AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK FIRST EDITION
LONDON AND NEW YORK
First Edition 2002 This edition published in the Taylor & Francis e-Library, 2005. “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.” © Europa Publications Limited 2002 11 New Fetter Lane, London EC4P 4EE, United Kingdom (A member of the Taylor & Francis Group) All rights reserved. No part of this publication may be photocopied, recorded, or otherwise reproduced, stored in a retrieval system or transmitted in any form or by any electronic or mechanical means without the prior permission of the copyright owner. ISBN 0-203-40355-X Master e-book ISBN
ISBN 0-203-41014-9 (Adobe eReader Format) ISBN 1-85743-150-2 (Print Edition) Editor: David Lea Commodity Surveys: Simon Chapman Assistant Editor: Annamarie Rowe
Foreword
This first edition of the Agricultural and Mineral Commodities Year Book aims to expand on the coverage given to commodities in three of Europa’s Regional Surveys of the World. The intention is to provide the reader with a knowledge of 40 of the world’s most widely traded commodities, and of the international context within which such trade takes place. All the commodities with a section in either Africa South of the Sahara, The Far East and Australasia, or South America, Central America and the Caribbean receive a more detailed assessment here, and seven new commodities (barley, lead, natural gas, phosphates, soybeans, wool and zinc) have been added. The book is divided into three parts. In Part One, three introductory essays, written by academics, assess aspects of the trade in commodities in the early 2000s. Prof. Donald MacLaren of the university of Melbourne writes on the importance of agricultural commodity trade in international relations, Dr Paul Crompton of the University of Western Australia examines developments in mineral and energy commodities, while Dr A.GaneshKumar of the Indira Gandhi Institute of Development Research in Mumbai assesses the impact of multilateral trade agreements on food security. In Part Two, 40 Commodities are surveyed. Each chapter contains a brief physical description of the raw material, of its means of processing and of its uses, before detailing production and trade in all the relevant regions of the world and examining the path of prices for that commodity in the last few years. Finally, Part Three contains a directory of some major international organizations operating in or having influence on the agricultural and mineral commodity field. The regional groupings used in the surveys in Part Two generally correspond to those established in the Regional Surveys of the World series. However, in a number of cases statistics are compiled by organizations which divide the world differently—these variations are explained whenever they occur. In a time of increasing global trade and extreme volatility in the price of certain commodities, it is hoped that this book will prove a valuable assistance to the reader with an interest in the field, enabling an accurate impression of the world’s commodity trade to be obtained. October 2002
Acknowledgements
The editors gratefully acknowledge the interest, co-operation and advice of all who have contributed to this volume. In particular, we would like to thank Simon Chapman for his work on the commodity surveys, Andrew Thomas for his statistical expertise, and the editors of the relevant Regional Surveys of the World. We are indebted to a large number of organizations, including those below, for their assistance in the preparation of this book, and of previous relevant sections in other books: Association of Iron Ore Exporting Countries Association of Tin Producing Countries BP PLC British-American Tobacco Co Central Selling Organisation Centre Internacional de Agricultura Tropical Cobalt Information Centre COMMEX Malaysia Copper Development Association De Beers Food and Agriculture Organization of the UN Gill & Duffus Group PLC Gold Fields Mineral Services Ltd Institute of Petroleum International Cocoa Organization International Coffee Organization International Copper Study Group International Grains Council International Institute for Cotton International Iron and Steel Institute International Lead Zinc Study Group International Monetary Fund
International Primary Aluminium Institute International Rice Research Institute International Rubber Study Group International Sugar Organization International Tin Research Institute International Tea Committee International Tobacco Growers’ Association Johnson Matthey PLC Malaysian Oil Palm Growers’ Council Metal Bulletin The Silver Institute Unión de Países Exportadores de Banano United Coconut Association of the Philippines, Inc United Nations Conference on Trade and Development US Department of Energy US Geological Survey, US Department of the Interior Woolmark World Bank World Bureau of Metal Statistics World Nuclear Association
Sources for Agricultural Production Tables (unless otherwise indicated): FAOSTAT database collection, FAO. Source for Export Price Indexes: UN, Monthly Bulletin of Statistics, issues to May 2002.
Contents
PART ONE
Introduction Agricultural Commodity Trade in International Relations DONALD MACLAREN
PART TWO
2
Developments in World Mineral and Energy Markets PAUL CROMPTON
12
Food Security and the WTO Agreement on Agriculture A.GANESH-KUMAR
20
Commodity Surveys Aluminium and Bauxite
33
Banana
46
Barley
56
Cassava
62
Chromium
67
Coal
71
Cobalt
78
Cocoa
83
Coconut
91
Coffee
96
Copper
109
Cotton
120
Diamonds
127
Gold
136
Groundnut
148
Iron Ore
153
vii
Jute
159
Lead
164
Maize
171
Manganese
179
Millet and Sorghum
183
Natural Gas
187
Nickel
203
Oil Palm
212
Petroleum
217
Phosphates
240
Platinum
248
Rice
258
Rubber
265
Silver
273
Sisal
279
Soybeans
282
Sugar
291
Tea
306
Tin
314
Tobacco
322
Uranium
329
Wheat
334
Wool
341
Zinc
348
PART THREE Major Commodity Organizations Major Commodity Organizations
358
Abbreviations
asscn assoc ave C c. Chair. cu Dir Dir-Gen. Dr EC EEC EU etc. Exec. f. FAO g GDP Gen. Sec ha kg km lb m m. mem., mems mg
Association associate avenue Celsius circa Chairman/person/woman cubic Director Director-General Doctor European Communities European Economic Community European Union et cetera Executive founded Food and Agriculture Organization of the United Nations gram(s) Gross Domestic Product General Secretary hectare(s) kilogram(s) kilometre(s) pound metre(s) million member(s) milligram(s)
ix
mm n. a. org(s) Pres Publ., Publs Rd Repub. Sec. Sec.-Gen. sq st tel. UN US USA
millimetre(s) not available organization(s) President Publication(s) Road Republic Secretary Secretary-General square street telephone United Nations United States United States of America
The Contributors
Paul Crompton is Lecturer in Economics at the University of Western Australia. A.Ganesh Kumar is Associate Professor at the Indira Gandhi Institute of Development Research, Mumbai. Donald MacLaren is Associate Professor in the Department of Economics at the University of Melbourne. International Telephone Dialling Codes To make international telephone calls to numbers appearing in this book, dial the international access code of the country from which you are calling, followed by the appropriate country code for the organization you wish to call (listed below, countries appearing in Part Three of this book only), followed by the area code (if applicable) and the telephone or fax number listed in the entry. Country
Code
Country
Code
Austria Bangladesh Barbados Belgium Canada Congo, Republic Côte d’Ivoire France Germany Indonesia Italy Japan Kenya Kuwait
43 880 1 246 32 1 242 225 33 49 62 39 81 254 965
Malaysia Mexico The Netherlands Nigeria Panama The Philippines Portugal Spain Switzerland Trinidad and Tobago United Kingdom United States of America Uruguay
60 52 31 234 507 63 351 34 41 1 868 44 1 598
PART ONE Introduction
Agricultural Commodity Trade in International Relations DONALD MACLAREN
Introduction Since the mid-20th century, international agricultural trade as a proportion of total merchandise trade has been in decline. Yet this diminishing relative economic importance has not been reflected in any decline in the significance of agricultural trade as a cause of tensions in international relations, particularly among the developed countries. Energy and mineral commodities may often attract more coverage in the media, as developments in, say, the petroleum or gold markets provide evidence of stark differences of opinion between producer and consumer countries, but these disputes often mirror those based on agricultural commodities. The most recent significant reminder of this was the lack of agreement between the European Union (EU) and the USA on agricultural matters which delayed the conclusion of the Uruguay Round of trade negotiations in the General Agreement on Tariffs and Trade (GATT) by some three years, from 1990 to 1993, and which came close to causing the Round to be aborted altogether. However, not all of the tensions have arisen among the developed countries, in particular between the EU, the USA and Japan. Despite agreement at the Fourth UN Conference on Trade and Development (UNCTAD IV) in 1976 to establish an Integrated Programme for Commodities which was intended to benefit developing countries through the manipulation of international commodity market prices, very little was accomplished over three years of discussion. Not only did the history of failed international commodity agreements militate against the success of the plan, but the unwillingness of the developed countries to underwrite the associated component of the Common Fund for Commodities ensured that, regardless of history, this particular attempt was not destined to succeed. More recently, it was evident during the prelude to the Ministerial Meeting of the World Trade Organization (WTO—the successor organization to GATT, created in 1994) in Doha (Qatar) in 2001 that many developing countries were dissatisfied with the trading arrangements for agricultural products that emerged from the Uruguay Round. To some extent this outcome was inevitable, given the lack of coalition-building and consensus amongst these countries about their own agenda. Today, they are determined to negotiate a better deal for themselves from of the so-called ‘Development Round’, which was initiated at Doha. However, it will remain unclear until much nearer to January 2005, when the
INTRODUCTION 3
Round is scheduled to conclude, whether or not the current tensions between the developed and developing countries over agricultural commodity trade will have been removed or at least significantly diminished. The definition of agricultural commodities for the purposes of measuring international trade flows is normally to regard them as those items which comprise Standard International Trade Classification (SITC) Sections 0 (Food and live animals), 1 (Beverages and tobacco), 2 (Crude material, excluding fuels) and 4 (Animal, vegetable oils and fats) but excluding Divisions 24, 25, 27 and 28. Over time, the proportion of bulk commodities in agricultural commodity trade has fallen from around 40% in the early 1970s to around 20% in the early 2000s. Given the relative lack of importance of bulk commodities in agricultural trade, but particularly in international merchandise trade, it is remarkable that tensions over trade distortions in bulk commodities should continue to persist disproportionately. The objective in this essay is to explain why international agricultural trade remains a source of substantial friction in international economic relations. Intuitively, it would be expected that a sector that, in the developed countries, contributes around 2% to Gross Domestic Product (GDP) and to employment (compared with 21% to each in developing countries), and approximately 9% to exports, would not be important in international economic relations. This intuition, clearly, is incorrect. The outline is as follows. The economic case for freer trade, which under-pinned GATT from 1947 and, since 1995, has continued to guide the work of the WTO across a much broader economic front, is explained as a benchmark against which to judge what has actually happened in agricultural trade. However, since the inception of GATT, the agricultural sector and agricultural commodity trade have been treated differently from the manufacturing sector—it has never been accepted by all of the major participants that the principles of conventional economics should apply to this sector and to trade in agricultural products. The commodity-trade issues of importance to the developing countries revolve largely, but not exclusively, around access to the markets of the developed countries. However, despite the adoption of Part IV of GATT (designed to provide non-reciprocal benefits for developing countries’ primary exports) in 1964, and the introduction of the General System of Preferences (GSP—allowing preferential access for defined primary exports from developing countries to developed countries) by some developed countries in the 1970s, there remains considerable disquiet among developing countries at the efficacy of the slogan ‘trade not aid’ as it is practised by developed countries. The roots of these ongoing disputes and tensions are easy to identify, namely, the pursuit by developed-country governments of domestic agricultural policy objectives by policy instruments which, although varying amongst the major players, have been poorly selected to achieve the objectives sought and which have distorted trade to an unusual degree. In addition, new causes of tension are emerging in areas such as sanitary and phytosanitary measures, the use of growth hormones, genetically modified foods, food security and the provision of public goods, such as a pleasant rural landscape. These new causes of tension may be more difficult to reduce because market intervention by government has the potential on efficiency grounds to improve upon pure market outcomes. The current negotiations in the WTO were mandated by the Uruguay Round Agreement on Agriculture to begin in 1999 on the issues deemed in 1993 to require further discussion and resolution. However, the agenda
4 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
has since been broadened beyond that which was required, to include issues referred to as non-trade concerns, for example, food safety and animal welfare. These concerns involve matters of interest to developed, developing and transition economies. The Case for Freer International Trade In the theory of international trade it is shown that, subject to some caveats, free trade maximizes a country’s income and that what is true for a single country is also true for the world economy. There is, however, the presupposition that maximizing national income through achieving economic efficiency is the only objective of trade policy. However, trade policy has an equity as well as an efficiency dimension—freer trade redistributes income by causing relative prices to change, thus making some individuals better-off and others worseoff. In principle, the gainers could compensate the losers to leave everyone better-off; in practice, such compensation requires some form of government mechanism and it is often not forthcoming. In the absence of compensation, the losers will lobby government for income support or will lobby to prevent trade liberalization from being implemented. The same political pressures accrue when the cause of falling prices is not the introduction of a policy of trade liberalization but the declining competitiveness of the domestic industry, relative to that of foreign suppliers. In an open economy, the use of the market mechanism, through price manipulation, to transfer income to those who lose from this decline depends upon breaking the direct link between the international and domestic markets. Once this link has been broken by instruments of trade policy, only then can domestic instruments be used effectively to achieve domestic objectives such as stability and security. Both of these objectives appear prominently in agricultural policy. In order to understand fully why governments do what they do in trade policy, instead of following the free-trade prescription of international economic theory or of supporting the incomes of those in declining sectors by direct means, the political economy of trade policy needs to be employed. There is no single model of political economy that is generally applicable, but in one group of models it is assumed that the government’s support for protection stems from a political-support motive. Policy-makers are assumed to pursue their own self-interest through balancing the political gains from supporting an industry, and the accompanying increased incomes in that industry, against the political losses which arise because there are losers, i.e. those who are paying the higher prices or the higher taxes. Since the gainers are relatively fewer in number than the losers, the gains per caput are more concentrated than are the losses for the many losers. Consequently, the positive influence on the voting intentions of the gainers exceeds the negative influence on the losers, who will have many other issues of political concern. Given this asymmetry, the decision for government to intervene is relatively straightforward. Of course, by the same logic, the decision to remove previously implemented income support is made more difficult because the political process has been captured by the lobby group. This simple idea can explain much of what has been and what continues to be observed in the agricultural policies of the developed countries. However, in some circumstances both gainers and losers may support intervention. This is apparent in the EU at the present time with respect to import bans on
INTRODUCTION 5
beef treated with growth hormone and to imports of genetically modified foods, where nonfinancial considerations have an impact on losers’ opinion. The empirical evidence suggests that governments focus almost exclusively on the gains for, or losses to, producers, ignoring the losses to consumers and taxpayers from intervention. Of course, this bias contrasts with the economic model in which all gains and losses are made part of the economy-wide calculation. Moreover, in international trade negotiations, the same focus is carried over. Trade negotiations are not about the economywide gains from freer trade but about making and receiving concessions with respect to protection in different sectors and the associated income changes for domestic producer groups in these sectors. Basically, the philosophy is mercantilist: exporting is good while importing is bad. Thus, there is an over-emphasis on trade concessions and an indifference towards the mutual gains to each economy from lower prices and greater choice for consumers. Agriculture in the GATT/WTO International trade tensions can be reduced bilaterally between the countries involved, they can be reduced through the formation of regional trading arrangements, or they can be solved through an international institution. The GATT was established in 1947 in order to provide a set of rules under which international trade would take place and which would constrain the ability of governments to act unilaterally in ways which harmed their trading partners. Part of that constraint was the existence of a dispute process, the aim of which was to resolve differences between trading partners that were not able to be solved bilaterally. Prior to 1995 the GATT was the most important institution through which trade tensions were dissipated when bilateral approaches had failed. That role was then assumed by the Dispute Settlement Mechanism in the WTO. The principle of ‘most-favoured-nation treatment’ (i.e. non-discrimination in trade) was fundamental from the start, together with reciprocal tariff concessions. The underlying aim of the GATT was to enable governments, through negotiation, to move the world economy towards free trade and full employment. This aim was largely achieved in the manufacturing sector but not for agriculture. From the outset, and largely at US insistence, it was recognized that agriculture was a special case and, consequently, some important exemptions were written into specific Articles to allow governments to intervene in agriculture and agricultural trade in ways which were banned for other products. For example, import quotas (Article XI) and export subsidies (Article XVI) were allowed for agricultural products but not for other goods. For other sectors, import tariffs were the only accepted instrument of trade protection. Thus agriculture remained largely outside the mainstream of trade liberalization in the GATT because tariffs were not the principal form of protection from imports. Hence, negotiations based upon the exchange of tariff concessions did nothing for agricultural trade. In effect, there were almost no constraints placed on the activities of governments in their desire to pursue their domestic agricultural policy objectives and to do so without taking into account the adjustment costs which their policy instruments imposed on their trading partners. This lack of external constraint and the lack of concern about the international effects of agricultural policies meant, inevitably, that there were conflicts between governments. These tended to
6 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
occur and to be more serious during periods of depressed market conditions, such as those of the mid-1980s. There have been a number of well-documented conflicts in international economic relations, some of which, with hindsight, bordered on the absurd. The most important and consistent source of irritation in agricultural trade has been the Common Agricultural Policy (CAP) of the EU. The CAP was established as a replacement for the national agricultural policies of the six participants in the original European Economic Community (EEC—the precursor of the EU) and, while the original policy objectives, as set out in the Treaty of Rome (1957), may have been reasonable ones, especially in the context of the early postwar period, the instruments chosen in 1958 were deliberately designed to insulate the internal market from the international market in order to attain security of food supply and market stability. The effect of this insulation was to make international prices more volatile. At the same time, high domestic support prices increased domestic production and reduced the need for imports, even allowing surplus production which could only be exported into lower-priced international markets with the aid of export subsidies. The effect of reduced imports and higher exports lowered world market prices and reduced the market opportunities for commercial exporting countries, ceteris paribus. These subsidies were regarded by other exporters, such as Australia, Canada, New Zealand and the USA, as unfair and disruptive to their commercial interests, and food-importing developing countries found these subsidized imports disruptive to their domestic agriculture. Serious frictions began to surface in the late 1970s as the EU moved from being a net importer to being a net exporter of a number of commodities. The dispute over the use of export subsidies escalated in 1986 when the USA introduced a series of such subsidies, known as the Export Enhancement Program. Apart from the EU, the other two major players in international agricultural markets are Japan (although it is a passive player in agricultural trade negotiations), and the USA. For both, agriculture remains a special case. Japan, like the EU, has never conceded that free trade in agricultural products should be the ultimate goal in trade negotiations. On the other hand, since the 1960s the USA has vigorously pursued the free-trade agenda for its export commodities (such as wheat) but continues to be protectionist for import-competing commodities (such as sugar), just as Japan and the EU are. A further force, which emerged at the beginning of the Uruguay Round negotiations in 1986, was the Cairns Group of agricultural exporting countries (by 2002, the Group’s membership had expanded to 18 countries: Argentina, Australia, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Fiji, Guatemala, Indonesia, Malaysia, New Zealand, Paraguay, Philippines, South Africa, Thailand and Uruguay). This unlikely grouping was instrumental in ensuring that agriculture was firmly in the negotiating agenda in the Uruguay Round and for insisting at both the midterm review in 1988 and at the scheduled conclusion in 1990, that there would be no overall agreement without an agreement on agriculture. Their aim was to reduce distortions in international markets for agricultural commodities through increased market access, a reduction in domestic support and a ban on export subsidies. The actual outcome of the Agreement was weaker than the negotiating position adopted by these supporters of change but it was a substantial move towards bringing agriculture under the same rules-based constraints as those imposed on other sectors.
INTRODUCTION 7
It is instructive in understanding the tensions in international relations to which agricultural trade has given rise, to summarize the agricultural trade negotiations in each of the last three negotiating rounds in the GATT. This summary provides only a background. There have been a number of specific instances of acute tension but these are too many and too complex to discuss in this essay. In 1964, at the beginning of the Kennedy Round (1964–67) of trade negotiations in the GATT, the EEC and the USA disagreed fundamentally about the treatment of agriculture. The USA wanted negotiations on agriculture and manufactures to proceed together, thereby diminishing the extent to which agriculture would be treated as a special case. The EEC took the view that the CAP was newly established and that market forces would not be allowed to jeopardize its progress towards its objectives. The inability of these two major players to agree on the fundamentals of agricultural trade meant that little of substance emerged from the Round and agricultural trade in temperate zone products would remain distorted, with the attendant tensions. In addition, little emerged to improve the commodity-trade position of the developing countries: the introduction of what became known later as the Multifibre Agreement only made matters worse for exporters of textiles; and the price stabilization mechanism for wheat in the International Grains Agreement of 1967 was short-lived. In the initial years of the Tokyo Round (1973–79) the emphasis had shifted from negotiations about market access to concerns about the security of food supplies, as well as to the broader role of commodities in economic development. Central to food security, and to trade and development, was discussion on the potential role for international commodity agreements, or managed international commodity markets, to provide food security, to accelerate economic development and to help generate the foreign exchange necessary for food-importing developing countries. The latter required improved market access to developed country markets, that is to say, a reduction in their agricultural trade barriers and a reduction in their use of escalating tariff regimes on semi-processed and processed commodities. This necessary accommodation was not forthcoming. At the same time, schemes were introduced by some of the developed economies throughout the early-1970s through the GSP. The basic idea was to give developing countries non-reciprocal preferential access to developed country markets. However, the measures were not applied to the agricultural products that were regarded as ‘sensitive’ by the developed countries and which were the main exports of the supposed beneficiaries. Thus, they did little to advance the trade prospects which the receivers of these preferences might reasonably have expected. Therefore, despite the ‘special and differential treatment’ which was provided under Part IV of the GATT and upon which the developing countries sought to expand, almost nothing changed in policy terms during these negotiations, and commodity markets reverted to oversupply and depressed prices. In the Uruguay Round (1986–93), agriculture played a prominent part, although not until the eleventh hour, a constructive one. Apart from the WTO Agreement on the Application of Sanitary and Phytosanitary Measures and the Agreement on Technical Barriers to Trade, both of which affect agricultural trade, the principal outcome was the Agreement on Agriculture. The essential elements of this Agreement from the standpoint of reduced international tensions were the new constraints imposed through the three pillars of market access, domestic support and export assistance. Under market access, all non-tariff
8 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
barriers were converted to tariffs, bound against increase, and reduced over a six-year period according to a formula. In addition, in order to ensure the opening of markets to imports, tariff rate quotas (TRQs, the application of tariffs, or of higher tariffs, above a certain level of imports) were introduced. This mechanism, if anything, has added to tensions rather than reducing them. Domestic support was categorized into three so-called ‘boxes’ (amber, blue and green) ranked from most to least trade-distorting. Amber box policy instruments were to be reduced, again according to a formula. An aggregate measure of support, similar to the OECD’s Producer Support Estimate measure, was established in order to ensure compliance with the Agreement. A formula for the restriction of export subsidies was also agreed. Apart from the obvious benefits of a more liberal trading system, and the linking of domestic prices to international ones through the abolition of non-tariff barriers, the Agreement on Agriculture, to some extent, has broken the link between lobby groups and governments’ responses. Thus the Agreement has altered the political economy of agricultural policy in a direction which will reduce the tensions created by the traditional forms of market intervention. Nevertheless, despite these gains from more disciplined international markets, there remain some serious tensions, most of which involve either the USA or the EU, or both. The Roots of the (Intractable) Problem It is clear from the preceding discussion that the tensions in international economic relations caused by agricultural commodity trade have as their root, in most instances, government intervention in the domestic agricultural sector. The objectives of this intervention are many and they vary across countries and through time. Most objectives have little to do with economic efficiency and the correction of market failures; instead they are derived from a much broader agenda, including the necessity for political support. The explicit objectives include: providing farm families with a level and a stability of income which is more equitable than that provided by markets alone; conserving the social fabric of rural societies; controlling the rate at which the agricultural sector adjusts to changing comparative advantage; providing the research and development necessary to improve the sector’s productivity; ensuring the security of food supplies; and helping to make the sector more competitive in international markets. In order to achieve this substantial menu of objectives, a variety of policy instruments continue to be used. These may be categorized as: price policies (those which raise product prices or reduce the prices of inputs); structural policies (such as grants for farm amalgamations and early-retirement schemes for farmers); marketing policies (marketing boards and state trading enterprises); quantitative policies (TRQs, production quotas and area set-asides); legal (including regulations on the use of chemicals and hormones, and regulations on food standards and labelling); and miscellaneous (for example, the funding of research and development, direct and de-coupled income payments). Of these different categories of instrument, the most heavily used and the one considered to have done the greatest damage to international economic relations, is price policy. It is the most heavily used because it seems such an obvious form of intervention: raise the product price and producers’ incomes will rise. Moreover, from a political perspective, the gains to the
INTRODUCTION 9
gainers are obvious and the political reward instantaneous. In the longer term, however, the gainers are not necessarily the recipients. The beneficiaries are the owners of the fixed assets, the values of which rise with price support. The owners of farm land benefit but the users find that their costs of production rise, their incomes fall and there is then a demand for further increases in product prices to offset the increases in costs. Price-support programmes always increase production, they often decrease consumption and, therefore, in the context of international trade, they always increase exports or decrease imports. Either way, they distort international markets and they impede the ability of other countries to achieve their own agricultural-policy objectives without their having to resort to trade measures such as tariffs or export subsidies. In pursuing their objectives through price policies, governments have taken an inward-looking approach and have not considered as part of the costs of their policies the expenses they force onto other countries through the linkages formed by international markets. In such circumstances, international trade tensions are inevitable. This brief discussion provides the explanation why agricultural negotiations failed to deliver much benefit until the mid-1990s—prior to that point, governments had found it extremely difficult to wean themselves off price supports. However, since that time, the beginnings of change have been observed. It has now been broadly accepted that the best way to deliver income support to farm families (and to achieve such wider goals as the continuation of rural development), is through de-coupled income payments, that is to say, payments which are made without reference to levels of production. This mechanism does little to distort international markets, yet achieves many of these wider domestic objectives. Markets are allowed to work, domestic political support will continue and international tensions should be reduced. The Current State of Play The current agricultural negotiations in the WTO began in March 2000 and Phase 1 was completed a year later. During this Phase, Members were able to submit their proposals on the various issues which remained pending from the Uruguay Round, most notably those concerning market access, domestic support and export assistance. Phase 2 of the negotiations was completed in February 2002. In this Phase the issues for negotiation were developed further and new issues were proposed. There are now 21 headings, including, inter alia: market access (tariffs, TRQs, and state trading enterprises); domestic support (the amber-, blue- and green-box divisions have been retained); export assistance and restrictions (state trading enterprises, export subsidies, export credits, and export taxes); food aid; food safety; and trade preferences. Regular meetings are being held in the WTO Committee on Agriculture to discuss some of these issues with a view to having a draft document prepared by the end of 2002. The aim of this document would be to provide an overview of progress to date. In this so-called Modalities Phase, targets will be established for the three pillars in the WTO Agreement on Agriculture. Since the Doha Declaration in November 2001, the agricultural negotiations have been part of a single undertaking, which must be concluded in its entirety by 1 January 2005. The basic objective for the agricultural negotiations is, according to the WTO, ‘to establish a fair
10 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
and market-oriented trading system through a programme of fundamental reform’. These reforms are to include a fortification of the rules on government support for agriculture and the effects of that support in international markets, further limiting such support. In this Round, it would appear that developing and transition economies have sought solidarity in numbers, and have undertaken some coalition-building. In addition to groupings representing established international organizations such as the Caribbean Community and Common Market (CARICOM) and the Cairns Group, there are a number of ad hoc groups arguing common positions for a number of countries. For example, since Doha, the WTO has seen the emergence of cohesive groups representing Africa, Developing Countries, Small Island States, and some Transition economies. It would be premature to speculate on how far the final outcome of these negotiations will get towards achieving the aim, as quoted above. Much will depend upon a confluence of interests of the disparate groups as well as upon the state of international agricultural markets during the negotiating period. It will also depend upon the compromises which may be necessary across the several different negotiating groups outside agriculture. Summary and Conclusions The objective in this chapter has been to explain why the relatively small value of agricultural trade in total merchandise trade bears so little relationship to the substantial tensions which it causes for international relations. Fundamentally, the explanation lies in the pursuit by the governments of the developed countries of policy objectives for their agricultural sectors. While these objectives seem reasonable when assessing each developed country in isolation, the price-policy instruments used to achieve them have tended to expand production, reduce consumption, restrict imports and expand exports. The comparative advantage of the (developing) food-exporting countries has been diminished and the comparative disadvantage of the (developed) food-importing countries has been offset in inappropriate ways. However, over the past decade both the EU and the USA have moved some of their farm income support away from these price policies and towards de-coupled direct payments. While it is usually easier for the governments of exporting countries to reduce support than it is for governments of importing countries, it is unusual for governments to have gone as far as have those in Australia and New Zealand. In these countries, support for agriculture is negligible, as such price-support mechanisms as existed, such as that for wool in Australia, have gradually been abandoned. Will other developed countries follow this lead? It is to be hoped that the souring of international relations that has arisen periodically as a result of agricultural protectionism will shortly be a thing of the past. However, while the traditional causes of these tensions are becoming less important, there remains plenty of scope for successors to emerge. As the current WTO negotiations on agriculture move toward their scheduled conclusion, it appears likely that such issues as consumer concerns about food safety and the role of agriculture in maintaining national heritage, may emerge as major impediments to future agreements, and thereby continue the tradition of agricultural commodity trade as a major source of tension in international relations.
