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Outlook for the Zinc Market – May '09 Annual Meeting Nordic Galvanizers Vaasa Finland

This report provides an overview of the global zinc market, with a focus on the European market and galvanized sheet market. It discusses key factors affecting the zinc market and concludes with insights on the current state of the industry.

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Outlook for the Zinc Market – May '09 Annual Meeting Nordic Galvanizers Vaasa Finland

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  1. Outlook for the Zinc Market – May´09 Annual Meeting Nordic Galvanizers Vaasa Finland 7th of May 2009 Boliden Commercial AB/Mikael Lesser

  2. KEY FACTORS ZN METAL MARKET • Global Zn market in oversupply by 550 Kmt in 2008 and 385 Kmt and 2009 • Zinc price and cost of production are moving in opposite direction • Premiums have reached levels in Europe where imports have become unattractive • Chinese SRB buying large quantities of zinc in Q1 2009 Boliden Commercial AB/Mikael Lesser

  3. CONTENTS • Global Zinc market • European Zinc market • Galvanised Sheet market • Summary Boliden Commercial AB/Mikael Lesser

  4. Global Zinc market • European Zinc market • Galvanised Sheet market • Summary Boliden Commercial AB/Mikael Lesser

  5. CONCLUSION GLOBAL ZINC MARKET • Oversupply of concentrates resulted in oversupply of metal by 524 Kmt in 2008. • LME stocks increased steadily to 332 Kmt, mainly in Asian and Middle East warehouses. • Zinc price came down, while cost are going up. Many mines and smelters operate below cost price. This triggers closures high cost smelters. • > 800 Kmt capacity reduction last months • China large importer of concentrates. SRB has bought big quantities of Zn in Q1 2009, resulting in 235 Kmt imports in Q1 2009 • Weak sulphuric acid market might lead to further production cuts Boliden Commercial AB/Mikael Lesser

  6. GLOBAL ZN MARKET - CONCENTRATES World Zn in concentrates will be in oversupply the coming years. This triggers oversupply of Zn metal. Data: CRU Zinc Quarterly, Jan ´09. 240409 6 Boliden Commercial AB/Mikael Lesser

  7. 2009 China Zinc in concentrate Market:During 2008 China has imported 1198 000 tons of zinc in concentrate. The main exporter of Zn in concentrate to China is Australia, followed by Peru and Canada. 2008/2009 Data: WorldTradeStats, CRU Lead and Zinc concetrateApril-09. 20090423 7 Boliden Commercial AB/Mikael Lesser

  8. GLOBAL ZN MARKET - METAL The oversupply of Zn metals was 524 Kmt in 2008 and is expected to be 385 Kmt in 2009. Data: CRU Zinc Quarterly, Jan´09. 240409 8 Boliden Commercial AB/Mikael Lesser

  9. Crisis hits the zinc industry hard Major reduction in global zinc consumption • Customer industries for zinc among the hardest hit (i.e. automotive, construction, white goods) • Zinc demand fluctuations even more amplified due to supply chain effects 12/20/2019 Boliden 9 Boliden Commercial AB/Mikael Lesser

  10. Customer industries for zinc among the hardest hit in earlier recessions *in terms of EBITA drop, peak to trough 12/20/2019 Boliden 10 Boliden Commercial AB/Mikael Lesser

  11. 10 Construction and automotive account for about 70 per cent of global zinc consumption • Galvanizing has been the fastest growing segment, used in automotive and construction • Galvanizing is expected to increase to 54% of global zinc use by 2020 SOURCE: ILZSG, Brook Hunt 12/20/2019 Boliden 11 Boliden Commercial AB/Mikael Lesser

  12. Lower construction activity in mature economies Lower growth in China vs first half 2008 Construction activity lower Segment of global demand: 49% in zinc* Source: Brook Hunt, CRU 12/20/2019 Boliden 12 Boliden Commercial AB/Mikael Lesser

  13. Western world car sales weak Global car production in sharp decline Automotive production sharply down Segment of global demand (transport): 11% in copper, 23% in zinc* Source: Brook Hunt, CRU 12/20/2019 Boliden 13 Boliden Commercial AB/Mikael Lesser

  14. More than 15 % lower demand for zinc Global Zinc demand growth 10 5 0 Per cent -5 -10 -15 -20 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Zinc demand Source: CRU 12/20/2019 Boliden 14 Boliden Commercial AB/Mikael Lesser

