Insumos de capital necesarios en la producción

The latest metal price boom beginning in early 2000 illustrated in Exhibit 2 was accompanied by strong growth in production volume. Between 2001 and 2008, cumulated production volume grew by an annualized 4.9 percent for non-ferrous metals and 3.4 percent for other minor metals. Output for refractory metals grew at an annual rate of 9.6 percent; double that of non-ferrous base metals as illustrated in Exhibit 5:

53 2009 price data from IMF (non-ferrous base metals) and InfoMine.com

Annualized growth 2001 – 2008, percent

4.9 9.6 3.4

Cumulated production volume,

In millions metric tons of contained metal, 2008

0.4 22.4

71.7

Non-ferrous base metals

Refractory metals

Other minor metals

Annualized growth 1980 – 2001, percent

2.1 -0.4 4.2

Exhibit 5 – Cumulated metal production in 2008 Source: Own illustration

Just as metal prices experienced a long period of stagnation prior to this boom, production volume also grew at a much slower rate between 1980 and 2001. Production volume for ferrous base metals grew at an annualized rate of 2.1 percent. Production volume for non-ferrous base metals stagnated on average over two decades. Other minor metals expanded by 4.2 percent during the same period.

Despite the stronger production growth of refractory metals, aggregated production volume of non-ferrous base metals in 2008 dominated refractory metal volume by a factor of 3.2 and other minor metals by a factor of 200. In order to assess the rising economic relevance of metals for consumers, it is necessary to capture how the amount spent for metals develops over time. The price of a metal reflects its opportunity cost, in the sense of what a consumer has to give up in order to purchase another unit of a metal.⁵⁴ A rising price indicates that a consumer has to give up more, if he is to obtain another unit of the metal. Whether the consumer indeed purchases another unit is measured by the consumption development.

Multiplying global production volume V of metal _i i measured in metal content as an approximation of global consumption with the price P of metal i yields the absolute amount _i

54 Tilton (2003), p.28; Tilton/Lagos (2007), p.20

spent on the metal, which may also be interpreted as the metal's market value, the revenue related to or consumer spending for the metal. Aggregating the market value of all metals in the aggregate metal group j denotes the market value of the aggregate metal group:









 ⁿ

i

ij ij ij n

i

ij P V c

MV

1 1

(1)

c is a conversion factor. If the unit price of the metal refers to the pure metal ij c_ij 1. If the unit price refers to a processed form of the metal, e.g., a concentrate or oxide, which contains only a portion of the metal, 1 1



 _ij

ij

ij s

c s , with s_ij denoting the metal content in the processed form.

It should be noted that calculating the market value by taking the price of the pure metal implicitly assumes that all the metal produced can be valued according to this price. Whereas non-ferrous base metals are mostly traded in this form, refractory metals are often traded in the form of ferro-alloys or concentrates and only a small amount is refined further and sold as pure metal. Ideally, all forms of processed metal should therefore be valued by their respective market price. Most of the time price information is not available in such granularity. However, the published price of a metal is usually the price of the metal in the most commonly traded form. This listed price is usually a reference price for other processed forms. By evaluating the relative change of market value based on this reference price rather than the absolute level, the margin of error is reduced.

Also, aggregating the individual market values obscures differences between metal markets.

General statements based on the market value development of the aggregate metal group must therefore be interpreted with consideration for the individual metal markets. Nonetheless, given the large amount of metals, an aggregated view helps to develop a first focus in the context of a top down approach, followed by a metal specific assessment. Finally, approximating consumption by global primary production neglects secondary production from recycled scrap, which implies that the absolute market value may be higher. However, the effect from omitting secondary production on the relative change of market value during a time period is assumed to be small.

Having these caveats in mind, developing a perspective on metal markets by assessing their market value yields important insights. Exhibit 6 depicts the growth rates in market value of aggregated metal groups before and during the boom based on three-year moving averages to receive more stable results. For reasons of simplicity, the periods are referred to as 1980 to

2001 and 2001 to 2008 in the text and in the exhibit caption to illustrate the span of years covered.

