Follow the Money Group Jingyuan Hu Kari Havnevik Guðrún Lilja Jónsdóttir Francisco Rodríguez Saa
2003
file:///Users/amy/Dropbox/jj/commodity/stream.html 2004 2005 2006 2007
Gordon Brown becomes prime minister of Great Britain
Winter Olympics in Turin, Italy
North Korea claims nuclear test
FIFA World cup
Hurricane Katrina in Amercica
9.0 Asia quake leaves 212,000 dead European Union expanded
Summer Olympics in Athens, Greece
Conflict in Sudan escalates into war
Start of the colour revolutions
U.S. launches war against Iraq
Winter Olympics in Salt Lake City, U.S.
Switzerland joins United Nations
002
FIFA World cup
2008 2009 2010
Winter Olympics in Vancouver, Canada
FIFA World cup
2002
The shutdown of the UK tabloid News of the World
GM enters bankruptcy protection
Barack Obama wins election IMF: Global economy worst in 60 years
Lehman Bros files for bankcruptcy
Global economic crisis
Summer Olympics in Beijing, China
Quake death toll 22,000 in China
2003
2011
Iraq War is declared formally over
price
World Economy
2004
England riots
nickel lead iron gold copper aluminium zinc uranium tin silver
Tohoku earthquake and tsunami in Japan
Streamgraph 2/1/12 AM nickel lead iron gold copper aluminium zinc uranium tin 8:18 silver
fuel price
industrial inputs price commodity price Page 1 of 1
Energy and Coal
Real cost of coal
Coal burning has existed for centuries, and its use as a fuel has been recorded since the 1100s. It powered the Industrial Revolution, changing the course of first Britain, and then the world, in the process. In the US, the first coal-fired power plant – Pearl Street Station – opened on the shores of the lower East River in New York City in September 1882.1 Shortly thereafter, coal became the staple diet for power plants across the world.
in Process
thermal/ steam
electricity generation
metallurgical, coke
Value
steel production
Cost thermal/ steam
cement manufacture
mining
preparation
transport
type
use
in US The Annual Economically-Quanti!able Costs of Coal
Electricity
Emission
Land Disturbance: Carbon & Methane
$ 5.5B [Hg] Mercury Impacts
40%
However, coal combustion caused
In 2009, of the world electricity is generated by coal
2%
Chemical and petrochemical
2%
Iron and steel
7%
Cementation metallic mineral product
4%
Energy sector
3%
Residential
74%
Electricity transformation
3%
Other
80%
GHG emission in electricity generattion
$ 187.5B
$ 1.8B
$ 2.2B
$ 74.6B
Fatalities Among the Public Due to Coal Transporation by Rail
Public Healthy Burden in Appalachian Communities
Emissions of Air Pollutants from Combustion
$ 8.8B
$ 3.2B
Abandoned Mine Lands
Subsidies
$ 61.7B Climate Contribution from Combustion
$ 345B and More
Coal is pretty cheap on the electronic bill, however, in reality we are paying a much higher cost in the long run, if we look at the big picture. The whole process and its impact on human being and environment can somehow tell the true cost of coal.
30 coal miners dead in America in 2008, 3200 in China. The death rate of coal mining is much higher than imagined.
As in the graph, American actually spent a lot on different issues and problems that brought by coal mining. Though the number is roughly calculated, it reveals the truth behind the “cheap coal”. The high death rate of coal mining is also a serious problem.
Nuclear(4)
Oil(36)
Coal (161/TWh)
population coal consumption
1950
1965
1980
1995
2010
World trade of coal
2010
2000 Export 206114
Import
Export
Japan Korea, South 67944 Taiwan 50410 Germany 39386 Russia 28323 United Kingdom 26377 Canada 26303 India 25736 Netherlands 25461 Spain 24014
Australia Indonesia Russia United States South Africa Colombia Canada Kazakhstan Vietnam China
168586
World share of coal consumption
Australia 77450 China 77061 South Africa 63332 Indonesia United States 59634 43981 Russia Colombia 39522 Kazakhstan 37990 Canada 35695 Poland 29474
Import
206702 195062
122095 83178 76683 76380 36920 36305 24676 22658
125807 101563 71130 55154 30030 29358 23734 22831
million tons
China is developing fast as well as its domestic demand. Its energy supply replies on coal resource. It has transformed from a big coal exporter to a giant importer through the last decade.