INTRODUCTION 11
Bibliography and References Baldwin, R.E. Trade Policies in Developed Countries, in Jones, R.W. and Kenen, P.B. (Eds), Handbook of International Economics, Vol. 1 International Trade, North-Holland, Amsterdam, 1984. Brandt, W. North-South: A Programme for Survival (The Report of the Independent Commission on International Development Issues under the Chairmanship of Willy Brandt). Pan Books, London, 1980. Croome, J. Reshaping the World Trading System: A History of the Uruguay Round. World Trade Organization, Geneva, 1995. Hopkins, R.F. Developing Countries in the Uruguay Round: Bargaining under Uncertainty and Inequality, in Avery, W.P. (Ed.) World Agriculture and the GATT. Lynne Rienner Publishers, London, 1993. International Agricultural Trade Research Consortium. The Uruguay Round Agreement on Agriculture: An Evaluation. Commissioned Paper Number 9, Department of Applied Economics, University of Minnesota, St Paul, MN. [iatrcweb.org/Publications/commiss.html]. Josling, T.E. Agricultural Trade Policy: Completing the Reform, in Policy Analyses in International Economics, No. 53. Institute for International Economics, Washington, DC, 1998. Josling, T.E., Tangermann, S. and Warley, T.K. Agriculture in the GATT. Macmillan Press Ltd, London, 1996. Little, I.M.D. (1975) Economic Relations with the Third World—Old Myths and New Prospects, in Scottish Journal of Political Economy, Vol. XXII (3):223–235. Scottish Economic Society, Glasgow, 1975. Maizels, A. Selected Issues in the Negotiation of International Commodity Agreements: An Economic Analysis. TD/B/C.1/224, United Nations Conference on Trade and Development, Geneva, 1982. Murray, T. Trade Preferences for Developing Countries. John Wiley and Sons, New York, NY, 1977. OECD. Agricultural Policies in OECD Countries: Monitoring and Evaluation. Paris, 2002. Preeg, E.H. Traders in a Brave New World: The Uruguay Round and the Future of the International Trading System. University of Chicago Press, Chicago, IL, 1995. Warley, T.K. Western Trade in Agricultural Products, Part III in Shonfield, A. (Ed.) International Relations of the Western World 1959–1971, Vol. 1 Politics and Trade, Oxford University Press, London, for the Royal Institute of International Affairs, 1976. Winters, L.A. The So-Called “Non-Economic” Objectives of Agricultural Support, in OECD Economic Studies, No. 13 (Winter), pp. 237–266. OECD, Paris, 1990. World Bank. World Development Report. Washington, DC, annual. WTO. The Results of the Uruguay Round of Multilateral Trade Negotiations: The Legal Texts. Geneva, 1995. Dispute Settlement—Status in brief of the disputes. Geneva, 2002. [www.wto.org/english/tratop_e/ dispu_e/dispu_status_e.htm]. WTO Agriculture Negotiations: The Issues, and where we are now. Geneva,2002. [www.wto.org/english/ tratop_e/agric_e/negs_bkgrnd00_contents_e.htm].
Developments in World Mineral and Energy Markets PAUL CROMPTON
Introduction The consumption of mineral and energy commodities is closely linked to the level of industrial activity. Given the geographical imbalances that exist in global industrial production, demand for these primary commodities is most heavily influenced by industrial activity within the developed economies of the USA, the European Union (EU) and Japan. In fact, these countries are responsible for the majority of global demand for these commodities. For example, they currently account for 44% of global crude steel consumption, 54% of oil consumption and 83% of uranium consumption. Furthermore, these countries remain a net importer of most commodities. An important feature of today’s global economy for mineral and energy markets is the high degree of correlation between business cycles across countries. Today, more than ever before, declines in commodities demand caused by slowing economic activity are likely to be transmitted across national boundaries. Not surprisingly, changes in the combined industrial production of the major markets mentioned above can exert significant pressure on world mineral and energy prices. Despite this, the countries of Asia, in particular the People’s Republic of China, Taiwan and the Republic of Korea (South Korea), continue to increase in importance within world markets. In the medium-to-longer term the developing countries of Asia, South America and Africa are likely to play a more important consumer role in global commodity markets. Market Trends In the 1990s and early 2000s, world mineral and energy markets have been subject to strong cyclical fluctuations in global economic growth. After a period of widespread weakness in economic activity in 1998 and 1999, strong global growth during the first three quarters of 2000 led to greater world consumption of all mineral and energy commodities and, given low levels of stocks, significant increases prices. For example, in the first three quarters of 2000 Gross Domestic Product (GDP) increased by 1.7% in the USA and by 1.2% in the EU (Japan, by contrast, in a prolonged period of economic stagnation, experienced GDP contraction of 0.5% in the same period). Much of this growth was driven by industrial production, which increased over this period by 2.8% in the USA, by 2.3% in the EU and
INTRODUCTION 13
Table 1: GDP Growth in 1999–2001, and forecasts for 2002–03 (%)
Source: OECD, OECD Economic Outlook No. 71, June 2002.
by 2.1 % in Japan. The associated strong demand for commodities was reflected in higher prices: copper prices increased by 4.3% in the same period, petroleum prices by 12.2% and zinc prices by 4.2%. In the final quarter of 2000, generally weaker demand for these commodities resulting from slower global economic growth resulted in lower average prices. These conditions continued in 2001, particularly in the world’s largest economy, the USA, placing further downward pressure on both the demand for commodities and prices, US GDP growth was 1.2% in 2001, compared with 4.1% in 2000—similar declines were experienced in many other member countries of the Organisation for Economic Co-operation and Development (OECD) (see Table 1, below). The slowdown in growth was attributed to a decline in consumer spending, owing to widespread unease at the country’s economic prospects, with a resultant effect on the manufacturing sector. Furthermore, weakness in the US construction sector exacerbated the general weakness in commodity demand. In terms of industrial production, the USA experienced a 3.1 % decline during 2001. The figures for the member states of the EU, however, were mixed, with industrial production declining in Spain and the United Kingdom, while it improved in France and Germany. Japan’s continuing frailty was reflected in an 11 % decline in industrial production, reinforcing the trend in the USA. The impact of the economic slowdown experienced by many OECD economies in 2001 on mineral and energy markets was exacerbated by the adverse economic conditions experienced by many Asian countries, many still recovering from the continent’s economic crisis of 1998. For example, both Taiwan and Singapore fell into recession in 2001. In the former, GDP contracted by 1.9% in that year, while in the latter, which suffered from a marked reduction in demand for its exports, GDP declined by 2.4%. The global economic weakness in 2001 (exacerbated by global political uncertainty following the attacks on the USA in September and the subsequent ‘war on terrorism’) led to price decreases for a number of mineral and energy commodities, including 6.8% for aluminium, 12.9% for copper, 14.3% for petroleum and 21.3% for zinc. In the short term, prospects for mineral and energy markets are strongly dependent on the resumption of strong global growth, after the generally poor economic performance of 2001. Forecasters predicted that 2002 would witness a continuation of the previous year’s economic weakness, with concomitant weakness in minerals and energy demand and, therefore, prices. Of most importance to the short-term outlook is the ability of the USA
14 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
economy to recover from the short and shallow economic downturn experienced in 2001. US economic activity was expected to stabilize early in 2002 and recover in the second half of the year, although a lack of public and institutional confidence in major corporations and in financial markets during the year was thought to be endangering this recovery. The OECD forecast GDP growth of 2.5% for the USA in 2002, while in most other OECD countries, GDP growth in 2002 was expected to remain close to 2001 levels (see Table 1). The countries of Asia are another source of optimism for global mineral and energy markets, with expected growth rates ranging between 3.5 to 7% in 2002 and beyond. This should result in further increases in the share of global minerals and energy consumption for the Asian region. For example, Asia should account for around 90% of the expected increase in world steel consumption in the years ahead. The general outlook for mineral and energy commodities in 2003 and beyond is good, with most OECD economies having moved past the economic woes of 2001. Global growth is expected to return to long-run trend levels of 2.5%–4% in the OECD, and 5–7% in Asia. The improving medium-term outlook for growth among OECD economies is being driven by current low real interest rates and supportive fiscal policies across the majority of countries. Growth in activity of this magnitude can be expected to reverse many of the commodity price decreases of 2001. Price outcomes, however, are likely to be equally influenced by levels of global supply, with significant increases in export volumes leading to a continuation of price weakness, despite stronger global demand. Of particular importance here are the exploration and development lags associated with expansions in mineral and energy production. As a consequence, such lags could be important in determining price outcomes. A number of uncertainties surround the outlook for global mineral and energy markets. The first is the economic performance of the Russian Federation, an important participant in many world commodity markets. For example, in 2001 Russia accounted for 20% of world aluminium trade and 10% of world copper trade, compared to 3% and 1%, respectively, for the Soviet Union in 1990. The Russian economy is expected to resume growth of around 4% annually in 2002 and beyond, after the turmoils of the 1990s. Economic growth of this magnitude will restrict Russia’s ability to maintain current export levels of raw materials, amid increasing domestic demand for mineral and energy commodities. The ongoing change in socioeconomic and geopolitical conditions will add uncertainty to the former Soviet Union’s impact on global commodity markets—the consequences of these continued reforms for domestic economic activity are difficult to predict, with the potential to expand or reduce demand for commodities. These conditions will also influence foreign perceptions of supply security and investment risks. The second source of uncertainty to global mineral and energy markets is the economy of the People’s Republic of China, which has become increasingly integrated into the global economy as exports to the USA, Europe and Asia continue to increase. Although growth prospects for the Chinese economy are good, as the development of such economic linkages suggest, it is not immune from future global economic downturns. Nevertheless, China should account for a significant portion of global growth in minerals and energy consumption over the medium term. Already China is a large importer and exporter of commodities, and changes in its demand or stocks can exert significant pressure on world
INTRODUCTION 15
markets. The uncertainty lies in China’s ability to satisfy commodity demand from domestic production, and, therefore, any associated reliance on imports. This import demand for commodities has historically been volatile. For example, steel imports into China have ranged between 5%–35% of domestic steel consumption in recent decades. At the same time, China has become an important international supplier of certain commodities. For example, the PRC is now the second-largest exporter of thermal coal behind Australia, with exports in 1999 of 79m. metric tons, although, again, future growth in domestic electricity requirements may well limit the extent to which coal export volumes from China can expand. In the 1990s the Chinese economy grew at an average annual rate of 10.7%, in real terms. This growth is expected to stabilize over the medium term, at around 7.5% annually. The success of the Chinese economy, however, is linked to reforms currently taking place in China. These include deregulation in the banking, telecommunications and insurance industries in accordance with World Trade Organization (WTO) membership regulations. Other reforms involve the transition of state-owned enterprises to privatesector ownership. For example, reforms in China’s energy sector involved an overhaul of the existing regulatory framework, with the regulation of the coal, power, oil and gas sectors separated from the government and made the responsibility of a series of independent regulatory bodies. The reform process is ongoing, most notably in the electricity and natural gas sectors. One important trend emerging in China is the recognition of both internal and external pressure to adopt less environmentally damaging energy sources such as natural gas. Energy Supply: A Global Challenge One of the more pressing challenges in the medium term will be meeting global energy demand, particularly in developing economies. There are abundant proven reserves of oil, natural gas, coal and uranium to meet global energy demand to 2020 and well beyond. The challenge, however, is in financing adequate levels of production, transformation, transportation and distribution of energy to match the rising demand. This is particularly important in developing countries, where the scale of the required investment will require substantial inflows of foreign capital. One option available to developing countries is the lowering of regulatory and market barriers to encourage joint ventures with foreign producers. This process is already underway, with Algeria, Egypt, Libya and Nigeria, among others, altering domestic policy to encourage foreign involvement in ‘upstream’ processing in their domestic petroleum industries. Similarly, Saudi Arabia has begun encouraging foreign investment in its ‘upstream’ natural gas industry. Furthermore, China and India will require substantial foreign investment in their respective coal industries to ensure demand in the medium term is satisfied. Increased global demand will result in increased international trade in energy products as regional imbalances between consumption and production continue to widen. For example, dependence on Middle East petroleum supplies is likely to rise, particularly among OECD member countries and in Asia. This growing joint reliance, however, does expose the
16 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
international economy to the risk of price shocks or supply disruptions in producing countries. These concerns have been intensified by disruptions to natural-gas production in Indonesia. Such occurrences emphasize the importance of addressing longer term supplysecurity issues at a governmental level, a key outcome of which is likely to be technological development and environmental policies that will reduce the demand for traditional fuels. Over the medium term, coal is expected to remain the primary source of global energy supply, followed by petroleum. These commodities, therefore, will remain the most heavily traded energy sources on global markets. Given its environmental advantages, the demand for gas, particularly for new electricity-generation projects, is likely to continue its expansion of the 1990s and early 2000s. Nuclear, hydroelectric and other renewable sources are expected to maintain a constant proportion of global energy supply. The application of energy sources such as solar and wind power will continue to be restricted by the high relative cost of these alternatives. Exploration and Production Despite rising global consumption of mineral and energy commodities, the real prices of these commodities continue to decline over the longer term. The fundamental cause of this downward trend is the continual improvement in exploration, mining, processing and distribution technologies, and the consequent reduction in costs. In addition, governments in developing countries have sought to facilitate foreign participation in exploration and extraction projects. Despite this liberalization, global expenditure on exploration activities was volatile in the 1990s and early 2000s. For example, exploration expenditure on nonferrous metals increased from US $2,600m. in 1993 to $5,600m.in 1997, before declining as the turn of the century approached, reaching $2,200m. in 2001. Latin America has accounted for the largest portion of this increase in exploration expenditure, with spending increasing from $320m. in 1991 to $1,700m. in 1997. Despite the reduction in global expenditure since that time, Latin America still attracts more exploration expenditure than any other region, reflecting both good prospects for exploration and the relative political and economic stability of the region (although this was abruptly ended in the early 2000s, as the financial crisis in Argentina threatened to spread throughout the continent, and political upheaval damaged confidence in Venezuela). Africa and South-East Asia also accounted for significant portions of this global increase in expenditure, although these regions, particularly the former, experienced the greatest decline after 1997. Despite the importance of Africa and South-East Asia, Australia is the second largest spender on exploration. The changing patterns of global exploration expenditure are being reflected in the geographical location of production. For example, in 1980, South America accounted for 14% of global base-metal production—the corresponding figure for 2000 was 28%. Furthermore, Asia accounted for 38% of global coal production, this figure having risen from 27% in 1980. Despite Africa’s relatively large share of global exploration expenditure, its share of world production for most commodities declined as the end of the 20th century approached. For example, African gold production, which represented 59% of world production in 1980, accounted for only 22% in 2000. Similarly, the continent’s share of base-metal production also declined, from 13% to 4% over the same period. This
INTRODUCTION 17
trend reflects the continuing concern among investors at the high levels of risk present in the African mining industry. Industry Consolidation A feature of the 1990s and early 2000s in global mineral and energy markets, and one which is likely to remain prominent in the medium term, is the consolidation of operations through mergers and acquisitions. The economic objectives behind consolidation include reductions in capital requirements, synergy of operations and the need to acquire an adequate scale of operations to remain globally competitive. Industry rationalization, whereby financially vulnerable and small companies are acquired by their stronger competitors, is particularly strong among North American firms, primarily within each particular commodity industry. This is a reflection of the need to specialize and avoid the conglomeration trend evident in the US minerals industry of the 1960s and 1970s. Examples of this include the acquisition in 2000 of Reynolds Metals Co. by Alcoa Inc., so that the US aluminium sector is effectively controlled by a single company. Similarly, the US copper industry has undergone further consolidation in recent years with the acquisition in 1996 of Magma Copper Company by the Australian-owned BHP Minerals (which itself merged with the British concern Billiton, forming BHP Billiton, in 2001) and that of Cyprus Amax Minerals by Phelps Dodge Corporation in 1999. For European and South African firms, mergers and acquisitions are more likely to occur across commodities, reflecting the nature of their conglomerate, multicommodity companies. The minerals and energy industry is also expected to continue to globalize operations and management. This is required by the very nature of the industry, where deposits are geographically sparse. Expansion often drives exploration and discovery into new regions, often far away from initial operations. International Issues Tariff barriers continue to impact on international trade in mineral and energy commodities, despite continued growth in trade volumes and the gradual movement to more liberal trade policies throughout the world. National trade policies are increasingly taking on an outward focus, through multilateral and regional commitments, and new liberalizing initiatives. Indeed, since the introduction of the WTO in 1995, member countries have been committed to improving the transparency and openness of their trading environment. Nevertheless, tariffs on mineral and energy products continue to be a feature of international trade. The composition of trade in these products is also affected by tariff escalation, in which tariffs generally increase with the degree of processing. In many countries, unprocessed ores and fuels have no tariffs imposed, while trade in semi-processed and processed materials face significant tariff barriers. Typically these are in the range of 5%– 35%. Tariffs are generally highest in developing countries, a policy often defended on the basis of the need to protect local mineral and energy industries. In such countries, tariffs can be as high as 50%–80% for processed materials. Despite the progress made by the WTO, trade battles continue to occur. The most notable recent example occurred in March 2002, when the USA imposed a 30% tariff on
18 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
imported steel products for a period of three years, in response to claims of the ‘dumping’ (sale to one country’s market of product below cost price) of steel in the USA by foreign producers, thereby damaging the domestic industry. Several countries lodged formal complaints with the WTO and threatened the USA with punitive trade sanctions in retaliation. A number of countries subsequently reached bilateral agreements with the US, mitigating the impact of the steel tariffs on their exports. For example, the Australian federal government successfully negotiated exemptions for 85% of Australia’s steel exports to the USA. Joint-venture agreements between producers and consumers have also become more commonplace. For example, the Korean steel conglomerate, Pohang Iron and Steel Co Ltd (POSCO), and BHP Billiton have entered a joint-venture agreement to produce iron ore from Western Australia’s Mining Area C. POSCO has agreed to purchase a minimum of 3m. metric tons of ore from the site annually, from 2003. A supply agreement has also be reached between Hamersley Iron and China’s leading steelmaker, Shanghai Baosteel Group, which involves the development of a new mining site in Western Australia’s eastern Ranges. Shanghai Baosteel, which holds a 46% stake in the project, has agreed to purchase 10m. tons of ore annually over the next 20 years, worth an estimated US $3,800m. in total. Joint ventures of this nature are an important component of risk diversification as producers move to secure supply over the longer term. The Kyoto Protocol Global mineral and energy markets will also be influenced over the medium to longer term by the Kyoto Protocol to the United Nations Framework Convention on Climate Change (‘Kyoto Protocol’), which is aimed at reducing global emissions of so-called ‘greenhouse gases’ (those gases that retain atmospheric heat and thus are considered to contribute to climate change). Key aspects of the Kyoto Protocol include emission targets, target timetables for developed countries and market-based mechanisms for meeting those targets. Emission targets are to be reached over a five-year budget period, from 2008–12. Emission levels vary on a country basis, yet as an example the target for the USA is to reduce emissions to 7% below the 1990 level. Emission targets include all six major greenhouse gases: carbon dioxide, nitrous oxide, methane, and three synthetic ozone-depleting chlorofluorocarbons. The delay in the commencement of the budget period in 2008 will allow companies time to commence the transition to improved energy efficiency and/or lower-carbon technologies. Reductions in emission target levels can be achieved through activities that reduce carbon levels, such as planting trees. This provides companies with low-cost opportunities to reduce emission targets. Other options include the joint implementation of project-based emission reductions in developing countries. Under this option, developed countries can use these emission reductions to contribute to their own domestic greenhouse-gas reduction targets. Central to the protocol is the development of an emission permit-trading system in which countries or companies can purchase the right to emit an amount of additional gas from countries that have kept emissions well below target levels. Such a system enforces the strong economic incentives necessary to reduce emissions, while providing medium-term flexibility to companies in minimizing the cost of the adjustment towards emission targets.
INTRODUCTION 19
For the Kyoto Protocol to be a success, the developed countries must adopt it and aim to meet their emissions targets. They must also appreciate that compliance with these targets is likely to impose significant financial costs on developed economies and occasion significant changes in world energy markets, in particular the location of energy-intensive production. However, nearly all developed countries have expressed some reservations as to the Protocol’s implications for the domestic economy, and some, most notably the USA, have rejected its implementation, claiming that the potential benefits did not justify the costs. Conclusion Following the abrupt end in the early 2000s to the sustained period of economic growth in many developed countries, most notably the USA, the outlook for mineral-commodity markets appears stronger in the medium term. The continuing expansion of the Chinese economy, together with the resumption of growth in other major consumer countries, such as Russia and the South-East Asian nations, following the economic difficulties experienced from the late 1990s, suggests that prices may improve. However, many of the countries mentioned thus far in this paragraph are also significant producers of commodities. Significant economic expansion could decrease the availability of production for export, thereby increasing costs for other consumer countries. It is the balance between these two demands that is of greatest importance to the mineral-commodity industry in a time of economic expansion. Political uncertainty in the Middle East makes the prospects for perhaps the most essential of all commodities, petroleum, more difficult to predict—a significant rise in the price of petroleum would prove a serious impediment to industrial production in the developed world. Meanwhile, the consolidation of the minerals and metals industry is expected to continue. As new resources are identified (for example, those of the Canadian north) and new extraction and processing technologies developed, the environmental concerns that arise out of mining activity are almost certain to be more widely aired. The international environmental agenda is expected to focus more on sustainable development in general, rather than on climate change per se, as it did in the 1980s and 1990s, and it is the interaction of these concerns with the increasingly liberal global trade regime that is of primary importance to producer companies and producer nations in the developing world.
Food Security and the WTO Agreement on Agriculture A.GANESH-KUMAR
Food security, trade liberalization and the World Trade Organization (WTO) have, in the early years of the 21st century, all been at the centre of various public and expert debates, among academics, policy-makers, in the media and in civil society at large, both at national and international levels. The views expressed are often as diverse as the participants in these debates and the particular situations they describe. Quite often, the various views expressed in these debates start from widely differing premises, even different notions of what constitutes food security, its links to international trade, the role of WTO in influencing food security, and so on. The purpose of this article is primarily to equip an interested reader with sufficient understanding of these issues so that s/he can follow these debates more intelligently. With this aim, the article begins with a widely accepted definition of food security, and presents some data on the state of affairs in this regard in different parts of the world. Then, a simple framework for understanding food security and its links to international trade is discussed. Finally, the article examines the provisions of the WTO Agreement on Agriculture and discusses its implications for food security. Defining Food Security The World Food Summit of 1996 declared that ‘food security exists when all people, at all times, have physical and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life’. This definition implies three conditions, viz., availability, access and adequacy, which must be satisfied in order to achieve food security. First of all, food must be available for people to consume close to where they normally reside. Secondly, people should have economic access to the available food; that is to say, they should have sufficient income to purchase food at the prevailing price. Finally, people should consume adequate food not merely to survive but in order to lead an active and healthy life. That is, they should get adequate and balanced nutrition. State of Affairs Quantitative assessment of the state of food security in a country or region has typically relied on certain summary measures. These include: per caput per day food availability (which includes domestic production, stocks and imports) in terms of energy (calories), protein, and fat. Both average levels and some measure of volatility (such as the statistical
INTRODUCTION 21
Table 1—Average Calories Per Caput Per Day
coefficient of variation) are typically examined. It must be noted that these availability measures capture only the supply side of food security. In order to assess the access and adequacy aspects of food security, it is necessary to examine some measures on the demand side for different sections of the population. In other words, one needs a measure that captures the influence of income distribution on the access and adequacy aspects. One such measure is the number of malnourished children under the age of five years. The fact that similar data for those over the age of five years are not widely calculated, at least, not according to standard criteria, is indicative of the way that the aspects of food security relating to access and adequacy are typically insufficiently quantified. Tables 1, 2 and 3, calculated using data from the FAO, present some information on the average level of food available per caput per day in terms of calories, grams of protein and of fat. These indicate that on average, food availability in developing countries as a group has improved over the past four decades. For the latter half of 1990s, roughly the period since the signing of the WTO agreements, the figures for both calories per caput per day and grams of protein per caput per day were about 30% higher than in the 1960s. Availability of fats has doubled over this same period. It is noteworthy that this improvement in food availability has come about even though population in the developing countries as a whole has more than doubled in the same time-scale, from about 2,600m. to over 5,700m. Despite this increase in food availability, on average developing countries continue to have less food per head in the early 2000s than was available in industrialized countries in the 1960s. Table 2—Protein (g per caput per day)
22 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Table 3—Fat (g per caput per day)
The picture of increasing food availability in developing countries as a whole, however, masks substantial differences between countries, indeed between regions. While the countries of Latin America and the Caribbean and South Asia have shown steady improvement over time (albeit at different pace), the countries of sub-Saharan Africa have seen a slight improvement only in the 1990s. While the group of nations termed as Net Food Importing Developing Countries (NFIDCs, defined by the WTO and 22 in number) has seen a steady improvement in food availability there has been hardly any improvement in the situation of the Least Developed Countries (LDCs, defined by the UN on grounds of income, human resources and economic diversification and currently numbering 49) as a group. It is worth noting that, on average, food availability in LDCs is far less than in NFIDCs. Turning to the volatility of food availability, the calculations based on the food availability statistics from which Tables 1, 2 and 3 were derived reveal that developing countries as a whole witnessed an increase in such volatility during the 1970s. Since then volatility in food availability in developing countries has declined. This decline was most substantial (by over one-half in case of calories and proteins and slightly less than one-half in case of fats) in the latter half of 1990s. Consequently, the difference in the variability of food supply between developing countries and industrialized countries has reduced dramatically by the late 1990s. As with the average level of food availability, the trends in the volatility of food availability across different regions and sub-groups of developing countries also show substantial variation. While Latin American and Caribbean countries and the countries of South Asia show a reduction in volatility, the situation has worsened in sub-Saharan Africa, although the level of volatility in the latter region is still less than that in the other two regions. How have domestic production and imports contributed to these changes in the food availability situation? Research has shown that bulk of the food available in developing countries comes from domestic production. Trends in food production per caput, however, display a similar diversity among developing countries. At a regional level, growth has been highest in the Latin American and Caribbean countries. The South Asian developing countries have also been witnessing a trend for growth in food production per head, albeit with some fluctuations. On the other hand, the situation in sub-Saharan Africa is a matter of
INTRODUCTION 23
Table 4—Malnourished Children under 5 years (millions)
Source: Diaz-Bonilla et al. (2002).
