A WORLD HUNGRY FOR COMMODITIES

(1)

(2)

26. März 2010 Basinvest AG Seite 2

• A world hungry for commodities

3

• Investor behaviour

18

• Industry dynamics

25

• That makes us bullish

29

• That makes us cautious

59

• Gold

66

• Oil

84

• Uranium

94

(3)

(4)

(5)

China and India lagging behind

Oil consumption (per capita) by country

281

126 ₈₃

1'266

1'027

69

44

32

5

2

0

500 1'000

1'500

USA

Japan

Germany

China

India

P

o

pul

at

ion i

n

m

ln

0

20

40

60

80 bbl

/day

per 1'

000 peopl

(6)

China, India: Urbanization drives commodity use

Urbanisation drives infrastructure development; increased economic development drives

wealth which drives consumption… this will be a commodity demand driver for several

decades to come

(7)

(8)

(9)

(10)

China‘s share of global demand soars in 2009

In recent months, China has represented 46–49% of world steel demand and 45–46% of

world base metal demand compared with 34.4% and 32.8%, respectively, in 2008.

(11)

Chinese shortfalls in selected commodities

China is short resources and consumption per capita still lags the US. China is

already the dominant consumer of metals but massive growth potential remains.

(12)

(13)

(14)

(15)

(16)

(17)

(18)

(19)

(20)

Commodities have a relatively small share of the

derivatives market

While commodities are one

of the oldest and largest

physical markets in the

world, representing about

10% of global GDP, they

constitute only a small

share of total futures

outstanding and an even

smaller share of the

mammoth $600 trillion OTC

derivatives market.

(21)

passive activities

But even this relatively

small share of commodities

in global derivatives

markets overestimates the

ability of speculators to use

commodity derivatives to

eliminate inefficiencies. In

fact, a large portion of the

futures market is dedicated

to rather passive activities

such as commercial

hedging and index tracking.

(Source: ML)

(22)

Mark-to-market valuation – metal & mining stocks

still not overpriced!

1170

2733

3729.5

2206.5

Price

(GBP, per 22.3.10)

5.6x

8.9x

Xstrata

Source: ML

5.6x

8.9x

Anglo American

5.0x

6.8x

Rio Tinto

6.0x

9.8x

BHP Billiton

EV/EBITDA

(spot scenario)

PER

(spot scenario)

Company

(23)

Sharp decrease in volatility on raw material equity indices

DJ STOXX Basic Resource Index - Volatility

(24)

Sector CDS spreads are tightening

CDS Metals/Mining Sector Graph

(25)

(26)

Severe production cuts - Future supply will be impacted

• Capex follow commodity prices

with a lag

• Less supply in future suggests

prices could rise dramatically

when demand recovers

• The gross fall in capex may

reach $24bn in 2010, this

equates to the removal of approx.

3mt of annual copper

• Industry may well be in an even

worse position with regards to

supply than it was in 2003

(27)

Recent capex increases absorbed by inflation

Almost half of Rio Tinto‘s increase in capital expenditure between

2003 and 06 was absorbed by inflation

(28)

Steel inventories in North America at levels of 1983

North American steel product inventories

increased by 313k tons sequentially, to

7.8mm tons in February. Inventories were

up 261k tons in January. The inventory

rebuild has been under way for the past

six months. Feb inventories rose 4% on a

sequential basis and are down 18% versus

last year. The sequential rise is above the

average February increase of 25k tons.

Inventories are 41% below the 10-year

average of 13.1mm tons. While inventory

tons have increased, months on hand

were flat at 2.5, given the corresponding

increase in shipments. MoH are below the

10-year average of 2.8.

(29)

(30)

Crude steel production

World crude steel production

for January was 108.9mt, up

slightly from the 107.0mt

total in December. On an

annualised basis, the total

represents 1,282mtpa,

25.5% above January 2009’s

figure. Yet again, we have

seen the world ex-China

production continue its

recovery while China’s figure

of 573mtpa annualised

disappointed. With lead

indicators remaining in

positive territory, (and unless

production is constrained by

raw material availability), we

expect continued growth in

output through the coming

quarter.