  15. Zinc industry cuts production by ~10% • Latest prognosis on global zinc consumption for full year 2009 is minus 5-10 %. Source: Company data, CRU, Brook Hunt, ILZSG 12/20/2019 Boliden 15 Boliden Commercial AB/Mikael Lesser

  16. Average zinc price flat from Q4 08 s LME stocks Zinc price (LME average) USD/t Q1-09 vs. period Q1 2008 2,426 - 52% Q2 2008 2,115 - 44% Q3 2008 1,773 - 34% Q4 2008 1,189 - 1% Q1 2009 1,174 - Quarterly average 16 2009-04-29 Boliden Commercial AB/Mikael Lesser

  17. World Zn Metal Stocks 30.04.09:Overall LME stock level has reached 332,275 Mttoday, European stocks are at 55,600Mtand Shanghai stocks are at 75,434 Mt. Data: Reuters, 20090504 17 Boliden Commercial AB/Mikael Lesser

  18. Profitability under pressure 18 2009-04-29 Boliden Commercial AB/Mikael Lesser

  19. Availability of raw materials + low metal prices high TC/RC high metal prices high TC/RC Availability of metal + - low metal prices low TC/RC high metal prices low TC/RC - Business cycle of metals Boliden Commercial AB/Mikael Lesser

  20. China: Net tradeof Zn in Concentrate and Zn metal (incl zinc alloys): Zinc concentrate imports in March were lower than in January and February this year, though were broadly in line with imports in March 2008. However, the net trade in Zinc Metal is already close to 2008 year end figures. SRB buying large quantities Data: CHR Metals March 2009: World Zinc/China Zinc Positive figures indicate net exports; negative figures indicate net imports Export figures are for all refined zinc, not just >99.995%. 20090505 20 Boliden Commercial AB/Mikael Lesser

  21. Zinc metal exports from China: China’s exports of refined zinc have effectively dried up, with the LME prices falling further behind the Shanghai prices during the course of February, March and into April. The metals exported were mainly shipped to other Asian countries. Data: WorldTradeStats CHR March 2009 20090429 21 Boliden Commercial AB/Mikael Lesser

  22. Zinc metal importsinto China: The strong Shanghai/LME arbitrage, over $170/t for imported zinc, has been hugely influential in pulling surplus zinc stocks out of the rest of the world to accumulate instead in China. * : Data for March/July 2008 used from CHR as worldTrade Stats not available Data: WorldTradeStats CHR March 2009 20090504 Boliden Commercial AB/Mikael Lesser

  23. Cash LME Zn price vs Shanghai Zn price Imports into China for financial reasons! Boliden Commercial AB/Mikael Lesser

  24. Global Zinc market • European Zinc market • Galvanised Sheet market • Summary Boliden Commercial AB/Mikael Lesser

  25. CONCLUSIONS ZINC MARKET EUROPE • Closures and production reduction: • Closure RuhrZink: 140 Kmt • Nyrstar Balen closed to Sep 2009: 180 Kmt • Nyrstar Budel reduces output 28%: 70 Kmt • Boliden reduces output: 30 Kmt • Xstrata Nordenham reduces output: 20 kmt • Copsa Mica closed for 2009: 60 Kmt • LME stocks in Europe remain at low level (55 Kmt). However, unknown level of unwarranted stock • Zinc consumption expected to decrease in 2009 by 8% • SHG spot slab premiums have come down during 2008 • Imports into Europe unattractive at low premium levels Boliden Commercial AB/Mikael Lesser

  26. Zn Metal Balance in Europe: The zinc demand has been significantly undermined by the deterioration in Europe’s main end-use sector. CRU now calculates a reduction in demand by 668 000 mt 2009-2012. Total forecasted capacity reduction in Europe is 540 Kmt. Based on this CRU consumption forecast, the market is in deficit by 534 Kmt in 2009. Boliden however believes consumption will be lower than CRU anticipates. Cutbacks European smelters not included The historical data is in dark blue and the capacity in light blue. The balances in the history 2005-2007 are based on the actual production and the balances for 2008 and forward are based on the capacity. Data: CRU Zinc Quarterly, Jan ´09; comparison of forecasted Zn metal production capacity and Zn metal consumption; Bulgarian and Romanian figures are taken out of the equation as they mainly export to non-EU countries; as soon as the EU stats show that they start to export more to the EU we will include the those countries again in this chart. 20080424 26 Boliden Commercial AB/Mikael Lesser