concern, with per-head food production in this region exhibiting a sustained decline from the 1960s until the mid-1980s, since when it has remained more or less stagnant. The situation with regard to the LDCs is similar to that of sub-Saharan Africa, whereas the NFIDCs and developing countries as a whole have witnessed growth in food production per caput over the period in question. Imports as a source of food for developing countries constituted only about 15% of domestic food production in the 1990s, while in the 1960s and 1970s this was about 10%. The ratio of food imports to total merchandise export, which can be considered as a measure of the total food bill, was in the range of 15%–20% in the early 1960s for most of the developing countries except those of South Asia. This proportion has declined dramatically over time for the developing countries as a whole, to slightly less than 5% in 2000. While for NFIDCs this ratio has not changed much over time, the LDCs have actually witnessed a rise in their food bill in recent decades. The situation across different regions also shows some variation. South Asia has seen the most dramatic decline in this ratio, from around 30%– 35% in the 1960s to around 5% by 2000. The Latin American and Caribbean countries have witnessed a more modest decline. In the case of sub-Saharan Africa, however, the ratio was roughly the same in 2000 as in the early 1960s. It may be noted that across all groups of developing countries and across all regions, total merchandise exports have grown over time. This implies that the differences in the evolution of the ratio detailed in this paragraph mainly reflect the trends in food imports. On the consumption side, data on the number of malnourished children show a similar picture of overall improvement in food security among developing countries, albeit with substantial differences across different regions (see Table 4). South Asia and East Asia account for the largest numbers of malnourished children, although both these regions have witnessed a steady decline in their number (except for a brief increase in the mid-1980s in South Asia). Latin America and the Caribbean witnessed a similar steady decline in the number of malnourished children. On the other hand, the figure for sub-Saharan Africa has actually increased, while in West Asia and North Africa, there is hardly any change. Thus, overall, the picture that emerges is one of improvement in the food security situation in developing countries as a whole, though the LDCs notably have witnessed a worsening of the situation. Across different regions, there has been an improvement in Latin
24 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
America and the Caribbean and in large parts of Asia, but the situation in sub-Saharan Africa remains a matter of concern. Food Security—A Development Problem Poverty is often the root cause of food insecurity, both at the national and household levels. It is the poor households within a country, or other economic grouping, which suffer from inadequate food consumption. The income levels of the poor are so low that, at the prevailing price, they cannot purchase sufficient quantities of food to meet their nutrition requirements to lead a healthy and productive life. Rich households, on the other hand, rarely face a threat to their food intake because they have sufficient income to purchase their food requirements, however high food prices may be. Thus, food insecurity at the household level can be observed even when there is sufficient food available in the country to meet the food requirements of all citizens. The solution, therefore, can readily be identified as an improvement in the income levels of the poor, through income transfer mechanisms and/or employment generation. This calls for sustained economic growth, which is one of the fundamental problems confronting developing countries. Food insecurity of poor households is often aggravated when there is food insecurity at the national level. Food security of a nation is threatened if there is insufficient food available in the country to meet the needs of a growing population. Frequently in developing countries, a particular region of a country is threatened by food insecurity, owing to climatic differences, poor transport infrastructure, political instability, a general lack of development relative to other areas, etc. Inadequate food availability results in a rise in food prices, which would force the poor to reduce their already low levels of food intake. Thus, national-level food insecurity translates into household-level food insecurity. The primary reason for national-level food insecurity is usually inadequate domestic food production. A whole host of developmental issues (such as the low asset-base of farmers, restricting the use of modern farm inputs and techniques, the low education- and skills-base of farmers and farm workers, environmental degradation; the poor state of rural infrastructure, the lack of marketing and storage facilities, weak rural institutions that allow the concentration of wealth, resources, power and access to government schemes in the hands of a small rural élite, etc.) are usually the fundamental reasons for inadequate food production. However, in some cases it is also the inappropriate and restrictive macroeconomic and agricultural policies prevailing in many developing countries that act as a serious disincentive for farming, resulting in low agricultural productivity and ultimately insufficient food production. The problem is essentially one of food management and food price stabilization at the macroeconomic level, rather than one of production, per se. If the domestic production shortfall is extreme (such as during a drought or famine) the government can take the responsibility of food distribution upon itself by imposing severe restrictions on the normal private channels of distribution. Such intervention may be feasible as a country affected by such calamity is now more likely to receive adequate international food aid and be in a position to return to a more normal situation more quickly. More typical, however, is the case when domestic production shortfalls are not drastic in magnitude but recurrent and incremental over time—in cases such as these, international
INTRODUCTION 25
food aid may not be so easily forthcoming. In such a situation, the government of a country can undertake food-price stabilization policies in order to protect the food security of the poor. One such action would be to release all or part of any food stocks that it may hold and/ or import food in order to bolster supply in the country and thereby stabilize food prices. However, if (as is often the case) the government does not have any/adequate food stocks and/or is unable to import sufficient quantities of food to meet the domestic shortfall, then the country would face a food security problem in the form of rising prices. Thus, successful management of national-level food security depends upon the ability of the government to undertake buffer stock and/or trade operations. This, in turn, depends on the availability of resources, including foreign-exchange reserves, and in poor countries these resources are often insufficient to be able to undertake a vigorous buffer stock operation or to import the necessary amount of food using foreign currency. The effect of the foreign-exchange constraint on a country would be exacerbated whenever events occurring elsewhere in the world result in an increase in food prices in the international market. For example, if crops fail in a distant rich nation (for example, as is widely predicted to happen to certain crops in Western and Central Europe following the floods of mid-2002) pressure is applied to world prices (either because food exports by the directly affected nation are reduced or because the nation becomes a net importer of food, or both) and hence to the ability of a developing nation to meet its food requirements given its foreign-exchange constraints. Unequal distribution of income and wealth across nations can, thus, result in some nations being foodinsecure even when at a global level sufficient food is available (just as some households may be food-insecure even when the country as a whole is food-secure). Essentially, the above examples show that poverty of households and nations is the fundamental threat to food security, and that, to a large extent, this is really a development problem, and must be recognized as such. Factors such as foreign-exchange constraints, domestic resource constraints, poor infrastructure, low domestic food production, rapid growth of population, etc., that render a nation food-insecure in the first instance or restrict its ability to become food secure, are in fact characteristics of a low level of economic development of a country. Most developing countries exhibit one or more of these characteristics. Although the immediate reason for food insecurity in particular developing countries and at different points in time could vary, the only long-term solution is sustained economic development in the poor countries of the world. Trade, Food Security and the WTO—Understanding the Linkages Trade can affect food security directly and indirectly. Food imports have a direct impact on food security, although this is not always beneficial to an importing country. In the shortrun, food imports will add to the domestic supply and help in the control of prices. However, this suppression of prices reduces the profitability of farmers and, thus, their income. Farmers may see this as a disincentive, and react by further reducing production. Thus, a situation can arise whereby ever greater amounts of imports are required over time to compensate for the shortfall in domestic food production. Again, this may not be sustainable in the medium- or long-run if the country in question frequently faces foreign-
26 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
exchange difficulties. In this regard, the political, social and demographic characteristics of the nation in question are of paramount importance. If the majority of the population in a nation live in urban areas and depend on non-agricultural activities for their livelihood (and hence are net-consumers of food), then food imports that reduce the price paid by consumers can be net-beneficial to the country. On the other hand, if the majority of the population in the country live in rural areas and are dependent on agriculture (and particularly food production) for their livelihood, such imports will reduce the profitability of farming, thereby threatening the agriculturalists’—and eventually the country’s—longterm food security. Indirectly affecting food security is the fact that trade (in both agriculture and manufactured products) can promote a country’s economic development. Expanding exports can help create employment opportunities which, in turn, will help increase household incomes, thereby improving those households’ food security. Growth in exports from developing countries will also strengthen the national foreign-exchange position, enabling the import of capital goods and technology that will help in improving productivity levels and, consequently, incomes. Besides, the improvement in the foreign-exchange position of these countries over the long-run would permit them to import more food, both habitually and in case of the emergencies outlined above, further increasing food availability and food security. Economists have long argued that in order to enjoy these long-run benefits of ‘trade-fordevelopment’, resulting ultimately in poverty reduction and enhanced food security, the various distortions in the world trade regime have to be removed. Such distortions are widespread across different commodities and sectors and can be found in both industrialized and developing countries. These distortions take many forms, from high tariffs that often escalate as a commodity moves up in the value-added chain, to domestic production and export subsidies, to quantitative restrictions (QRs). The latter can range from outright import bans on certain commodities, to quotas on imports, to specifying quality requirements that are extremely difficult for a poor developing country to achieve. Trade in agriculture was and continues to be subjected more than that in any other sector to these distortions. It is in this context that multilateral trade agreements (such as those made at the WTO) that seek to reduce or remove the distortions in the international trade regime have an important role to play. Among the series of agreements covering the different aspects of trade that form the WTO agreements, the Agreement on Agriculture (AoA) is the most relevant to trade in agriculture and to food security in particular. The rest of this article focuses on the features of the AoA, followed by a discussion of the issues in the AoA that have a bearing on food security. Features of the AoA The main provisions of the AoA concern market access, domestic support and export subsidies. The Agreement specifies the requirements that all member countries must fulfil and provides for special and differential treatment for developing-country members. Market access: This includes tariffication, tariff reduction and access opportunities. Tariffication means that all non-tariff barriers (NTBs) such as quotas, variable levies,
INTRODUCTION 27
minimum import prices, discretionary licensing, state trading measures, voluntary restraint agreements, etc., are to be abolished and converted into an equivalent tariff—the so-called tariff bindings. Ordinary tariffs, including those resulting from the tariffication of the NTBs, are to be reduced by an average of 36% by developed countries over six years, and by 24% over 10 years by developing countries. The AoA also stipulates that minimum access equal to 3% (rising to 5% over six years) of domestic consumption in 1986–88 must be permitted at low tariff rates—the so-called tariff quota. The Agreement also contains a protective provision that allows imposition of an additional tariff whenever there are either import surges above a particular level (the so-called volume trigger) or the import price falls below the reference (1986–88) level (price trigger). The AoA also permits the maintenance of QRs for a limited time period by countries that face balance-of-payments problems. Domestic support: All domestic support measures in favour of agricultural producers that do not qualify under the various exemptions provided in the AoA (discussed below) are subject to reduction requirements. The various non-exempt forms of support provided in 1986–88 are to be measured by the total Aggregate Measure of Support (AMS). Ceilings on the AMS were then specified at 5% of the total value of agricultural production for developed countries, and 10% for developing countries—the so-called de minimis level. If the AMS exceeds this level, then the base-level support must be reduced by 20% in developed countries over six years (or, in developing countries, by 13.3% over 10 years). Most importantly, the AoA specifies reduction requirements only in aggregate terms— countries are left free to choose the products covered and the extent of support. Support measures that are exempt from reduction requirements (in fact expenditure on these measures can be increased without limit) are listed in the so-called ‘Green Box’, and are applicable to both developed and developing countries. The Green Box includes measures that have minimal trade-distorting effect (or none at all), are publicly funded, not involving transfers from consumers and not having the effect of providing a price support. These include many government services (such as research services, training, extension and advisory services, inspection services for health, safety, grading and standardization purposes, marketing and promotion services, infrastructural services, etc.), public stockholding programmes for food security, domestic food aid to sections of the population in need, and some direct payments to farmers not linked to production decisions, such as decoupled income support measures, income insurance and safety-net programmes, natural disaster relief, structural adjustment assistance programmes, and payments under certain environmental and regional assistance programmes. Besides these, the Agreement also allows exemptions to the so-called ‘Developmental Measures’ and ‘Blue Box’ Measures. The former are those instruments that have a ‘developmental effect’ in developing countries, and are also exempt from reduction requirements. These include direct and indirect measures that promote agricultural and rural development (such as investment subsidies, agricultural input subsidies to low-income/ resource-poor farmers, and domestic-support measures designed to encourage diversification away from growing illicit narcotic crops), and they have, since the conclusion of the AoA, been forming an integral part of the development programmes in developing countries.
28 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Blue Box measures include direct payments under production-limiting programmes, as long as they are made on fixed areas and yield or a fixed number of livestock. Payments that are made on 85% or less of production in a defined base period also qualify for exemptions. The important point to note about the Blue Box payments is that production is still required in order to receive these payments, but the actual payments are not directly related to the current quantity produced. Industrialized countries are the primary beneficiaries of the Blue Box measures. Export subsidies: The AoA specifies reduction requirements on export subsidies, both in terms of expenditure and in terms of volume. Developed countries are required to reduce export-subsidy expenditure by 36%, and the volume entitled to export subsidy by 21%, both over six years. For developing countries, the percentage reductions specified are 24% (for expenditure) and 14% (for qualifying volume) over 10 years. The agreement also specifies that products not subject to export-subsidy reduction requirements are not to receive any such subsidy in the future. NFIDCs: The AoA also explicitly acknowledges the possible negative effects of its implementation in certain LDCs and NFIDCs, especially in terms of the availability of adequate supplies of basic foodstuffs from external sources on reasonable terms and conditions, including short-term difficulties in financing normal levels of commercial imports of basic foodstuffs. It provides for a number of mechanisms to ensure that the implementation of the Agreement does not adversely affect the availability of food aid at a level that is sufficient to meet the food needs of these countries. These include: a mechanism to review the aid requirement of these countries, provision of food aid increasingly in the form of grants, financial and technical assistance to improve agricultural productivity and infrastructure in these countries, differential treatment of these countries with regard to export credit and finance for short-term food imports. Food Security and the AoA—Issues of Concern Two sets of concerns on food security arise in the context of the AoA. The first stems from the implementation of the AoA and its failure to match the expectations of a liberal trade regime as a stimulant for economic development (and hence food security) in developing countries. The second set concern the adequacy of the various provisions of the AoA to promote food security, especially in those countries that are the most vulnerable. Implementation concerns: As mentioned above, food security is basically a problem of poor households and poor countries, and is essentially a development problem. To the extent the implementation of AoA has not resulted in the expected impetus to economic development in the developing countries, food security continues to be threatened in these countries. The main problem with the implementation of the AoA is that the barriers to agricultural trade emanating from the industrialized countries have remained in place (albeit with a change in character), as have the various trade-distorting domestic-support measures and export subsidies in these countries. It is by now well documented that, in the name of tariffication, certain industrialized countries have replaced the various non-tariff barriers to agricultural trade with very high tariff rates, often far exceeding the equivalent level tariff (a process termed by some as ‘dirty tariffication’). The high tariff rates have effectively
INTRODUCTION 29
excluded agricultural exports from developing countries. Consequently, the expected impetus to agricultural growth in developing countries has not been apparent. Further, the tariff rates in the industrialized countries tend to escalate as a commodity moves up the ladder in the processing chain. Thus, often a processed agricultural product (for example, chocolate) will attract a higher tariff than the raw materials (cocoa, in this example). Consequently, exports from developing countries continue to be in the form of raw materials, which fetch much lower returns. More importantly, the development of agroprocessing industries that can result in significant gains in productivity, employment and income in these countries continues to be impeded. The minimum access provision in the AoA, allowing imports of up to 5% of consumption at low tariff rates is no remedy to the high tariffs and, in any case, a number of countries have raised complaints that such quotas are unfairly distributed. Perhaps more disappointing is the continuation in the industrialized countries of the various domestic support measures permitted under the Blue Box exemptions. To the extent that these measures are directly related to production, it results in excess output. Conversely, developing countries are not in a position to provide such support and productivity and production levels remain low. Thus, there is a diversion of production from developing countries to developed countries, which is not conducive to economic development and food security in the former. Though export subsidies in the industrialized countries have declined in percentage terms, they remain significant, effectively distorting the prices of various agricultural products in the international market. This has raised many complaints of unfair competition, and acts as a major disincentive to farming in developing countries—as explained earlier, this has adverse consequences on food security in countries with a large agricultural and rural population. These concerns as to the inadequacies and imbalances in the AoA, and the questionable commitment of industrialized countries to genuine trade liberalization in agriculture that have led to the next round of trade negotiations being dubbed the ‘development round’. Inadequacies in the AoA: There are also concerns on whether the legal text of the AoA provides adequate flexibility to developing countries to pursue their food-security and developmental goals. Critics of trade liberalization and of the AoA argue that it is desirable to provide some level of trade protection for food security and rural development reasons, especially since the AoA allows industrialized countries to provide domestic support under the Blue Box exemptions, and reduction requirements on export subsidies under the AoA have not eliminated them. However, a study by Díaz-Bonilla, et al., summarizing these arguments, found that despite some of the problems in implementation of the AoA there was little merit in the major complaint. On the contrary, the AoA contains several features that can promote food security and agricultural development in the developing countries. For example, various Green Box measures mentioned earlier are available for promoting agricultural development and food security. Besides these, the AoA also allows countries to provide domestic support to agriculture (both product-specific and non-product-specific support) as long as such support lies within the de minimis level. What is perhaps required here is some allowance for food-insecure countries in the form of an enhanced de minimis level, or perhaps even the complete waiver of the de minimis restriction.
30 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Further, the Green Box also includes two measures that can be used specifically for food security purposes as long as they do not have the effect of providing price support to producers. The first of these measures is the use of stocks. The importance of food stocks in stabilizing food availability and thus protecting national-level food security is obvious from the analytical framework discussed earlier. As long as a country purchases stocks for foodsecurity purposes at the prevailing domestic market price it would not be violating the AoA provisions. Even if a country were to purchase stocks at some administered price instead of the market price, as long as the price support offered by the administered price is within the AMS limits, then such stocks are permissible under the AoA. In this case, the AoA may benefit from some additional text that automatically accords compliance to food-insecure countries that build food stocks up to some level (defined as some percentage of domestic consumption) for food security reasons. The second of these Green Box measures specifically for food security considerations is domestic food aid to sections of the population in need. Here too, the agreement allows publicly funded programmes that either directly provide food to the needy at subsidized rates (such as through ration shops) or through other income-transfer mechanisms (such as food stamps), or a combination of both. The more important issue perhaps lies in designing programmes that effectively target the needy and do not involve leakage of such food aid to the undeserving better-off sections of the population. The experience of many developing countries indicates that the latter is more of a problem than the provisions of the AoA per se. Adapting the existing AoA features and designing additional features specifically to meet the food security concerns of poor countries (such as those discussed above), however, presumes that the Agreement defines strict and objective criteria by which countries are identified to be food-insecure in order to allow special treatment. Herein perhaps lies a major inadequacy in the AoA. As mentioned earlier, the AoA recognizes four broad classifications of countries, namely, developed, developing, LDCs and NFIDCs. The agreement contains certain special provisions for the latter three groups, especially for the LDCs and NFIDCs. Díaz-Bonilla et al., however, have demonstrated that this classification is inadequate to address the different food security situations faced by various developing countries. Using cluster analysis and data on five indicators of food security (food production per caput, the ratio of total exports to food imports, consumption of calories per caput, consumption of proteins per caput and the rural/non-rural population share), they classify 167 countries (including industrialized and developing countries) into 12 distinct groups that differ in their food security profile. They found that while the current list of LDCs consists largely of countries that are food-insecure, many other food-insecure countries do not appear. Furthermore, they find that a third of the countries in the NFIDC group are not necessarily food-insecure, even though they are net importers of food. Finally, they find that the countries recognized as developing countries by the WTO are a heterogeneous grouping, both in terms of their food vulnerability and their relative development, and do not provide a sufficiently specific sample for discussions concerning food security. These findings suggest that the AoA should define food security using multiple but objective criteria, so that the differences in the food security situation across countries are better captured, and groups of countries facing a similar situation are properly identified. Further, it is equally important to appreciate that the food security situation of a country is
INTRODUCTION 31
dynamic and countries can move in and out of specific situations, and establish a programme of frequent evaluation of the food security situation in each developing country. Only when the food-insecure countries are properly identified can special treatment of these countries be provided for in the AoA. To conclude, we must return to the central premise of the essay—that food security is a problem for those afflicted by relative poverty and is a development issue. The only longrun solution is the successful promotion of economic development in the poor countries, providing adequate income for all to meet their food requirements. The historic experience of various developing countries has shown that an inward-looking, protectionist policy does not promote economic growth, whereas a liberal trade regime with appropriate domestic policies can promote economic growth and development. Multilateral trade agreements such as the WTO agreements seek to remove the various distortions that exist in the international trade regime. While the current set of agreements and their implementation has tremendous scope for improvement, the primary objective in future trade negotiations should be the removal of these anomalies, with a view to promoting economic growth and development in poor countries. Only this will help promote food security in the long-run. Bibliography and References Díaz-Bonilla, E. and Thomas, M. Trade and Food Security, in Díaz-Bonilla, E. and Robinson, S. (Eds), Shaping Globalization for Poverty Alleviation and Food Security, IFPRI 2020 Focus 8. International Food Policy Research Institute, Washington, DC, 2001. Díaz-Bonilla, E., Thomas, M. and Robinson, S. Trade Liberalization, WTO and Food Security. IFPRI, TMD Discussion Paper No. 82. International Food Policy Research Institute, Washington, DC, 2002. Díaz-Bonilla, E., Thomas, M. Robinson, S. and Cattaneo, A., Food Security and Trade Negotiations in the World Trade Organization: A Cluster Analysis of Country Groups, IFPRI, TMD Discussion Paper No. 59., International Food Policy Research Institute, Washington, DC, 2000. FAO. Rome Declaration on World Food Security and World Food Summit Plan of Action. Rome, 1996. Madeley, J. and Solagral. The Impact of Trade Liberalisation on Food Security in the South: Literature Review. CIDSE Background Paper, 2001. [www.cidse.org/en/tgl/tradelibbgr01.htm]. Von Braun, J., Wobst, P. and Grote, U. Development Box and Special and Differential Treatment for Food Security of Developing Countries: Potentials, Limitations and Implementation Issues. Center for Development Research (ZEF), Discussion Paper, University of Bonn, 2002.
PART TWO Commodity Surveys
Aluminium and Bauxite
Aluminium (Al) is the most abundant metallic element in the earth’s crust, comprising about 8% of the total. However, it is much less widely used than steel, despite having about the same strength and only half of the weight. Aluminium has important applications as a metal because of its lightness, ease of fabrication and other desirable properties. Other products of alumina (aluminium oxide) are materials in refractories, abrasives, glass manufacture, other ceramic products, catalysts and absorbers. Alumina hydrates are used for the production of aluminium chemicals, as fire retardants in carpet backing, and as industrial fillers in plastics and related products. The major markets for aluminium are in transportation, building and construction, electrical machinery and equipment, consumer durables and the packaging industry, which in the late 1990s accounted for about 20% of all aluminium use. Although the production of aluminium is energy-intensive, its light weight results in a net saving of energy, particularly in the transportation industry. About one-quarter of aluminium output is consumed in the manufacture of transport equipment, particularly road motor vehicles and components, where the metal is increasingly being used as a substitute for steel. In the early 1990s steel substitution accounted for about 16% of world aluminium consumption, and it has been forecast that aluminium demand by the motor vehicle industry alone could more than double, to exceed 5.7m. tons in 2010, from around 2.4m. tons in 1990. Aluminium is of great value to the aerospace industry for its weight-saving characteristics and its low cost relative to alternative materials. Aluminium-lithium alloys command considerable potential for use in this sector, although the traditional dominance of aluminium in the aerospace sector was under challenge during the 1990s from ‘composites’ such as carbon-epoxy, a fusion of carbon fibres and hardened resins, whose lightness and durability can exceed that of many aluminium alloys. World markets for finished and semi-finished aluminium products are dominated by six Western producers—Alcan (Canada), Alcoa, Reynolds, Kaiser (all USA), Pechiney (France) and algroup (Switzerland). Proposals for a merger between Alcan, algroup and Pechiney, and between Alcoa and Reynolds, were announced in August 1999. However, the proposed terms of the Pechiney-Alcanalgroup merger encountered opposition from the European Commission, on the grounds that the combined grouping could restrict market competition and adversely affect the interests of consumers. The tripartite merger plan was abandoned in April 2000, in favour of a merger between Alcan and algroup, which was effected in
34 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Bauxite (crude ore, ’000 metric tons)
* Estimated production. †Dried equivalent of crude ore. Source: US Geological Survey.
October. The amalgamation of Alcoa and Reynolds was approved by the European Commission and the US Government in May 2000. The level of dominance of these major producers has, however, been reduced in recent years by a significant geographical shift in the location of alumina and aluminium production to areas where cheap power is available, such as Australia, Brazil, Norway, Canada and Venezuela. The Gulf states of Bahrain and Dubai, with the advantage of low energy costs, also produce primary aluminium. Since the mid-1990s Russia has also become a significant force in the world aluminium market (see below), and in April 2000 the country’s three principal producers announced their intention to combine into a single group representing about 75% of Russian aluminium production and approximately 10% of world output. Bauxite is the principal aluminium ore, but nepheline syenite, kaolin, shale, anorthosite and alunite are all potential alternative sources of alumina, although not currently economic to process. Of all bauxite mined, approximately 85% is converted to alumina (Al2O3) for the production of aluminium metal. The developing countries, in which 70% of known bauxite reserves are located, supply 45% of the ore required. The industry is structured in three stages: bauxite mining, alumina refining and smelting. While the high degree of ‘vertical integration’ (i.e. the control of successive stages of production) in the industry means that a significant proportion of trade in bauxite and alumina is in the form of intracompany transfers, and the increasing tendency to site alumina refineries near to bauxite deposits has resulted in a shrinking bauxite trade, there is a growing free market in alumina, catering for the needs of the increasing number of independent (i.e. non-integrated) smelters.
COMMODITY SURVEYS 35
The alumina is separated from the ore by the Bayer process. After mining, bauxite is fed to process directly if mine-run material is adequate (as in Jamaica) or is crushed and beneficiated. Where the ore ‘as mined’ presents handling problems, or weight reduction is desirable, it may be dried prior to shipment. At the alumina plant the ore is slurried with spent-liquor directly, if the soft Caribbean type is used, or, in the case of other types, it is ball-milled to reduce it to a size which will facilitate the extraction of the alumina. The bauxite slurry is then digested with caustic soda to extract the alumina from the ore while leaving the impurities as an insoluble residue. The digest conditions depend on the aluminium minerals in the ore and the impurities. The liquor, with the dissolved alumina, is then separated from the insoluble impurities by combinations of sedimentation, decantation and filtration, and the residue is washed to minimize the soda losses. The clarified liquor is concentrated and the alumina precipitated by seeding with hydrate. The precipitated alumina is then filtered, washed and calcined to give the product. The ratio of bauxite to alumina is approximately 1.95:1. The smelting of the aluminium is generally by electrolysis in molten cryolite. Because of the high consumption of electricity by the smelting process, alumina is usually smelted in areas where low-cost electricity is available. However, most of the electricity now used in primary smelting in the Western world is generated by hydroelectricity—a renewable energy source. The recycling of aluminium is economically, as well as environmentally, desirable, as the process uses only 5% of the electricity required to produce a similar quantity of primary aluminium. Aluminium recycled from scrap currently accounts for about 40% of the total aluminium supply in the USA and for about 30% of Western European consumption. With the added impetus of environmental concerns, considerable growth world-wide in the recycling of used beverage cans (UBC) was forecast for the 1990s. In the mid-1990s, according to aluminium industry estimates, the recycling rate of UBC amounted to at least 55% world-wide. Total world output of primary aluminium in 2000 was estimated at 24m. tons, of which Latin American producers accounted for about 2.2m. tons. The USA normally accounts for about one-third of total aluminium consumption (excluding communist and former communist countries). Although it is the world’s principal producing country (accounting for about 15% of global output of primary aluminium in 2000), the USA does not produce a surplus of ingots, and limits production to satisfy its domestic requirements for fabrication, while importing the remainder from low-cost producers elsewhere. The USA produces a very small amount of bauxite for domestic use. In 2000 Brazil was the world’s third-largest producer of bauxite (after Australia and Guinea). The country possesses extensive bauxite reserves in Minas Gerais state and in the Amazon region, where deposits of some 4,600m. tons have been identified. The country’s huge Albrás aluminium plant, which began operations in early 1986, achieved its installed production capacity of 150,000 tons per year in October. The plant was largely financed by Japan (which takes a share of its output). In mid-1999 work was completed on the expansion of the Pinda rolling-mill in Pindamonhangaba. The US $370m. expansion, which also included the largest recycling plant in South America, led to an increase in production from 120,000 tons per year to 280,000 tons per year. Brazil’s annual output of primary
36 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
aluminium was maintained at 1.2m. tons during 1992–99. However, almost all of the country’s smelters (in particular, the massive Alumar plant) are the subject of expansion proposals, and production could increase rapidly during the next few years, assuming a recovery in world prices and provided that the costs of energy supplies can be contained. Jamaica was the world’s fourth largest producer of bauxite in 2000. A production levy on the Jamaican bauxite industry, which has operated since 1974, provides an important source of government revenue. Production capacity was increased in the second half of the 1980s in order to supply the strategic mineral stockpiles of both the USA and the Soviet Union. However, as a result of depressed conditions in the international market (see below), sales of bauxite and alumina accounted for only 42.8% of total export earnings in 1997/98, and 43. 2% in 1998/99, compared with 63% in 1990. Measures to revitalize Jamaica’s bauxite and alumina industry were announced in July 1998 by representatives of the Government, industry and the trade unions. Output of bauxite in 2000 was 12.6m. tons, its highest level for 25 years, but production declined to 11.7m. tons in 1999, owing to the closure of a US refinery that used Jamaican ore. Plans to expand bauxite production and improve efficiency were under discussion in 2000. The economy of Suriname relies heavily on the mining and export of bauxite. In 1993 bauxite, alumina and aluminium accounted for 91.5% of Suriname’s annual export earnings, whereas in 1978 the corresponding proportion had been 83.8%. In 1998 exports of alumina and aluminium represented an estimated 80.5% of export receipts. Guerrilla activity disrupted the industry in the 1980s and 1990s, and the sector was also affected by adverse price movements in the international market. Venezuela’s aluminium industry achieved rapid growth in the 1980s, as a result of the availability of raw materials and cheap hydroelectric power. Aluminium production, based on imported alumina, subsequently overtook iron ore to become Venezuela’s main export industry after petroleum. The exploitation of bauxite reserves of 500m. tons was expected to enable Venezuela to produce 3.4m.–4.0m. tons of high-grade ore annually from mines in Bolivar State when output reached full capacity in 1992, by which time Venezuelan aluminium plants were to be supplied solely with local bauxite. According to the US Geological Survey (USGS), Venezuela’s aluminium production increased from 561,000 tons in 1992 to a record 634,000 tons in 1997, but subsequently decreased, to 585,000 tons in 1998 and 570,000 tons in 1999 and 2000. Aluminium’s contribution to the country’s export revenue was 5.2% in 1995, 3.3% in 1996 and 3.4% in 1997. In 1992 Venezuela’s production of bauxite ore exceeded 1m. tons. The subsequent expansion of the bauxite sector has been rapid; output advanced to 2.5m. tons in 1993, and rose to 5.1m. tons per year in 1997 and 1998. In 2000 Venezuela’s state-owned aluminium complex was reported to be undergoing further preparation for transfer to the private sector, following unsuccessful attempts in 1998 and 1999 to dispose of the Government’s 70% holding by auction. Guyana’s nationalized bauxite production industry is a major source of the country’s export revenue, providing 15.5% of total domestic exports in 2000. The state-owned Guyana Mining Enterprise Ltd (Guymine) implemented a programme of rehabilitation for the industry, which was adversely affected in the mid-1980s, and again in the early 1990s, by depressed conditions for bauxite on the world market (see below). The transfer of Guymine to the private sector commenced in 1996.