(31)

Crude steel production

The latest data cements the steel

production recovery outside of China,

with strong growth in Western Europe in

January as positive sentiment builds.

(32)

(33)

(34)

(35)

(36)

Vessel deliveries should accelerate in 2H09,

scrapping has slowed to almost zero

(37)

(38)

(39)

Freight rates to China

Spot Iron Ore Freight from Brazil to China US$/t

(Capesize 150‘000 ton)

Spot Iron Ore Freight from Australia to China US$/t

(Capesize 150‘000 ton)

(40)

(41)

(42)

China: Credit and money supply surging

(43)

China: PMI above 50, still good FAI growth

(44)

China: IP growth still strong, retail sales growth >20%

(45)

China: Property market recovery

Property prices in tier-1 cities

Property prices continues to rise, on the back of rising price expectation and limited new

supply.

(46)

China: Property market recovery, Exports catching up

(47)

(48)

China: Indian spot iron ore (import) and scrap

prices

China Import Indian Iron Ore

63% Fe (CFR China)

USD/metric tonne

Iron & Steel Scrap China

Domestic Heavy Scrap

Yuan/metric tonne

(49)

Scrap prices in Europe moving up?

(50)

Starting to factor in revival in steel market

conditions in China

Steel China domestic

Hot rolled coil (2mm and up) Southern

China Yuan per tonne

China domestic cold rolled

coil (052mm) Yuan/tonne

(51)

Have US steel prices bottomed?

Steel US import

Cold rolled coil Euro per short ton

Steel US import

(52)

European steel prices

Steel EU domestic

(53)

(54)

China raw materials imports up again

China Iron Ore Imports in million

tons (monthly)

China Total Coal Imports in

million tons (monthly)

(55)

Strong Chinese commodities imports

China Refined Nickel Imports in kt

(monthly)

China Total Copper Imports in kt

(monthly)

(56)

Platinum –15% of production below spot

(57)

Nickel inventories have bottomed

(58)

Copper inventories have bottomed

(59)

(60)

Central banks balance sheets

FED-/ECB-Balance Sheet

0

500 1000

1500

2000

2500

3000

01

02

03

04

05

06

07

08

09 (in bn $)

EZB

FED

(61)

US debts

Gesamtverschuldung in den USA in Prozenten des BSP

(Quelle: Statistical History of the USA)

(62)

Public debts

Öffentliche Verschuldung im Verhältnis zum BSP

-10 10 30 50 70 90 110 130 Ja pa n Ita ly U.K . U.S . Ge rm an y Fra nce Sp ain Sw itze rla nd Sw ed en

Quelle: Standard & Poors

(63)

(64)

China: Steel inventory skyrocketing

(65)

(66)

(67)

(68)

(69)

(70)

(71)

(72)

Additions of gold to official reserves

have been small relative to world

nominal GDP

Gold reserves, tonnes, 1948-2008,

major official gold holders

(73)

Central Bank Gold Agreement (CBGA 3)

Gold holdings (tonnes) outside CGBA

reported end sep 09

CBGA gold holdings (tonnes) and

gold % total reserves, end sep 09

(74)

Gold selling under CBGA subsided

The official sector has become

a net gold buyer

Gold sales from CBGA signatories

have subsided

(75)

Gold buying from EMMAs and de-hedging

Central banks from emerging markets

have gradually boosted

their gold holdings

Gold producers have gradually

reduced their hedge books

(76)

(77)

Sensitivities

Scrap supply vs. change

In the gold price 1987-2008

Gold price vs. jewellery

demand 1987-2008

(78)

(79)

(80)

Gold price adjusted for inflation

Bloomberg Composite Gold Inflation Adjusted Spot Price

(Base year 1982-84 = 100)

(81)

(82)

Gold price in currencies from producer countries

(83)

US debt as a percent of GDP

In the U.S., public and private debt reached nearly 360% of GDP in the

third quarter of 2008

(84)

(85)

(86)

(87)

OPEC and non-OPEC production (in mlnb/d)

(88)

World oil demand (in mlnb/d)

(89)

OPEC cuts (in mlnb/d)

(90)

(91)

(92)

(93)

(94)

(95)

Top 10 mines account for 62% of supply (2008)

(96)

Uranium market supply-demand 2000-2020 est.

