Iluka Yoyo
Iluka Yoyo
Iluka Yoyo
Information herein derived, in part, from TZ Minerals International and Beijing Ruidow International Global Zircon Conference,
Shenzhen, China May 2010
This presentation contains forward-looking statements that are subject to risk factors associated with exploring for,
developing, mining, processing and sale of minerals.
These forward-looking statements are subject to a range of risk factors associated, but not exclusive, with potential
changes in:
market conditions
management decisions
While Iluka has prepared this information based on its current knowledge and understanding and in good faith, there are
risks and uncertainties involved which could cause results to differ from projections. Iluka shall not be liable for the
correctness and/or accuracy of the information nor any differences between the information provided and actual
outcomes, and furthermore reserves the right to change its projections from time to time. Iluka does not undertake to
update the projections provided in this document on a regular basis.
All currency referred to is Australian denominated unless otherwise indicated.
Structure of Presentation
220 delegates
Delegates included:
-
representatives of major zircon global supplies (with and without facilities in China)
Titanium Zirconium & Hafnium Branch, China Non Ferrous Metal Industry
Jiang Dongmin
General Manager of Zhengjiang Shenghua Biok Biology Co.
Vice-Chairman of China Titanium Zirconium Hafnium Association
Strategically important (though relatively small zircon sand input) for zirconium metal
-
Chinese zircon consumption is more heavily weighted towards zirconia and zirconium chemical
relative to global consumption
Global Zircon Segments 2008
Zirconia &
Chemicals
15%
TV Glass
3%
TV Glass
6%
Zirconia &
Chemicals
27%
Foundry/Casting
14%
Refractory 14%
Ceramics
54%
Ceramics
53%
Foundry/Casting
7%
Refractory
7%
8
Source: Iluka analysis
Tianjin Area
Qingdao Area
Zhangzhou Area
Shanghai Area
Xiamen Area
Huangpu Area
Zircon Demand
Consumption Accelerated by Developing/Urbanising Economies
Global Zircon Consumption CAGR since 1990 is 3.4% while Chinas CAGR is 17.2%
Zircon (kt)
World
China
Rest of World
1.2
1.0
0.8
1990-08 CAGR
= 3.4%
1980-89 CAGR
= 2.8%
1990-08 CAGR
= 1.3%
0.6
1990-08 CAGR
= 17.2%
0.4
0.2
0.0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
10
Source: Iluka analysis
2009 Ceramics
2009 Production
Change
Exports
Change
6.72 bn sq m
21.8%
2.5%
Sanitary Ware
12.3%
-15.2%
Household ceramics
30.6%
2.4 million
-6.6%
11
Source: Global Zircon Conference participant data
Industry challenges
-
world economy
sovereign debt
RMB appreciation
Need for ZrO2 growing sharply as a result the consumption of zircon sand will definitely
continue to increase
13
Chemicals
ZOC - Overview
Zirconia has excellent hardness and imparts wear, fracture, impact and corrosion resistance.
Zirconium is extremely corrosion resistant at high temperatures. Various other chemical uses.
Ceramics
53.4%
Gemstones+
Technical
Ceramics
Chemicals
7.4%
Nuclear (Metal)
Other
Other
1.4%
TV Glass
3.0%
Cosmetics
Fused Zirconia
9.0%
Paper coatings
TiO2 coatings
Foundry
13.2%
Source: TZMI, Roskill, Iluka consensus
Refractory
12.6%
Paint Dryers
14
China has grown from approximately 16% of global zircon consumption in 1998 to more
than 40% in 2009
1400
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
1200
1000
800
600
400
200
0
2000
2001
2002
China
2003
2004
2005
Rest of World
2006
2007
2008
2009
China % of World
15
Source: Iluka analysis
Chinas consumption of zircon expected to continue to grow based on a combination of rising per capita income
and urbanisation
Chinese Governments stated goal of quadrupling per capita GDP by 2020 (on 2000 levels)
McKinsey Consultants forecast, by 2025:
- urban population to reach 926 million people
- floor space built per year to rise to 3.06 billion square metres (up from 1.18 billion sqm in 2005)
Both factors are positive for zircon as demand linked to GDP per capita and construction
Zircons largest end use is in ceramic tiles
Usage increases with rising incomes
Chinas Urban Population
1000
900
800
700
600
500
400
300
200
100
0
People (Millions)
35
926
30
33
25
20
601
15
24
18
10
254
0
1990
2007
2025
2000
2008
2015
2025
16
By the end of 2008 China accounted for 40% of global ceramic tile production and close to 35%
of consumption
The proportion of production of medium to high quality grade tiles in China continues to increase
Chinese Ceramic Tiles
million sqm
4000
3500
3000
2500
2000
1500
1000
500
0
2003
2004
2005
Production
2006
2007
2008
Internal consumption
17
Source: Ceramic World Review 2009
Ceramics
China Tile Production Trends
% Chinese Tile
Production (RHS)
0.2
40%
Global Zircon
Intensity of Use
(LHS)
0.12
30%
0.08
25%
0.04
20%
15%
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
Chinas new tile production during the 1990s used less zircon that the rest of world
Ceramic segment zircon consumption expected to grow in China as affordability for good
quality floorings increases in China and China increases exports to compete with western
producers
18
*Note: Global Intensity of Use = Global Tile Production (m2) / Global Ceramic Grade Zircon Consumption (kt)
Source: Ceramic World, TZMI
(%of Total)
35%
China Tile Produ
Zircon kg / Tile
0.16
Feb
Mar
Apr
07 Cum
May
Jun
08 Cum
Jul
09 Cum
Aug
Sep
Oct
Nov
Dec
10 Cum
19
Source: Iluka interpretation of Chinese import statistics
20
China represented more than 23% of Ilukas total revenue in 2009: Ilukas biggest single market
China represents more than 40% of global zircon consumption and will continue to grow more
rapidly than other zircon markets.
