Global is at Ion Jon Barnes

8/9/2019 Global is at Ion Jon Barnes

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31 Mount Pleasant, London WC1X 0AD UK

Tel +44 20 7903 2000 Fax +44 20 7837 0976www.cruana lys is .com

LONDON | BEIJING | PHILADELPHIA | WASHINGTON

Globalisation and World

Copper Demand

Jon Barnes

Principal Consultant, Copper Fabricating, CRU

International Copper Study Group MeetingLisbon, Portugal, 1st October 2007

- The 2004 Pivot Point for Copper -- Current Evidence and Future Predictions -


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Presenta t ion s t ruc t ure

1.Copper Demand Overview

2. Globalisation

3. Copper demand trends the evidence

4. Copper demand trends the future?

5. Conclusions


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2006: Ref ined and Direc t Sc rap Copper Use

by Region (22.3m t onnes)

E&C Europe

7%

North America

16%

Rest of World

6%

Western

Europe

27%

North East

Asia

16%

Developing

Asia

28%


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A B C D G H I

J K

M

P R

E F

L

NT

U

O

Q

S

= 2.1mt

0 2 4 6 8 10 12 14

Electrical

Heat transfer

Signal Transfer

Malleable/Aesthetics

All Others

E lectronic wire & cable

Telecom cable

Auto heat exchanger strip

Alloy tube

C ommercial tubeO ther winding strip

C opper rod & bar

U

T

S

R

QP

O

C oinage stripNUtility power cableG

Ammunition stripMAuto wiring harnessF

R oofing/guttering stripLO ther LV cablesE

Alloy wireKMagnet wireD

P lumbing tubeJInd. power cablesCAlloy rod & barIS heet, strip and foilB

LA N cablesHBuilding wireA

E lectronic wire & cable

Telecom cable

Auto heat exchanger strip

Alloy tube

C ommercial tubeO ther winding strip

C opper rod & bar

U

T

S

R

QP

O

C oinage stripNUtility power cableG

Ammunition stripMAuto wiring harnessF

R oofing/guttering stripLO ther LV cablesE

Alloy wireKMagnet wireD

P lumbing tubeJInd. power cablesCAlloy rod & barIS heet, strip and foilB

LA N cablesHBuilding wireA

Million tonnes

2006 Copper Dem and St ruc t ure by Proper t y

Data: CRU Analysis

= 12.7mt

= 3.8mt

= 1.5mt

= 2.2mt


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K ey t rends and t hemes in copper c onsumpt ion

Electrical Properties

Electricity Generation Outlook

Fundamental Demand Drivers

Impact of Megatrends

Impact of High Prices / Scarcity

Substitution

TheftChina

Scrap Use

Economic & Political Risk

Economisation

Gulf Region

Location of New Copper Semis Plants

Recycling


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2.Globalisation

Increasing interdependence, integration & interaction among individuals,companies, corporations in disparate locations around the world.

and reliant upon three forces for development...

Human migration, international trade and rapid movement of capital and

the integration of financial markets.



5. Conclusions


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The World Is Flatargues Thomas L. Friedman

Painting - I Told You So by Ed Miracle

But dont just take his word for it!

Why Globalization Works

Martin Wolf

In Defense of Globalization

Jagdish Bhagwati

Mapping the Global Future

The US National Intelligence Councils2020 Project Report

The latter concluded,We see globalizationas an overarching mega-trend, a force so

ubiquitous that it will shape all of the othermajor trends of the world of 2020.

The Chinese Century

Oded Shenkar

all the following offer a widespectrum of viewpoints and opinions


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in Fr iedm ans f la t ( level ) w or ld

1. Globalisation 1.0 : 1492-1800 (Countries)2. Globalisation 2.0 : 1801-2000 (Companies)3. Globalisation 3.0 : 2001- XXXX (Individuals)

His 10 flatteners (which are creating a more level playing field)1. Berlin wall / Windows 952. Connectivity3. Workflow software

4. Uploading5. Outsourcing

6. Offshoring7. Supply chaining8. Insourcing

9. Informing10. The steroidsdigital, mobile, personal and virtual


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Molexs View on Globalisation The worlds getting smaller

Designedin Japan

Tooled inIndia

Made inthe USA

Shipped toSlovakia


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Molex in China 4 sites, 10 operationslatest in Chengdu

Molex ChengduPlant Profile

A $100 million investment


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A global Tier 1 auto supplier with116 companies in 32 countries.