COMMODITY SURVEYS 37
In November 1998 a preliminary agreement was signed for the construction of a primary aluminium smelter, with an eventual capacity of 474,000 tons per year, at Point Lisas, Trinidad. It was envisaged that this development, with a projected cost of US $1,500m., would proceed in two stages. The first phase, with an annual capacity of 237,000 tons, was to be completed in 2002. Its metal output would, according to the proposals, be exported to Europe and North America. However, in early 1999, with international prices of aluminium at their lowest for about five years (see below), plans for the Trinidad smelter project were postponed. Guinea possesses more than one-quarter of the world’s known bauxite reserves, and is the world’s leading exporter of bauxite, ranking second only to Australia in terms of ore production. Bauxite and alumina exports dominate the Guinean economy, accounting for 58.7% of its external revenue in 1998. Some Guinean bauxite ore, which is of very high grade, is domestically processed into alumina, and some Guinean alumina is exported to Cameroon for refining. Cameroon has extensive bauxite deposits, estimated at some 1,200m. metric tons, but these await commercial exploitation. In 1996 Malawi began to seek international participation in the development of the country’s 29m. metric tons of bauxite reserves at Mulanje. By 2000, however, exploitation of these reserves, in which Mozambique has reportedly expressed interest, had still not commenced. Ghana’s bauxite reserves are estimated at 780m. tons. Although the country lacks an alumina refinery, it possesses a substantial aluminium smelter facility, located at Tema, which processes imported alumina. The smelter is operated by the Volta Aluminium Co (VALCO), which is 90% owned by Kaiser. However, in recent years severe drought has caused serious shortages of electricity for the VALCO smelter, and by mid-1998 only one of its five potlines was in operation. By 2000, however, the situation had improved, VALCO operating an average of four potlines in that year. Ghana’s output of primary aluminium declined from 152,000 tons in 1997 to about 56,000 tons in 1998, but recovered to an estimated 104,000 tons in 1999, and to a reported 156,000 tons in 2000. In December 1999 VALCO received a power allocation for 2000 and 2001 that would enable the smelter to operate four potlines in those years, enough to produce about 80% of its full capacity of 200,000 tons per year. Sierra Leone has estimated bauxite reserves of 100m. tons. Exploitation of the Mkanji deposits, in the Southern province, began in 1964, but was interrupted from early 1995 by guerrilla insurgency. In 2000 Alusuisse Group of Switzerland announced that it intended to sell the Sieromco bauxite mine. In 1992 the South African aluminium producer Alusaf announced plans to construct the largest smelter complex ever to be built in the Western world, with an annual capacity of 636,000 tons. These smelters, located at Richards Bay, entered production in 1995, and the eventual full utilization of this capacity would increase total African aluminium output by a significant margin. South Africa’s output of primary aluminium advanced from 195,000 tons in 1995 to 677,000 tons in 1998. Production was 679,000 tons in 1999, and, reportedly, 671,000 tons in 2000. A major aluminium smelter project in Mozambique was formally inaugurated in 1998, although the country is not a significant producer of bauxite. The Mozal smelter, located near Maputo, represents the largest single investment project in Mozambique, with an estimated cost of about US $1,300m. The first aluminium was cast at
38 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
the smelter in June 2000, six months ahead of schedule. Using alumina from Australia, Suriname and Brazil, the smelter was expected to reach its operational capacity in 2001, with an output of 250,000 tons per year, which was projected to advance to 253,000 tons per year by 2004. In Nigeria the Ikot Abasi primary aluminium smelter, with a capacity of 193,000 tons per year, entered production in late 1997, although it was operating at only 20% of capacity in late 1998 and had to suspend its operations temporarily in June 1999, owing to lack of working capital. Nigeria’s output of primary aluminium was 20,000 tons in 1998 and 16,000 tons in 1999. Aluminium consumption has been advancing significantly in East Asia and India in recent years. In the early 2000s the People’s Republic of China was high among the world’s major consumers of aluminium. Its requirements had been forecast to rise by about 60% in 1995– 2000, to 2.5m. tons annually by 2000. In the event, domestic consumption totalled 3.4m. tons in that year. The main consuming sectors in 2000 were construction, packaging, communications and transportation. China’s domestic aluminium production capacity has, meanwhile, undergone significant expansion in recent years, reaching 3.3m. tons at the end of 2000, an increase of about 18 % compared with 1999. By 2005 production capacity is expected to have increased to more than 4.2m. tons. However, demand is forecast to outstrip supply by a wider margin up to 2005, increasing China’s reliance on imports. In 1999 it was reported that China had 111 aluminium smelters, of which about 40 had been constructed in the preceding two years. In August 1999 the China Aluminium Corpn (Chalco) was established to assume responsibility for the management of aluminium production facilities formerly controlled by the State Bureau of Nonferrous Metals Industry. At that time the aluminium smelters operated by Chalco had a production capacity of about 1m. tons per year. Japan was the world’s leading importer of unwrought aluminium in the late 1990s. The country’s imports of refined aluminium (primary metal) totalled 2.9m. tons in 2000. Japan produces only small amounts of primary aluminium, but is a major producer of secondary metal (obtained by remelting waste or scrap). The country also has substantial rolling and extrusion facilities for aluminium fabrication, using secondary or imported metal. The Republic of Korea does not produce primary aluminium, but, like Japan, has facilities for the manufacture of rolled aluminium products. In 1999 Alcan and a local wiremanufacturing company formed a Korean-based joint venture, Alcan Taihan Aluminum Ltd, to market such products throughout the Asia-Pacific region. In 2000 Alcan became the leading Asian manufacturer of aluminium rolled products through the acquisition of Aluminium of Korea Ltd (Koralu). Australia is the world’s largest producer and exporter of bauxite and alumina. In 2001 the country accounted for 39% of the world’s bauxite production and, in 2000, for almost 32% of alumina output. Australia’s five bauxite mines produced 53.5m. metric tons of the ore in 2001: a decline of 0.6% on the 2000 total. The country’s six alumina refineries include the huge Worsley facility in Western Australia, reported to be probably the lowest-cost refinery in the world. Expansion of the Worsley plant, increasing its annual capacity from 1.7m. tons to 3.1m. tons (so making it the world’s largest alumina refinery), was completed in 2000. At that time Alcoa owned 56% of the Worsley refinery, but the company was required to dispose of this interest, among several assets, as a precondition, imposed by
COMMODITY SURVEYS 39
competition authorities, for its merger with Reynolds (see above). Australia’s output of alumina increased from 14.5m. tons in 1999 to 15.7m. tons in 2000. The country has extensive bauxite deposits in Western Australia, the Northern Territory and Queensland. Owing to the availability of bauxite and alumina (Australia’s bauxite reserves, estimated at 3, 800m. tons, account for 15.8% of the world’s identified reserves), and of low-cost power (vast coal resources), the country provides a desirable location for aluminium smelters. There are six smelters currently operating, with a combined output of 1.8m. tons of primary aluminium in 2000. Alcoa of Australia, the world’s largest alumina-producing company, operates one of these smelters, together with two bauxite mines and three alumina refineries. In 1999/2000 the aluminium industry was Australia’s third-largest export sector (behind coal and gold), with earnings that included $A3,400m. from sales of alumina and $A3,900m. from sales of aluminium ingots. New Zealand has a single aluminium smelter, commissioned in 1971 at Tiwai Point, near Invercargill, South Island. The plant is controlled by a subsidiary of the Australian company Comalco. A major expansion of the smelter was completed in 1996, increasing capacity to 313,000 tons of primary aluminium per year. In the late 1990s more than 90% of the smelter’s production was exported. India has the world’s sixth-largest bauxite reserves, estimated to be at least 1,400m. metric tons. Indian bauxite is of high quality (about 90% metallurgical grade), and production has generally increased in recent years. India’s estimated output of alumina increased from 1.9m. tons in 1999 to 2m. tons in 2000. About 60% of the country’s recoverable bauxite is in the eastern state of Orissa. The government-controlled National Aluminium Co (NALCO) is the main bauxite-producing company in India, with output reaching a record 2.9m. tons in the year to March 2001. An expansion plan, aiming to increase NALCO’s bauxite production to 4.8m. tons per year, was completed by mid-2000. At the same time, the company increased the annual capacity of its alumina refinery in Orissa from 800,000 tons to 1,050,000 tons. NALCO and the privately-owned Hindalco Industries Ltd are among the world’s lowest-cost producers of alumina and aluminium. In 1999 Hindalco decided to expand the annual capacity of its aluminium smelter at Renukoot, in Uttar Pradesh, by 100,000 tons (from its existing capacity of 242,000 tons). In mid-2000 a major new bauxite-alumina project was being prepared in Orissa by a joint venture involving Alcan, Norwegian interests and a Hindalco subsidiary. The scheme, involving an estimated investment of US $900m., envisages the establishment of a bauxite mine at Baphilimali, producing a projected 3.6m. tons of ore per year, and an alumina refinery in the Rayagada district, with a planned initial capacity of 1.2m. tons per year. Completion of the project is scheduled for 2005. Despite the inadequacy of the electric power supply, India has the potential to become one of the world’s leading aluminium producers. In 2000 the country’s seven smelters (including five in the private sector) had a combined annual capacity of 825,000 tons, while output of aluminium ingots in that year was about 560,000 tons. As part of its expansion plans in the late 1990s, NALCO was increasing the capacity of its smelter at Angul, in Orissa, from 218,000 tons to 345,000 tons. Work on this project was due to be completed by mid-2002. NALCO’s output in the year to March 1999 was only 146,205 tons (compared with 200,162 tons in 1997/98). In 1999/2000 NALCO’s production totalled 212,661 tons. During the same period Hindalco produced 250,751
40 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
tons. Including three smaller companies, the total output of India’s aluminium industry in 1999/2000 was a record 620,512 tons, mainly in the form of ingots. Indonesia has bauxite mines in western Kalimantan (Borneo) and in the Riau archipelago, east of Sumatra. The main producing area is Bintan Island (part of the Riau group), where bauxite has been mined since 1935. Bintan currently has three bauxite mines (controlled by PT Aneka Tambang), which produce ore for export. However, deposits at two of the mines are expected to be exhausted soon (observers now predict that extraction will cease there in 2003, economic circumstances having enabled the site to outlive earlier expectations of closure in 2001). Research into further potential sites in western Kalimantan is ongoing. Indonesia has one major aluminium smelter, capable of producing 225,000 tons per year. The plant forms part of the Asahan Development Project, along the Asahan river on the island of Sumatra. The establishment of the smelter, which began operating in 1982, was intended as the first stage of a fully integrated national aluminium industry. A Japanese consortium of smelters and trading concerns owns 59% of the venture, PT Indonesia Asahan Aluminium Co (PT Inalum), and takes a proportionate share of the plant’s output. Indonesia’s share of Asahan’s production is essential to the country’s domestic aluminium requirements. In 1998, however, severe drought conditions caused shortages of power at the associated hydroelectric plant, forcing a reduction in Asahan’s output. By November the smelter was operating at less than 40% of its capacity. Indonesia’s production of primary aluminium ingots declined from 216,000 tons in 1997 to an estimated 130,000 tons in 1998 and to only about 100,000 tons in 1999. In 2000 production recovered to an estimated 160, 000 tons. In 1999 the Government of Viet Nam was considering the development of bauxite deposits in Lam Dong Province, in which, with Gia Lai, Kon Tum and Dac Lac Provinces, the country’s substantial bauxite reserves are located. In March 2000, after completion of a study, new government plans to exploit these deposits were reported. The proposals involved the creation of a bauxite-aluminium complex in Lam Dong Province. In April the Government approved a planned joint venture with Pechiney to develop the Tan Rai bauxite deposits (estimated at 385m. tons) in Lam Dong. The project envisaged investment of an estimated US $589m. in the establishment of mining operations, an alumina refinery and an aluminium smelter. According to the plans, a further US $375m. would be spent on the construction of an associated hydroelectric plant to provide power for the project. It was expected that, if the scheme was approved after further study, work to establish the mine would begin in early 2001 and about 1.7m. tons of bauxite per year would be produced from 2004. Meanwhile, in 1997 the Vietnamese Government had agreed to a proposal by Daewoo Corpn of the Republic of Korea to survey bauxite reserves in Dac Lac Province. The proposals envisaged the eventual development, at a cost of about US $1,000m., of a mine and an alumina refinery. In 2001, according to the USGS, Russia’s reserves of bauxite totalled 250m. metric dry tons, the 10th largest in the world. Russian production of bauxite in that year amounted to an estimated 4m. tons—the country thus ranking jointly with Suriname as the eighth-largest producer world-wide—compared with 4.2m. tons in 1999. Russian production of primary aluminium totalled an estimated 3.2m. tons in 2001, a similar figure to that of 2000. Russia was the largest producer of primary aluminium in the world in 2001, and the second largest
COMMODITY SURVEYS 41
producer in the world, after the USA, in 2000. Russia depends on imported bauxite to meet its requirements for the production of primary metal. In the late 1990s more than 80% of primary aluminium produced was reportedly for export via so-called short-term tolling contracts between producers and brokers. During the course of the 1990s, as a consequence of a massive decline in domestic demand for aluminium manufactures, Russian production of primary aluminium became almost exclusively export-oriented. In 1999, according to the USGS, domestic consumption of aluminium totalled 500,000 tons of primary metal, and 40, 000–50,000 tons of secondary metal. Kazakhstan produced 3.7m. metric tons of bauxite in 2000 (ranked ninth in world terms), much of it destined for processing in Russia, some in Ukraine and in Tajikistan. Projects to refurbish aluminium-processing facilities in Armenia and Azerbaijan were underway in 2001. Ukraine is a significant producer of alumina, with output reported at 1. 4m. tons in 2000. There are some deposits of bauxite in Central and South-Eastern Europe and exploitation is greatest in Greece, where 2.0m. metric tons of bauxite was produced in 2000, and in Hungary (1.0m. tons). There is also some smelter capacity in this region, chiefly in Romania (which produced an estimated 175,000 tons of primary aluminium in 2000), Greece and Slovakia. Although there is little or no commercial bauxite extraction in Western Europe, the region is a significant producer of primary aluminium thanks to imports of bauxite and alumina from producer countries. There are aluminium production sites throughout the region—the largest producer is Norway (1.0m. metric tons in 2000, according to reports), followed by Germany (a reported 644,000 tons), France (a reported 441,000 tons) and Spain (a reported 366,000 tons). There are bauxite resources in Iran and Turkey. In the former country, bauxite extraction increased from an estimated 150,000 metric tons in 1996 to an estimated 1m. tons in 2000. Development of the country’s smelter capacity enabled production of primary aluminium to exhibit a more modest increase over the same period, reaching an estimated 140,000 tons in 2000. Bauxite production in Turkey recovered to 459,000 metric tons in 2000, roughly its 1998 level, following a sharp decline in production in 2000. Primary aluminium production, by contrast, remained relatively constant around the 60,000-ton mark throughout 1996/2000. Although world demand for aluminium advanced by an average of 3% annually from the late 1980s until 1994 (see below), industrial recession began, in 1990, to create conditions of over-supply. Despite the implementation of capacity reductions at an annual rate of 10% by the major Western producers, stock levels began to accumulate. The supply problem was exacerbated by a rapid rise, beginning in 1991, of exports by the Soviet Union and its successor states, which had begun to accumulate substantial stocks of aluminium as a consequence of the collapse of the Soviet arms industry. The requirements of these countries for foreign exchange to restructure their economies led to a rapid acceleration in low-cost exports of high-grade aluminium to Western markets. These sales caused considerable dislocation of the market and involved the major Western producers in heavy financial losses. Producing members of the European Community (EC, now the European Union—EU) were particularly severely affected, and in August 1993 the EC imposed quota arrangements, under which aluminium imports from the former Soviet Union were to be cut
42 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
by 50% for an initial three-month period, while efforts were made to negotiate an agreement that would reduce the flow of low-price imports and achieve a reduction in aluminium stocks (by then estimated to total 4.5m. tons world-wide). These negotiations, which involved the EC, the USA, Canada, Norway, Australia and Russia (but in which the minor producers, Brazil, the Gulf states, Venezuela and Ukraine were not invited to take part), began in October 1993. Initially, the negotiations made little progress, and in November the market price of high-grade aluminium ingots fell to an 11year ‘low’. Following further meetings in January 1994, however, a Memorandum of Understanding (MOU) was finalized on a plan whereby Russia was to ‘restructure’ its aluminium industry and reduce its output by 500,000 tons annually. By March the major Western producers had agreed to reduce annual production by about 1.2m. tons over a maximum period of two years. Additionally, Russia was to receive US $2,000m. in loan guarantees. The MOU provided for participants to monitor world aluminium supplies and prices on a regular basis. In March the EU quota was terminated. By July the world price had recovered by about 50% on the November 1993 level. The successful operation of the MOU, combined with a strong recovery in world aluminium demand, led to the progressive reduction of stock levels and to a concurrent recovery in market prices during 1994 and 1995. Consumption in the Western industrialized countries and Japan rose by an estimated 10.3% to 17.3m. tons, representing the highest rate of annual growth since 1983. This recovery was attributed mainly to a revival in demand from the motor vehicle sector in EU countries and the USA, and to an intensified programme of public works construction in Japan. Increased levels of demand were also reported in China, and in the less industrialized countries of the South and East Asia region. Demand in the industrialized countries advanced by 11% in 1994, and by 2.2% in 1995. Levels of world aluminium stocks were progressively reduced during 1994, and by late 1995 it was expected that the continuing fall in stock levels could enable Western smelters to resume full-capacity operation during 1996. In May stock levels were reported to have fallen to their lowest level since March 1993, and exports of aluminium from Russia, totalling 2m. tons annually, were viewed as essential to the maintenance of Western supplies. Meanwhile, progress continued to be made in arrangements under the MOU for the modernization of Russian smelters and their eventual integration into the world aluminium industry. International demand for aluminium rose by 0.2% in 1995 and by 0.8% in 1996. In 1997 aluminium consumption by industrialized countries advanced by an estimated 5.4%. This growth in demand was satisfied by increased primary aluminium production, combined with sustained reductions in world levels of primary aluminium stocks. Demand in 1998, however, was adversely affected by the economic crisis in East Asia, and consumption of aluminium in established market economy countries (EMEC) rose by only 0. 1%: the lowest growth in aluminium demand since 1982. However, consumption in the EMEC area increased by an estimated 3.9% in 1999, with demand for aluminium rising strongly in the USA and in much of Asia. Compared with 1998, growth in consumption was, however, reduced in Europe and Latin America. World-wide, the fastest-growing sector of aluminium demand in 1999 was the transport industry (the largest market for the metal), with consumption rising by about 9%. Demand was expected to remain strong in
COMMODITY SURVEYS 43
2000, with sales of motor vehicles predicted to continue rising, while world aluminium output was forecast to increase, as additional smelter capacity became available. Production of primary aluminium in the first six months of 2000 was about 4% above the level for the corresponding period in 1999. In 2000, according to analysis by Alcan, world shipments of aluminium products (both primary and secondary/recycled metal in the form of fabricated products, including castings; excluding the former Soviet Union, other Eastern bloc countries and the People’s Republic of China) of aluminium increased to 28.47m. metric tons. Flat-rolled products constituted the largest category of aluminium products consumed, and within that category can sheet accounted for more than 30% of total sheet, plate and foil shipments. Castings (used mainly in engines and transmissions of passenger cars and light trucks) accounted for 26% of all aluminium products consumed. The transportation sector accounted for 30% of all shipments and was the fastest-growing end-use market for aluminium products. Terrorist attacks perpetrated against targets in the USA in September 2001 diminished the prospects for recovery in 2002 of various sectors of the world aluminium industry, in particular those of the aerospace sector. Weak demand and falling prices, the result of poor economic conditions generally, were already the salient characteristics of markets in North America and Europe before the attacks occurred. In late 2001 it was thought likely that continued declines in aluminium markets would lead to the closure of some smelting facilities, the consequent reduction in production then triggering a sharp recovery in prices as a result of relatively low stocks held world-wide. In November 1993 the price of high-grade aluminium (minimum purity 99.7%) on the London Metal Exchange (LME) was quoted at US $1,023.5 (£691) per metric ton, its lowest level for about eight years. In July 1994 the London price of aluminium advanced to $1,529.5 (£981) per ton, despite a steady accumulation in LME stocks of aluminium, which rose to a series of record levels, increasing from 1.9m. tons at mid-1993 to 2.7m tons in June 1994. In November 1994, when these holdings had declined to less than 1.9m. tons, aluminium was traded at $1,987.5 (£1,269) per ton. In January 1995 the LME aluminium price rose to US $2,149.5 (£1,346) per ton, its highest level since 1990. The price of aluminium was reduced to $1,715.5 (£1,085) per ton in May 1995, but recovered to $1,945 (£1,219) in July. It retreated to $1,609.5 (£1,021) per ton in October. Meanwhile, on 1 May the LME’s holdings of aluminium were below 1m. tons for the first time since January 1992. In October 1995 these stocks stood at 523,175 tons, their lowest level for more than four years and only 19.7% of the June 1994 peak. Thereafter, stock levels moved generally higher, reaching 970,275 tons in October 1996. During that month the London price of aluminium fell to $1,287 (£823) per ton, but later in the year it exceeded $1,500. In March 1997 the London price of aluminium reached US $1,665.5 (£1,030) per ton. This was the highest aluminium price recorded in the first half of the year, despite a steady decline in LME stocks of the metal. After falling to less than $1,550 per ton, the London price of aluminium rose in August to $1,787.5 (£1,126). In that month the LME’s aluminium holdings were reduced to 620,475 tons, but in October they reached 744,250 tons. Stocks subsequently decreased, but at the end of December the metal’s price was $1, 503.5 (£914) per ton, close to its lowest for the year. The average price of aluminium on
44 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
the LME in 1997 was 72.5 US cents per lb, compared with 68.3 cents per lb in 1996 and 81. 9 cents per lb in 1995. The decline in aluminium stocks continued during the early months of 1998, but this had no major impact on prices, owing partly to forecasts of long-term oversupply. In early May the LME’s holdings stood at 511,225 tons, but later that month the price of aluminium fell to less than US $1,350 per ton. In June LME stocks increased to more than 550,000 tons, and in early July the price of the metal was reduced to $1,263.5 (£768) per ton. In early September the LME’s holdings decreased to about 452,000 tons (their lowest level since July 1991), and the aluminium price recovered to $1,409.5 (£840) per ton. However, the market remained depressed by a reduction in demand from some consuming countries in Asia, affected by the economic downturn, and in December 1998 the London price of aluminium declined to $1,222 (£725) per ton. For the year as a whole, the average price was 61.6 US cents per lb. During the first quarter of 1999 the aluminium market continued to be over-supplied, and in March the London price of the metal fell to US $1,139 (£708) per ton: its lowest level, in terms of US currency, since early 1994. Later that month the LME’s stocks of aluminium rose to 821,650 tons. By the end of July 1999 these holdings had been reduced to 736,950 tons, and the price of aluminium had meanwhile recovered to $1,433.5 (£902) per ton. Stock levels subsequently rose, but, following the announcement in August of proposed cost-cutting mergers among major producers (see above), the aluminium price continued to increase, reaching $1,626.5 (£1,009) per ton at the end of the year. The steady rise was also attributable to a sharp increase in the price of alumina in the second half of the year. Following an explosion at (and subsequent closure of) a US alumina refinery in July, the price of the material advanced from $160 per ton in that month to $400 per ton (its highest level for 10 years) in December. However, the average LME price of aluminium for the year (61.7 US cents per lb) was almost unchanged from the 1998 level. With alumina remaining in short supply, prices of aluminium continued to rise during the opening weeks of 2000, and in early February the London quotation reached US $1,743.5 per ton: its highest level for more than two years. However, the LME’s stocks of the metal also increased, reaching 868,625 tons later that month. The London price of aluminium declined to $1,413 per ton in April, but recovered to $1,599 in July. Throughout this period there was a steady decrease in LME holdings, which were reduced to less than 700, 000 tons in April, under 600,000 tons in May and below 500,000 tons in July. At the end of July aluminium stocks were 461,975 tons: only 53% of the level reached in February; and by the end of August they had fallen to 399,925 tons. In September prices continued to rise, reaching $1,644 per metric ton on 13 September, even though stocks fell steadily throughout the month, which they ended at 361,050 tons. Thereafter, in October and November, the London quotation for aluminium was somewhat weaker, falling to respective ‘lows’ in those months of $1,446 and $1,443. Stocks declined simultaneously, standing at 331,250 tons on 31 October, and 320,725 tons on 30 November. Prices strengthened in December, reaching a ‘high’ for that month of $1,632.5 per ton. The firmer quotation was accompanied by the beginning of a sustained rise in stocks of aluminium held by the LME. Having fallen to 298,925 tons on 18 December, stocks ended the month slightly higher, at 321,850 tons, than at the end of the previous month.