Export vs. Import
Transforming China
Japan China Korea, South India Taiwan Germany Turkey United Kingdom Italy Netherlands
328131 316151
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Resource 1. http://www.skepticalscience.com/true-cost-of-coal-power.html 2. http://www.coalcrusher.org/coal/coal-application.html 3. http://www.markenglehartevans.com/2011/05/state-grid-vs-beijing-a-familiar-game-ofchicken/ 4. http://seekingalpha.com/article/238639-the-coal-situation-in-asia 5. http://www.worldcoal.org/ 6. http://www.c2es.org/technology/overview/electricity 7. http://nextbigfuture.com/2011/03/deaths-per-twh-by-energy-source.html 8. http://www.sourcewatch.org/index.php?title=Coal_mining_disasters 9. http://www.mapreport.com/subtopics/i.html 10. http://en.wikipedia.org/wiki/21st_century#Economics_.26_Industry 11. Ming Coal, Mounting Costs: The life cycle consequences of coal (http://chge.med.harvard.edu/programs/ccf/documents/MiningCoalMountingCosts.pdf ) 12. The True Cost of Coal (http://www.greenpeace.org/international/Global/international/ planet-2/report/2008/11/cost-of-coal.pdf ) 13. BP Statistical Review of World Energy 2011 (http://www.bp.com/assets/bp_internet/ globalbp/globalbp_uk_english/reports_and_publications/statistical_energy_review_2011/STAGING/local_assets/pdf/statistical_review_of_world_energy_full_report_2011.pdf ) 14. http://www.indexmundi.com/ 15. http://en.wikipedia.org/wiki/Coal 16. http://www.visualizing.org/ 17. http://www.iea.org/index.asp
2010
2001 Sweden
Iron Ore - Production Russia
Russia
Canada
Canada Ukraine
Ukraine
Kazakshtan
USA
USA China
China
Iran
India
Mexico
Mauritania
India
Mauritania
Venezuela
Brazil
Brazil
Australia
Australia
South Africa
South Africa
Mauritania Venezuela Mexico Kazakhstan Iran Canada Other countries United States South Africa Ukraine Russia India Brazil Australia China
Mauritania Kazakhstan Sweden South Africa Canada Ukraine United States India Other Countries Russia Australia Brazil China 0
50
100
150
200
0
250
200
400
600
800
Annual Report 2010 S&B Industrial Minerals S.A.
Assemblage
Iron Ore 3rd. Shipping
2nd. Shipping
1st. Shipping
4th. Shipping
Foundry Refractory Bricks & Monolithics Pelletizing machine
Pig Iron ingot
Automotive Industry
Cast Iron Auto Part
Iron Ore Pellets
Ship Building
Blast Furnace
Resource: nationmaster.com
1200
Cast Iron Sub Part or Sub- component
From Coal Metallurgical Coke is used as fuel
Iron ore
1000
Pig Iron
Formed Steel Continuous Casting
Other ingredients Cast Iron Scrap +
Reinforced Concrete
2010 Norway
2010
Sweden
Iron Ore - Market
Finland
Canada N Ukraine
A
Czech R
P Slovakia Romania
US
Al
Turkey
China
Bahrain China
India
M
Oman Phillipines
Ve
Pe
Malasya
Brazil
Br
Australia Ch
Ar
South Africa
New Z.
Exports Iron Ore - Supplying Countries from the ore (before sub-parts or sub-components are made)
Imports Iron Ore - Demanding Countries (Consumers) Importers
Albania New Zeland Norway Mexico Philiphines Venezuela Peru Chile Kazakhstan Bahrain United States Ukraine South A rca Sweden Canada India Australia Brazil 0
Iron ore is the source of primary iron for the world's iron and steel industries. It is therefore essential for the production of steel, which in turn is essential to maintain a strong industrial base. Almost all (98%) iron ore is used in steelmaking. Iron ore is mined in about 50 countries. The seven largest of these producing countries account for about three-quarters of total world production. Australia and Brazil together dominate the world's iron ore exports, each having about one-third of total exports.