Combined with its owner SumitomoElectric Industries it is the worlds#2 auto wire and wiring harnesssupplier. The world #1 is Yazaki.

Harness assembly is very labourintensive, so globalisation meansa shift to low labour cost nations.Also aggressive acquisitions.

Supply chains in auto components

From a 12% global market share in2002, it achieved its stated target of20% market share by 2010 in 2006!

Its new target is 25% market share

by 2012 and to be world #1.


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It plans to have 18 harness plants in China!Expanding Vietnamese capacity by 60%


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2. Globalisation



5. Conclusions


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The 1980s Dis t r ibut ion o f c opper consumpt ion grow t h

No change / decline / negligible consumption

Refined copper consumption increasing


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Auto wiring harnesses global supply chain in motion

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2002 2003 2004 2005 2006

ChinaS.KoreaVietnamPhilippinesIndonesiaOther Asia

Thailand

Asian Exports ($bn)Its 1980!

1 new auto in the US, e.g a GM.Auto wire - Delphi - USAHarness - Delphi MexicoConnector strip Olin USAElectric motor Delphi USA

Magnet wire Phelps Dodge MW - USAIts good news for US copper consumption

Now its today (October 1st 2007)

1 new US auto, its a Toyota Prius transplant!

Auto wire SEI ChinaHarness SWS ChinaCoil Dowa JapanConnector strip Dowa ChinaElectric motor SEI China

Magnet wire SEI Wintec - JapanGood news for consumption in China, Japan!


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Electro-deposited copper foil: Globalisation in microcosm

In Feb. 07 Mitsui sold Eurocel (Fr) to aninvestor group. It said, The electronic

components market is increasingly

centering round Asia so we need to follow.0

50

100

150

200

250

300

'00 '01 '02 '03 '04 '05 '06

Dev Asia

NE Asia

Europe

Americas

Demand by Region

000t

70%

72%

78%

78%

79%

85%

87%

Asia % share

In the 1980s & 90s major ED foilmakers

maintained a production base in each ofthe major regions (USA, Europe & Asia)

But the growth & concentration of PCBassembly in Asia in the last decade has

changed this. US & European customersrelocated, offshored or outsourced

as a result ED foilmakers have closedtheir plants in Europe & US at the sametimeas they are adding extra capacity in

Asia to meet a surge in demand (>supply)


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Let m e bore you w i th som e def in i t i ons

Refined copper consumption (for country A,B,C)

Point of first use of refined copper at mills (trend = competitiveness)

Net copper demand [expanded] (for country A,B,C)

Refined copper consumption+ Direct scrap use by mills+ Net imports of copper wirerod, brass mills, wire & cable (cu content)

= Net copper demand

Broader, more inclusive, and greater visibility of downstream trends,= more accurate predictor of refined consumption (argues Jon)


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China-The worlds workshop.the dawn of the Pacific century

0

1000

2000

3000

4000

5000

6000

95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06

000 tonnes

+934Refined Cu Cons.

-365Net Imports of CuSemis & W&C

+854Direct Scrap Use

+1423Net Cu Demand

Change 03-06(000 Tonnes)

CHINA

Since 2003 the major driver (39%) ofrisingrefined copper consumption:

Falling net imports of copper semis andincreasing net exports of wire and cable


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Chinese trade in cu wirerod, brass mill products, wire & cable

0

200

400

600

800

1000

1200

1400

1995 2000 2006

Wire & cable

Brass mill products

Cu wirerod & wire

Exports000 tonnes

Imports

000 tonnes

0

200

400

600

800

1000

1200

1400

1995 2000 200-1050

-700

-350

0

350

1995 2000 2006

000 tonnes

Net Trade

Net exports

Net imports

Totalnet imports

Export growth import substitutionand a rapidly shrinking trade deficit

2004


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South Korea Tiger, Tiger burning out

0

200

400

600

800

1000

95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06

000 tonnes

-135Refined Cu Cons.

