C2010 S4C Rhodes
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LBMA Precious Metals Conference 2010 27 September 2010 Session 4 – Jeffrey Rhodes 1 Jeffrey Rhodes | Global Head of Precious Metals & CEO INTL Commodities DMCC LBMA Precious Metals Conference | Berlin| September 26-28, 2010 “Scrap” 2 Agenda What Is Scrap Gold?” The Major Scrap Markets of The World East Versus West Europe & The Americas The Middle East & Indian Sub-Continent East Asia Rankings By Volume & Growth First Half of 2010 Key Drivers of Scrap Flows Outlook For The Global Economy Gold Prices Gold Price Expectatio ns Global Physical Arbitrage Scrap Supply Versus Primary Production Price Elastic Versus Price Inelastic Conclusions
Transcript of C2010 S4C Rhodes
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MA Precious Metals Conference 2010 27 September 201
ssion 4 – Jeffrey Rhodes
Jeffrey Rhodes | Global Head of Precious Metals& CEO INTL Commodities DMCCLBMA Precious Metals Conference | Berlin|September 26-28, 2010
“Scrap”
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Agenda
What Is Scrap Gold?”
The Major Scrap Markets of The World East Versus West Europe & The Americas The Middle East & Indian Sub-Continent East Asia Rankings By Volume & Growth First Half of 2010
Key Drivers of Scrap Flows Outlook For The Global Economy Gold Prices Gold Price Expectations Global Physical Arbitrage
Scrap Supply Versus Primary Production Price Elastic Versus Price Inelastic
Conclusions
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Scrap Supply – East Versus West
Tonnes 2000 2005 2008 2009 2009 v 2000
EAST
Middle East 202.5 325.3 415.8 488.5 141%
East Asia 143.0 207.8 349.6 425.5 198%
Indian Sub-Continent 102.1 129.9 132.5 176.9 73%
Total 447.6 663.0 897.9 1,090.9 144%
WEST
Europe 62.2 99.8 195.2 269.9 334%
North America 58.1 65.4 100.4 132.8 129%
Latin America 20.0 31.2 64.6 101.6 408%Africa 12.3 17.7 29.2 41.1 234%
CIS 17.2 23.5 26.7 35.3 105%Oceania 2.2 1.9 1.6 2.2 0%
Total 172.0 239.5 417.7 582.9 239%
Source: GFMS Gold Survey 2010
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Scrap Supply –
Europe & The Americas
Tonnes 2000 2005 2008 2009 2009 v 2000
United States 53.6 60.4 93.5 124.0 131%
Italy 24.6 46.7 61.0 78.0 217%
UK & Ireland 3.7 4.5 38.7 59.4 1505%
Mexico 3.8 7.2 28.1 50.3 1224%Germany 4.9 7.6 24.4 32.4 561%
France 5.9 12.1 21.2 24.9 322%
Spain 2.5 3.7 10.6 20.1 704%
Source: GFMS Gold Survey 2010
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Scrap Supply – The Middle East & India
Tonnes 2000 2005 2008 2009 2009 v 2000Turkey 56.0 67.7 199.0 217.2 288%
India 79.0 94.0 89.5 115.5 46%
Egypt 34.0 72.7 35.8 65.0 91%
Saudi Arabia & Yemen 60.8 92.5 69.4 57.3 -6%
Pakistan 20.0 30.9 35.5 53.9 170%
Iraq & Syria 3.5 14.4 21.9 35.6 917%
Iran 11.0 16.1 26.0 32.2 193%United Arab Emirates 10.6 28.2 25.4 27.1 156%
Source: GFMS Gold Survey 2010
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Scrap Supply –
East Asia
Tonnes 2000 2005 2008 2009 2009 v 2000
China 24.0 41.7 70.3 102.8 328%
Indonesia 36.0 67.0 72.5 79.9 122%
Thailand 13.5 12.4 51.7 66.0 389%
Vietnam 6.0 7.8 12.5 51.5 758%Japan 13.5 24.5 53.6 35.3 161%
Taiwan 10.8 13.0 33.6 30.1 179%
Korea 11.8 17.5 20.4 21.3 81%
Source: GFMS Gold Survey 2010
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Scrap Supply – Top 10 Ranked By Volume
Tonnes 2000 2005 2008 2009 2009 v 2000Turkey 56.0 67.7 199.0 217.2 288%
United States 53.6 60.4 93.5 124.0 131%
India 79.0 94.0 89.5 115.5 46%
China 24.0 41.7 70.3 102.8 328%
Indonesia 36.0 67.0 72.5 79.9 122%
Italy 24.6 46.7 61.0 78.0 217%
Thailand 13.5 12.4 51.7 66.0 389%
Egypt 34.0 72.7 35.8 65.0 91%
UK & Ireland 3.7 4.5 38.7 59.4 1505%
Saudi Arabia & Yemen 60.8 92.5 69.4 57.3 -6%
Source: GFMS Gold Survey 2010
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Scrap Supply –
Top 10 Ranked By Growth
Tonnes 2000 2005 2008 2009 2009 v 2000
UK & Ireland 3.7 4.5 38.7 59.4 1505%
Mexico 3.8 7.2 28.1 50.3 1224%
Iraq & Syria 3.5 14.4 21.9 35.6 917%
Vietnam 6.0 7.8 12.5 51.5 758%
Spain 2.5 3.7 10.6 20.1 704%
Germany 4.9 7.6 24.4 32.4 561%Thailand 13.5 12.4 51.7 66.0 389%
China 24.0 41.7 70.3 102.8 328%
France 5.9 12.1 21.2 24.9 322%
Turkey 56.0 67.7 199.0 217.2 288%
Source: GFMS Gold Survey 2010
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Scrap Supply Versus Primary Production
0
500
1,000
1,500
2,000
2,500
3,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Gold Mine Production (tonnes)Gold Scrap Supply (tonnes)
Average Gold Price USD
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Conclusions
Average gold prices rose by 3 ½ times from 2000 to 2009
Despite this primary gold production fell by 1%
Producer hedging is no longer an acceptable practice
Central Banks are no longer sellers
With primary gold production completely inelastic, hedging non-existent and the OfficialSector moving to the buy side, scrap gold flows are the only credible counter toinvestment buying
The only reason to buy gold is the anticipation of capital gains
Above ground stocks estimated at 165,000 tons, 55% or 90,000 tons held as jewellery
Investment buyers and scrap sellers are driven by the samemotivation – price expectations
Possibility of a “Perfect Storm” of selling once sentiment changes
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Thank You
