China China - A A Western Western Miners Perspective Perspective - - PowerPoint PPT Presentation

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China China - A A Western Western Miners Perspective Perspective - - PowerPoint PPT Presentation

Feb 22, 2024 176 likes •404 views

China China - A A Western Western Miners Perspective Perspective Radosaw Zaoziski Director of Market and Credit Risk Management, KGHM 0 After weaker than expected 1H 2014, the global economies accelerate. International Monetary Fund

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China China - A A Western Western Miner’s Perspective Perspective

Radosław Załoziński Director of Market and Credit Risk Management, KGHM

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After weaker than expected 1H 2014, the global economies accelerate. International Monetary Fund (IMF) forecasts higher growth in 2015.

1

Forecasts of GDP and CPI for 2014 and 2015 are based on IMF data, World Economic Outlook (07.10.2014). *Eurozone aggregate excludes Latvia; F – Forecast; y/y – year over year;

USA

GDP y/y 2014F: 2.2% GDP y/y 2015F: 3.1% CPI y/y 2014F: 2.0% CPI y/y 2015F: 2.1%

World

GDP y/y 2014F: 3.3% GDP y/y 2015F: 3.8%

Canada

GDP y/y 2014F: 2.3% GDP y/y 2015F: 2.4% CPI y/y 2014F: 2.0% CPI y/y 2015F: 2.0%

Chile

GDP y/y 2014F: 2.0% GDP y/y 2015F: 3.3% CPI y/y 2014F: 4.4% CPI y/y 2015F: 3.2%

Eurozone*

GDP y/y 2014F: 0.8% GDP y/y 2015F: 1.3% CPI y/y 2014F: 0.5% CPI y/y 2015F: 0.9%

Poland

GDP y/y 2014F: 3.2% GDP y/y 2015F: 3.3% CPI y/y 2014F: 0.1% CPI y/y 2015F: 0.8%

China

GDP y/y 2014F: 7.4% GDP y/y 2015F: 7.1% CPI y/y 2014F: 2.3% CPI y/y 2015F: 2.5%

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Growth still robust…

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GDP to grow above 7.0% yoy, but nowhere near pre-crisis levels

Source: Bloomberg, IMF WEO, KGHM

4 5 6 7 8 9 10 11 12 2010 2011 2012 2013 2014 2015 Real GDP growth (% yoy) IMF WEO forecast

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…although unevenly distributed

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China’s growth slowdown is concentrated in the north

Note: Provincial GDP growth in 1H2014. Source: GavekalDragonomics, KGHM

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The need for reforms becomes increasingly apparent

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Reforms may hurt in near-term, but bring benefits globally by 2019

The chart shows change of GDP (in %) resulting from 1ppt change in China’s GDP growth. Source: IMF, KGHM

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Stable inflation environment is beneficial for the economy

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Inflation is stable, with no visible pressures

Source: Bloomberg, KGHM

  • 10
  • 8
  • 6
  • 4
  • 2

2 4 6 8 10 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Headline CPI (% yoy) Non-food CPI (% yoy) PPI (% yoy)

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Investments are slowing…

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Fixed assets investments (FAI) growth is slowing due to lower public contribution

Source: BofAML, Bloomberg, KGHM

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… as well as IP

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Industrial production momentum declining along GDP

Source: Bloomberg, KGHM

2 4 6 8 10 12 14 16 18 20 30 35 40 45 50 55 60 65 70 2007 2008 2009 2010 2011 2012 2013 2014 PMI Manufacturing (sa) PMI New Orders (sa) Industrial Production (% yoy, rhs)

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Real estate market closely watched

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New houses prices has showed some weakness recently

Note: Average prices of new houses in 70 medium-to-large-sized cities. Source: Bloomberg, KGHM

  • 1,5
  • 1,0
  • 0,5

0,0 0,5 1,0 1,5 2,0 2,5

  • 6,0
  • 4,0
  • 2,0

0,0 2,0 4,0 6,0 8,0 10,0 Mar-2012 Sep-2012 Mar-2013 Sep-2013 Mar-2014 New houses price growth (% mom, rhs) New houses price growth (% yoy)

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China wants to explore Emerging Markets potential

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Export becomes more dependent on emerging economies

Source: Bloomberg, KGHM

5 10 15 20 25 30 35 40 2006 2007 2008 2009 2010 2011 2012 2013 2014 US Emerging Markets EU Japan ASEAN China's export by destination (% of total, 12m sums-based)

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External trade may suffer from currency appreciation

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Stronger currency hurts price competitiveness

