Market Outlook for Major Energy Products Metas and Minerals
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Market Outlook for Major Energy Products Metas Public Disclosure Authorized and Minerals Public Disclosure Authorized 00,~~~~~~~~~~~~~~~~~~~~~~~~~~ Public Disclosure Authorized Public Disclosure Authorized The World Bank Market Outlook or Major Energy Products, Mletals, and Minerals World Bank Washington, D.C Copyright @ 1994 The World Bank 1818 H Street, N.W. Washington, D.C 20433, U.S.A Alrightsreserved Manufactured in the United States of America Fast pdnitingJuly 1994 Fubtre developments in commodity markets camnotbe known with certainty. However, in activities involving commodities, judgments have to be made about future events in these markets. The forecasts preaented here are judgments based upon analysis of the commodity markets and on discussions with people with expertise m these markets. However, no repTesentation is made that the findings, intrpretations, and conclusions exprssed are accurate or complete; they are entizely those of ihe World Banks staff and consulnts and dwuld notbe attrbuted in any manner to the members of its Executive Board or the countries they represent Users of the information m this publication should recognize the large degree of uncertainty associated with these forecasts and use them with appropriate caution. The World Bank does not take any responsibilty for the results of any actions taken by purchasers of this publationbased on the hiformation thlein. The material in this publication is copyrighted. Requests for permission to reproduce portions of it should be sent to the Office of the Publisher, at the address in the copyright notice above. The World Bnk encourages dissemination of its work and will normally give permission promptly and, when reproduction is for nopurposes, thout asking a fee. Pernmssion to copy portons for classrom use is granted trough the Copyrght Clearance Center, Inc, Suite 910,222 Rewood Drive, Danvers, M csets 0193 US.A The complete backlst of publications from the World Bank is shown m the annual Inde of Publcatwns,which contains an alphabetical title ist (wffi full orderng information) and indexes of sbet, authors, and cunmties and regions. The latest edition is available free of dharge from the itributio Unt, Office of the Publisher, The World Bank, 1818 H Street, N.W, Washington, D.C 20433, USA., or from Publications, The World Bank, 66, avenue d'I6na, 75116Pans, France. ISBN 08213-27658 ISSN 1013-7440 Contents Preface CommodityDessinpton ................. vi Notes and Definitons ................ ...... , vu Energy -Petroleulm ..... _,,1 Summary . .1 ' emand Oulook ............... Supply Outlook ............... 9 PetoleumPrie Outlook ................ 18 AnnexPeriu I: Fiscalrc andu Financialo k..........................Incentives: ............................................................ Key to Oil Deeomn ........................ .. ... AnmexII: World Refining Outlook ......... Coal .. .3 coal........................................................................................................................................... 33 Summay .......... 33 Derand Outlook .......... 34 Supply Outlook .39 Trade Outlook . ... .... , 43 Price Outlook........ 434............. Technologyand Enviroument ..................... 45 Metals and Minerals Copper.............. ..................... 52 Slmmary ...... 52 Demand Oudook............ ..... 53 SupplyOudook ........ .........................................................................................................57 Price Outlook .. 65 Tin,,,,,,,.., ,,, .79 Summazy.................. .............. 79 Demand Outlook ..... Supply Outlook .... 84 Price Outlook .... 90 - -ric..el..... .. 93 Sunmy , ... 93 Demand Outlook.... 94 Supply Oudook , , ,....... 96 Price Prosects .... 103 Aluminum and Bauxite ............... Q7 SilummaTry .............. 107 DemandOutlook ........... 109 Supply Outlook .................................................................................. ..........................113 Production Costs ...........-. 119 Trade Outook .120 Price Outlook .121 Ir nO e........................................................................ 3 bronO0re 13 Summa.ary _.... 137 Demand Outlook ................................ 38 Supply Outlook......... _. 140 Trade Outlook ......... 145 Price Prospects........... .... 148 SteeL .......... .. 156 Summary ............. ... 156 Demand Oudook . ..... 157 Supply Outlook ......... ..... .160 Trade Prospects.......... .... 166 PriceOutlook .......... ........ 168 Lead andZinc ......... ......._ . 17 in Summary............... ... 73 Demand Outlook ....... 174 Supply Outlook ..... .... 176 PriceOutlook ......... .. ..... 178 Gold ..... 182-__ Summary ................................ .. .... 