Iron Ore Price
5
10
15
20
25
30
35
0
In 2009, China imported almost two-thirds of the world’s total iron ore exports and produced about 60% of the world’s pig iron. Since international iron ore trade and production of iron ore and pig iron are key indicators of iron ore consumption, this demonstrates that iron ore consumption in China is the primary factor upon which the expansion of the international iron ore industry depends.
200 180 160 140 120 100 Series1
60 40 20
Dec 2001 jun.02 Dec 2002 jun.03 Dec 2003 jun.04 Dec 2004 jun.05 Dec 2005 jun.06 Dec 2006 jun.07 Dec 2007 jun.08 Dec 2008 jun.09 Dec 2009 jun.10 Dec 2010 jun.11 Dec 2011
0
5
10
15
20
25
30
35
Over the last 40 years, iron ore prices have been decided in closed-door negotiations between the small handful of miners and steelmakers which dominate both spot and contract markets. Traditionally, the first deal reached between these two groups sets a benchmark to be followed by the rest of the industry
US Geological Survey 2011 Annual Report Iron Ore Worldwide
80
Malaysia Finland Spain Slovakia Oman Turkey Argen na Romania Netherlands Canada Poland Austria Czech Republic Belgium United States Italy France Germany Japan China
This benchmark system has however in recent years begun to break down, with participants along both demand and supply chains calling for a shift to short term pricing. Given that most other commodities already have a mature market-based pricing system, it is natural for iron ore to follow suit. Although exchange-cleared iron ore swap contracts have developed over the past few years, to-date no exchange has established a proper futures market for the largely seaborne $88 billion a year iron ore trade.[6]
40
To answer increasing market demands for more transparent pricing, a number of financial exchanges and/or clearing houses around the world have offered iron ore swaps clearing. The CME group, SGX (Singapore Exchange), London Clearing House (LCH.Clearnet), NOS Group and ICEX (Indian Commodities Exchange) all offer cleared swaps based on The Steel Index's (TSI) iron ore transaction data. The CME also offers a Platts based swap, in addition to their TSI swap clearing. The ICE (Intercontinental Exchange) offers a Platts based swap clearing service also. The swaps market has grown quickly, with liquidity clustering around TSI's pricing. By April 2011, over US$5.5 billion dollars worth of iron ore swaps have been cleared basis TSI prices.
Resource: US Geogolical Survey >usgs.gov Annual Report 2010 of S&B Industrial Minerals
2006 Northwest Territories British Columbia Ontario Michigan Nevada Saskatchewan Arizona
Bolivia Dominican Republic Venezuela Argentina Brazil Peru Chile Mexico
North America
South America
5 - 14 %
NW. Territ
13% of Net R. 2% of Net P.
Bri. Colum.
10 %
Ont.
2-7% 2-5% 5 % of Net P. 2%
Europe 5%
India Mongolia China Myanmar Papua New Guinea Philippines Indonesia
Ghana Mozambique Botswana Namibia South Africa Tanzania Zambia Zimbabwe
Sweden Greenland
1-6%
Mining Royalties & Mining Taxation
Africa
Bo
Ve
0-3%
Ar
0,2 - 3 % Br NV
0-3%
Saskatch.
India
2.5-7.5%
Mon
1- 4 %
Ch
Variable SA - V Ta 0-5%
1-7.5%
Mya
2%
Za
2%
N. Gui, Phi
0%
Zi
3-12 %
MI Pe Ch, M AR
Australia 0.4-20 %
GM
Dom. R.
3-4%
Northern Territories New South Wales Western Australia Queensland
Asian & Pacific Countries 3-10 %
B
5-10 %
N
18 %
4 - 7 % N. S. Wales 2.5-7.5% W. Aus. 2.7 %
0% Sw, Gr
Unit Based Indo.
NW. Territ. Bri. Colum.
Saskatch.
Ont. Mon
MI NV
Ch
AR
India
Dom. R.
M
Mya Phi
Ve
G N. Gui Ta
Pe
Br
Za
Bo N
Indo
M Zi
B W. Aus.
