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ECONOMIC OVERVIEW November 2018
Method to Madness

This month’s outlook will attempt to explain AME’s economic methodology. As a group of engineers and social scientists, AME is pragmatic about forecasting without any assistance from divine intervention. Instead, we offer robust industry models which are typically updated quarterly.

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ALUMINIUM November 2018
Outside China, Alumina is Shifting

China has increased its domestic alumina capacity to satisfy the increase in Smelter Grade Alumina (SGA) demand. This geographical shift in capacity, along with energy costs and raw materials supply sources, has had a major impact on alumina producers outside China. The past has seen competitive pressures lead to curtailments and product changes of several previously well-established SGA suppliers. How will these operations fare in the future?

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COBALT October 2018
DRC Dominates Cobalt Supply

Cobalt supply is dominated by the copper-cobalt mines in the Democratic Republic of Congo (DRC). Indeed, the DRC is showing no signs of slowing down with the restart and expansion of Katanga’s Kamoto complex, and the commissioning of ERG’s Metalkol tailings project. However, there are challenges for mining companies operating in the DRC, which presents both a risk to global supply and an opportunity for holders of cobalt resources elsewhere in the world.

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COPPER November 2018
Capital Intensity of New Copper Mines

The new, large-scale Las Bambas, Cobre Panamá, Aktogay and Bozshakol mines have high capital intensities of over US$6.6/lb of annual copper capacity. Las Bambas has a capital cost of US$6.6bn due to its remoteness and need for a new town, while Cobre Panamá’s US$5.48bn capex includes a power plant, port facility and capacity to process low-grade ores. Aktogay and Bozshakol also have low grades, requiring larger volumes be processed per tonne of copper produced.

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IRON ORE November 2018
The Iron Ore Pellet Market

With supply disruptions and surging demand, iron ore pellet premiums have rallied from the lows of 2015 to a record high in 2018. The supply deficit has impacted both the Atlantic and Asian markets, with the Atlantic blast furnace (BF) and direct reduction (DR) pellet premium lifting over 80% and 50% respectively from 2015, while the Chinese BF pellet premium soared over 200%. As producers regain confidence, idle capacity is returning to production while the overhang of Samarco is a disincentive for investment in new merchant capacity.

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LNG October 2018
Mozambique: Counting on LNG

Mozambique is poised for a massive economic transition with the discovery of around 175Tcf (5Tcm) of recoverable gas and a potential US$50bn of LNG developments. This progress spells hope for the world’s 10th poorest nation, which has a GDP of less than US$540 per capita.

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METALLURGICAL COAL November 2018
Mozambique’s Significant Potential

Mozambique was once expected to be the next big player on the global metallurgical coal market. In 2008, exports were forecast to reach 40Mtpa by 2016; however, with years of delays and weakening coal prices, only 3.6Mt of exports were achieved for the year. Vale’s Moatize mine is the leading operation, with coking coal exports to exceed 7Mt in 2018 with positive cash margins. Are other producers likely to follow suit in the coming years to fulfil Mozambique’s massive supply potential?

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NICKEL October 2018
New Caledonia: Trouble in Paradise

Just over a decade ago, New Caledonia was seen by many as the key to future finished nickel supply. Blessed with abundant nickel resources and the highest average grades of any nickel laterite producing country, major players in the global nickel industry Inco and Falconbridge invested heavily in new capacity. Fast forward to today, and New Caledonia’s nickel industry is on the ropes, with high hopes yet to be realised. How did it get to this and what does the future hold for the tropical French territory?

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OIL & GAS October 2018
Argentina Taps its Vast Shale Resources

Argentina is is determined to achieve natural gas self-reliance by 2019, a goal which currently seems within reach due to the development of the Vaca Muerta shale depsit. However, replicating the success of US shale plays will be an arduous task.

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OIL REFINERIES October 2018
The Unfolding of the Teapots

Chinese independent refineries, widely known as “teapots”, were historically recognised as incompetent and unsophisticated refining units that were configured to produce small volumes of low-quality fuel products for industrial usage. These teapot refineries used to have very limited feedstock flexibility largely due to their rudimentary operations and the government’s tight control of crude imports.

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SPOTLIGHT October 2018
Capture Future Tyre Demand

Discover upcoming tyre supply opportunities across 15,000 existing and upcoming global projects. Furthermore, identify existing and upcoming fleet tyre opportunities.

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STEEL November 2018
China's Steel Capacity Cuts

China initiated the 13th Five Year steel capacity reduction plan in 2016 to attack oversupply after a period of low to negative steel margins. China not only achieved its 2016 and 2017 capacity reduction targets, it is also on track to reach the five-year target in 2018, two years ahead of schedule. In a separate assault the government eliminated 30-50Mtpa of Induction Furnace steel production by June 2017. These initiatives have rejuvenated China’s steel industry, lifted utilisation rates, removed obsolete capacity, increased ownership concentration and improved steel producer margins.

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THERMAL COAL November 2018
The Thermal Coal Pricing Puzzle

The record price gap between Australian premium and high-ash thermal coal in 2018 has left many market spectators scratching their heads. The situation has multiple facets, several key participants and is a combination of both demand and supply dynamics. China is the primary driver; although the statistics show that a shift to higher-quality imports is only a fraction of the story.

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ZINC November 2018
Grade Expectations

After a period of steady decline, the weighted-average zinc grade of primary zinc mines is expected to increase in the long term, rising from 4.7% in 2017 to 5.2% in 2030. This rise in zinc grade is a function of the closure of large, low-grade operations, such as Sumitomo’s 275ktpa San Cristobal and the commencement of higher grade operations including Vedanta’s 250ktpa Gamsberg and MMG’s 170ktpa Dugald River. This rise in zinc grade is substantially at odds with the declining grade trends common to copper and nickel.

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