Note: NEER = nominal effective exchange rate. Source: Bloomberg, KGHM

85 90 95 100 105 110 2008 2009 2010 2011 2012 2013 2014 RMB appreciation vs. USD RMB appreciation vs. basket (NEER-based) 2011-12-31=100

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Economy in shape to create more than 10 million jobs this year

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Annual target of creating 10 million jobs should be comfortably reached

Note: Data in millions. 2014 bar includes data until August. Source: GavekalDragonomics, KGHM

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Urban population to reach 1 billion by mid-century

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Urban population is forecast to grow rapidly as people move to cities

Note: Urban population as percentage of total in brackets. Source: United Nations, KGHM

12% 14% 16% 18% 17% 17% 19% 23% 26% 31% 36% 43% 49% 51% 56% 61% 65% 69% 71% 73% 75% 77%

200 400 600 800 1 000 1 200 1 400 1 600 1950 1960 1970 1980 1990 2000 2010 2015 2025 2035 2045 Total population (millions) Urban population (millions)

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Decrease of stocks in official warehouses, low volatility on the market

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Copper price and LME stocks

Source: Bloomberg, KGHM

2 000 4 000 6 000 8 000 10 000 12 000 100 000 200 000 300 000 400 000 500 000 600 000 700 000 800 000 900 000 1 000 000 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 USD/t tons LME COMEX Shanghai LME copper price

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High-cost mines may start losing money

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Lower price now threatens marginal mines [USD/t]

Source: CRU International

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Pushbacks to the expected start-up date and ramp-up of key mine projects

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Current expected production estimates vs. January 2014; projects with capacity of 25,000 t/y+

Source: KGHM Analysis, CRU International April 2014, Macquarie Research

CRU Jan 2014 Current estimates Difference 2014 2015 2016 2017 2014 2015 2016 2017 2014 2015 2016 2017

Toromocho, Peru

143 219 219 229 100 180 258 231

  • 43
  • 39

39 2

Caserones (ex Regalito), Chile

127 146 150 140 70 140 150 150

  • 57
  • 6

10

Nchanga Refractory Ore SxEw, Zambia

83 83 83 76 30 50 50 50

  • 53
  • 33
  • 33
  • 26

Collahuasi Expn, Chile (SX-EW)

24 29 32 30 20 20 20 20

  • 4
  • 9
  • 12
  • 10

Sentinel, Zambia

190 239 290 90 170 225

  • 100
  • 69
  • 65

Jabal Sayid, Saudi Arabia

5 47 57 57 50 57 53,7

  • 5

3

  • 3

Constancia, Peru

42 97 118 50 90 130 8

  • 7

12

Antucoya SxEw, Chile (SX-EW)

38 66 80 50 82 82 12 16 2

Boleo SXEW, Mexico (SX-EW)

3 31 37 37 36 54 55

  • 3

5 17 18

Ok Tedi Open Pit Extension, PNG

53 53 53 75 60

  • 53

22 7

Las Bambas, Peru

49 330 400 45 200

  • 49
  • 285
  • 200

Tenke Expansion 2, Congo DR (SX-EW)

40 56 68 68 115

  • 40
  • 56
  • 68

47

Rosemont, USA

31 97,4 66

Aktogay, Kazakhstan

2 17 20 50

  • 2
  • 17

30

Tia Maria SxEw, Peru (SX-EW)

79 45

  • 34

Tsagaan Suvarga, Mongolia (SX-EW)

46 58 71 20

  • 46
  • 58
  • 51

Total -259 -338 -479 -143

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Weaker consumption growth this year…

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Copper consumption, % change in 2014 vs. 2013

Source: CRU International

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…but should stabilise in the following periods

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Copper consumption, global (‘000 tonnes), 2014 - 2018

Source: CRU International, KGHM

  • 5 000

10 000 15 000 20 000 25 000 2014 2015 2016 2017 2018 North America Europe Australasia Asia ex. China China Africa

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Power sector is the biggest copper consumer in China

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Chinese copper demand by end user, 2013

Source: CRU International, National Bureau of Statistics, KGHM

Real estate, construction; 7% Power Generation and distribution; 28% White goods/automobiles/ electronics; 33% Manufacturing; 10% Infrastructure; 6% High-tech; 7% Others; 9%

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Copper market balance – oversupply in 2015-2016

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Institution

2014 2015 2016 2017

Macquarie

150 597 144

  • 243

Wood Mackenzie

162 553 637 319

HSBC

149 556 23

  • 703

SML (BME Copper)

331 316 146 129

Goldman Sachs

385 454 15

  • 112

CRU International

103 259 410 138 Average

213 456 229

  • 79

Median

156 504 145 9

Source: Market researches, KGHM

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