Ch
Ar
SA - V
“Many nations impose royalty tax, but some nations -as diverse as Chile, Greenland, Mexico, Sweden, and Zimbabwe- do not. In most nations that impose royalty tax, policy nakers are interested in determining whether the level of royalty and its computational method are competitive and efficient.� Mining Royalties A Global Study of Their Impact on Investors, Government, and Civil Society.
Resource: Mining Royalties_A Global Study of Their Impact on Investors, Government, and Civil Society
North. Territ.
North. Territ. Queensl.
Queensland
EU 27 China Japan South Korea India Russia Ukraine USA Canada Brazil
Exp
Import
Import and Export of Steel between 1999-2006 shown in %
2008
2008
Utilization Capacity 1998
2002
2006
2008
82 % 62 % 55 %
55 %
25%
South America Latin America
EU 15
Asia
(not Asia)
China
20 %
World
In modern economies production and capasity is very stable as shown in the graphs. The economy stays stable because it is well developed and the demand of steel is stable because the steel in not used for large size infrastructure. In China on the other hand the production and capacity are increasing because they are now going through a liberalization and industrialization. The same trend is expected to be seen in India and Brazil in a 10 year period. The white curve shows how well the capacity is exploited. Low utilization means that it is to large capacity according to the production. This is related to the consolidations around the world. Consolidation
of steel companies is very common in most parts of the world. In modern economies it is a couple of large companies ruling most of the production and that gives a high utilization rate. In developing economies there are many small firms which gives a fragmented marked, and when this market is put out on the world market (for instant China) there is an enormous overcapacity and the country will go through a consolidation face. China is in the middle of this face now, which forces them to shut down all the production on the country side and move it down to the coast were the logistic costs are lower and it is richer access to raw material.
Utilization in steel production
Degree of consolidation of steel between the world regions
Capacity and production are displayed in million tonnnes. Utilization is calculated as percentage of production to capacity. Thus the the two x axes are showing production and capacity on the left side and procentage on the right which applies to utilization.
Production
The largest EU steel production contries 2007
5,1%
3,6 %3,5 % 3,4 %
5,1 %
Poland
23,3 %
6,9 %
9,1%
Chech Republic
Romania
The reason for the great decline of the new member states in EU was because of old and poor technology which was still the fact after the Sovjet time. When these counties left the Sovjet regime they went through a transition in economy. They went from planned economy to market based economy, which resulted in overcapasity. In that period of time they produced poor steel with low quality which is not the case today. Now the focus is based on high quality steel.
1989
2000
15,4% 9,2% -30,5 %
-59,7%
-66,7%
Top World Exporters, million of Rolled Steel, tonns
The change in the steel production in the New member States of EU from 1989-2000 Production in New EU member states Particularly the large steel producing regions in the New Member States, Poland, the Czech Republic and Romania have experienced massive restructuring and reorganization since the collapse of the planned economies. From 1989 to 2000 total steel production decreased by between 30-66 % in these major steel producing countries. Outdated capacities were dismantled and former volume output has increasingly been shifted towards quality-output. From 2002-2007, total steel production in the new EU Member States has stabilized.
Germany
2009 2008 2007
South Korea
2009 2008 2007
Ukraine
2009 2008 2007
Russia
2009 2008 2007
Japan
2009 2008 2007
The largest EU steel producing countries are Germany, Italy, France, Spain, the UK, Belgium, Poland, Austria, Nederland and the Czech Republic. These relative positions have been steady for years. All together, the output level among New Member States are modest compare to the largest producing steel companies the EU 15 and only two New Member States are in the top 10.
al 55 .8
l not Stee
& Co Coke
Iron Ore & Pellet 136.2
.8 ng 8
Limestone 13.1
cli Recy
Lime 8.1
l for Stee rted Expo
Steel Collected for Recycling 91.7 Recovered Steel from Recycling 94.5
c Colle .8 ted 5
Im d rte
po g Pi n
Iro 5 3.