  27. European Zinc Producers – yr 2009 -15 Kmt NB -15 Kmt Total -540 Kmt (-25%) NB CH EZ -20 Kmt -180 Kmt XS MY NY NY BO RU -140 Kmt NY -70 Kmt -25 Kmt CM -60 Kmt XS KU -15 Kmt GL Boliden Commercial AB/Mikael Lesser

  28. Zn Metal Imports into the EU15 in 2008:Mexico was the major exporter into Europe in 2008. Data: WorldTradeStats, 95 % of the total volume is shown in the picture. 20090331 28 Boliden Commercial AB/Mikael Lesser

  29. Zn Metal Imports into the EU15 Jan-Feb 2009:India has risen to be the second largest exporter into Europe with its exports for Jan-Feb (7 414Mt) already close to full year 2008 figures (12 390Mt) . Data: WorldTradeStats 010808, 80 % of the total volume is shown in the picture. 20090131 Boliden Commercial AB/Mikael Lesser

  30. Zn Metal Trade of the EU15:The imports into Europe have reached a record level in 2007. The bars represent the volume for the Jan-Feb period of 2009, to be compared to FULL year figures 2004-2008. Data: WorldTradeStats 20090424 30 Boliden Commercial AB/Mikael Lesser

  31. Zn Metal imports into the EU15 excl. Norway:During 2008 301,000 Mt have been imported into EU15. Where did the materials go? Data: WorldTradeStats 20090131 31 Boliden Commercial AB/Mikael Lesser

  32. Global Zinc market • European Zinc market • Galvanised Sheet market • Summary Boliden Commercial AB/Mikael Lesser

  33. Galvanised Sheet: EU 15 trade with Non-EU countries: Trade VolumeThe comparable figures for Feb 2008 to Feb 2009 have dropped by 49%. However, the trend continues; The imports are higher than the exports. 2009 bars are Jan-Feb period, to be compared to FULL year figures 2004-2008. Data: WorldTradeStats, imports mean customs cleared metal, not necessarily physical shipments; the shipments can have taken place much earlier; data includes galvanized sheet with > 600 mm width. 20090423 33 Boliden Commercial AB/Mikael Lesser

  34. Galvanised Sheet: Import from Non-Eu countries into EU15Total 2008 2,292,475 Mt Data: WorldTradeStats, imports mean customs cleared metal, not necessarily physical shipments; the shipments can have taken place much earlier; data includes galvanized sheet with > 600 mm width. updated 20090331 34 Boliden Commercial AB/Mikael Lesser

  35. Galvanised Sheet: Imports into the EU15, YE 2008China was the main export country to EU15 in 2008. Asia, all together, is exporting 75% of the imported galvanized sheets to EU15 until Jan-Nov 2008. Data: WorldTradeStats, displayed are those countries making up 80% of the imports; data includes galvanized sheet with > 600 mm width Updated 20090131 35 Boliden Commercial AB/Mikael Lesser

  36. Galvanised Sheet: The export duty (from 5% to 15%) has now started to show in the trade statistics, with reservation for the economic recession in EU15. The European car sales plunged the final months of 2008 in Europe and new car registrations are down 17.2% in Q1 2009. Data: WolrdtradestatMarch 2009 BrookHunt jan 2009. Updated 20090427 Boliden Commercial AB/Mikael Lesser

  37. Global Zinc market • European Zinc market • Galvanised Sheet market • Summary Boliden Commercial AB/Mikael Lesser

  38. SUMMARY • Zn concentrates in oversupply, resulting in oversupply of Zn by 524 Kmt in 2008 and 385 Kmt 2009 • Rationalisation zinc smelters, due to closures of high cost smelters. Bad sulphuric acid market might trigger further production cuts. • LME stocks increased to 332 Kmt. European stocks remain low at 55 Kmt • Premiums have reached levels in Europe where imports have become unattractive • Premium development in Europe depends on supply/demand balance, which is difficult to forecast • Chinese SRB has bought large quantities of zinc in Q1 2009 38 Boliden Commercial AB/Mikael Lesser

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