(97)

construction/planned

(98)

Anticipated delivery of reactors under

construction/planned

(99)

(100)

Cash costs copper – today‘s copper price (black line)

Quelle: BMO

Cumulative Production

C

odel

c

o

R

io T

int

o

BH

P

N

o

rils

k

KG

H

M

Xs

tr

a

ta

A

ngl

o

A

m

er

ic

an

K

a

za

kh

m

y

s

S

out

her

n C

opper

Katanga

E

qui

nox

F

ir

s

t Q

uant

um

Ca

p

s

to

n

e

Q

uadr

a

A

n

to

fagas

ta

F

reepor

t

Inmet

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

0%

20%

40%

60%

80%

100%

US

$

/l

b

$0

$1'100

$2'200

$3'300

$4'400

$5'500

$6'600

U

S

$

/t

o

nne

(101)

Copper incentive price (Macquarie)

(102)

Cash costs aluminium – today‘s aluminium price (black line)

Quelle: BMO

Cumulative Production Du b a l BH P H y d ro A lum in um Ot h e r C h in a Ch a lc o Al c o a Ri o T in to Ru s a l Al b a C e n tur y A lum in u m Va le $0.40 $0.50 $0.60 $0.70 $0.80 $0.90 $1.00 $1.10 $1.20 0% 20% 40% 60% 80% 100% U S $ /lb $0 $440 $880 $1'320 $1'760 $2'200 $2'640 $3'080 US $ /t o n n e

(103)

Cash costs nickel – today‘s nickel price (black line)

Cumulative Production

U n io n d e l N iqu el Xstrata Pr iv a te BHP Vale J inc hua n P a ci fi c M e ta ls S u mi to mo Eramet Norilsk

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

0%

20%

40%

60%

80%

100%

US

$

/lb

$0

$4'400

$8'800

$13'200

$17'600

$22'000

$26'400

US

$

/t

o

n

e

(104)

Cash costs zinc – today‘s zinc price (black line)

Quelle: BMO

Cumulative Production

H udB a y V o to ranti m Ne w B o lid e n Mi ner a V o lc an An g lo Am e ri c a n G lenc or e OZ M ine ra ls Te c k H u n dus tan Xs tr a ta

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

0%

20%

40%

60%

80%

100%

US

$

/lb

$0

$440

$880

$1'320

$1'760

$2'200

$2'640

$3'080

US

$

/t

o

n

e

(105)

Cash costs lead – today‘s lead price (black line)

Quelle: BMO

Cumulative Production

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

0%

20%

40%

60%

80%

100%

US

$

/l

b

$0

$440

$880

$1'320

$1'760

$2'200

US$

/t

o

n

e

(106)

Long-term copper chart

Quelle: BMO

Copper

Nominal Real

0

100

200

300

400

500

600 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08

US

¢

/l

b

(107)

Long-term aluminium chart

Quelle: BMO

Aluminum

Nominal Real

0

50

100

150

200

250

300 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08

US ¢/lb

(108)

Long-term nickel chart

Quelle: BMO

Nickel

Nominal Real

0

5

10

15

20

25 72 74

76 78

80 82

84 86 88

90 92

94 96

98 00

02 04

06

08 US

$

/l

b

(109)

Long-term zinc chart

Quelle: BMO

Zinc

Nominal Real

0

25

50

75

100

125

150

175

200

72

74

76

78

80

82

84

86

88

90

92

94

96

98

00

02

04

06

08 U

S

¢

/lb

(110)

Long-term lead chart

Quelle: BMO

Lead

Nominal Real 0 20 40 60 80 100 120 140 160 180 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08

US ¢/lb

(111)

(112)

(113)

(114)

(115)

(116)

Fundamentals Kupfer

(117)

(118)

Fundamentals Aluminium

(119)

(120)

Fundamentals Nickel

(121)

Fundamentals Nickel – Outlook (Source: Macquarie)

(122)

Fundamentals Zink

(123)

Fundamentals Zink – Outlook (Source: Macquarie)

(124)

Fundamentals Blei – Outlook (Source: Macquarie)

(125)