COMMODITY SURVEYS 45
Export Price Index for Aluminium (base: 1980=100)
At the end of January 2001 the London quotation rose to US $1,737 per metric ton, thus approaching the highest level recorded in 2000. By the end of January stocks had recovered to 394,075 tons. By the end of February LME holdings stood at 483,200 tons, and the London price had declined to $1,553 per ton. In both March and April, on a month-on-month basis, stocks fell, while prices were generally weaker, the London quotation reaching $1,540 on 27 April. May 2001 marked the beginning of a very substantial accumulation of stocks, which was to continue up to the time of writing, in July 2002. Although the London quotation rose as high as $1,586 on 4 May, prices fell precipitously in June-November, reaching a low of $1,243 on 7 November, but recovering to $1,430 at the end of that month. The sustained decline was attributed to slow economic growth world-wide, which had caused the market to be over-supplied, aggravated by the events in New York, USA, on 11 September. On 28 March 2002 LME stocks rose to 1,029,400 metric tons. The London quotation weakened in both April and May, falling to $1,318 on 23 May. In early June the price recovered to $1,398, while, at the end of that month, stocks of aluminium held by the LME totalled more than 1.2m. tons. Almost all the producers of primary aluminium outside Communist or former Communist countries are members of the International Primary Aluminium Instititute (IPAI), based in London. The IPAI’s membership comprises 39 companies, operating primary aluminium smelters in 24 countries, collectively representing substantially all of the Western countries’ production of primary aluminium. In 1993 the International Aluminium Committee was formed to represent most of the aluminium smelters in the former Soviet Union.
Banana
Although it is often mistakenly termed a ‘tree’, the banana plant, Musa Sapentium is, in fact, a giant herb. It grows to a height of 3 m–9 m (10 ft–30 ft) and bears leaves that are very long and broad. The stem of the plant is formed by the overlapping bases of the leaves above. Bananas belong to the genus Musa but the cultivated varieties are barren hybrid forms which cannot, therefore, be assigned specific botanical names. These banana hybrids, producing edible seedless fruits, are now grown throughout the tropics, but originally diversified naturally or were developed by humans in prehistoric times from wild bananas which grow in Indo-China. The plantain hybrid has grown in central Africa for thousands of years, and traders and explorers gradually spread this and other varieties to Asia Minor and East Africa; the Spanish and Portuguese introduced them to West Africa and took them across the Atlantic to the Caribbean islands and the American continent. However, the varieties now most commonly traded internationally were not introduced to the New World until the 19th century. The banana is propagated by the planting of suckers or shoots growing from the rhizome, which is left in the ground after the flowering stem, having produced its fruit, has died and been cut down. Less than one year after planting, a flowering stem begins to emerge from the tip of the plant. As it grows, the stem bends and hangs downwards. The barren male flowers which grow at the end of the stem eventually wither and fall off. The seedless banana fruits develop, without fertilization, from the clusters of female flowers further up the stem. Each stem usually bears between nine and 12 ‘hands’ of fruit, each hand comprising 12–16 fruits. Before it is ripe, the skin of the banana fruit is green, turning yellow as it ripens. To obtain edible white flesh, the skin is peeled back. The process of fruiting and propagation can repeat itself indefinitely. In commercial cultivation the productive life of a banana field is usually limited to between five and 20 years before it is replanted, although small producers frequently allow their plants to continue fruiting for up to 60 years. Banana plantations are vulnerable to disease and to severe weather (particularly tropical storms), but the banana plant is fast-growing, and a replanted field can be ready to produce again within a year, though at a high cost. The varieties of dessert banana on which international trade is predominantly based, and which are most usually eaten raw owing to their high sugar content (17%–19%), comprise only a few of the many varieties which are grown. Many types of sweet banana, unsuitable for export, are consumed locally. Apart from the trade in fresh, sweet bananas, the fruit has few commercial uses, although there is a small industry in dried bananas and banana flour.
COMMODITY SURVEYS 47
Production of Bananas (’000 metric tons, excluding plantains)
* Unofficial figure. † FAO estimate. Source: FAO.
The numerous high-starch varieties with a lower sugar content, which are not eaten in their raw state, are used in cooking, mostly in the producing areas. Such varieties are picked when their flesh is unripe, although they are occasionally of a type which would become sweet if left to ripen. Cooking bananas, sometimes called ‘plantains’ (though this term is also applied to types of dessert banana in some countries), form the staple diet of millions of Africans. Bananas can also be used for making beer, and in Africa special varieties are cultivated for that purpose. Advances in production methods, packaging, storage and transport (containerization) have made bananas available world-wide. Although international trade is principally in the sweet dessert fruit, this type comprises less than one-fifth of total annual world banana production. The banana was introduced into Latin America and the Caribbean by the Spanish and the Portuguese during the 16th century. The expansion of the banana industry in the small Latin American (so-called ‘green’ or ‘banana’) republics between 1880 and 1910 had a decisive effect in establishing this region as the centre of the world banana trade. Favourable soil and climatic conditions, combined with the ease of access around the Caribbean and to a major market in the USA, were major factors in the initial commercial success of the Latin American banana industry. Although advances in storage and transportation made the US market more accessible to producers in other areas, they also made available an equally important market in Europe (see below). Owing to considerably lower production costs than in other producing areas, bananas from Central and South America command the major portion of the world export market. It is there that the large multinational companies
48 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
(notably United Brands, Standard Fruit and Del Monte) which dominate the world banana market are established. Bananas are grown in most Latin American countries. Brazil has traditionally been the region’s leading producer of bananas, although they contribute only a small proportion of the country’s total export earnings. The banana industry is of far greater economic importance in Ecuador, where production in 2000 surpassed that in Brazil and where bananas are the leading cash crop (as they are in Honduras), and in Colombia and Costa Rica, where they vie with coffee as the principal source of export revenue. Ecuador, the world’s second largest producer of bananas (after India), is the leading exporter, with shipments of 4.0m. metric tons (valued at US $954m.) in 1999. In that year bananas accounted for 21.4% of Ecuador’s export earnings. Banana shipments contribute significantly to the export receipts of Honduras (providing 8.6% of the total in 2000) and Costa Rica (9% in 2000). In October 1998, however, about 70% of the Honduran crop was destroyed by ‘Hurricane Mitch’, necessitating extensive replanting during 1999. In that year bananas contributed only 3.3% of Honduran export revenue. Among other Latin American countries where bananas are a major export are Panama (21.1% in 1999, excluding trade of the Colón Free Zone) and Belize (16.4% in 1999). Bananas are also a useful source of foreign exchange in Colombia (where they provided 4.8% of total export earnings in 1999), Guatemala (5.9% in 1999) and Nicaragua (3.0% in 1999). The territories most dependent on bananas for export receipts are Caribbean islands, including Dominica (where bananas represented 23.9% of total exports, by value, in 2000), Guadeloupe (22.2% in 1997), Martinique (36.6% in 1997), Saint Lucia (62.5% of domestic exports in 1999) and Saint Vincent and the Grenadines (41.3% of total exports (including re-exports) in 1999). These islands’ size dictates that, while the crop is of utmost economic importance, they cannot be styled major producers in global terms (the largest producer in 2001 was Martinique, with an estimated 310,000 metric tons). As noted above, bananas are an important subsistence crop in many African countries. In 2001, Africa accounted for an estimated 11.2% of total world production, and, across the continent, Angola, Burundi, Cameroon, Côte d’Ivoire, Egypt, South Africa and Tanzania all produce bananas on a large scale. Only Cameroon and Côte d’Ivoire are notable exporters, however. In 2000 Côte d’Ivoire’s exports of bananas totalled 243,032 metric tons, compared with 241,580 in 1999, and 206,060 in 1998. Bananas accounted for 2.1% of the country’s export earnings in 1996, the last year for which figures are available. Cameroon exported an estimated 138,100 tons of bananas in 2000, after two years in which exports were estimated by the FAO to have declined to zero as a consequence of drought. The countries of the European Union constitute the most important market for the bananas of both Cameroon and Côte d’Ivoire. Both countries have benefited from the protective import policy of the EU (see below). Exports of bananas from Côte d’Ivoire are estimated to have increased threefold since the late 1980s, those of Cameroon twofold. In both countries production for export is undertaken on large plantations (operated by Dole and Chiquita in Côte d’Ivoire, and by Del Monte and Dole in Cameroon). Yields in Cameroon and Côte d’Ivoire are reportedly comparable with those achieved in Latin America, although quality remains inconsistent. The cost of producing bananas for export in Africa tends to be high, owing, in part, to poor communications infrastructure.
COMMODITY SURVEYS 49
In the Far East, the pattern of banana production is similar to that prevailing in Africa, in so far as it is dominated by subsistence crops. India, for example, is by far the world’s largest producer of bananas, but its exports are of little significance. The same is true of other major Far Eastern producers, such as the People’s Republic of China, Indonesia, Thailand and Viet Nam. The notable exception is the Philippines, where output of bananas totalled 4.9m. metric tons in 2000, and exports in the same year amounted to 1.6m. tons, compared with 1.3m. tons in 1999 (when bananas accounted for 0.7% of the country’s export earnings), and 1.1m. tons in 1998. The increase in shipments from the Philippines in 2000 was attributed to a rise in production, strong demand from East Asia, which constitutes the main market for Philippine bananas, and the weakness of the Philippine peso relative to the US dollar and the Japanese yen. In terms of value (f.o.b.), Japan was by far the most important destination for Philippine banana exports in 2001, followed by the People’s Republic of China, the Republic of Korea and Taiwan. Minor producers in the Asia-Pacific region include Australia, Bangladesh, Cambodia, Malaysia, Papua New Guinea and Pakistan. Production in Europe is confined to the continent’s southernmost fringes and possessions. The largest producer is Spain (Canary Islands—415,200 metric tons in 2001), while the crop is also grown in Portugal (Madeira and the Azores) and in Greece (Crete). Many of the countries of the Middle East produce small quantities of bananas, the most significant being Lebanon (110,000 tons in 2001, according to FAO estimates). There is no international agreement governing trade in bananas, but there are various associations—such as the Union of Banana-Exporting Countries (UPEB), comprising Colombia, Costa Rica, Guatemala, Honduras, Nicaragua, Panama and Venezuela; the Caribbean Banana Exporters’ Association, comprising Jamaica, Belize, the Windward Islands and Suriname; and WIBDECO, the Windward Islands Banana Development Co— which have been formed by producer countries to protect their commercial interests. Prices vary greatly, depending on relative wages and yields in the producing countries, freight charges, and various trade agreements negotiated under the Lomé Convention between the European Community (EC, now the European Union—EU) and 71 African, Caribbean and Pacific (ACP) countries. The Lomé arrangements include a banana protocol, which ensures producers an export market, a fixed quota and certain customs duty concessions. In this connection, the prospect of a withdrawal of internal barriers to intra-EC trade, as a result of the completion of a single market with effect from January 1993, was the cause of considerable anxiety to most major banana exporters (see below). The EU is the world’s largest market for bananas, accounting, in 2000, for an estimated 3. 3m. tons, representing about 27% of world banana imports. Under the market arrangements prior to the end of 1992, just over one-half of banana imports were subject to quota controls under the Lomé Convention. Approximately 20% of market supplies were imported, duty free, from former British, French and Italian colonies. The Windward Islands of Saint Lucia, Dominica and Grenada together accounted for some 90% of banana exports to the EC under the Lomé Convention’s banana protocol, Jamaica and Belize also being parties to the Convention. Around 70% of bananas from the Windward Islands were exported to the United Kingdom. France maintained similar arrangements with its traditional suppliers (overseas territories such as Guadeloupe and Martinique), as did Italy (Somalia). Another 25% of EC demand was satisified internally. The remainder of quota
50 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
imports (representing 10% of overall market demand) were imported, duty free, into Germany, mainly from Latin American countries. Banana consumption in Germany, at 18 kg per head annually, has been approximately twice that of other EU countries. Banana imports into the residual free market originated mainly from the same countries, but attracted a 20% import tariff. This complex market structure, which strongly favoured the Caribbean islands, was maintained by barriers to internal trade. These prevented the re-export of imports into Germany from, for instance, Honduras or Ecuador, to the United Kingdom and France. Without these restrictions, Central and Latin American exporters, enjoying the cost advantages of modern technology and large-scale production, and subject to a 20% import tariff on their EC exports, would have substantially expanded their market share, and possibly displaced Caribbean producers altogether in the longer term. The intention of the Commission of the European Communities that the tariff-free quota system would cease after 1992 held serious implications for Caribbean producers, who, with the ACP secretariat, sought to persuade the EC to devise a new preference system to protect their existing market shares, possibly taking the form of quota allocations, which would accord with the obligations of the EC countries in relation to trade with the ACP under the terms of the Lomé Convention. These guarantee that ‘no ACP state shall be placed, as regards access to its traditional markets…in a less favourable position than in the past or present’. In December 1992 it was announced by the EC Commission that ACP banana producers were to retain their preferential status under the EC’s single-market arrangements that were to enter into force in July 1993. These would guarantee 30% of the European banana market to ACP producers, by way of an annual duty-free quota of approximately 750,000 tons. Imports of Latin American bananas were to be limited to 2m. tons per year at a tariff of 20%, with any additional shipments to be subject to a tariff rate of 170%, equivalent to 850 European Currency Units (ECU) per ton. It was asserted that, as the proposals linked tariffs with quotas, the EC was not in contravention of the General Agreement on Tariffs and Trade (GATT) regulations on the restriction of market access. These arrangements were opposed by Germany, Denmark, Belgium and Luxembourg, as well as by the Latin American banana producers, who forecast that their shipments to the EC, totalling approximately 2.6m. tons annually, could decline by as much as 20%. In early 1993 the German Government unsuccessfully sought a declaration from the Court of Justice of the European Communities that the EC Commission was in violation of GATT free-trade regulations. In June the Governments of Ecuador, Guatemala, Honduras, Mexico and Panama obtained agreement by GATT to examine the validity of the EC proposals. In the mean time, the new arrangements covering EC banana imports duly took effect on 1 July. In February 1994 a GATT panel ruled in favour of the five Latin American producers, declaring that the EU policy on bananas unfairly favoured the ACP banana exporters and was in contravention of free-trade principles. The Latin American producers accordingly demanded that the EU increase its annual quota to 3.2m. tons and reduce the tariff level on excess shipments. The EU responded to the ruling by offering to increase the Latin American banana quota to 2.1m. tons in 1994 (with effect from 1 October) and to 2.2m. tons in 1995, and to reduce the tariff rate by one-quarter. This compromise was accepted by
COMMODITY SURVEYS 51
Colombia, Costa Rica, Nicaragua and Venezuela, but rejected by Ecuador and the other Latin American producers. The Latin American exporters assenting to the plan were each to receive specific quotas, based on their past share of the market, within the overall 2.1m. ton quota. In October 1994 the Court of Justice of the European Communities rejected a petition by Germany seeking a quota of 2.5m. tons in that year, with subsequent annual increases of 5%. With the accession to the EU in January 1995 of Austria, Finland and Sweden, it was anticipated that the quota for duty-free bananas would be increased by up to 350,000 tons annually to accommodate the community’s enlarged membership. (This proposed level of increase, however, was viewed by Germany as inadequate.) In the same month, the US Government indicated that it was contemplating the imposition of retaliatory trade measures against both the members of the EU and those Latin American banana exporters which had agreed to the 1994 quota compromise arrangements. (Although the USA is only a marginal producer of bananas, US business interests hold substantial investments in the multinational companies operating in Central and South America.) In February 1995 the EU came under further pressure from a number of African banana-producing countries, led by Cameroon and Côte d’Ivoire, which sought further improvements in their access to EU markets under ACP arrangements. The USA, meanwhile, with the support of Germany, Belgium, the Netherlands and Finland, declared in July that renewed efforts should be made to formulate a new banana import regime that would reconcile the interests of the Latin American and ACP producers. France and the United Kingdom, however, reiterated their intention to maintain their perceived obligations towards their former Caribbean colonies, whose economies would be severely affected by the operation of a free market in bananas. In September 1995 the USA formally instituted a complaint against the EU with the World Trade Organization (WTO), the successor organization to the GATT. Further representations to the WTO by the US Government, supported by the Governments of Ecuador, Guatemala, Honduras and Mexico, followed in February 1996. In the following month the EU, which had raised its annual duty-free banana quota to 2.35m. tons (see above), proposed a compromise reallocation of quotas, under which the Latin American producers would obtain 70.5% of the new quota (as against their existing proportion of 66. 5%), while the ACP growers would receive 26% (down from 30%). An additional allowance of 90,000 tons annually was also to be extended to certain categories of bananas from Belize, Cameroon and Côte d’Ivoire. In May, however, the USA, together with Ecuador, Guatemala, Honduras and Mexico, made a concerted approach to the WTO to disallow the EU banana import regime in its entirety. Efforts by the contending groups of producers to achieve a compromise followed in July, when it was announced that ministerial meetings between the ACP and Latin American producing countries were to take place in October. In late July the EU announced that its annual quota for Latin American bananas was to be raised to 2.2m. tons to reflect increased demand from the enlarged EU membership. An interim report issued by the WTO in March 1997 upheld the complaint instituted in 1996 by the USA and four Latin American producers, and declared the EU to be in violation of its international trade treaty obligations. Representations by the EU against the ruling were rejected by the WTO appeals committee in September 1997, and the EU was
52 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
informed that it must formulate a new system for banana imports by early 1998. This ruling was accepted in principle by the EU, which in January 1998 proposed new arrangements under which it would apply a system of quotas and tariffs to both groups of producers, while retaining an import-licensing system. A quota increase to 2.5m. tons annually was to be offered to the Latin American exporters. It was also proposed to offer aid totalling ECU 450m. to the Caribbean producers to assist their banana industries towards the ability to compete efficiently in a proposed ‘free’ market in bananas by 2008. In June 1998 the US Government expressed dissatisfaction with the terms of the EU plan. The EU, however, refused to agree to further consultations with the WTO appeals committee. The US position was reinforced in September when the ‘Group of Seven’ major industrial countries sought, without success, to persuade the EU to accept the terms of the WTO ruling. However, the EU offered a new compromise plan, whereby the Latin American banana producers would, with effect from early 1999, receive an annual quota of 2.53m. tons, at an import duty rate of US $90 per ton, with the ACP growers retaining free access for annual shipments of 857,000 tons, which the EU stated to be in compliance with the WTO decision. This was rejected in October 1998 by the USA and the Latin American petitioners (who had been joined in February by Panama), and it was announced that the US Government was to seek authorization by the WTO for a programme of trade retaliation against the EU. Following further unsuccessful negotiations, and a challenge by the EU to the legality of the proposed sanctions, the US Government published in early December a list of 16 EU exports, including cashmere clothing, biscuits, candles and electric coffeemakers, on which it intended to impose tariffs of 100% with effect from early 1999. These measures, which were directed principally against the United Kingdom, France and Germany, and from which Denmark and the Netherlands (which had advocated acceptance of the WTO ruling) were exempted, provoked considerable anxiety internationally, on the grounds that they could lead to a wider disruption of world trade. Negotiations between representatives of the USA and the EU were resumed in January 1999, while the implementation of the proposed tariffs was suspended pending consideration by the WTO of their validity in international law. The WTO also agreed to re-examine the terms of the compromise plan put forward by the EU in the previous September. Following sustained but unsuccessful attempts by the USA and the EU to reach a negotiated settlement, the US Government, supported by the five Latin American petitioners, announced in early March 1999 that it was to invoke the punitive tariffs. Concurrently, a number of countries in the Caribbean Community and Common Market (CARICOM) grouping announced that they were considering the abrogation of a narcoticscontrol agreement with the USA, which permitted US enforcement agencies to pursue suspected drugs-traffickers into their territorial waters and air space. In April 1999 the WTO ruled that the revised EU banana import proposals represented an attempt to avoid compliance with the original WTO ruling, and formally authorized the USA to impose trade sanctions against EU goods, valued at US $191.4m. annually (compared with damages of $520m. originally claimed), to compensate for losses incurred by US companies as a consequence of the EU banana regime. (This authorization was only the second in the 51-year history of the WTO and its predecessor, GATT.) The EU announced its acceptance of the decision, although indicating that the formulation of
COMMODITY SURVEYS 53
reforms could span the period to January 2000. The USA, meanwhile, accepted the need for this period of consultation and further extended the suspension of its import tariff proposals. However, in March 2000, following a complaint by the EU, a WTO panel ruled that the sanctions against EU goods imposed by the USA were a violation of international trade rules. In mid-2000 the European Commission proposed the possible introduction of a tariff quota system involving the distribution of licences on a ‘first come, first served’ basis. However, it also suggested that, if a consensus were not reached, a tariff-only solution, whereby no restrictions would be imposed on quantities but which would give ACP countries preferable rates, would be the only viable solution; the latter option was rejected by a number of EU governments as potentially damaging to EU banana-growers. Moreover, the granting of licences on a ‘first come, first served’ basis was subsequently rejected by representatives of Latin American banana-producing states, while the USA stated that the proposed regime did not adequately address its concerns. In July a WTO panel ruled that the sanctions against EU goods had been imposed prematurely by the USA, some six weeks before it had received the authorization of the WTO to apply them. The European Commission indicated at this time that it would take no further action itself, but that companies affected by sanctions before the WTO authorization were free to pursue claims for compensation in the US courts. The USA, meanwhile, was reported to be planning to ‘rotate’ the sanctions onto a new list of goods, the US Congress having ordered a so-called ‘carousel’ sanctions regime under which the list would change every six months. In addition, in May, the WTO had authorized Ecuador, the world’s largest banana exporter, to impose sanctions of up to US $201.6m. in the form of tariffs applied on EU service providers, industrial designs and copyrights. In October 2000 the European Commission formally approved the introduction of a tariff quota system for bananas on a ‘first come, first served’ basis. Such a system would retain the use of three quotas until 2006, the Commission favouring the introduction of a tariff-only regime thereafter. The third quota would permit annual imports of 850,000 tons and would be available to all exporters. However, ACP exporters would be granted a tariff preference of US $264 per ton, rather than $275 per ton, as had previously been proposed. The proposed new tariff quota system was immediately rejected by Colombia, Costa Rica, Guatemala, Honduras, Nicaragua and Panama, which threatened renewed action with the WTO. The USA also questioned whether the new regime was ‘WTO-compatible’. Shortly after the announcement of the details of the proposed new regime. EU governments declared that it provided ‘a basis for settling the banana dispute’. In March 2001 the EU announced that it would delay the introduction of the new tariff quota system for bananas in order to consider an alternative proposal, by the US fruit trading company, Chiquita Brands International, which would effectively grant quotas based on historical market share. Chiquita Brands International had, in January, initiated legal action against the European Commission in respect of losses allegedly incurred as a result of EU restrictions on banana imports. The USA had also threatened to implement new trade sanctions if the EU proceeded with the introduction of the new regime. In April the dispute over bananas appeared finally to have been resolved after the EU agreed temporarily to reallocate to Chiquita Brands International a larger share of the European banana market
54 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
from 1 July 2001, the date set as a target for the introduction of the new tariff quota system. In return, the USA was reported to have agreed to suspend, from that date, the sanctions it had imposed on EU goods; and to support a waiver in the WTO that would allow a specific quota for bananas from traditional ACP exporters. Under the settlement negotiated, the EU agreed to transfer 100,000 tons of bananas from the quota reserved mainly for ACP producers to that set for Latin American producers. From 1 July most import licences to the EU would be allocated on the basis of traditional shipment levels. Some 17% of licences would be reserved for new exporters or for companies which had significantly increased their imports since a 1994–96 reference period. Under the terms of the Cotonou Agreement, the successor convention to the fourth Lomé Convention that covers the period 2000–20, the system of trade preferences hitherto pertaining was to be gradually replaced by new economic partnerships based on the progressive and reciprocal removal of trade barriers. In a protocol to the Cotonou Agreement (the Second Banana Protocol), the ‘overwhelming importance to the ACP banana suppliers of their exports to the Community (EU) market’ was acknowledged, and the EU agreed to seek to ensure the continued viability of their banana export industries, and the continued access of their bananas to the EU market. Bananas were included by the UN Conference on Trade and Development (UNCTAD) on a list of 18 commodities in its proposed integrated programme for the regulation of international trade in primary products, based on commodity agreements backed by a common fund for financial support. The UN’s FAO and UNCTAD are seeking, through an inter-governmental group, to formulate such an international agreement on bananas, involving producers and consumers, which would ensure a proper balance of supply and demand, regulating trade in order to provide regular supplies for consumers at a price remunerative to producers. The main impediments to a trade pact are disagreements on the means by which the market would be stabilized, in particular on the definition and use of export quotas, which producers consider to be restrictive, and on the lowering of trade barriers to allow reciprocal trade, which is opposed by countries with high production costs. The average import price at US ports of first-class bananas from Central America and Ecuador declined from 25.46 US cents per lb in 1991 to 19.91 cents per lb in 1994. The annual average rose to 20.02 cents per lb in 1995,21.41 cents in 1996 and 22.25 cents in 1997, but eased to 21.61 cents in 1998. It fell to 19.39 cents per lb in 1999. On a monthly basis, the average price advanced from only 18.14 cents per lb in October 1998 to 24.62 cents in November (following the damage caused by ‘Hurricane Mitch’), but fell to 19.66 cents in December. The monthly average increased to 23.33 cents per lb in February 1999, but was reduced to only 17.02 cents in October. Banana prices rose sharply in early 2000, and the average for February was 24.63 cents per lb. According to the World Bank, the annual average price of bananas at US ports for 2000 was $424.0. Prices increased steadily throughout 2000 and into 2001—the average price for the latter year was $583.3, although the average for July-September of that year exceeded $650. Prices declined sharply thereafter, before recovering in 2002, the average price for the first seven months of that year being $553.0.
COMMODITY SURVEYS 55
Export Price Index for Bananas (base: 1980=100)
Barley
This annual cereal, of the genus Hordeum, is a member of the gramineae family. Varieties are distinguished by the arrangement of kernels on the plant. The two principal commercial forms are six-rowed barley (H. vulgare) and two-rowed barley (H. distichum). An irregular variety is also cultivated in Ethiopia. World-wide, barley is the fourth most-cultivated grain crop after wheat, rice and maize. In most of Europe, the USA and Canada, barley is generally sown in the spring. In the Mediterranean region, and in the southern USA, however, it is sown in the autumn. Barley is also grown as an annual winter crop in many areas. Barley is cultivated primarily for use as animal feed. As its protein content is superior to that of maize or sorghum, barley’s inclusion in feed compounds lessens the need for protein supplements. High-quality grain is used for malting (the controlled germination of cereals, and the arrest of this natural process through exposure to heat). Most of the malt produced from barley is used in the brewing industry. Germination capability is the key determinant of the grain’s suitability for malting, and modern brewing industries usually require this to be not less than 98%. Barley is a relatively minor source of flour for human consumption. (Barley flour is a by-product of pearling, the removal of the grain’s outer husk and part of its kernel.) However, its use for human consumption may be increased by research in progress in 2002, which seeks to identify ways in which the beneficial qualities of barley, such as its high fibre and antioxidant content, low fat content and lack of cholesterol, might be exploited to promote human health. Barley has been cultivated since ancient times and has been adapted to a wider range of climates than any other cereal, extending from subarctic to subtropical conditions. It does not, however, thrive where there is extreme heat and humidity. World barley production declined during the 1990s at an average annual rate of 3.6%, having increased sharply, by an average rate of 2.9% per year, in the 1970s, and steadily, by an average annual rate of 0.5%, during the 1980s. Average world production in 1990–99 was about 156m. metric tons per year, compared with about 147m. tons in 1970–79 and some 165m. tons in 1980–89. During the 1990s, with the exceptions of South America and Oceania, the decline in barley production was world-wide, but was especially marked in the countries of the former Soviet Union and Eastern Europe, owing to adverse weather conditions, combined with political upheaval and its economic consequences. Like that of other cereals, notably wheat, the production of barley may vary considerably from year to year. Part of the variation is attributed to weather conditions. Drought, for example, occasionally decimates North African output.
COMMODITY SURVEYS 57
Production of Barley (’000 metric tons)
* Estimated production. † Unofficial figure. Source: FAO.