Iluka now has a zircon market share of more than 35% in China.
Iluka Shanghai Representative Office has now been extended to a regional office for all of Asia
(with increasing staff levels)
Continued focus on improving our service to the Chinese market: reliability, convenience,
stream-lined supply chain, stronger relationships, communication
21
mt
600000
60%
500000
50%
400000
40%
300000
30%
200000
20%
100000
10%
0
0%
2004
2005
China
2006
2007
2008
2009
% China Sales
22
Source: Iluka data
2005
2006
2007
2008
2009
23
Source: Iluka analysis
300
Zircon Sales
kt
200
100
Severe reduction in 1H
2009 sales, including
China
0
Asia
Europe
Americas
Other
-100
1H 2008
China
2H 2008
1H 2009
2H 2009
Change
(2H 2008 to 2H 2009)
Sales Volumes
k tonnes
1H
2008
2H
2008
1H
2009
2H
2009
Change
(2H 2008 to 2H
2009)
33
41
11
36
(5)
China
81
81
15
104
23
Europe
74
98
17
(81)
Americas
38
33
20
(13)
Other
Total
227
254
42
181
(73)
24
Excludes CRL
Declining production from Ilukas traditional ore bodies will be off-set from new production at
Murray and Eucla Basins
kt
400
300
200
100
0
2006
2007
2008
Other
2009
MB
2010
2011
Eucla
25
Note: All production figures exclude CRL
26
Decline in production from major producers and Indonesia resulted in the zircon market
falling into short supply through the course of 2008
The Global Financial Crisis resulted in an over supply in 2009 despite significant
reductions in production
1,250
1,000
750
500
2005
2006
2007
2008
Supply
Demand
2009
2010
27
Demand
- Jan + Feb ~ 40-50kt/month consumption (normally a very quiet period)
- Mar + Apr ~ 40-50kt/month consumption
- expect H1, 2010 to be near 250kt consumption
- expect H2, 2010 to also be close to 250kt consumption
Supply
- total supply to end of March ~ 150kt
China recovered from the Financial Crisis by Q3, 2009 and is now far exceeding all consumption expectations
Iluka expects monthly consumption in China to stay firmly in the range of 35-50kt per month and in the range
of 450-500kt for all of 2010
28
Source: Iluka estimates based on market data
2010 Supply
29
('000)
16
14
12
10
8
6
4
2
2007
2008
2009
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
2010
30
Source: Iluka interpretation of Chinese import statistics
Zircon demand across all main markets rebounded strongly in first quarter
uncontracted bulk shipments to Europe
steady improvement in North American market
continued strong demand in China
Iluka advised customers of 1st of at least 2 price increases in 2010 (April and July)
31
Zircon Supply/Demand
TZMI Perspective from Conference - Data not reproduced
Future growth in demand (ceramics and specialty applications) driven by China and
emerging economies
Not a large number of new projects to be commissioned, plus time to market for new
projects may take longer than expected
New supply will fill the gap & perhaps lead to short term excess
- short term surplus (not currently a surplus)
- expect discipline on part of suppliers
TZMI view that Q2 price increases of US$20-50/tonnes have been passed through
2nd half price increase they expect to be a similar magnitude to the high end of this
range (although they are hearing higher numbers)
TZMI view on prices doesn't reflect demand (on which they are bullish) but supply
33
Zircon Supply
Ilukas View - Supply Crunch Near Term?
Zircon Supply
Induced New Projects at 0%, 25% and 50% Zircon
price rises (on 2008 levels)
1800
1600
1400
1000
ktpa
Current Producers
No price rise
1200
800
600
400
200
0
2000
2002
2004
2006
2008
2010
2012
2014
34
7.0
6.0
Zircon/TiO2 Ratio All
Feedstock Producers
(including J-A)
5.0
0.25
0.2
4.0
0.15
3.0
Zircon/TiO2 Ratio
Excluding Iluka
2.0
0.1
1.0
0.05
0.0
0
1990
1995
2000
2005
2010F
2013
Iluka Outlook
Confluence of Positive Factors
Additional high margin zircon and rutile production over the next 3 years
Tight industry supply conditions for high grade titanium dioxide and zircon
Ilukas inducement analysis suggests prices need to increase appreciably
Iluka has idled upgrading capacity capable of being re-activated
36
Closing Slide
Closing Statement
Jian Dongmin, GM Zhejiang Shenghua Biok Biology Zircon Valley Branch Company,
Director China Nonferrous Metal Industry Association
Copies of the Conference presentational materials can be obtained from TZ Minerals International
(www.tzmi.com)
38