The Heat is On Refractory raw material supply outlook Mike O’Driscoll, Director, IMFORMED Networking and knowledge for the industrial minerals business 12 May 2022 Outline The Heat is On: Refractory raw material supply outlook 1. Refractory mineral overview Key raw materials & sources 2. Supply situation China supply dominance & issues: end game? 3. Outlook Influencing trends Spotlight: bauxite, magnesia, graphite, andalusite FM ingots cooling at Haicheng Zhonghao Magnesite, Haicheng, Liaoning, China Calcined bauxite kiln, Jiexiu , Shanxi, China Loading bags of DBM for export, Bayuquan, Liaoning, China Refractory minerals overview “There would be no life without refractories, and without raw materials there would be no refractories. We tend to neglect the importance of sources of raw materials , we take them for granted. Our efforts are aimed at the end product... we need to get closer to the source .” W. H. “Bauxite Bill” McCracken (1923 - 2016) world authority on refractory raw materials formerly of F&S International, Harbison Walker Refractories Heiki Miki Managing Executive Officer & Division Director - Overseas Business, Shinagawa Refractories, Japan The Heat is On: Refractory raw material supply outlook “ Maintaining stable supply chains of raw materials are essential to properly serve our customers ’ industries ” Raw material Refractories Refractory markets Bricks Steel (58 - 70%) 10 - 15kg/t Ladle 70t 1 month Nonferrous metal 3kg/t Copper kiln 150t 3 months Monolithics Cement 1kg/t Rotary kiln 250t 10 months Precast parts Glass Melt furnace 4kg/t 500 - 8,500t 10 yr Basic Instinct: Refractory Magnesia Supply Refractory minerals overview “... we need to get closer to the source. ” The Heat is On: Refractory raw material supply outlook 39 7% 35 7% 33 6% 32 6% 32 6 % 30 6% 25 5% 25 5% 24 5% 24 5% 23 4% 21 4% 19 4 % 19 4% 18 3% 17 3% 16 3% 15 3% 13 2% 12 2% 11 2 % 10 2% 10 2% 9 2% 8 2% 7 1% Ceramics Chemicals Metallurgy Agrimarkets Paint/Pigments Food/Pharma Construction Glass Plastics/Polymers REFRACTORIES Abrasives Oilfield drilling Cement Environment Paper Rubber Cosmetics Foundry Welding Electronics/Electrical Flame retardants Detergents Filtration/Clarification Absorbents Friction Batteries “Mineral Kaleidoscope” Total number of primary industrial minerals used in each market Significant industrial minerals category • Refractories ranked 10 th (of 26) most important IM market • Consumes 38.7% (24 types) of main industrial minerals (total 62 types) ≥ 30 minerals ≥20 minerals REFRACTORIES Refractory minerals overview Adapted from The Heat is On: Refractory raw material supply outlook Basic Instinct: Refractory Magnesia Supply Refractory classification Industrial mineral (incl. synthetic) Main chemical component Primary source country BASIC Dead burned magnesia 85 - 99.8% MgO China Fused magnesia 97 - 99.8% MgO China Dead burned dolomite 56 - 62% MgO, 36 - 40% CaO USA Chromite >46% Cr 2 O 3 South Africa Sintered/fused spinel 66 - 80% Al 2 O 3 , 21 - 33% MgO China Olivine 40 - 50% MgO, 35 - 45% SiO 2 Norway ACIDIC High alumina Low alumina Silica Calcined alumina >99.5% Al 2 O 3 China Fused alumina 94 - 99.5% Al 2 O 3 China Calcined bauxite 85 - 88% Al 2 O 3 China Sintered /fused m ullite 40 - 75% Al 2 O 3 USA Andalusite, sillimanite, kyanite 60 - 65% Al 2 O 3 South Africa Refractory clays 20 - 45% Al 2 O 3 China Pyrophyllite 20 - 30% Al 2 O 3 South Korea Quartzite, silica sand >97% SiO 2 Regional