Consumtion of Pig Iron and Recovered Steel 196.8
l in M f Stee
o Import
ctured
anufa
BO Exported Pig Iron 0.6
BF Slag 24.1
rt eel Impo Crude St
Recovered Steel from Production
F9
EA
F6
9.3
9.8
Recovered Steel from Manufactured Goods
s
Good
i Sem
Constr
uction
Consum
er Good
s
Others
hed
is Fin
Machin
d& ishe 15.3 Fin 1 t of ucuts r o Imp l Prod e Ste
Illustration of Steel Flows in EU 15, 2004
Steel in Society
ery
Packag in
g
Automo ti
ve
Crude Steel Consumtion 161.8 Cru de Ste el E xp ort
Production of Finished and Semi Finished Steel Products 156 Steel in Manufactured Goods
Export
Exp
ort o
f Fin
ishe
d an
of Stee
l in Ma
nufactu
red Go
ods
d Se
mi F inish
ed S
teel Prod u
To understand the global economy picture of minerals the end-user applications and the flow of steel is an important factor. Recovery and use of minerals and metal develop along with the economy. When the economy grows the demand for steel increases. Steel is not a metal per se, but an alloy. In a steel alloy, iron ore, coal, limestone, fluc agent og refractory masses are used. The iron ore is the metal, coal is a fossil fuel and in fluxing agent refractory minerals as olivine, serpentine and dolomite. Following the steel produc-
tion show how the demand of minerals and fossil fuels develop along with the economy since steel is pretty much the pillar of the economic development and industrialization. The flow of steel. By following the flow of steel in a modern industry from recovery to production, there are several economic fields consists of mayor companies which has important influence on the world economy. Fields of: recovery, import, export, consumption, production and recycling.
cts 1
23.7
Resources: Import and export International Iron and Steel institute, 2007 Consolidation between steel companies in the world: The Boston Consulting Group. Estimate for 2006 in figures from the Iron and Steel institute. Utilization: OECD Steel Committee Top World Exporters of rolled steel, 1st may 2010 report, www.steelonthenet.com Flow of steel in –EU: EUROFER- The European Confederation of Iron and Steel industries 2007
$8,648,800,579,198
GOLD
GOLD IS COMMODITY MONEY
SUPPLY&DEMAND
Supply 49% Demand 51%
Gold has intrinic value because it is used in industry and in the making of jewelry. Historically gold has been a common form of money because it is relatively easy to carry, measure, and verify for impurities.
THE VALUE OF ALL THE GOLD IN THE WORLD based on current gold price ($1,726)
Jewellery (2151 t) 57%
DEMANDFLOWS
Industrial (433 t) 11%
Gold production pr. kilograms. (2010) 320,000
1. China
2. United States
223,000
3. Australia
222,000 197,698
4. South Africa 5. Russian Federation
190,000
6. Peru
WHO DIGS FOR GOLD?
182,000
7. Indonesia
The biggest gold mining country in the world is China producing 320,000 kg pr. year (2010) producing 30% more than U.S and Australia that take 2. and 3. place.
130,000
8. Canada
97,000
9. Uzbekistan
Mine production (2209 t) 59%
SUPPLY FLOWS
Recycled gold (1323 t) 32% Net official sector sales (234 t) 6%
90,000
10. Ghana
86,000
11. Papua N.Guinea 12. Brazil
66,000
WHO OWNS THE GOLD?
60,000
13. Mexico
International financial statistics for official gold holdings show that United States onws the most gold: 8,133 tonnes (january 2012).
51,000
14. Colombia
47,000
15. Argentina 16. Mali
Investment (1182 t) 31%
47,000 42,000
17. Chile
40,000
18. Tanzania
40,000
10000 8000
2000
20. Kazakhstan
22,000
0
Official sector 17% Industrial 12%
4000
37,000
Investment 18%
ABOVE-GROUNDSTOCKS
6000
19. Philippines
Jewellery 51 %
Unaccounted for 2%
United States Germany
IMF
Italy
France
China Switzerland Russia Japan Netherlands
AVERAGE CASH COST PR/OZ IS RISING
GOLD PRICE
One of the major caveats related to gold mining and gold prices has been the rising cost of production. Higher labor costs, higher energy costs, and lower grade ores have all contributed to boosting costs.