National producer-support policies are also a major influence. In the 1990s and early 2000s several major barley-producing countries, including leading exporters, pursued policies of market deregulation, prompting growers to substitute competing coarse grains, oilseeds or other protein crops for barley in years when their economic prospects appear more favourable. The most significant example of such deregulation has been the European Union’s (EU) ongoing adjustment of support arrangements for cereals, which is forecast, in the near term, to permit an expansion in member states’ production by increasing the price competitiveness of EU cereal crops on world markets. According to the FAO, world barley production totalled 141m. tons in 2001, compared with 135m. tons in 2000 and 128m. tons in 1999. These totals are similar to those corresponding to years in the early 1970s. In recent years the EU has dominated world barley production. In 2001 production of barley in the EU totalled 48.4m. metric tons (equivalent to 34.2% of total world output), compared with 51.5m. tons in 2000 (38.1%) in 2000 and 48.6m. tons (37.9%) in 1999. Among the EU member states, the principal producer is Germany, which harvested 13.6m. tons of barley in 2001, compared with 12.2m. tons in 2000 and 13.3m. tons in 1999. The domestic brewing industry is the primary destination for German production. France, generally the largest European producer until the mid-1970s when it was surpassed by Germany, is now generally the second largest producer in the EU, although in a number of years in the 1990s and in 2000 its production was exceeded by that of Spain (see below). French production was 9.8m. tons in 2001, compared with 9.7m. tons in 2000 and 9.4m. tons in 1999. Spanish barley harvests fluctuate more widely than that in most other major
58 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
European countries (for example, the country produced in 1996 more than double its 1995 output), owing, in part, to the warmer climate and the vulnerability to drought. Spain’s 2001 production totalled 6.2m. tons, compared with 11.3m. tons in 2000 and 7.4m. tons in 1999. Barley production in the United Kingdom has declined since its peak of the early 1980s—until that point its harvests sometimes exceeded those of France. British production of barley in 2001 was 6.7m. tons (greater than that of Spain, in fact), compared with 6.5m. tons in 2000 and 6.6m. tons in 1999. The crop is grown in all 15 EU member states, the other most significant producer being Denmark (an estimated 4.1m. tons in 2001, broadly in line with previous years’ totals). The countries of the former Soviet Union ranked second in world barley production in 2001, with output amounting to 36.4m. tons, or 25.8% of the world total, a considerable increase from the 2000 figure of 26.4m. tons (19.8%, itself a marked increase on the 1999 figure). Within this group, production was dominated by Russia, which harvested 19.5m. tons in 2001, compared with 14.1m. tons in 2000 and 10.6m. tons in 1999. Ukraine also showed a marked increase in production in 2001, to 10.2m. tons, compared with 6.9m. tons in 2000 and 6.4m. tons in 1999…The other principal regional producers were Kazakhstan, Belarus and Lithuania. North America was the world’s third largest regional producer of barley in 2001, contributing 16.8m. tons, or 11.9%, to total world production. In the late 1990s, and early 2000s, Canadian production has tended to be about double that of the USA, where the climate is warmer and, hence, better suited to other cereals, most notably maize. In 2001 Canada produced 11.4m. tons of barley, compared with 13.5m. tons in 2000 and 13.2m. tons in 1999. US output was 5.4m. tons in 2001, 6.9m. tons in 2000 and 6.1m. tons in 1999. Other significant producing areas are the Middle East, where Turkey contributed an estimated 6.6m. metric tons of the region’s total output of 9.3m. tons in 2001; and Oceania, where Australia contributed nearly.all the 7.8m. tons produced in 2001. China is the principal producer in the Far East, with output amounting to 3.4m. tons in 2000. As noted above, North African production may fluctuate considerably from year to year in response to the level of rainfall. In 2000, for instance, Morocco, the largest producer in the region, produced only 466,000 metric tons, compared with 1.5m. tons in 1999 and 1.1m. tons in 2001. A similar pattern was observed in the other significant growers in the region, Algeria and Tunisia. Ethiopia is by far the largest producer in sub-Saharan Africa, with 2001 output estimated to equal the 2000 level of 1.1m. tons. Barley is far less important than wheat or maize in international trade. In 1990–99 the amount exported ranged between 18m. metric tons (1993) and 24m. tons (1992), averaging 21.2m. tons per year. In comparison, the amount of barley exported in 1970–79 averaged 12.7m. tons annually, and that exported in 1980–89 20.7m. tons. Exports of barley flour and grits and of pearled barley may vary enormously from year to year; they are of negligible significance in international trade. Exports of barley malt, however, are of considerable and steadily increasing importance. In 1990–99 exports of barley malt increased by an annual average of 3.3%, compared with average annual growth of 9.0% in 1970–79 and 3.0% in 1980–89.
COMMODITY SURVEYS 59
In 2001 world barley exports amounted to almost 24m. metric tons. The main exporters in that year were the EU, which accounted for 63% of the total, Australia (12.5%), Canada (7.5%) and the USA (4.6%). Intermittently, Russia, Ukraine and Turkey are also major exporters. Saudi Arabia is consistently and by far the largest individual importer of barley, accounting, on average, for about 21 % of the total market in each year in 1990–99. In 2000 Saudi Arabian imports represented about 22% of the total world-wide. Chinese imports increased steadily during the 1990s and in 2000 amounted to 2.1m. tons, or about 10% of the total quantity of barley imported in that year. Japanese imports averaged 1.6m. tons during the 1990s, and in 2000 totalled 1.7m. tons, 8.0% of the world total. North African imports (Algeria, Morocco and Tunisia exclusively) may be subject to considerable fluctuation from year to year, but in some years are very substantial. In 2000 they totalled 1. 8m. tons, 8.5% of the total imported world-wide. Despite its status as the leading producer and exporter of barley, the EU is also a major importer. In 2000 EU imports amounted to 4. 2m. tons, almost 20% of the total. Exports of barley malt totalled 5.2m. metric tons in 2000. In that year the EU was the leading exporter, accounting for almost 62% of the total, followed by Canada and Australia, which each accounted for a little less than 10% of the total. Canada has consistently exported more barley malt than Australia since 1995. Japan was the leading individual market for barley malt in 2000, importing 15.7% of the total. Thailand and the Republic of Korea are also important markets for barley malt, although far smaller than their Japanese counterpart. The Chinese market is far smaller still, although it grew significantly during the 1990s. In regional terms, and overall, South America was the leading importer of barley malt in 2000, with purchases amounting to almost 1m. tons, about 20% of the total. Brazil is by far the biggest market for barley malt in South America, accounting for almost 64% of the region’s imports in 2000. The EU was the second largest market for barley malt in 2000, accounting for about 16% of total imports. Trade in feed barley has been propelled in recent decades by rising meat consumption in Asia, the Middle East, North Africa and South America. Imports of barley—and, indeed, all feed grains—by countries in those regions have risen in line with the development of meat production there. This trend is forecast to continue as the diets of those countries become increasingly protein-based. Barley is the principal grain fed to livestock in Saudi Arabia and, traditionally, in North Africa too. However, its use does vary, depending on the relationship between its price and those of competing feed grains, such as maize and sorghum. The use of barley as a feed grain has declined somewhat in North Africa in recent years, owing to poor crops. Indeed, in the mid-1990s maize overtook barley as the main feed grain imported into North Africa, although this was partly the result of increased poultry production. Nevertheless, the countries of the Middle East and North Africa are expected to continue to constitute the world’s most important feed barley market in the medium term. Exploiting its geographical advantage, the EU has been the dominant supplier of feed barley to North Africa and Saudi Arabia, and, for that matter, to the former Soviet Union and Eastern Europe. Australia has also had some success in marketing feed barley in the Middle East. Exports of barley by Canada have tended to be to markets where it, too, has a natural geographical advantage. Canada has lost considerable market share in Asia as a result
60 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
of competition from Australia and, to a lesser extent, the USA and the EU. While most of the barley it produces is of malting quality, US exports are primarily of feed barley. The other factor that has driven trade in barley in recent years has been increased demand by brewing industries for high quality grain for malting. For instance, about one-third of Australian barley produced is now marketed as malting barley. Chinese demand has been a considerable fillip to Australia’s export trade, and in some years China’s imports of barley from Australia have consisted entirely of malting quality grain. The prospects for Australia’s export trade appear favourable if, as expected, the growth in the Chinese brewing industry is repeated in other developing countries. Overall, as with feed barley, the supply of malting barley to the world market is dominated by the EU. Owing to its dominance in both the production of and trade in barley, the EU has been able to exert the strongest influence on the international price of the grain. The EU’s long-term policy of effectively using exports to manage the supply and demand of barley (and other grains) within its own borders provoked strong criticism, especially in the USA. The policy of subsidizing exports in order to reduce internal surpluses was most controversial, especially as in some years the level of subsidy could be higher than the price of the grain itself. Since 1993, however, as a result of budgetary constraint and international pressure, the EU has implemented a major reform of its Common Agricultural Policy (CAP), causing the internal price of barley (and other grains) to fall sharply, in line with the rest of the world, thus reducing the need for subsidization in order to compete on world markets. Reform of the CAP has aimed to expand internal use by reducing prices, in order to lessen imports of substitute feed grains. The effect of further reform of EU agricultural policy, undertaken under the ‘Agenda 2000’ programme, is expected to be the elimination of the need for export subsidies, enabling the EU to comply with World Trade Organization constraints on the subsidization of exports. EU agricultural policy reform has been assisted by the unforeseen substantial decline in the value of the euro against the US dollar, which, in combination with stronger world prices, has reduced the need for subsidies in order to make EU grains competitive. In early 2002 the EU was reportedly importing large quantities of competitively priced barley from the Black Sea region, as well as other feed grains, owing to a combination of high domestic prices after a substantially reduced crop, strong demand and zero import duties. The wide range of barley varieties and grades, the subsidies granted in certain markets and the effects of pooling combine to make general international price information on barley difficult to express accurately. Malting barley generally attracts a premium over feed barley, although again, the amount of this premium varies according to the market and the variety. Prices generally rose in late 2001 and early 2002 as adverse climatic conditions in many growing areas affected production. As a specimen, the average price of Pacific Northwest feed barley (f.o.b. at US ports) in January 2001 was US $125 per metric ton. This price decreased steadily during the year, falling to $95 in August, before increasing thereafter owing to increased import demand from East Asia, ending the year at $115. The price declined slightly from the second quarter of 2002, before increasing rapidly in August, as news of poor weather and flooding in Europe heightened demand.
COMMODITY SURVEYS 61
Export Price Index for Barley (base: 1980=100)
Cassava
Cassava (Manihot esculenta) is a perennial woody shrub, also known as Manioc, Tapioca or Yuca, up to 5 m in height, which is cultivated mainly for its enlarged, starch-rich roots, although the young shoots and leaves of the plant are also edible. The plant can be harvested at any time from seven months to three years after planting. A native of Central and South America, cassava is now one of the most important food plants in all parts of the tropics (except at the highest altitudes), having a wide range of adaptation for rainfall (500–8,000 mm per year). Cassava is also well adapted to low-fertility soils, and grows where other crops will not. It is produced mainly on marginal agricultural land, with virtually no input of fertilizers, fungicides or insecticides. It is little grown outside tropical regions. The varieties of the plant fall into two broad groups, bitter and sweet cassava, formerly classed as two separate species, M. utilissima and M. dulcis or aipi. The roots of the sweet variety are usually boiled and then eaten. The roots of the bitter variety are either soaked, pounded and fermented to make a paste (such as ‘fufu’ in West Africa), or dried, as in the case of ‘gaplek’ in Indonesia, or given an additional roasting to produce ‘gari’. They can also be made into flour and starch, or dried and pelletized as animal feed. In Indonesia a highfructose syrup is being produced from cassava starch in order to reduce sugar imports. The cassava plant contains two toxic substances, linamarin and lotaustralin, in its edible roots and leaves, which release the poison cyanide, or hydrocyanic acid, when plant tissues are damaged. Sweet varieties of cassava produce as little as 20 mg of acid per kg of fresh roots, whereas bitter varieties may produce more than 1,000 mg per kg. Although traditional methods of food preparation are effective in reducing cyanogenic content to harmless levels, if roots of bitter varieties are under-processed and the diet lacks protein and iodine (as occurs during famines and wars), cyanide poisoning can cause fatalities. Despite the disadvantages of the two toxins, some farmers prefer to cultivate the bitter varieties, possibly because the cyanide helps to protect the plant from potential pests, and possibly because the texture of certain food products made from bitter varieties is preferred to that of sweet cassavas. Cassava is the most productive source of carbohydrates and produces more calories per unit of land than any single cereal crop. Cassava is a staple source of carbohydrates and forms an essential part of the diet throughout tropical areas. Although the nutrient content of the roots consists almost entirely of starch, the leaves are high in vitamins, minerals and protein, and are a popular foodstuff in certain areas, particularly Africa, where they are known as ‘saka saka’. A plot of cassava may be left unattended in the ground for two years
COMMODITY SURVEYS 63
Production of Cassava (’000 metric tons)
* FAO estimate (s). Source: FAO.
after maturity without deterioration of the roots and the plant is resistant to prolonged drought, so the crop is valued as a famine reserve. The roots are highly perishable after harvest and, if not consumed immediately, must be processed (flour, starch, pellets, etc.). While the area under cassava has expanded considerably in recent years, there is increasing concern that the rapid expansion of cassava root planting may threaten the fertility of the soil and subsequently other crops. Under cropping systems where no fertilizer is used, cassava is the last crop in the succession because of its particular adaptability to infertile soils and its high nutrient use-efficiency in yield terms (although there is now evidence to suggest that cassava yields increase with the use of fertilizer). With the exception of potassium, cassava produces more dry matter with fewer nutrients than most other food crops. Soil fertility is not threatened by cassava itself, but rather by the cultivation systems which employ it without fertilizer use. In recent years there has been interest in the utilization of cassava as an industrial raw material as well as a food crop. Cassava has the potential to become a basic energy source for ethyl alcohol (ethanol), a substitute for petroleum. ‘Alcogas’ (a blend of cassava alcohol and petrol) can be mixed with petrol to provide motor fuel, while the high-protein residue from its production can be used for animal feed. The possibility of utilizing cassava leaves and stems (which represent about 50% of the plant and are normally discarded as cattle-feed concentrates) has also been receiving scientific attention. As a staple source of carbohydrates in the tropics, cassava is an essential part of the diet of about 300m. people. It is cultivated on almost 9m. ha in Africa and provides more than onehalf of the caloric requirements of about 200m. people in the continent. The area in Africa
64 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
planted to cassava amounts to considerably more than one-half of the world total, and Africa’s output accounts for more than 50% of world production. Most of the African crop is produced by subsistence farmers and traded domestically; only a small amount enters world trade. Since the early 1970s African cassava production has been seriously undermined by mealybug infestation. Indigenous to South America, the mealybug (Phenacoccus manihoti) encountered few natural enemies in Africa, and by 1990 had infected all African cassavagrowing areas, with the exceptions of Uganda and Madagascar. In 1981 the parasitic wasp Epidinocarsis lopezi was introduced into Nigeria from Paraguay to attack the mealybug, and by 1990 E. lopezi was successfully established in 25 African countries. The green spider mite (Mononychellus tanajoa), another threat to cassava cultivation, is also being successfully combated by the introduction of a natural enemy, the phytoseiid mite (Typhlodromalus aripo), which by 1997 had established a presence over 400,000 sq km in west Africa, and in 1999 was reported to have reduced the presence of the green spider mite by up to 70% in some regions. In that year the only countries remaining to be included in the programme were Angola and Liberia. Funding was being sought to extend the range of these operations into other cassava-producing regions of Africa. Another threat is African cassava leaf mosaic disease, which, like the green spider mite, deprives the plant of chlorophyll and results in low yields. A new variety of cassava, reported to be resistant to this disease, was introduced in Uganda in 1997, with the aim of restoring production in the 60,000 ha lost annually to this blight. In addition, the development of high-yielding varieties (HYV) under the aegis of the International Institute of Tropical Agriculture was being successfully conducted in Nigeria during the late 1990s. The cultivation of a new HYV, also possessing resistance to pest damage, was reported to be proceeding successfully in Ghana in 1998. Thailand is the world’s leading exporter of processed cassava products, accounting, for instance, for more than 90% of world trade in cassava starch in 2000, and for more than 40% of trade in cassava tapioca. The main importers of these products, mostly in the form of pellets, are the Netherlands, France, Belgium and Germany, where cassava is sold as starch or used in the preparation of animal feed, providing a cheap substitute for cereals. It is a cheap energy source and, when combined with a protein source, makes a suitable substitute for cereals such as barley and maize. As, owing to its Common Agricultural Policy, cereal prices have risen within the European Community (EC, now the European Union—EU), the search for cheaper alternatives and the fact that cassava is not subject to the variable levy has led to an increase in imports of feed-grade cassava (mostly tapioca pellets from Thailand). Following protests from cereal producers (notably in France), the EC decided in 1979 to eliminate subsidies on compound animal feed, with the aim of reducing the use of cassava-based products. Thailand subsequently agreed to adopt voluntary export quotas for its tapioca products to EC countries. However, during the mid-1990s Thailand’s cassava exports to the EU declined, largely as a result of adverse weather conditions and lower yields. Since 1994 the government of Thailand has been offering cassava growers incentives to plant alternative crops. In 2001, according to preliminary estimates by the FAO, international trade in cassava products (dry weight) increased by 6%, compared with the previous year, to 7.3m. metric tons. Although demand from the EU was reported to have fallen as a consequence of a reduction in pig herds in the Netherlands and
COMMODITY SURVEYS 65
Spain, the decline was made good by increased demand from the Far East, in particular from the People’s Republic of China. Thai exports of cassava products were forecast to rise to 7. 0m. tons (dry weight of chips or pellets) in 2001, an increase of 7.7% compared with their estimated total in 2000. In late 2001 the FAO assessed the prospects for international trade in cassava in 2002 as dependent on the interplay between possible stronger prices for cereals within the EU, which would tend to increase demand for cassava, and possible continued reductions in EU member states’ pig herds, which would have the opposite effect. Demand from China, another major determinant of trade prospects, remained difficult to predict. Within South-East Asia demand increased during the 1990s for dried starch derived from cassava for use in the production of textiles and paper, and by manufacturers of processed foods. Viet Nam, with a total area under cassava of 283,000 ha, has obtained private Taiwanese and Japanese investment in the construction of a substantial facility for cassavaprocessing at Dong Nai. In regional terms, Latin America is the third largest producer of cassava, accounting for 18.2% of estimated world output in 2001. Brazil is by far the major producer, with estimated output of 24.1m. metric tons in 2001, compared with 23.3m. tons in 2000, and 20.9m. tons in 1999. Brazilian production has expanded in recent years in response to stronger prices, as has that of Colombia. In 2001 Colombian output was estimated at almost 2m. tons, compared with 1.8m. tons in 2000 and 1999, and 1.6m. tons in 1998. Paraguay is the second largest regional producer of cassava after Brazil, with estimated output of 3.9m. tons in 2001, compared with 2.7m. tons in 2000, and 3.7m. tons in 1999. None of the Latin American producers of cassava are significant exporters of the commodity. During 1993 the average monthly import price of hard cassava pellets at the port of Rotterdam, in the Netherlands, declined from US $160 per metric ton in January to $120 per ton in November. The annual average was $137 per ton, compared with $183 in 1992. Prices continued downward in later years, and fell very sharply in 1997. In 1999 the average import price of hard cassava pellets at Rotterdam was $102 per ton. A further sharp decline was experienced in 2000, in which year the average price was $84 per ton, and in the first eight months of 2001 the average price fell to $81 per ton. A steady recovery began thereafter, and by August 2002 the pellet price at Rotterdam had increased to $97 per ton. In January-August 1999 the average international price of cassava starches and flours was $176 per ton (the lowest price since 1988), compared with an average price of $305 per ton in the corresponding period of 1998. This price declined further throughout 2000, to an annual average of $158 per ton, although a recovery in January-March 2001 restored prices to the previous year’s average in that period. Export Price Index for Cassava (base: 1980=100)
* The monthly index remained constant at 36 throughout 1999–2001
66
Chromium
Chromium, historically used as an alloying element, is a hard, lustrous metal, the name of which derives from the Greek kroma (colour). It is only obtained from Chromite (the name applied both to the metal-bearing mineral and to the ore containing that mineral—the terms chromite ore, chromium ore and chrome ore are used interchangeably). Chromite is used by the metallurgical, chemical and refractory industries. About 85% of total demand for chromite is from the metallurgical industry, 8% from the chemical industry and 7% from the refractory and foundry industries. For the metallurgical industry, most chromite ore is smelted in an electric arc furnace to produce ferrochromium. Within the metallurgical industry the major use of chromium is as an essential alloying element in stainless steel, which is valued for its toughness and resistance to most forms of corrosion. Chromium chemicals are used for wood preservation, dyeing, and tanning. Chrome plating is a popular way of enhancing the appearance of motor vehicles, kitchen appliances, etc. World reserves of chromite ore were estimated by the US Geological Survey (USGS) to total about 3,600m. metric tons in 2001. More than 80% of known reserves are in South Africa, with a further 4% located in Zimbabwe and about 9% in Kazakhstan. South Africa produced almost 44% of estimated world chromite ore supplies in 2001, and is also the world’s dominant ferrochromium producer, accounting for about 43% of estimated world ferrochromium requirements in 2000. In that year Zimbabwe accounted for about 5%. South African charge-grade, high-carbon ferrochromium (which has a chromium content of 52%–55%) has been replacing the more expensive high- and low-carbon ferrochromium (which have a chromium content of 60%–70%) since the development, during the years 1965–75, of the Argon Oxygen Decarbonizing Process, which permits the widespread use of less costly charge-grade, high-carbon ferrochromium. South Africa’s ferrochromium sector has also benefited from its access to inexpensive supplies of electrical power, and to low labour costs. Strong demand for ferrochromium in the late 1980s, together with conditions of undersupply, generated an expansion of capacity both in South Africa and Zimbabwe. However, the potentially damaging effects of international boycotts and trade bans, and of civil disturbances, on South Africa’s ferrochrome industry led, in the 1980s, to the development of new production capacity, generally close to ore deposits, in Brazil, Finland, Greece, India, Sweden and Turkey. After 1993, and the implementation of political change, South Africa acted to consolidate its pre-eminence in international ferrochromium markets. In 1996 plans were outlined for the construction of a charge chrome smelter, with an annual
68 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Chromium Ore (’000 metric tons, gross weight)
* Estimated production. Source: US Geological Survey.
capacity of 100,000 tons, principally for export to Japan and China, at the Dilokong mine in northern South Africa, which has an estimated output capacity of 480,000 metric tons per year. In 1997 it was forecast that South African ferrochromium could account for 60% of world supplies by 2005. As noted above, Kazakhstan is the location of very substantial deposits of chromite ore. The country is the leading producer of the commodity among the republics of the former Soviet Union, with output in 2001 estimated by the USGS to have totalled 2.3m. metric tons, compared with 2.6m. tons in 2000. Production of ferrochromium in 2000 was estimated to have amounted to 640,000 tons, equivalent to 12.5% of world output in that year, compared with abut 598,000 tons in 1999. Production of chromite ore in Kazakhstan is from the Donskoy complex in the Aqtobe (Aktyubinsk) region. In 1998 more than 50% of the ore mined was exported, while the remainder was processed into ferroalloys, also destined for export. Russia is the only other notable producer of chromite ore among the former Soviet republics, with estimated output of 100,000 tons in 2000. Russia’s production of ferrochromium in that year was estimated to have amounted to 274,000 tons in 2000, compared with 249,000 tons in 1999 and 203,000 tons in 1998. Russian production of ferrochromium has declined substantially since 1992, when it totalled 400,000 tons. In 1999 the Saranov complex was reportedly the exclusive source of Russian chromite ore. In the Far East, India is the leading producer of chromite ore, with estimated output of 1. 5m. tons in 2001, as in 2000. India’s reserves of chromite were assessed at 26m. tons in 2001, less than 1% of total reserves world-wide. Output of ferrochromium (including ferrochrome and charge chrome) in 2000 was estimated to have amounted to 352,000 tons, more than double the country’s output in 1990.
COMMODITY SURVEYS 69
The People’s Republic of China and Japan were reportedly the main destinations for Indian exports of chromite ore in 2000. Viet Nam’s reserves have been officially assessed at some 20m. metric tons of chromium oxide. Production of chromite ore on a large scale commenced in the second half of the 1990s, and totalled an estimated 55,000 tons in 2000, compared with about 48,000 tons in 1999. China (itself formerly a producer of some chromium ore, although production was reported to have ceased in the late 1990s) is the principal destination for exports, which are mainly in the form of chromite concentrate. The Philippines was formerly a major producer of chromite ore, with annual output that usually exceeded 500,000 tons until the end of the 1970s. Production has since fallen away very substantially, and totalled only an estimated 15,000 tons in 2000. Australian output of chromite ore was estimated to have totalled 130,000 metric tons in 2000, as in the two previous years. In Latin America Brazil is the most important producer of chromite. In 2000 output was estimated at 400,000 metric tons, compared with 420,000 tons in 1999, and about 300,000 tons in 1998. The state of Bahia is the location of mining and beneficiation operations. Brazilian output of ferrochromium (both high- and low-carbon) amounted to an estimated 91,000 tons in 2000. In the Caribbean Cuban production of chromite amounts, on average, to 40,000 tons annually. Turkey is the most significant producer of chromite ore in the Middle East, with estimated output of 500,000 metric tons in 2001, a considerable decline compared with 2000, when production totalled 1m. tons. Turkish production of ferrochromium totalled an estimated 110,000 tons in 2000. Neighbouring Iran is also a major producer of chromite, with production in excess of 300,000 tons in each of the years 1998–2000. Output of ferrochromium, currently about 14,000 tons annually, is to be boosted, it was announced in 2000, through the construction of two new ferrochrome complexes, each with annual capacity of 25,000 tons, and scheduled, initially, for completion in 2002. Finland is the pre-eminent European producer of chromite ore, with estimated output of 640,000 metric tons in 2000. Finnish production of ferrochromium reportedly totalled an estimated 260,600 tons in the same year. Although its production has declined very substantially since the early 1990s, Albania remains a significant producer, with output estimated at 70,000 tons in 2000, about the same level as in 1999, compared with more than 100,000 tons annually in each year during 1993–98. Albania aims to restore its chromite mining industry through the improvement, with the assistance of Turkish investment, of existing facilities at Kalimash, near Tirana, and through the construction of new mines in the north east of the country. Albanian output of ferrochromium was estimated at about 10,000 tons in 2000, compared with some 28,000 tons in 1999. Elsewhere in Europe chromite is mined on a small scale in Greece and Cyprus. World ferrochromium supplies have exceeded demand in each year since 1990. They were boosted in particular by investment in new ferrochromium projects that increased world capacity by about 15% in 1991–92. South Africa was prominent in this investment programme. Following the dissolution of the Soviet Union in 1991, significant quantities of chromium raw materials entered the world market, and the subsequent integration of former Eastern bloc ferrochromium production exacerbated the surplus in supply, leading to rationalization measures within the industry; in South Africa, the chromite ore and
70 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Export Price Index for Chromium (base: 1980=100)
* The monthly index remained constant at 222 throughout 1999–2001.
ferrochromium sectors reduced their capacity by between 40%–50%. Market conditions began to improve, however, in 1994, as chromium supplies from Russia and Kazakhstan were reduced, while demand from Western stainless steel producers improved. This higher level of world demand was not sustained in 1996, with consequent reductions in ferrochromium prices. In 1997 and 1998 South Africa reinforced its pre-eminence in world chromite and ferrochromium markets. Prices of ferrochromium in early 1999 were between 32 and 37 US cents per lb: their lowest level since 1993. Oversupply of stainless steel in world markets generated supply surpluses of ferrochromium during most of 1999, although late in the year an improvement in price levels indicated a return to a balance of supply and demand; this recovery was sustained in 2000, the average price for that year being 41 cents per lb.