-133Net Exports of CuSemis & W&C

+43Direct Scrap Use

+41Net Cu Demand


SOUTH KOREA

The main reason for the slump inrefined cu consumption since 2004:

Fast declining net exports of cu wirerod,brass mill products and wire & cable


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USA - The old workshopthe end of the American century

0

500

1000

1500

2000

2500

3000

3500

4000

4500

95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06

000 tonnes


+427Net Imports of CuSemis & W&C

-83Direct Scrap Use

+94Net Cu Demand


UNITED STATESOF AMERICA

The weak dollar has been the most

important defender of US refinedcopper consumption, but even so

Rising net imports of cu wirerod, brassmill products and wire & cable


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Germany At the centre of a united and enlarged Europe

0

250

500

750

1000

1250

1500

95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06

000 tonnes

+210Refined Cu Cons.

+524Net Exports of CuSemis & W&C

+174Direct Scrap Use

-140Net Cu Demand


GERMANY

The leading driver of increasingrefined copper consumption:

Rising net exports of copper semis anddeclining net imports of wire & cable


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The UK A declining regional powerand fading fast

0

100

200

300

400

500

600

95 96 97 98 99 '00 '01 '02 '03 ' 04 '05 '06 '07

000 tonnes


+273Net Imports of CuSemis & W&C

-75Direct Scrap Use

-121Net Cu Demand


UNITED KINGDOM

The key driver of the long term erosion inthe UKs refined copper consumption:

Falling net exports of copper wirerodand rising net imports of brass mill

products and wire & cable (from China!)The UKs last copper

wirerod mill closedin December 2006


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Global isat ion t ouc hes every t h ing!

GWOT / Iraq / Afghanistanneeded ammo subcontractors.National mints outsource.

Ammunition Casings.Defence Industries.Coinage.

National Industries

EHV power cable market is

global. LAN cable is routinelyrebadged in China for US

Power cable, telecom cable,

LAN cable, desal. tube,transformers, generators

Utility / Network Products

Taps, plumbing goods, lock

sets, lighting all exported inhuge quantities from China

Building wire, plumbingtube, pipe fittings andfixtures, lighting products

Construction Products

Predominant industry trend.Accelerating in intensity. Esp.

where very labour intensive.

Connectors, ED Foil, WiringHarness, Electric Motors,

Cord sets, ACR Tube, etc.

OEM Components.

Perhaps eventually autos?

Globalisation EffectsCopper ProductsEnd Use Segment


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Where nex t for c opper c onsum pt ion g row t h?

China, BulgariaRod and Bar

China, Mexico, USA, Iran, Thailand, Vietnam*Tube and Pipe

China, India, Bulgaria, JapanSheet and Strip

China, United Arab Emirates, Saudi Arabia,

Egypt, Turkey, Spain, Russia, Bulgaria*Copper Wirerod

New Capacity Investment HotspotsProduct Segments

Current p ro jec t s f rom c opper mi l l equ ipm ent supp l ie rs


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2000-2020 - Dis t r ibut ion o f copper consumpt ion grow t h !?

No refined copper consumption long before 2020

Major decline in refined copper consumption by 2020


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Conclusions

Globalisation is themega-trend its irreversible its accelerating.

Its impact on copper demand can be seen. It will be more visible.

Its influence will ultimately spread beyond OEMs, ODMs, OBMs andEMS into construction and utility products.

The copper industry will be winners, but there will also be losers. There are certain pivot points in history that are greater than others

because the changes they produced were so sweeping, multifaceted,and hard to predict at the time(Rothkopf). 2004 was the pivot for copper.

Before 2004, Chinese copper demand growth was complimentary; Butsince then its demand growth has been partly at the expense of others.

Globalisation meanspolarisation in copper demand growth.

Hugely positive for copper consumption in China, India & some other

industrialising nations - but uncertain for others, and negative for many.


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CRU Copper t eam

Allan Trench Research Manager, Copper TeamDavid Duckworth Principal Consultant, Copper Supply

Jon Barnes Principal Consultant, Copper Fabricating

Christine Meilton Principal Consultant, Copper Raw Materials

Prem Chaphekar Senior Consultant, Copper Fabricating

Eleni Joannides Senior Consultant, Copper Market

Karine Pearson Senior Consultant, Copper Mine Costs

John Tomlinson Consultant, Copper Consumption

Ruth Chapman Consultant, Copper Fabricating

Shi Lin Consultant, Copper Supply (Beijing Office)

Please address any questions or comments to:

[email protected] + 44 (0) 20 7903 2116

Thank You!

Global is at Ion Jon Barnes

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