Non-ferrous base metals

Refractory

metals Other

minor metals Real market value growth rates,

percent

-1 21

33

-3

1 13

average 2000 - 2002 to average 2006 - 2008 average 1980 - 1982 to average 2000 - 2002 Market value growth periods, 3-year moving average

Exhibit 6 – Real market value growth by metal group before and during the commodity boom

Source: Own illustration

It is apparent that for the two decades prior to the commodity boom, real market value growth was stagnant or slightly negative across all metal groups, reflecting falling real prices and low production growth. However, during the boom from 2001 to 2008, rising real prices and a significant increase in production yielded higher growth rates of market value. Particularly the growth of refractory metals dwarfed that of other metal groups. Annualized growth in market value was 33 percent for refractory metals, compared to 21 percent for non-ferrous base metals and 13 percent for other minor metals. In other words, the absolute amount consumer spent for refractory metals rose faster by a factor of 1.5 annually compared to that for non-ferrous base metals. After a period of seven years at the end of the boom, consumers spent on average 2.4 times more on other minor metals, 3.8 times more on non-ferrous base metals and 7.2 times more on refractory base metals compared to spending at the beginning of the boom.

Exhibit 7 to Exhibit 9 show the market value growth for individual metal markets and the decomposition⁵⁵ into the respective value drivers real price and production as an approximation of consumption for the period 2001 to 2008.

15 16

20 20

26 27 Copper

Nickel

Unweighted average: 21%

Aluminium Lead Tin Zinc

85 92 84 85 82 54

15 8 16 15 18 46 Price Production Real market value growth

average 2000 - 2002 to average 2006 - 2008, percent

Real market value growth decomposition,

percent

Exhibit 7 – Growth and decomposition of non-ferrous base metals market value from 2001 to 2008

Source: Own illustration

55 The decomposition of market value growth is estimated keeping either growth (or decline) in production or price zero and calculating the market value growth had only one of the factors occurred. The percentage share of each driver was then calculated based on its portion of the actual market value growth. Because the product, not the sum of production and price determines the market value, a residual remains due to multiplicative effects, which was attributed to production and price based on the respective share of growth.

20

Real market value growth average 2000 - 2002 to average 2006 - 2008, percent

Real market value growth decomposition,

percent

Exhibit 8 - Growth and decomposition of refractory metals market value from 2001 to 2008

1 Growth in price overcompensated falling production

2 Falling price overcompensated rising production

Real market value growth average 2000 - 2002 to average 2006 - 2008, percent

Real market value growth decomposition,

percent

Exhibit 9 - Growth and decomposition of other minor metals market value from 2001 to 2008

Source: Own illustration

The market value growth rates of non-ferrous metals span a range of 15 percent for aluminum to 27 percent for nickel. The increase in market value from 2001 to 2008 was predominantly driven by an increase in real price across all metal markets, attributing over 80 percent to total growth. The exception was aluminum, were market value growth resulted equally from growth in production and real price.

A mixed picture exists for refractory metals. Growth rates for market value range from 20 percent for niobium to over 50 percent for molybdenum. For molybdenum and vanadium, an increase in real price was the major driver, contributing over 85 percent of market value growth. The dominant share of real price increase holds true as well for tungsten, manganese, chromium, and cobalt, albeit to a lesser extent. For titanium and niobium, an increase in market value stemmed to over 60 percent from a rise in production. On average, rising production reflecting an increase in consumption attributed more to market value growth than for non-ferrous base metal markets.

Finally, other minor metals display an equally mixed record. For the majority of metals, market value growth stemmed from an increase in real price, which overcompensated falling production in the case of thallium. In the case of rhenium and germanium, growth resulted mainly from a rising production. Market value growth for gallium and beryllium was negative despite rising production due to falling real prices. Market value of tantalum fell due to falling prices and falling production.