge, is of declining quality and of little benefit to most global tungsten concentrate consumers. • Releasing more material from the DLA is not a solution. Few can use it/time to market/no price relief. • China has a stockpile. Is strategic in nature and not for market interventions.

  37. The DLA & Chinese National Stockpile • The US DLA stockpile of tungsten, while huge, is of declining quality and of little benefit to most global tungsten concentrate consumers. • Releasing more material from the DLA is not a solution. Few can use it/time to market/no price relief. • China has a stockpile. Is strategic in nature and not for market interventions. • Stockpiles are really bad for markets and producers.

  38. Results and Implications • The costs of doing business has tripled. A container of Blue Oxide used to cost $200k, it now cost $600k.

  39. Results and Implications • The costs of doing business has tripled. A container of Blue Oxide used to cost $200k, it now cost $600k. • Carbide companies failed to translate increasing raw materialprices into higher finished goods prices. A major increase incemented carbide prices needs to take place.

  40. Results and Implications • The costs of doing business has tripled. A container of Blue Oxide used to cost $200k, it now cost $600k. • Carbide companies failed to translate increasing raw material prices into higher finished goods prices. A major increase in cemented carbide prices needs to take place. • Some companies could run out of material. However, where there is a high price, there is a way.

  41. Results and Implications • The costs of doing business has tripled. A container of Blue Oxide used to cost $200k, it now cost $600k. • Carbide companies failed to translate increasing raw material prices into higher finished goods prices. A major increase in cemented carbide prices needs to take place. • Some companies could run out of material. However, where there is a high price, there is a way. • As the supply and demand remain close to balanced, price volatility will exists.

  42. Results and Implications • The costs of doing business has tripled. A container of Blue Oxide used to cost $200k, it now cost $600k. • Carbide companies failed to translate increasing raw material prices into higher finished goods prices. A major increase in cemented carbide prices needs to take place. • Some companies could run out of material. However, where there is a high price, there is a way. • As the supply and demand remain close to balanced, price volatility will exists. • What goes up must come down- the bubble will burst.

  43. Results and Implications • The costs of doing business has tripled. A container of Blue Oxide used to cost $200k, it now cost $600k. • Carbide companies failed to translate increasing raw material prices into higher finished goods prices. A major increase incemented carbide prices needs to take place. • Some companies could run out of material. However, where there is a high price, there is a way. • As the supply and demand remain close to balanced, price volatility will exists. • What goes up must come down- the bubble will burst. • License situation will be critical later in the year.

  44. Results and Implications • The costs of doing business has tripled. A container of Blue Oxide used to cost $200k, it now cost $600k. • Carbide companies failed to translate increasing raw material prices into higher finished goods prices. A major increase in cemented carbide prices needs to take place. • Some companies could run out of material. However, where there is a high price, there is a way. • As the supply and demand remain close to balanced, price volatility will exists. • What goes up must come down- the bubble will burst. • License situation will be critical later in the year. • LMB and other publications no longer reliable indicators of price.

  45. Solutions • Ore prices which justify future resource development.

  46. Solutions • Ore prices which justify future resource development. • Better Supplier / Consumer relationships.

  47. Solutions • Ore prices which justify future resource development. • Better Supplier / Consumer relationships. • Pricing structures which allow profitability at all levels.

  48. Solutions • Ore prices which justify future resource development. • Better Supplier / Consumer relationships. • Pricing structures which allow profitability at all levels. • More accurate mechanism for material pricing besides publication reports.

  49. Solutions • Ore prices which justify future resource development. • Better Supplier / Consumer relationships. • Pricing structures which allow profitability at all levels. • More accurate mechanism for material pricing besides publication reports. • As the cemented carbide industry consolidates into a few huge global companies and a smattering of regional companies, change will have to come in the supply chain.

  50. Platts Steel & Ferroalloys Conference - 2005 Thank You! Presented June 14, 15, 2005by Zigong International Marketing, LLC 421 High Street, Fairport Harbor, OH 44077, USA

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