Fused silica >99.8% SiO 2 USA SPECIALISED Zircon 66% ZrO 2 +HfO 2 Australia Zirconia >99% ZrO 2 China Silicon carbide >93% SiC China Graphite 75 - 99% C China INSULATING Diatomite >75% SiO 2 USA Perlite 65 - 80% SiO 2 China Vermiculite 45% SiO 2 South Africa Refractory minerals overview Categories | Chemistry | Source The Heat is On: Refractory raw material supply outlook ▪ Comparison of prices for refractory minerals World distribution of primary established sources of main minerals - detailed Refractory minerals overview New Edition 2021 Please drop by the IMFORMED stand to pick up your complimentary copy The Heat is On: Refractory raw material supply outlook AUSTRALIA DBM FM Zircon JAPAN Aluminas DBM SiC CHINA Aluminas Bauxite DBM FM Flint clay Graphite Mullite SiC Spinel Zirconia SOUTH AFRICA Andalusite Chromite Zircon RUSSIA/CIS Aluminas DBM FM SiC EUROPE Aluminas Andalusite DBM FM Dolomite Olivine SiC Spinel MEXICO DBM FM GUYANA Bauxite BRAZIL Bauxite DBM, FM Graphite SiC INDIA Aluminas Graphite USA Aluminas Dolomite Mullite Kyanite SiC Spinel Zircon PERU Andalusite CANADA Graphite ▪ Comparison of prices for refractory minerals Summary of w orld distribution of primary established sources of main traded minerals Refractory minerals overview MOZAMBIQUE Graphite Zircon MADAGASCAR Graphite VIETNAM SiC Mineral Total no. country sources* DBM 21 Silicon carbide 20 Fused alumina 14 Fused magnesia 12 Pyrophyllite 11 Dolomite 9 Graphite 9 Zircon 9 Aluminas 8 Kyanite 5 Andalusite 5 Bauxite 4 Chromite 4 * based on Note: 1. certain sources supply only regional/local markets 2. others are captive to consumers The Heat is On: Refractory raw material supply outlook Ukraine & Russia ref. minerals snapshot Refractory minerals overview based on The Heat is On: Refractory raw material supply outlook Exports Russia 1 Ukraine 2 DBM 59,815 -- FM 39,884 -- Fused alumina 53,313 27,432 SiC 48,323 6,927 Fireclay 22,146 4,042,644 Latest export data (tonnes) Production/Capacity (‘000s tonnes) 1 2021 2 2020; Source: ITC 78% world Prof. Valeriy Martynenko Director, Ukrainian Research Institute of Refractories, Kharkiv Source: Ted Dickson & Richard Flook 2014 Estimated world consumption of refractory minerals: total ~35 - 37m tonnes Basic Instinct: Refractory Magnesia Supply Refractory Clays 46% Magnesia 26% Recycled Refractories 7% Calcined Bauxite 4% Brown Fused Alumina 3% Dolomite 3% Tabular Alumina 2% Calcined Alumina 2% Refractory Clays Magnesia Recycled Refractories Calcined Bauxite Brown Fused Alumina Dolomite Tabular Alumina Calcined Alumina Graphite Calcium Aluminate Cements Sillimanite Minerals (incl. Andalusite) Chromite White Fused Alumina Zircon Silicon Carbide Silica Spinel Olivine ≤1% Refractory minerals overview The Heat is On: Refractory raw material supply outlook Mineral producer Mineral processor/distributor Intermediate end user market (ie. refractories) End user market (eg. steel, glass, cement) Mineral trader Trad. Captive Direct Captive route processing buy production Exploration, reserves, mining, processing, recycling tailings Sourcing, logistics, marketing, financing Sourcing, processing, storage, logistics Sourcing, processing, storage, logistics, formulating, application End use application Recycling + End user owns mine Increasing mind set End user owns process plant End user sourcing Refractory minerals overview Supply Chain Options The Heat is On: Refractory raw material supply outlook ▪ Comparison of prices for refractory minerals World annual production capacity 2020/21 selected minerals ©IMFORMED 021 | imformed.com Refractory minerals overview Andalusite k. tonnes Total 310 South Africa 160 France 55 Peru 45 Calcined Bauxite k. tonnes Total 1,225 China (82%) 1,000 Guyana 180 Spain (Guyana) 45 Fused Alumina k. tonnes Total 1,300 China (62%) 800 Germany 80 USA/Austria 60 DBM k. tonnes Total 10,500 China (48%) 5,000 Russia 2,500 Turkey 760 FM k. tonnes Total 2,100 China (90%) 1,900 Russia 115 Turkey 40 Graphite k. tonnes Total 1,000 China (82%) 820 Brazil 68 Mozambique 30 Silicon Carbide k. tonnes Total 1,000 China (45%) 450 Norway 80 Japan 60 Zircon k. tonnes Total 1,200 Australia 400 South Africa 270 China (12%) 140 Source: IMFORMED estimates; USGS The Heat is On: Refractory raw material supply outlook Supply situation China export dominance | 2021 exports * world share combined; ** estimate Source: China Customs; ITC Refractory Mineral Export Volume tonnes World share avg 2016 - 20 Value US$m BFA 564,877 59%* 719.2 WFA 393,324 477.3 Bauxite 1,014,467 90%** 279.7 Graphite 121,719 52% 137.0 DBM 1,239,617 54%* 326.3 FM 615,473 366.5 Silicon Carbide 374,891 45% 349.2 Bauxite operations, Shanxi, China The Heat is On: Refractory raw material supply outlook Source: adapted from USGS 2022 data for 2021 Major import sources 2017 - 21; US net export minerals excluded, eg. boron, clays, diatomite 100% 70 - 99% 40 - 69% 20 - 39% Potash 93% Canada, Russia, Belarus Iron oxide pig. 91% CHINA , Germany, Brazil Rare earths >90% CHINA , Estonia, Malaysia, Japan Titanium min. 90% S.Africa,Australia , Madagascar, Mozambique Antimony 84% CHINA , Belgium, India Chromium 80% South Africa, Kazakhstan, Russia, Mexico Diamonds 76% S.Africa , India, Congo, Botswana Barite >75% CHINA , India, Morocco, Mexico Fused alumina >75% CHINA , France, Bahrain, Russia Feldspar 32% Turkey Salt 29% Chile, Canada, Mexico, Egypt Mica ( scrap,flake ) 28% Canada, CHINA , India Lithium >25% Argentina, Chile, CHINA, Russia Bromine <25% Israel, Jordan, CHINA Zircon <25% S.Africa , Senegal, Australia, Russia Perlite 23% Greece, CHINA , Mexico, Turkey Vermiculite 20% S.Africa , Brazil Garnet 56% S. Africa, CHINA, India, Australia Alumina 58% Brazil, Australia, Jamaica, Canada Magnesia 55% CHINA , Brazil, Israel, Canada Iodine >50% Chile, Japan Silicon carbide >50% CHINA , Netherlands, S. Africa Asbestos Brazil, Russia Bauxite (non - met) CHINA , Guyana, China Fluorspar Mexico, Vietnam, S. Africa, Canada Graphite CHINA , Mexico, Canada, India Mica (sheet) CHINA , Brazil, Belgium, India Nepheline syenite Canada Manganese Gabon, S. Africa, Australia, Georgia Scandium Europe, CHINA, Japan, Russia Strontium Mexico, Germany, CHINA Yttrium CHINA, S. Korea, Japan DBM+FM China 69% Brazil 13% Turkey 5% Mexico 4% Other 9%. Fused alumina China 91% France 3% Bahrain 2% Russia 2% Other 2% Silicon carbide China 88% Netherlands 4% South Africa 4% Other 4% The Heat is On: Refractory raw material supply outlook Supply situation China export dominance | US mineral import reliance • in 2021 24 industrial minerals @ ≥50% import dependency • 10 @ 100% import dependency, of which 6 sourced from China • +8 sourced from China @ 50 - 91% import dependency (=14 total) • 7 refractory minerals • @ >50% import dependency Supply situation China export dominance | Japan mineral import reliance Source: Heiki Miki, Shinagawa Refractories (2021) The Heat is On: