Can the U.S. act alone on mercury?
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Transcript of Can the U.S. act alone on mercury?
Can the U.S. act alone on mercury?
Some initial hypotheses from the analysis of commodity flows
Edward Weiler, Economist
(202) 564-8836
U.S. Environmental Protection Agency
May 1, 2002
Session 1: Economics of the Worldwide Mercury Market & Materials Flow
Prepared for: Breaking the Cycle: Long-term Management of Surplus & Recycled Mercury & Mercury-Bearing Waste
Hynes Convention Center, Boston, Massachusetts, May 1-3, 2002
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Key Questions to be Addressed
What do we know about world supply and demand for mercury?
What is the relationship between the U.S. and world markets?
What does the future hold for supply and demand?
What are the implications for environmental policy?
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World Supply and Demand:Primary Mine Production
World Virgin and By-Product Production of Mercury
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1987 1989 1991 1993 1995 1997 1999
YearM
etr
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on
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Algeria China Spain Kyrgyzstan/USSR Other
Source: Metal Statistics 1997 & 2000 U.S. Geological Survey Minerals Yearbook 2000
Three key producing nations– Spain, Kyrgystan, Algeria
(for export)
– China (for domestic demand), but mines rumored to be closing
Production “lumpy” but declining – 9% average annual decline
since 1987
– Kyrgystan is exception
Virgin producers also broker secondary supply from non-mining sources.
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World Supply and Demand:Secondary Production
Very dependent on rate of chlor-alkali shutdowns; large potential for year to year variability.
Mining by-product assumed to be all production in countries other than Spain, Kyrgyzstan, Algeria and China.
Recycling numbers for devices approximately 40-80 tonnes per year in U.S. Similar quantity assumed in Europe.
Flow from stockpiles could also be significant in a given year.
WORLD SECONDARY SUPPLY OF MERCURY(in Metric Tonnes)
Source Annual Supply
Chlor Alkali ~ 375
Mining By-Product ~ 300
Recycling MCDs 80 - 160
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World Supply and Demand:Demand Trends
World demand data very scarce– GOBI International data points are only summary available
North America, Europe dominate mercury use– 70% of total use in 1990 and 59% in 1996– Northeast Asia is also important locus (China, primarily)
Data suggest downward demand trend – Total demand declined 33% from 1990 to 1996 – Not clear that northeast Asia is declining
Important continuing uses: – Artisanal gold mining: potentially significant quantities of Hg used,
released– Lighting: expanding uses (small quantities)
6Sources: U.S. Demand; U.S. Bureau of Mines Circular 9412 and USGS Minerals Yearbook 1994 - 1997, World Demand: GOBI International
U.S. and World Demand
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World Demand:Artisanal Gold Mining Could represent an important contributor to world
demand– Representative mercury use is 1 gram hg per gram of gold extracted – Estimates indicate 180 to 250 tonnes per year of artisanal gold
production worldwide (Veiga, MMSD)– Suggests mercury used by miners would be several hundred tonnes
per year, but estimate is highly uncertain
Demand for mercury by miners is insensitive to mercury price– Hg cost is very small relative to value of recovered gold
(approximately 0.1%)– Amazon: mercury prices five times market rates; still affordable
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Domestic Supply and Demand:Secondary and By-Product Production
U.S. Demand and Production
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2500
1980 1985 1990 1995
YearM
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Secondary Production US Demand
Source: U.S. Bureau of Mines Circular 9412 and USGS Minerals Yearbook 1994 - 1997
Non-virgin supply in U.S.now exceeds total demand– U.S. not dependent on
world markets "Lumpy" supply,
internationalnature of trade preclude "closed" market
According to one expert, recent U.S. demand significantly lower than 400 tonnes
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U.S. Trade Patterns: Net Imports/Exports
U.S. is often a net exporter, but patterns vary. Import/exports reflect market making, as well as balancing
domestic supply/demand.