Coal
Coal is a mineral of organic origin, formed from the remains of vegetation over millions of years. There are several grades: anthracite, the hardest coal with the highest proportion of carbon, which burns smoke-free; bituminous and subbituminous coal, used for industrial power: some is made into coke when the volatile matter is driven off by heating; and lignite or brown coal, the lowest grade and nearest to the peat stage. Anthracite and bituminous coal are classed as ‘hard’ coal. Coal gas is made from brown coal, but is not widely used for energy except in the republics of the former Soviet Union. Geographically, coal is one of the most evenly distributed of the fossil fuels. Of estimated world proven reserves of 984,453m. metric tons at the end of 2001 (comprising 519,062m. tons of anthracite and bituminous coal and 465,391m. tons of sub-bituminous coal and lignite), about 30% were located in the Far East and Australasia, 26% in North America, 23% in the republics of the former Soviet Union and 13% in Europe. During the period 1976–2000, according to the World Coal Institute, annual world production of hard coal (excluding sub-bituminous coal and lignite) increased from 2,469m. tons to 3,639m. tons: a rise of more than 47%. High levels of output and demand were maintained during the 1990s, owing to the increasing use of coal world-wide as the primary fuel for electricity generation. In 1999 coal accounted for about 38% of this demand, which is expanding at an annual rate of about 3%. Environmentalists, however, have increasingly criticized the large-scale use of fossil fuels as a prime causative factor in ‘acid rain’ pollution and the warming of the global atmosphere by accretions of carbon gases. As the greater part of coal output is consumed within the producing country, only a relatively small proportion of coal production enters world trade. In 2000 an estimated 381m. tons of steam coal (for power generation) was traded internationally, together with about 192m. tons of coking coal (for use in metallurgical industries). About 90% of total world consumption of coal is both mined and used in the same producing countries, mainly the USA and China. In 2001 China was estimated to account for about one-quarter of both world coal production and world consumption. In 2001 coal was estimated to account for 40.6% of primary energy consumption in the Asia-Pacific region, compared with 39.7% in 2000. Among the countries with the highest levels of utilization of coal for electricity generation in 2000 were Australia (84%), the People’s Republic of China (an estimated 80%) and India (66%). The Asia-Pacific region was also the principal world consumer of coal, accounting for an estimated 52% of global demand in 2000.
72 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Hard Coal (million metric tons, excluding brown coal and lignite)
* Estimated production. † Data include sub-bituminous coal. ‡ Data refer to fiscal year 1998/99. Source: The Mining Journal Ltd.
With identified reserves of 114,500m. metric tons (including sub-bituminous coal and lignite) at the end of 2001, China is the world’s largest producer of hard coal. About 75% of these deposits are located in the north and north-west regions. Only about 7% of the country’s proven reserves of anthracite and bituminous coal can be surface-mined, however, and less than 50% of its mines are fully mechanized. Moreover, many of these employ outdated technology. In 1992 the Government began to implement a comprehensive restructuring of the coal industry, in which uneconomic mines were closed, the industry’s labour force was reduced from 3m. to 2.5m. by 1995, and controls on the selling prices of coal were abolished. The reorganization continued in the later 1990s, with many small and unprofitable coal-mines, including some operated by township enterprises, being forced to close. As a result, China’s annual production of coal (including brown coal) was reduced from 1,397m. tons in 1996 to 1,029m. tons in 1999. During the latter year about 31,000 small mines (some of them operating illegally) were closed, leaving fewer than 38,000 functioning at the end of 1999. The programme continued in 2000, with a further 18,900 coal-mines scheduled for closure. In May it was reported that the Chinese Government aimed to limit coal production to 870m. tons in 2000, with output restrictions imposed on large state-owned collieries as well as on small mines. In the event, production reportedly totalled 1,171m. tons. Meanwhile, China’s exports of coal (traditionally a very small proportion of the country’s output) were being promoted, reaching 55.1m. tons (48.2m. tons of steam coal and 6.9m. tons of coking coal) by the end of 2000. Australia is also an important coal producer, overtaking the USA in 1986 as the world’s leading coal exporter, and accounting in 2000 for about 25% of world trade in steam coal
COMMODITY SURVEYS 73
and more than 50% of world trade in coking coal. Although Australia possesses less than 10% of the world’s coal reserves, it has become a major exporter because of comparatively low domestic demand for coal (which supplies about 43% of domestic primary energy), and the mineral’s location in unpopulated areas, inexpensive to mine. More than one-half of Australia’s coal output is exported, about 40% of this to Japan, mainly for use in its steel industry. Coal is Australia’s principal export commodity, and coal exports were valued at $A 10,840m. (9.1 % of the country’s total export earnings) in the year to June 2001. In recent years Australian coal-exporting companies have been forced to accept lower prices in their negotiations with Japanese power utilities (for sales of steam coal) and steel-producers (for coking coal). For the year to March 2000 contract prices for steam coal were reduced by 13%, and those for coking coal by 18%. For the Japanese fiscal year (April-March) 2000/ 01 contract prices for steam coal were reduced by a further 4%, to US $28.75 per metric ton (f.o.b.); and contract prices for coking coal by a further 5%, to US $39.75 per ton (f.o.b.). For the Japanese fiscal year 2001/02, however, this downward trend was checked, with contract prices for steam coal rising by 20%, and those for high-quality coking coal by 7.5%. To increase the Australian industry’s competitiveness, mining companies have restructured their activities, reducing employment at Australian mines by almost 30% in the 24 months to June 1999, and raising productivity by about 40%. Profitability has been boosted by a decline in the value of the Australian dollar, and Australian coal exports have been forecast to increase by as much as 20% in 2000–05. Australia is involved with Japan in a joint project to establish two coal liquefaction plants. A promising future was foreseen for this process, with petroleum prices rising (as they were when the project was envisaged) and conventional reserves rapidly being depleted. India has the fourth largest coal reserves in the world, after the USA, China and Russia, but nevertheless requires some imports of coal to satisfy domestic requirements. Coal, of which India is, after China and the USA, the third largest consumer, is its prime source of commercial energy. In the mid-1990s there were 530 operating mines, of which 355 were underground. With the assistance of foreign technology and a programme of modernization, India significantly increased its coal production during the 1990s. Demand was forecast to rise from 311m. tons in 1997 to 396m. tons by 2001, of which power generation requirements were expected to account for more than 55%. Although significant coal reserves are known to exist in Pakistan, output of hard coal totalled only 3.5m. tons in 2000. In the late 1990s feasibility studies were under way to ascertain prospects for future expansion. In recent years Indonesia has emerged as a significant regional producer and exporter of coal, of which its total reserves were estimated at 5,370m. tons in 2001. These reserves are in part formed by a variety with an exceptionally low content of sulphur and ash, the causative factors in air pollution resulting from coal combustion. Output of this coal, which has attracted interest in the USA, Japan, Spain and the Scandinavian countries, totalled 2m. tons in 1991 and was forecast to rise to 8m. tons annually by the late 1990s. Total Indonesian coal production was forecast to reach a level of 120m. tons annually by 2002, as East Asian consumers reduced their reliance on exporters outside the region. In 2000 Indonesia was the world’s fourth largest exporter of steam coal (after Australia, South Africa and China), exporting more than 48m. tons in that year.
74 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
The world’s leading coal importer is Japan, which is seeking to reduce its dependence on petroleum for energy. In 2001, however, coal accounted for only 20% of Japan’s total primary energy supply. The exploitation of Japan’s proven coal reserves, estimated to total only 773m. tons in December 2001, has proved too expensive for domestic supplies to be able to compete with much cheaper imported coal. The country’s coal industry has been in decline since the mid-1980s, with uneconomic mines closing, despite government provisions of subsidies and ‘guide-lines’ seeking to persuade the steel industry to purchase domestic coal at prices far above those on the international market. Viet Nam, with exploitable reserves of 165m. short tons of high-quality anthracite, emerged in the late 1990s as a leading world supplier of this coal, principally to the Japanese steel industry, which normally purchases between 40% and 45% of export supplies, which totalled 3.6m. metric tons in 1997 but declined to about 3m. tons in 1998, in response to decreased East Asian demand. In August 1999 the government-controlled coal-producing company, Vinacoal, was reported to have imposed severe restrictions on output, pending a fall in accrued coal stocks estimated at about 4m. tons. In regional terms, the proven reserves of coal of North America, at an estimated 257, 783m. metric tons at 31 December 2001, rank second to those of the Asia-Pacific region. The aforementioned total comprised 120,222m. tons of anthracite and bituminous coal, and 137,561m. tons of sub-bituminous coal and lignite. By far the greater part of these reserves (almost 97%) lay within the USA, while those of Canada and Mexico were estimated, respectively, at only 6,578m. tons and 1,211m. tons. In 2000 US production of hard coal (including sub-bituminous coal) totalled an estimated 899.1m. tons, equivalent to about one-quarter of output world-wide, compared with 916m. tons in 1999. US production of brown coal was also estimated to have declined in 2000, and the USA thus recorded, for the first time in 40 years, a decline in overall production of coal for a second successive year. In 2000 US exports of steam coal totalled 24.6m. tons, while those of coking coal amounted to 28.4m tons. In 2001 coal provided about 25% of the USA’s total primary energy needs, and accounted in 2000 for about 56% of the country’s electricity generation. Production of hard coal by Canada in 2000 was estimated at 33.8m. tons, while that of Mexico amounted to an estimated 2.6m. tons. Canadian exports of steam coal totalled 4.6m. tons in 2000, while those of coking coal amounted to 27.2m. tons and were thus almost on a par with those of the USA. In 2001 coal supplied about 10% of Canada’s total primary energy requirements. At 31 December 2001 the proven reserves of coal of the former Soviet republics were estimated at 229,975m. metric tons, comprising 97,362m. tons of anthracite and bituminous coal, and 132,613m. tons of sub-bituminous coal and lignite. Coal was estimated to have supplied 19% of the total primary energy needs of the former Soviet republics in 2001. Of the total proven reserves, 157,010m. tons, or about 68%, were estimated to lie within Russia, comprising 49,088m. tons of anthracite and bituminous coal, and 107,922m. tons of sub-bituminous coal and lignite. Russian production of hard coal was estimated at 169.2m. tons in 2000, compared with 152.4m. tons in 1999. In 2000 exports of steam coal by Russia amounted to 27m. tons, while those of coking coal totalled 7.3m. tons. In 2001 Russia was estimated to have met some 18% of its total primary energy requirements from coal. After Russia, among the former Soviet republics, Ukraine possesses the largest proven reserves of coal, estimated at 34,153m. tons at 31 December 2001. Ukraine’s reserves comprised 16,
COMMODITY SURVEYS 75
274m. tons of anthracite and bituminous coal, and 17,879m. tons of sub-bituminous coal and lignite. In 2000 Ukraine produced an estimated 80.8m. tons of hard coal, compared with 81.2m. tons in 1999. In 2001 the country was estimated to have met almost 30 % of its total primary energy requirements from coal. At an estimated 34,000m. tons at the end of 2001, the proven reserves of coal of Kazakhstan, comprising 31,000m. tons of anthracite and bituminous coal, and 3,000m. tons of sub-bituminous coal and lignite, were almost equal to those of Ukraine. Output of hard coal by Kazakhstan in 2000 amounted to an estimated 71.1m. tons, compared with 56.6m. tons in 1999, while in 2001 the country met an estimated 57% of its primary energy requirements from coal, the highest rate of dependence of any of the former Soviet republics. At the end of 2001 the proven reserves of coal of Europe (including Turkey) were estimated at 125,395m. metric tons, comprising 47,512m. tons of anthracite and bituminous coal, and 77,883m. tons of sub-bituminous coal and lignite. In Western Europe, Germany’s proven reserves of coal were estimated at 66,000m. tons, comprising 23,000m. tons of anthracite and bituminous coal, and 43,000m. tons of sub-bituminous coal and lignite. German production of hard coal in 2000 was estimated at 37.4m. tons, compared with 43. 8m. tons in 1999. In 2000, with estimated production of some 180m. tons, Germany was the world’s leading producer of brown coal (used primarily for electricity generation), and in that year Germany relied on coal to generate 51% of its electricity, compared with an average rate of utilization for that purpose of 25% among the EU member states in 1999. In 2001 Germany was estimated to have met about 25% of its total primary energy needs from coal. Elsewhere in Western Europe, proven reserves of coal constitute a relatively small resource. Those of Greece were estimated to total 2,874m. tons at 31 December 2001, while those of the United Kingdom were estimated at 1,500m. tons. The proven reserves of Spain and France, meanwhile, were estimated, respectively, at 660m. tons and 36m. tons. In 2000 imports of steam coal by the EU member states were estimated at 122m. tons, while the corresponding figure for coking coal was 45m. tons. The United Kingdom’s imports of steam coal were estimated to have totalled 15m. tons in 2000, complemented by imports of 8.5m. tons of coking coal. Among the EU member states, in addition to Germany, Greece (69%), Denmark (52%) and the Netherlands (42%) all relied to a high degree on coal for electricity generation in 2000. In 2001 Greece was estimated to have met more than 30% of its total primary energy requirements from coal. In Central Europe, Poland’s proven reserves of coal were estimated at 22,160m. metric tons at the end of 2001, comprising 20,300 tons of anthracite and bituminous coal, and 1, 860m. tons of sub-bituminous coal and lignite. The country’s production of hard coal was estimated 102.2m. tons in 2000, compared with 110.2m. tons in 1999. Poland’s exports of steam coal totalled 18m. tons in 2000, while foreign sales of coking coal in the same year amounted to 5.8m. tons. In 1999 exports of coal, coke and briquettes contributed 3.6% of Poland’s total export earnings. The proven reserves of coal of the Czech Republic were estimated at 5,678m. tons at 31 December 2001, comprising 2,114m. tons of anthracite and bituminous coal, and 3,564m. tons of sub-bituminous coal and lignite. Production of hard coal was estimated to have amounted to 14.9m. tons in 2000, compared with 14.3m. tons in 1999, and 16.1m. tons in 1998. In 2000 the Czech Republic depended on coal for the generation of 71% of its electricity, and, in 2001, was estimated to have met about 51% of
76 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
its total primary energy requirements from coal. Bulgaria’s proven reserves of coal were estimated at 2,711m. tons at the end of 2001, comprising 13m. tons of anthracite and bituminous coal, and 2,698m. tons of sub-bituminous coal and lignite. Estimated output of hard coal in 2000 was no greater than 100,000 tons. Bulgaria was nevertheless estimated to have derived about one-third of its primary energy from coal in 2001. Elsewhere in Europe, the proven reserves of coal of Romania and Hungary were estimated, respectively, at 1, 457m. tons and 1,097m. tons at the end of 2001. Hungary’s reserves consisted exclusively of sub-bituminous coal and lignite, while those of Romania included just 1m. ton of anthracite and bituminous coal. Romania was estimated to have produced 1.3m. tons of hard coal in 2000, and to have derived about one-fifth of its primary energy from coal in 2001. Hungary, meanwhile, met an estimated 13 % of its primary energy requirements from coal in 2001. At the end of 2001 Turkey was estimated to possess proven reserves of coal totalling 3, 698m. metric tons, of which 278m. tons were anthracite or bituminous coal. In 2000 Turkish production of hard coal was estimated at 2.3m. tons. In 2001 Turkey was estimated to have met about 30% of its primary energy requirements from coal. At 31 December 2001 the proven reserves of coal of South and Central America were estimated at 21,752m. metric tons, comprising 7,738m. tons of anthracite and bituminous coal, and 14,014m. tons of sub-bituminous coal and lignite. Brazil’s proven reserves of coal, estimated at 11,929m. tons, and consisting exclusively of sub-bituminous coal and lignite, were the largest in the region. In 2000 Brazilian output of hard coal was estimated at 5.6m. tons, approximately the same as in the two preceding years. In 2001 Brazil was estimated to have met about 8% of its primary energy requirements from coal. Colombia’s proven reserves of coal were estimated at 6,648m. tons at the end of 2001, of which 6,267m. tons consisted of anthracite or bituminous coal. The country’s output of hard coal was estimated at 37.1m. tons in 2000, compared with 32.7m. tons in 1999. In 2000 exports of Colombian coal, which is used for pulverized coal injection, comprised 34m. tons of steam coal and 500, 000 tons of coking coal, and contributed 6.1% of the country’s total export earnings. In 2001 Colombia was estimated to have met about 10% of its primary energy needs from coal. Venezuela’s proven reserves of coal, comprising exclusively anthracite and bituminous coal, were estimated at 479m. tons at 31 December 2001. The country’s output of hard coal in 2000 was estimated at 8.9m. tons. Elsewhere in South America, Chile is a significant consumer of coal, meeting an estimated 16% of its primary energy requirements from coal in 2001. The proven reserves of coal of Africa were estimated to total 55,367m. metric tons at the end of 2001, and included 55,171m. tons of anthracite and bituminous coal, some 90% of which (49,520m. tons) were located in South Africa. Production of hard coal by South Africa was estimated to have totalled 225.3m. tons in 2000, the country thus ranking as the fourth largest producer in the world in that year. South African exports of steam coal amounted to 67.5m. tons in 2000, while those of coking coal totalled 2.5m. tons. South Africa was thus the world’s second largest exporter of steam coal in 2000, after Australia. In 1999 exports of coal, lignite and peat accounted for 6% of South Africa’s total export earnings. Some 90% of South Africa’s electricity was generated using coal in 2000, the highest rate of dependence in the world, while in 2001 the country was estimated to have met 75% of its
COMMODITY SURVEYS 77
Export Price Index for Coal (base: 1980=100)
primary energy needs from coal. The proven reserves of coal of Zimbabwe were estimated at 502m. tons of anthracite and bituminous coal at the end of 2001. Zimbabwe’s output of hard coal totalled an estimated 4.2m. tons in 2000. The proven reserves of coal of the Middle East (excluding Turkey) were estimated at 1, 710m. metric tons at the end of 2001, and consisted exclusively of anthracite and bituminous coal. Iran is the only significant regional producer of hard coal, with estimated output of 1. 2m. tons in 2000. The index of export prices for coal averaged 75 in February 2001. Australia’s exports of coal (including briquettes) had an average value of US $37.35 per metric ton in 1994, rising to $40.08 per ton in 1995. The average price per ton was $43.14 in 1996, but declined to $41.42 in 1997 and to $37.04 in 1998. During the first three months of 1999 Australia’s coal exports earned an average of only $34.68 per ton, and prices subsequently fell further. Most Australian coal shipments are delivered to overseas buyers under long-term contracts at negotiated prices, but in 1999 international coal prices on the ‘spot’ market (for prompt delivery) were at their lowest levels for more than 20 years. In September hard coking coal was being traded in Asia at about US $32 per ton. International ‘spot’ prices remained depressed throughout most of 2000, but, from the beginning of the final quarter of that year, began to rise dramatically in response to increased demand for US thermal coal from US electricity generators. By mid-2001 ‘spot’ prices of US coal were reported to have doubled—in some cases trebled—since late 2000. By mid-2001, as a result of the weakness of the Australian dollar, coal prices expressed in terms of the Australian dollar were almost 80% higher than at the beginning of 2000.
Cobalt
Cobalt is a hard, brittle metal, with a number of industrial uses. Prior to the 20th century it was chiefly used in salt form as a blue pigment for glass and ceramics. Cobalt is usually mined as a by-product of another metal, principally copper, although nickel-copper-cobalt ores are common and, in South Africa, some platinum ores yield cobalt. It is rarely mined as the primary product of an ore, and is found in very weak concentration, generally 0.1%–0. 5%. The ore must be crushed and ground after mining and subjected to a flotation process to obtain the concentrate. In the mid-1990s it was forecast that a new method of extraction, known as pressure acid leaching, would substantially increase the rate of recovery of cobalt as a by-product when laterite nickel ore is treated. In the early 2000s, however, this process was still not widely applied. About 35% of all cobalt produced is used in metallic form as superalloys (in gas turbine aircraft engines, for example), hardfacing and stellite. Approximately 34% is applied to chemical uses in such industries as glass manufacture, paints and inks, rechargeable batteries and, increasingly, as catalysts in the processing of oil and petroleum feed stocks and synthetic materials. A further 10% is used in the manufacture of ceramics, 11% in magnetic alloys and 10% in the fabrication of hard metals. The USA is the world’s principal consumer of cobalt. The Democratic Republic of the Congo (DRC) possesses almost one-half of the world’s identified cobalt reserves. These reserves also have the highest grade of the metal, with up to six metric tons of cobalt produced with every 100 tons of copper. The mining, marketing and export of cobalt from the DRC is conducted by a state monopoly, La Générale des Carrières et des Mines (GÉCAMINES). From 1990, however, the country’s cobalt output was seriously disrupted by economic dislocation, caused by internal unrest, and by thefts of cobalt, which in some years were estimated to have resulted in the loss of 5%–25% of total output. Projects by GÉCAMINES to exploit new deposits and rehabilitate existing mines in partnership with Canadian, South African and other interests were initiated in the late 1990s, but continued political instability has meant that they have not all proceeded smoothly. An eventual restoration of internal order within the DRC could enable the country to re-establish cobalt output at the levels of the early 1980s, when annual exports were in the range of 14,000–16,000 tons. In 2000 the DRC was the world’s leading miner of cobalt, with production of 7,000 metric tons. Output was estimated to have been maintained at that level in 2001, when it was matched only by that of Zambia. (In 1992 the DRC (as Zaire) was overtaken by Zambia as the world’s leading cobalt producer, although
COMMODITY SURVEYS 79
Production of Cobalt Ore (cobalt content, metric tons)
* Estimated production. Source: US Geological Survey.
cobalt output in Canada advanced strongly during the 1990s and in 1993 exceeded that of Zambia.) In 1998 the DRC and Zambia jointly accounted for about 30% of world cobalt exports. Since the early 1980s Zambia has promoted the expansion of its cobalt production in an attempt to offset declines in the country’s copper output. In 2001 Zambia was, jointly with the DRC, the world’s leading producer of the commodity, with estimated output of 7,000 metric tons, compared with 4,600 tons in 2000, in which year the country’s Government completed the privatization of Zambia Consolidated Copper Mines Ltd (ZCCM), one of its principal producers of cobalt. In recent years Morocco, which reportedly produced 1,305 tons of cobalt in 2000, has tended to export concentrates to the People’s Republic of China. The construction of a second pre-treatment plant at Cobalt Métallurgie Bou Azzer’s (CMBA) refinery at Guemassa, near Marrakesh, in 1999 was expected to lead to a reduction in these exports as domestic output of refined cobalt increased. In the late 1990s two mining companies in South Africa were producing cobalt metal as a by-product of platinum production. South African production totalled an estimated 585 tons in 2000, compared with 450 tons in 1999. In 1992 the Ugandan government initiated a project to extract cobalt from stockpiles of cobaltiferous concentrate at the Kilembe copper mine, in south-western Uganda. An extraction plant is now operated at Kilembe by Kasese Cobalt Co Ltd (KCCL), a joint venture between state-owned Kilembe Mines Ltd and Canada’s Banff Resources Ltd. In 2000 Ugandan exports of cobalt totalled 395 tons, according to data cited by the US Geological Survey, earning some US $13m. More than 90% of the cobalt retrieved at Kilembe is exported. In 2000 production of cobalt by Botswana was reported to have totalled 319 tons, compared with 331 tons in 1999. In recent years Botswana has exported
80 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
cobalt to Norway and Zimbabwe for refining. Zimbabwe itself produced an estimated 126 tons of cobalt in 2000. Following the identification of nickel-cobalt deposits in northwestern Tanzania in the early 1990s, the exploitation of cobalt reserves, estimated at about 20,000 tons, was expected to begin in the early 2000s. Reserves of cobalt identified in Côte d’Ivoire and Madagascar remained unexploited in 2000. With estimated output of 6,500 metric tons in 2001, compared with 5,600 tons in 2000, Australia was the world’s third largest producer of cobalt. Cobalt is mined as a co-product of nickel in Australia and output is rising as new mines in Western Australia approach their capacities. With estimated output of 1,100 tons in 2001, the French territory of New Caledonia (one of the earliest sites of cobalt exploitation) ranked as the world’s seventh largest producer of cobalt. Output is expected to be boosted, from about 2005, by Inco Ltd of Canada’s Goro Lateritic nickel-cobalt operation whose annual cobalt production may be as high as 5,000 tons. In 2000 the People’s Republic of China was estimated to have produced 200 tons of cobalt from deposits in Gansu and Jinchang. Although it has produced none in recent years, the Philippines possesses substantial reserves of cobalt. A project to construct a nickel smelter, in which Japan’s Sumitomo Metal Mining Co is a joint partner, and the proposed revival of the Nonoc nickel complex—shut down in 1986—with the aid of South African investment will, if successful, allow commercial production to resume before 2005. Both projects envisage the use of pressure acid leaching. As observed above, Canada emerged in the 1990s as a leading producer of cobalt and remained, in 2001, the world’s fourth largest source of the metal with estimated annual output of 5,000 metric tons. There has been an intensification of Canadian cobalt exploration in recent years in response to increased demand. Russia is the leading producer of cobalt among the former Soviet republics, and in 2001, with estimated output of 4,000 metric tons, ranked as the fifth largest producer in the world. Kazakhstan is the only other significant ex-Soviet producer, with estimated output of 300 tons in 2000. Cuba is by far the leading Latin American producer of cobalt, and in 2001, with estimated output of 2,600 metric tons, ranked as the sixth largest producer in the world. Elsewhere in Latin America, Brazil was estimated to have produced 900 tons of cobalt in 2000, compared with 700 tons in 1999, and 400 tons annually in 1996–98. Cobalt extraction in other regions of the world is negligible. Traditional cobalt-mining may eventually be challenged by the wide-scale retrieval of manganese nodules from the world’s seabeds. It is estimated that the cobalt content of each nodule is about 0.25%, although nodules recovered from the Pacific Ocean in 1983 had a cobalt content of 2.5%. Ferromanganese crusts, containing extractable cobalt, have been identified at relatively shallow depths within the USA’s exclusive economic zones, which extend 370 km (200 nautical miles) into US coastal waters. Research into the potential exploitation of cobalt-bearing nodules continued throughout the 1990s and early 2000s, some of the most valuable were considered to be those in the Pacific Ocean around the Cook Islands, where estimates of the cobalt resource were placed as high as 32m. metric tons. Nodules off Namibia were thought to have a lesser, though still significant, cobalt content. However, the full exploitation of seabed resources such as these is thought to lie decades, rather than years, in the future.
COMMODITY SURVEYS 81
The Cobalt Development Institute (CDI), founded in 1982, comprises 60 members from 18 countries, consisting of consumers, processors, merchants and the seven leading producers, including the DRC and Zambia. On the free market, the price of high-grade cobalt (minimum purity 99.8%) stood at more than US $14 per lb in early June 1993, but declined to $11.175 in November. Following reports of unrest in Zaire, the price of cobalt rose sharply in January 1994, reaching $22.75 per lb. After further fluctuations, the cobalt price increased to $28.125 per lb in October, but fell to $25.50 in December. Another strong advance in cobalt prices occurred in early 1995, with the quotation for high-grade metal reaching US $30.40 per lb in February. The price was reduced to $27.05 per lb in April, recovered to $29.30 in May, but declined to $27.05 again in July. It advanced to $32.875 per lb in January 1996, but fell to $20.625 in August. In September the cobalt price reached $23.40 per lb. In March 1997 the free-market price of high-grade cobalt declined to US $19 per lb, but in May, in response to the internal conflict in Zaire (now the DRC), it rose to $25.325. In June, following the establishment of the DRC, the price of cobalt eased to $22.50 per lb, although by December it had risen to $25.75. Cobalt prices subsequently declined, but the quotation for high-grade metal generally remained above $24 per lb until mid-1998. From June the price moved steadily downward, owing to increased availability and falls in demand, and in December it stood at only $12.10 per lb. Market sentiment was also affected by the continuation of regular sales of cobalt by the US government’s Defense Logistics Agency (DLA). According to the CDI, deliveries of refined cobalt from the DLA’s strategic stockpile in 1998 totalled 2,310 tons, accounting for 6.9% of the world’s available supplies (compared with 5.8% in 1997). The cobalt market slumped even further in January 1999, when, prior to another offering from the DLA, the price for high-grade metal declined to only US $8.40 per lb: its lowest level since the contract was introduced in June 1993. Following the announcement of proposed reductionsin Russia’s cobalt production, however, the metal’s price rapidly recovered, reaching $19.25 per lb in February 1999. Thecobalt price eased to $14.80 per lb in May, but advanced to $22.10 in June, following forecasts of declines in African production. The revival of the cobalt market was partly influenced by the conclusion, in January, of a three-year agreement granting a London-based trading company, MRG Cobalt Sales, exclusive rights to market GÉCAMINES’ output of cobalt world-wide. MRG had made a similar arrangement with ZCCM in October 1998, so the new agreement gave it control of about 30% of world cobalt supplies. In the second half of 1999, however, the free-market price of cobalt moved steadily downward, and in November the quotation for high-grade metal was $14.20 per lb. The price recovered to $15.05 per lb in December. Meanwhile, in August, an Australian mining company began marketing cobalt on the internet. Another internet site for selling cobalt was established later in the year by a London-based brokerage company. The price of high-grade cobalt rose to US $15.25 per lb in January 2000, but eased to $14.05 in February. It advanced to $16.975 per lb in early May, but slumped to $13.30 in July. The average annual ‘spot’ price for cobalt in 2000 was $15.16 per lb. Market oversupply and deteriorating economic conditions, most notably in aircraft manufacture, a major market
82 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
for cobalt, contributed to further price falls in 2001. The average price per lb in December of that year, according to Metal Bulletin, was as low as $7.01. Prices declined further in 2002, barring a brief rally in May—the Metal Bulletin price fell below $7 in July.