Refractory raw material supply outlook Basic Instinct: Refractory Magnesia Supply Silicon carbide Gansu, Ningxia, Jiangsu, Liaoning, Henan DBM, FM Liaoning Bauxite, BFA/WFA Shanxi, Guizhou, Henan, Chongqing Shandong Graphite Helongjiang Graphite Shandong Refractory clays Shanxi, Inner Mongolia, Shandong, Henan, Hebei Bayuquan , Yinkou Xingang Zhangjiang Fangcheng Qingdao 500 km • >40 types of refractory raw materials (natural & synthetic) • total production capacity >30m. tpa* • 2 - 3m. tpa are exported* * “historically” until c.2015 Supply Situation China’s primary refractory mineral sources The Heat is On: Refractory raw material supply outlook BFA/WFA Jiangsu, Shandong, Zheijiang Andalusite Xinjiang Supply situation: What’s happening & why? Refractory mineral market hit by succession of Chinese storms 2017 Perfect Storm #1 2021 - 22 Perfect Storm #2 Early warning signs? • 2003 SARS • 2008 Beijing Olympics • 2017 - 19+ anti - pollution drive B ut , this time the impact is being felt deeper and wider... ...and crucially, perhaps longer term The Heat is On: Refractory raw material supply outlook Created by: 2017 • Export quota system ends • Environmental inspections • Control of explosives • Crackdown on illegal businesses 2018+ • Environmental inspections continue • New China Customs audit of minerals trade • Supply sector reform • US - China trade war All underpinned & driven by President Xi Jinping Supply situation: What’s happening & why? Perfect Storm #1: 2017 was a game changer The Perfect Storm? #1 (or, Imperfect Storm...) China minerals meltdown = Refractory minerals supply squeeze 1. “Imperfect” for consumers 2. “Perfect” for suppliers/developers ex - China The Heat is On: Refractory raw material supply outlook 1. “Imperfect” for consumers 2. “Perfect” for suppliers/developers ex - China The Perfect Storm? #2 (or, Imperfect Storm...) China minerals meltdown = Refractory minerals supply squeeze Created by: 2019 • China mineral imports rise 2020 • Covid - 19 pandemic • Shutdowns • Logistics chaos • China recovery starts 2021 - 22+ • China: ➢ Environmental inspections ongoing ➢ Covid - 19 shutdowns ➢ Power cuts ➢ Industry reforms ➢ Heavy rains: Henan, Shanxi, Guizhou ➢ Domestic market growth ➢ Mid - Long term disruption • Ongoing shipping crisis • Energy crisis • Market recovery Supply situation: What’s happening & why? Perfect Storm #2: 2021 - 22+ end - game for Chinese mineral supply? The Heat is On: Refractory raw material supply outlook • Q4 2021 China energy crisis: China coal price rises • National Development & Reform Commission (NDRC)’s Dual Control Policy: “red alerts” across country & industry sectors • End - Sept: 2021: widespread power cuts/rationing • = major disruption to all energy - intensive operations, ie. ref. mineral processing, calcination, fusion ( FM,BFA,SiC ) • Already tight supply impacted further: 70 - 80% BFA cap. closed Henan; >95% FM cap. closed Liaoning • Ref. mineral prices rise: eg. BFA/WFA US$800 - >$1,000/t; FM, MgO≥97% US$900 - >1,000/t Supply disruption Supply situation: What’s happening & why? Perfect Storm #2: 2021 - 22+ end - game for Chinese mineral supply? 8 Oct. 2021 Parmod Sagar, Chairman, Indian Refractory Makers Association “The steep rise in freight and raw material costs has inflated refractory selling prices by almost 40% in the past two quarters.” Events dictate supply shortages end - 2021/Q2 2022 The Heat is On: Refractory raw material supply outlook