182 Demand Outlook ... 183 Supply Outlook ........... .185-- Price Oudook .......... .... 187 Silvrer.19 Summary .......... ...... 192 Demand Outlook .... 193 Supply Outlook .......... 194 Price Oulook .......... 195 Annex I: Privafizationand Libealization of the Mining Sector in Developing Countries: Implicatons for Market Outlook ..................... .. .0 0 Annex II: Recent Developmentsand Prospects for Chinas MIetalsMrket ...... 221 IV Preface -Thisreport is a compilationof studies that review the market prospects for energy and for metals and minerals commodities. -The forecasts are mainly used in projecting the balance of payments of countries that boirow from the World Bank and in appraising investment projects that include these commodities as inputs or outputs. Because of the multiple purposes they are intended to serve, the price forecasts are presented m current (nominal) as well as 1990 constant dollar (real) tens. 1 For the period 1994-96, the price forecasts are the prices expected for the individual years. For 2000 and 2005, the price forecasts are intended to indicate the underlyingtrends. The forecastsare conditionalon the various macroeconomicand commodity-specificassumptions used-all of whichare subjectto greatuncertainty. The macroeconomicscnario underpinng the forecastsis discussedin the WorldBanks report GlobalEconomc Prospects and the DevelopingCozwtries, 1994. Becauseof the uncetanty inherentin commodityprce forecasts,the I tional Trade Division penodicallyprpares pr'oabilitydistributions of its priceforecasts. -These are presented in the summary. For most commoditiesor groupsof commodities,this reportpresents standardizedsets of tables giving historicaland forecastvalues fir production, consumption,export andimports. These tables give details of majoreconomic regions, as well as of countriesthat are major participantsin these markets. The forecastsare basedon professionaljudgments and simulationruns of gobal comrmoditymodels mnaintainedby the Bank. In preparngthis reportthe Bankhas consultedwidely with expertson commoditiesin bothpublic and private ogniations, whohave been most forthcoming in providingdata and in discussingthe outlookfor the variouscommodity markets. Their cooperationnas addedto the accuracyof this reportand is gratefilllyacknowledged. All remainngenrors are the responsibl3ityofthe authors. t Commoditypries have been deflatd by the World Bmnk¶sManlhcturing Unit Value (MEN) index and the G-7 CPL Th cMUV inde is te c it indexof US dola prics of industril countrices'macuted cxpods(SITC 5-8) to he devdoping counti and my be regaded as a useful deflarto mcasur changesin the net bartertem oftrade of developingcountrics highy dependenton exportsof primarycommodiies. The G-7 CPI may be a usefl deflatorto use il circuMStac=where the majorcountrie inftion rateis believedto be an appopiatemeasme of changesin the overal price orcost leveL v Commodity Description Energy Petroleum,average OPEC price, OPEC govemmentsales weighted by export volumesthrough 1981;beginning 1982 OPEC spot prices weighted by OPECexport volumes. ThermalCoal, (12,000BTU/lb, less than 1.0%sulfir, 12% ash), f.ob. Piers, HamptonRoads, NorfoL.: Metalsand Minerals t-opper (Livw, cash wucuars through November 1981; from Decemner 1981 through June 1986, high grade cathodes, settlement price; subsequently,grade A- Tin (Mlaysian), Straits quality, ex-smelter,Penang, official settlement price. N-ickel (Canadian), eletrolytic catodes, Ni 99.9% shipping point through 1979; subsquently cathodes, minimum 99.8% purity, official morning session weekdy average bid/asked price. Aluminum, indicative price of U.S. unlloyed prmary ingot in the European Market through 1978; subsequent LME stand grade, minimum 99.5% purity, cash prce. Lead (LME), settement price, refined lead, purity 99.97%. Zinc (LME), settlement price, good ordiary brand through August 1984; thereafter High Grade brand Iron Ore (Brazilian), CVR) Itabira sinter feed produced from 64.2 purty ore, metal content weight contract to Germany, Federl Republc, f£o.b reference pnce through 1974; from 1975 through 1985, standard sinter feed from 64% purty ore; stting 1986 Southern System (Itabira and other southern mines) 64%; during 1988 and 1989, 64.2%; beginning 1990 64.3% purity ores. Bauxte, crude and dried, US import reference prce based on imports from Jamaica through 1974; from 1975 US import price, cif. US port. Gold (UK), 99.5% fine, London aflernoonfixing, average of dailyrates. Silver amdy & Harman), 99.9% grade refined, New York. vi Notes and Defimitions * 3Commodt maret-price dscipti are shown on page iDn * Dollars e United States dollarsunless otheis specifid * All tons refe to metc tons (1,000 kilograms)unless othewise notd. Abbrevistions ad Symbols tons = mericuns lb - pounds cm -cubicmeters bbl - barels kg ilogms