Worldwide physical supply and demand for gold, movements in foreign exchange rates, inflation, interest rates and political turmoil are all factors that effects the movement of gold price. The effects of all these factors are somewhat complex and variable. But the important point to remember is simply that they cause the price of gold to move independently of the prices of financial assets.
(Total cash cost US$/oz)
500
IS GOLD MINING PROFITABLE?
% 5 9 1
400
Gold production is a very energy- and labor-intensive process, making it very expensive to operate a gold mine... especially now. Over the past few years, rising energy and labor prices have forced global gold production costs to increase quite dramatically.
300
Cash cost margings per ounze illustrate the trends in profitability. By comparing the gold price and the production cost the profit can be described. The gold price today needs to be high to cover the expense of the increasing production cost.
200 100 0
The gold mine companies who are able to produce gold ounce with low cash cost are more profitable than others. If gold is a by pass product for mines the cash cost is much lower.
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
TIMELINE FOR GOLD PRICE & PRODUCTION COST
Gold price US$ pr/oz Gold production cost US$ pr/oz
1990- 1997 – India introduces multiple laws over these 7 years that deregulate its gold market, making it easier for people to buy and sell gold.
$2000
$1500
$1000
1980 Gold reaches a peak of about $850 an ounce amid geopolitical instability introduced by Russia’s invasion of Afghanistan and the Shi’ite revolution in Iran.
1994 –1996 – the amount of gold that is forward sold rises almost 150% to 100 million ozs, and the price of gold plunges by a whopping $275 an ounze
The Gulf War
9/11 2001 attacs The Euro, European currency, is introduced, backed by a new European Central Bank, holding 15% of its reserves in gold.
Start of the Iran-Iraq war
$500
The price of gold went up by more than 250% in one year, hitting an all time record of $850 per ounce. Then almost as quickly it collapsed.
$0
.82
Dec 1982
Dec 1983
Dec 1984
1982
1983
1984
Dec 1985
1985
Dec 1986
1986
Dec 1987
Dec 1988
Dec 1989
Dec 1990
1987
1988
1989
1990
United States becomes the world’s second largest gold Dec 1991 Dec 1992 Dec 1993 producing nation
1991
1992
1993
December 2003 – January 2004 gold breaks $400, reaching levels last traded in 1988. Investors increasingly buy gold as risk insurance for portfolios.
August 1999 – Gold falls to a low of $251.70 on worries about central banks reducing their gold reserves and mining companies selling gold in forward markets to protect against falling prices.
Dec 1994
Dec 1995
Dec 1996
Dec 1997
Dec 1998
Dec 1999
Dec 2000
1994
1995
1996
1997
1998
1999
2000
Gold price continues to rise and further grow of the price is predicted
Gold companies increaced their production cause of price decline.
Des 2001
Dec 2002
Dec 2003
Dec 2004
2002
2003
2004
Gold reaches a 21year of low of about $250 an ounce
2001
Gold price falls, massive global economic recession Dec 2005after Dec 2006 Dec 2007 Dec 2008 the collapse of Lehman Brothers
2005
2006
2007
2008
Gold price rises, driven by a weaker dollar and economic Decuncertainty. 2009 Dec 2010
2009
Dec
2010 2011
WORLD BIGGEST GOLD MINE COMPANIES & MINES
10 biggest goldmines Other big goldmines
BARRICK COMPANY Barrick is the gold industry leader, with a portfolio of 26 operating mines located across five continents. The Company also has the largest reserves in the gold industry, with about 140 million ounces of proven and probable gold reserves. Barrick produced 7,765 millions ounce of gold in 2010. The Company is targeting growth in annual gold production to 9.0 million ounces within five year.
2010 Production
North America 40% Africa 8% Australia Pacific 25%
South America 27%
2010 Gold Reserves
Africa 9%
North America 40%
Australia Pacific11% South America 40%
Sources: www.gold.org, www.barrick.com, http://www.wealthdaily.com/articles/gold-mining-production-costs, http://www.theundergroundinvestor.com/2006/10/a-the-gold-timeline-a-history-of-gold-prices/, www.infomine.com, www.indexmundi.com.