US Net Imports/Exports
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400
600
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1,000
Year
Met
ric
Tonn
es
Imports
Exports
Source: US International Trade Commission
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World Mercury Prices
Clear downward trend– data limitations do not
alter this conclusion Trend consistent
across pricing sources Bottom line: Mercury
production and sale is significantly smaller and less profitable enterprise
Also, falling prices do not appear to increase demand
World Price and US Demand for Mercury
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50.00
100.00
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350.00
400.00
450.00
Years
$ p
er f
lask
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2500
Met
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LME Platt's Metal Week Europe US Demand
Source: Platt Metals Week 1980-1998, Metallstatistik 1995
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Mercury Pricing: U.S. and World
U.S. spot prices track withEuropean prices.
U.S. market independent, but clearly linked to world markets through pricing.
Price Comparison (USA & Europe)
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50
100
150
200
250
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350
400
450
Year
$ p
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lask
NY Prices LME Platt's Metal Week Europe
Source: Platt Metals Week 1980-1998, Metallstatistik 1995, and American Metal Market
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Primary Production: Response to Price Changes
Primary production tracks price – other mercury
supplies driven by regulation, gold prices
Virgin mines very responsive to price
Source: American Metal Market and Metal Statistics 1997 & 2000 U.S. Geological Survey Minerals Yearbook 2000
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Future Supply/Demand Scenarios:Possible Demand Scenarios
High-Demand – 50 percent decline in chlor-alkali world demand, and 50 percent
decline in most mercury product uses over 20 years– Metal halide lamp growth of 15 percent per year
Medium Demand– 70 percent decline in chlor-alkali demand over 20 years, and 10
percent per year decline in product uses, consistent with recent trends
– Halide lamp demand grows at 15 percent for next five years
Low Demand– All chlor-alkali plants phased out over next 10 years, most product
uses decline by 20 percent per year.– Halide lamp demand grows for five years, then declines
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Future Supply/Demand Scenarios:Possible Supply Scenarios Low Supply (consistent with high demand)
– 50 percent decline in chlor-alkali plants over 20 years; no recycling increases
Medium Supply– 70 percent decline in chlor-alkali plants over 20 years – 5 percent per year increase in recycling of mercury wastes
High Supply (consistent with low demand)– All chlor-alkali plants closed over next 10 years – 10 percent per year increase in recycling of mercury wastes
Virgin production assumed to close gap between secondary supply and demand; byproduct production constant
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Future Supply/Demand Scenarios:Cumulative Future Demand and Supply
CUMULATIVE DEMAND AND SUPPLY(in Metric Tonnes)
ScenarioCumulative
SupplyCumulative
DemandCumulative
Excess Supply
High Demand/Low Secondary Supply 38,018 38,018 0
Medium Demand/Secondary Supply 32,373 25,727 6,646
Low Demand/High Secondary Supply 35,337 9,689 25,648
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Future Supply/Demand Scenarios:Key Insights
Excess Hg could exist in medium, low scenarios– Even "high demand" scenario results in 35 percent drop in demand
from current levels.
Mines will be first to close– Mines highest cost source of supply– Other sources of supply unaffected by Hg demand
Excess supply may lead to further decline in hg prices– At some point, sale of Hg becomes impossible
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Implications for Policy
Storage/treatment option is needed– Excess mercury may have no market
Storage costs not insignificant– Initial estimate: $500-$700 per ton (NPV over 10 years)– Also lost revenue from sale of mercury plus future treatment costs
Extent of storage will depend on specifics of storage policy
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Implications for Policy:Stockpile Releases
Potential stockpile releases likely to reduce virgin production – Drop in Spanish production in mid-1990s coincided with stockpile
releases; mining responsive to price and supply
Impact on Hg demand likely minimal
Could reduce emissions associated with Hg mining
Impact on U.S. suppliers limited in low and medium supply scenarios, as DLA releases only replace virgin production
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Conclusions Can U.S. act alone on mercury?
– No: Markets are integrated.
What does the future mercury market look like?– Structural decline in demand unaffected by price.– Likely to continue to drop to point where sale of excess mercury is
difficult.
What are implications for policy?– Storage/treatment/disposal important for excess mercury.– Stockpile releases may offset virgin production or be used
strategically to discourage virgin production.