Cocoa
The Cocoa tree (Theobroma cacao), up to 14 m tall, originated in the tropical forests of Central and South America. The first known cocoa plantations were in southern Mexico around AD 600. Cocoa first came to Europe in the 16th century. The Spanish and Portuguese introduced cocoa into Africa—on the islands of Fernando Póo (now Bioko), in Equatorial Guinea, and São Tomé and Principe—at the beginning of the 19th century. At the end of the century the tree was established on the African mainland, first in Ghana and then in other west African countries. Cocoa is now widely grown in the tropics, usually at altitudes less than 300 m above sealevel, where it needs a fairly high rainfall and good soil. The cocoa tree has a much shallower tap root than, for example, the coffee bush, making cocoa more vulnerable to dry weather. Cocoa trees can take up to four years from planting before producing sufficient fruit for harvesting. They may live to 80 years or more, although the fully productive period is usually about 20 years. The tree is highly vulnerable to pests and diseases, and it is also very sensitive to climatic changes. Its fruit is a large pod, about 15–25 cm in length, which at maturity is yellow in some varieties and red in others. The ripe pods are cut from the tree, where they grow directly out of the trunk and branches. When opened, cocoa pods disclose a mass of seeds (beans) surrounded by white mucilage. After harvesting, the beans and mucilage are scooped out and fermented. Fermentation lasts several days, allowing the flavour to develop. The mature fermented beans, dull red in colour, are then dried, ready to be bagged as raw cocoa, which may be further, processed or exported. Cultivated cocoa trees may be broadly divided into three groups. All West African cocoas belong to the Amazonian Forastero group, which now accounts for more than 80% of world cocoa production. It includes the Amelonado variety, suitable for chocolate manufacturing, grown in Ghana, Côte d’Ivoire and Nigeria. Criollo cocoa is not widely grown and is used only for luxury confectionery. The third group is Trinitario, which comprises about 15% of world output and is cultivated mainly in Central America and the northern regions of South America. Cocoa processing takes place mainly in importing countries, although processing capacity was established in West Africa during the 1960s and processed products now account for a significant part of the value of its cocoa exports. The processes include shelling, roasting and grinding the beans. Almost half of each bean after shelling consists of a fat called cocoa butter. In the manufacture of cocoa powder for use as a beverage, this fat is largely
84 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Cocoa Beans (’000 metric tons)
* Unofficial figure. † FAO estimate. Source: FAO.
removed. Cocoa is a mildly stimulating drink, because of its caffeine content, and, unlike coffee and tea, is highly nutritional. The most important use of cocoa is in the manufacture of chocolate, of which it is the main ingredient. About 90% of all cocoa produced is used in chocolate-making, for which extra cocoa butter is added, as well as other substances such as sugar—and milk in the case of milk chocolate. Proposals that were initially announced in December 1993 (and subsequently amended in November 1997) by the consumer countries of the European Union (EU), permitting chocolate manufacturers in member states to add as much as 5% vegetable fats to cocoa solids and cocoa fats in the manufacture of chocolate products, have been perceived by producers as potentially damaging to the world cocoa trade. In 1998 it was estimated that the implementation of this plan could reduce world demand for cocoa beans by between 130,000–200,000 metric tons annually. In July 1999, despite protests from Belgium, which, with France, Germany, Greece, Italy, Luxembourg, the Netherlands and Spain, prohibits the manufacture or import of chocolate containing non-cocoa-butter vegetable fats, the European Commission cleared the way to the abolition of this restriction throughout the EU countries. The implementation of the new regulations took effect in May 2000. After coffee and sugar, cocoa is the most important agricultural export commodity in international trade. Recorded world exports (excluding re-exports) of cocoa beans totalled 2,499,608 metric tons in 2000, of which African countries accounted for 1,718,711 tons. The world’s leading exporters of cocoa beans in 2000 were Côte d’Ivoire (1,113,476 tons),
COMMODITY SURVEYS 85
Ghana (an estimated 360,250 tons), Indonesia (333,619 tons), Nigeria (an estimated 139, 000 tons), Cameroon (an estimated 75,887 tons) and Ecuador (49,047 tons). The principal importers of cocoa are developed countries with market economies, which account for about 80% of cocoa imports from developing countries. Recorded world imports of cocoa beans in 2000 were 2,401,841 tons. The principal importing countries in that year were the Netherlands (with 494,735 tons, representing 20.6% of the total), the USA (471,181 tons) and Germany (251,297 tons). Côte d’Ivoire is the world’s principal cocoa grower, accounting for more than 38% of output in 2001 and 44.1% of international cocoa exports in 2000. Government measures, implemented in August 1999 to liberalize the country’s cocoa sector, included the abolition of the state cocoa board, with the consequent removal of guaranteed prices. However, in November, the impact on Ivorian cocoa-growers of sharply lower world cocoa prices (see below) prompted the government to reintroduce a minimum price mechanism and buffer stock arrangements. These measures, combined with other forces, brought about a strong recovery in prices—in 2002 prices paid to farmers were reported to have reached record high levels. Since the mid-1960s, when it accounted for more than one-third of world production, Ghana’s share of the world market has fallen to about 14%, owing to the neglect of the industry and to the official policy of maintaining prices payable to producers at uneconomic levels. The decline has been exacerbated by the smuggling of cocoa to neighbouring countries, where higher prices are obtainable. The spread of plant diseases, particularly black pod and swollen shoot, have also inhibited recovery. In 1992 cocoa was overtaken by gold as Ghana’s main export commodity. In recent years, however, Ghana has sought to revive cocoa production through programmes of replanting and the introduction of disease-resistant varieties, together with insect spraying, and improved facilities for transport and storage. From July 1993 the Ghana Cocoa Board (COCOBOD) was deprived of its monopoly, and trading companies were licensed to purchase cocoa direct from farmers. Although COCOBOD has retained exclusive control over Ghanaian cocoa exports, proposals were under consideration in mid-2000 for assigning it a purely advisory and regulatory role. In July 2000 Ghana and Côte d’Ivoire announced plans to co-ordinate their cocoa sales as part of a joint strategy to generate a recovery in world prices. Among the smaller African producers, cocoa exports are a significant component of the economies of Cameroon, Equatorial Guinea, São Tomé and Príncipe and Togo. Although cocoa remains Nigeria’s main export crop, its significance to the economy has been eclipsed by petroleum. In the Far East and Australasia Indonesia is the leading producer of cocoa. Production has risen very rapidly since the 1970s, when the crop first began to be planted extensively, to the point that in 2001, with output of cocoa beans totalling an estimated 340,000 metric tons, Indonesia was the third largest producer in the world. In 2000 Indonesia was the third largest exporter of cocoa beans in the world, shipping 333,619 tons. These exports, which make a relatively small contribution to the total value of Indonesia’s foreign trade, are mainly to Asian markets. The production of cocoa in Malaysia commenced on a large scale in the 1950s. Cultivation expanded rapidly in the 1980s and cocoa became the country’s fourth largest agricultural sector. In the early 1990s Malaysia was the fourth largest producer of cocoa world-wide, but production declined substantially during the decade, owing to the prevalence of low prices on international markets, and in 2001, with output of an estimated
86 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
100,000 tons, Malaysia ranked as the world’s eighth largest producer. In 2001 the country exported only 16,248 tons of cocoa beans, mainly to Asian markets, and was a substantial net importer of the commodity. Papua New Guinea’s production of cocoa beans amounted to an estimated 42,500 tons in 2001, while in 2000 exports totalled 38,000 tons. In 1999 exports of cocoa contributed 1.6% of Papua New Guinea’s total export earnings. Latin America is the third most important producing area for cocoa beans, providing an estimated 15.4% of the total world crop in 2001. In that year Brazil was the world’s fifth largest producer of cocoa beans. In 2000 its exports of cocoa beans totalled 1,900 metric tons, equivalent to just 0.1 % of total world exports of 2,523,323 tons in that year. Brazil’s earnings from cocoa exports, which totalled about US $2m. in 2000, are relatively insignificant to the country’s economy, compared with those from coffee. In 1999 Ecuador obtained 2.3% of its export revenue from cocoa, compared with only 1.0% in 1998 and 2. 4% in 1997. The total volume of exports declined from 71,100 tons in 1996 to 12,135 metric tons in 1998, owing to the devastation caused to the cocoa crop as a result of El Niño (an aberrant current which periodically causes the warming of the Pacific coast of South America, disrupting usual weather patterns) in 1997–98. Cocoa exports increased to 63,600 tons in 1999, but declined again, to 49,047 tons, in 2000. In 1999 the Dominican Republic derived only an estimated 0.6% of its export earnings from cocoa and cocoa products (including exports from free-trade zones), compared with 2.3% in 1998. The country’s cocoa crop was severely damaged by ‘Hurricane Georges’ in September 1998. World prices for cocoa are highly sensitive to changes in supply and demand, making its market position volatile. Negotiations to secure international agreement on stabilizing the cocoa industry began in 1956. Full-scale cocoa conferences, under United Nations auspices, were held in 1963, 1966 and 1967, but all proved abortive. A major difficulty was the failure to agree on a fixed minimum price. In 1972 the fourth UN Cocoa Conference took place in Geneva and resulted in the first International Cocoa Agreement (ICCA), adopted by 52 countries, although the USA, the world’s principal cocoa importer at that time, did not participate. The ICCA took formal effect in October 1973. It operated for three quota years and provided for an export quota system for producing countries, a fixed price range for cocoa beans and a buffer stock to support the agreed prices. In accordance with the ICCA, the International Cocoa Organization (ICCO), based in London, was established in 1973. In December 2000 its members comprised 19 exporting countries, accounting for more than 80% of world production and exports, excluding re-exports, of cocoa beans, and 23 importing countries, accounting for almost 70% of world imports of cocoa beans. The USA, a leading importer of cocoa, is not a member. Nor is Indonesia, whose production and exports of cocoa has expanded rapidly in recent years. The governing body of the ICCO is the International Cocoa Council (ICC), established to supervise implementation of the ICCA. A second ICCA operated during 1979–81. It was followed by an extended agreement, which was in force in 1981–87. A fourth ICCA took effect in 1987. During the period of these ICCA, the effective operation of cocoa price stabilization mechanisms was frequently impeded by a number of factors, principally by crop and stock surpluses, which continued to overshadow the cocoa market in the early 1990s. In addition, the achievement of ICCA objectives was affected by the divergent views of producers and consumers, led by Côte
COMMODITY SURVEYS 87
d’Ivoire, on one side, and by the USA, on the other, as to appropriate minimum price levels. Disagreements also developed over the allocation of members’ export quotas and the conduct of price support measures by means of the buffer stock (which ceased to operate during 1983–88), and subsequently over the disposal of unspent buffer stock funds. The effectiveness of financial operations under the fourth ICCA was severely curtailed by the accumulation of arrears of individual members’ levy payments, notably by Côte d’Ivoire and Brazil. The fourth ICCA was extended for a two-year period from October 1990, although the suspension of the economic clauses relating to price support operations rendered the agreement ineffective in terms of exerting any influence over cocoa market prices. Preliminary discussions on a fifth ICCA, again held under UN auspices, ended without agreement in May 1992, when consumer members, while agreeing to extend the fourth ICCA for a further year (until October 1993), refused to accept producers’ proposals for the creation of an export quota system as a means of stabilizing prices, on the grounds that such arrangements would not impose sufficient limits on total production to restore equilibrium between demand and supply. Additionally, no agreement was reached on the disposition of cocoa buffer stocks, then totalling 240,000 tons. In March 1993 ICCO delegates abandoned efforts to formulate arrangements whereby prices would be stabilized by means of a stockwithholding scheme. At a further negotiating conference in July, however, terms were finally agreed for a new ICCA, to take effect from October, subject to its ratification by at least five exporting countries (accounting for at least 80% of total world exports) and by importing countries (representing at least 60% of total imports). Unlike previous commodity agreements sponsored by the UN, the fifth ICCA aimed to achieve stable prices by regulating supplies and promoting consumption, rather than through the operation of buffer stocks and export quotas. The fifth ICCA, operating until September 1998, entered into effect in February 1994. Under the new agreement, buffer stocks totalling 233,000 tons that had accrued from the previous ICCA were to be released on the market at the rate of 51,000 tons annually over a maximum period of four-and-a-half years, beginning in the 1993/94 crop season. At a meeting of the ICCO, held in October 1994, it was agreed that, following the completion of the stocks reduction programme, the extent of stocks held should be limited to the equivalent of three months’ consumption. ICCO members also assented to a voluntary reduction in output of 75,000 tons annually, beginning in 1993/94 and terminating in 1998/ 99. Further measures to achieve a closer balance of production and consumption, under which the level of cocoa stocks would be maintained at 34% of world grindings during the 1996/97 crop year, were introduced by the ICCO in September 1996. The ICCA was subsequently extended until September 2001. In April 2000 the ICCO agreed to implement measures to remedy low levels of world prices (see below), which were to centre on the elimination of sub-grade cocoa in world trade: these cocoas were viewed by the ICCO as partly responsible for the downward trend in prices. In mid-July Côte d’Ivoire, Ghana, Nigeria and Cameroon disclosed that they had agreed to destroy a minimum of 250,000 tons of cocoa at the beginning of the 2000/01 crop season, with a view to assisting prices to recover and to ‘improving the quality of cocoa’ entering world markets. A sixth ICCA was negotiated, under the auspices of the UN, in February 2001. Like its predecessor, the sixth ICCA will aim to achieve stable prices through the regulation of
88 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
supplies and the promotion of consumption. The Agreement took effect, provisionally, on 1 January 2002, and will take effect definitively, subject to its ratification by at least five exporting countries (accounting for at least 80% of total world exports) and by importing countries (representing at least 60% of total world imports), on 1 October 2003. As the table below indicates, international prices for cocoa have generally been very low in recent years. In 1992 the average of the ICCO’s daily prices (based on selected quotations from the London and New York markets) was US $1,099.5 per metric ton (49.9 US cents per lb), its lowest level since 1972. The annual average price per ton subsequently rose steadily, reaching $1,456 in 1996 and $1,619 in 1997. The average rose in 1998 to $1,676 per ton, its highest level since 1987, but slumped in 1999 to $l,140(a fall of 32.0%). In 1996 the monthly average ranged from $1,339 per ton (in March) to $1,538 (June). In 1997 it varied from $1,373 per ton (February) to $1,770 (September). The average increased in May 1998 to $1,794 per ton (its highest monthly level since February 1988), but fell in December to $1,515. In 1999 the highest monthly average was $1,455 per ton in January, and the lowest was $919 in December. The comparable figure for February 2000 was only $859 per ton: the lowest monthly average since March 1973. On the London Commodity Exchange (LCE) the price of cocoa for short-term delivery increased from £637 (US $983) per ton in May 1993 to £1,003.5 in November, but it later retreated. In July 1994, following forecasts that the global production deficit would rise, the price reached £1,093.5 ($1,694) per ton. In late February 1995 the London cocoa quotation for March delivery stood at £1,056.5 per ton, but in March the price was reduced to £938 (US $1,498). The downward trend continued, and in late July the LCE cocoa price was £827.5 ($1,321) per ton. Prices under short-term contracts remained below £1,000 per ton until the end of December, when the ‘spot’ quotation (for immediate delivery) stood at £847.5 ($1,319) per ton. During the first quarter of 1996 London cocoa prices continued to be depressed, but in April the short-term quotation rose to more than £1,000 per ton. In May the LCE ‘spot’ price reached £1,104.5 (US $1,672) per ton. Cocoa prices had increased in spite of the ICCO’s forecast that supply would exceed demand in 1995/96, following four consecutive years of deficits. In July 1996, however, the ‘spot’ quotation in London declined from £ 1,049 ($1, 630) per ton to £924 ($1,438). In December the ‘spot’ price was reduced to £848.5 ($1, 419) per ton. In January and February 1997 short-term quotations for cocoa were at similarly low levels, but in March the ‘spot’ price on the London market rose from £894.5 (US $1,449) per ton to £1,012.5 ($1,621) in less than two weeks. On 1 July the London ‘spot’ price stood at £1,143 ($1,895) per ton: its highest level, in terms of sterling, for more than nine years. Three weeks later, however, the price declined to £963 ($1,615) per ton. By late August international cocoa prices had recovered strongly, in response to fears that crops would suffer storm damage, and in early September the LCE ‘spot’ quotation reached £1, 133.5 ($1,798) per ton, while prices for longer-term contracts were at their highest for almost a decade. Thereafter, the trend in cocoa prices was generally downward. In the first half of December, however, the London price advanced from £987 ($1,663) per ton to £1, 117 ($1,824).
COMMODITY SURVEYS 89
In February 1998 the LCE price of cocoa for short-term delivery was reduced to less than £1,000 per ton. Following political unrest in Indonesia and forecasts of an increased global supply deficit, the cocoa market rallied in the first half of May, with the London ‘spot’ price rising from £1,072.5 (US $1,787) per ton to £1,140 ($1,857). Meanwhile, cocoa under long-term contracts was being traded at more than £1,200 per ton. However, in late June the London price of cocoa for July delivery declined to £1,002.5 per ton. During July the ‘spot’ price reached £1,070 ($1,752) per ton, before easing to £1,026.5 ($1,684). London cocoa prices remained above £1,000 per ton until late September, when the ‘spot’ quotation fell to £970 ($1,651). Later in the year there was a steady downward trend, and in late December the price of cocoa was about £860 ($1,440) per ton. During the early weeks of 1999 the London cocoa market remained relatively stable, but in March the ‘spot’ price declined to £803 (US $1,307) per ton. The slump later intensified, following forecasts of plentiful crops and a weakening in consumption trends, and by late May the London price of cocoa had fallen to only £602.5 ($962) per ton. Prices subsequently rallied, and in June, with the EU failing to resolve an impasse over common rules on chocolate products (see above), the quotation for July delivery reached £819 per ton. In July, after the EU agreed to allow chocolate manufacturers to include vegetable fats, the ‘spot’ price of cocoa eased to £694 ($1,089) per ton, although it later recovered to £754 ($1,194). A further decline in cocoa prices ensued, and in September the ‘spot’ quotation fell to £601.5 ($975) per ton. After a slight recovery, the downward trend continued. In November the London cocoa price for short-term delivery was reduced to £527.5 per ton. In December the ‘spot’ quotation reached £570.5 ($926) per ton, but later in the month the price retreated to £530.5 ($854): its lowest level, in terms of sterling, since 1992. Despite the coup in Côte d’Ivoire in December 1999, the cocoa market weakened further during the opening weeks of 2000, and in late February the London price for short-term delivery stood at only £509 per ton. Meanwhile, the equivalent New York price of cocoa fell in February to only US $734 per ton: its lowest level for more than 25 years. In March the London ‘spot’ quotation advanced to £598.5 ($940) per ton, before easing to £549 ($874). Comparable prices in May ranged from £575.5 ($880) to £606.5 ($911) per ton, and those in July were between £582 ($881) and £599 ($907). In August the LCE price of cocoa for short-term delivery fell to £564 per ton. In September, however, the London ‘spot’ quotation rallied, ranging between £586 ($855) and £593 ($860) in that month. In December a further downward movement occurred, the ‘spot’ quotation in that month ranging between £556 ($803) and £534 ($774). Early in the same month the New York second position ‘futures’ price declined to $707 per ton, its lowest level for 27 years. In January 2001 the London price of cocoa for short-term delivery rose to £833 per ton, this upward movement being attributed to a steeper decline in deliveries from Côte d’Ivoire than had earlier been forecast. This recovery was sustained in February, when speculative buying and estimates of potential shortages in supply boosted the short-term price to £945. In March, however, as a result of improved forecasts of production by Côte d’Ivoire, the London ‘spot’ quotation declined, ranging between £799 (US $1,153) and £917 ($1,346) per ton. Comparable prices in May ranged from £745 ($1,068) to £799 ($1,136). In early May fund and speculative buying, together with renewed pessimism about the level of production in Côte d’Ivoire, boosted the price of the London July ‘futures’ contract to a
90 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Export Price Index for Cocoa (base: 1980=100)
three-week high of £815 per ton at one point. In June, however, the London price of cocoa for short-term delivery declined steadily, falling to £676 per ton late in the month. During the first two weeks of July the London ‘spot’ market quotation ranged between £728 ($1, 024) per ton and £674 ($947) per ton. In August reports of a poor conclusion to the main crop in Côte d’Ivoire caused the price of the second ‘futures’ position on the London market to rise above £750 per ton, but this recovery was cancelled out in September by substantial selling of new crop West African cocoa. Late in the month forecasts of reduced production by Côte d’Ivoire in 2001/02 caused the London December ‘futures’ contract to rise as high as £758 per ton at one point, the rally attributed to short-covering by commodity funds. In early October the price of the London second position ‘futures’ contract rose to £838 per ton, the highest price since midMay. This strengthening of the second position contract was, once again, attributed to fund buying. London ‘futures’ prices increased rapidly from mid-November, in response to renewed pessimism with regard to production by Côte d’Ivoire, and forecasts of a deficit in the season’s cocoa crop of some 200,000 tons. In the third week of November London ‘futures’ prices reached their highest levels for three years. The closing price of the London March contract on 16 November was £952 per ton, representing an increase of some £200 per ton over the preceding 14 days. The upward trend in prices continued during 2002, amid further reports of poor weather in West Africa and political unrest in the principal cocoa-growing areas of Côte d’Ivoire. The maintenance by one trading company of an unusually ‘long’ position in cocoa, thereby causing scarcity elsewhere in the market, exacerbated this trend throughout the first half of 2002. In March the price of the London second position contract reached £1,261 per ton, the highest price for a second position contract since September 1987. By the end of July 2002 the London ‘futures’ price had risen to £1,317. The Cocoa Producers’ Alliance (COPAL), with headquarters in Lagos, Nigeria, whose 12 members include all the major producers except Indonesia, was formed in 1962 with the aim of preventing excessive price fluctuations by regulating the supply of cocoa. Members of COPAL account for about 80% of world cocoa production, with its seven African members providing about 67%. COPAL has acted in concert with successive ICCA. The principal centres for cocoa-trading in the industrialized countries are the London Cocoa Terminal Market, in the United Kingdom, and the New York Coffee, Sugar and Cocoa Exchange, in the USA.
Coconut
The coconut palm (Cocos nucifera) is a tropical tree, up to 25 m tall, with a slender trunk surmounted by a feathery crown of leaves. The geographical origins of the tree are thought to be in the Asia-Pacific region. Its presence in most coastal areas and on many islands in the tropics is largely due to man, who introduced it to West Africa and the Americas. The tree’s fruits first appear after about six years, though the palm may not reach full bearing until it is about 20 years old. It may continue fruiting for a further 60 years. (Hybrid varieties have advanced the time of initial fruiting from the sixth to the fourth year, and the onset of full bearing from the 20th to the 10th year.) The fruits, green at first but turning yellow as they ripen, are often left to fall naturally, but, as many are then over-ripe, harvesting by hand is widely practised. Coconut, the most important of all cultivated palms, is frequently a smallholder crop, found mainly in small plots around houses and in gardens, although in the Philippines the average coconut farm covers 4–7 ha in area. The plant’s fruit, fronds and wood provide many thousands of families with a cash income as well as basic necessities such as food, drink, fuel and shelter. The palms grow with little or no attention where conditions are favourable. More than 80 varieties are known, divided broadly into tall palms, produced by crosspollination, and dwarf palms, which are self-pollinating. The sap of the coconut palm itself can be evaporated to produce sugar or fermented to make an alcoholic drink called ‘toddy’. This may be distilled to produce a spirit called ‘arrack’. Coconut oil is a rich source of medium-chain triglycerides (MCT), whose applications in medical nutrition include infant milk formulas and foods for persons unable to digest and assimilate fats. Its other food applications include use as a flavouring and also as an ingredient to prolong the shelf life of certain food products. All parts of the fruit have their uses. Beneath the outer skin is a thick layer of fibrous husk. The fibres can be combed out to produce coir (from the Malay word kayar, which means ‘cord’), a material used for making ropes, coconut matting, brushes, mattresses and upholstery (see below). Inside the husk is the nut—what people in temperate areas think of as a ‘coconut’ since the whole fruit is not usually imported. The nut has a hard shell, inside which is a thin white fleshy layer of edible ‘meat’. The nut’s hollow interior is partially filled with a liquid called ‘coconut water’ which is gradually absorbed as the fruit ripens. This ‘water’ is a refreshing and nutritious drink when taken from a young nut (7–8 months), while that from more mature nuts can be prepared as a soft drink and is also used in the production of yeast, alcohol, wine and vinegar. The so-called ‘coconut milk’ is the white,
92 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Coconuts (’000 metric tons)
* FAO estimate (s). † Unofficial figure (s). Source: FAO. Production of Copra (’000 metric tons)
* Unofficial figure (s). † FAO estimate (s). Source: FAO.
creamy extract obtained after pressing freshly grated coconut ‘meat’. Coconut flour, a byproduct of ‘coconut milk’, is a useful nutritional source of dietary fibre. The shells are mainly utilized as fuel, but small quantities are used to make containers, ornaments, ladles and buttons, and pulverized shells can be used as filler in plastics moulding, plywood and mosquito coil repellents. Raw coconut shell is a more efficient fuel after it has been carbonized into charcoal and, on further processing, can be converted into the still more efficient activated carbon, which finds a market in highly industrialized countries concerned with pollution control.
COMMODITY SURVEYS 93
After harvesting, the fruits are split open, the husk removed and the nuts usually broken open. The ‘meat’ is sometimes eaten directly or used to prepare desiccated coconut, widely used in the bakery and confectionery trades. However, by far the most important economic product of the plant is obtained by drying the ‘meat’ into copra, either in the sun or in a kiln (which may be heated by burning the coconut shells). The dried copra is the source of coconut oil, used mainly in the manufacture of soap, detergent and cosmetics, and also as a cooking oil and in margarine production. As technology advances, more uses for coconut oil are being developed. Recent experiments have shown that it can be converted into diesel fuel, and a programme of conversion might alleviate the financial burden on countries which are heavily dependent on petroleum imports. The residue left after the extraction of oil from copra is a valuable oilcake for feeding livestock, particularly dairy cattle. Good copra has an oil content of about 64%. Most extraction is done in the coconutgrowing countries, although there is a substantial trade in copra to countries that extract the oil themselves. Although the largest producer of copra, the Philippines was overtaken as the largest exporter in 1992 by Papua New Guinea, whose copra sales represented 28.1% of the world export trade in 1999 and 23.5% in 2000. The eclipse of the Philippines as a copra exporter, however, has been attributable to increased levels of crushings of its copra into crude coconut oil for export. Japan was formerly the main importer of copra, but it has been overtaken by Germany, which has accounted, on average, for about one-quarter of all imports in recent years. Germany’s partners within the European Union (EU) also constitute a major market for copra, coconut oil, desiccated coconut and copra meal. Coconut oil has encountered competition from the development of more productive annual oilseed crops, such as soybeans and rapeseed in the northern hemisphere, and from oil palm in the tropics. Up to 7 metric tons of oil per ha can be produced from oil palm, compared with a maximum of 3.25 tons from coconuts. The necessity for the production of copra prior to the extraction of oil has further eroded the competitiveness of coconuts in the world market for vegetable oils. In 2000 the Philippines accounted for 48% of world exports of coconut oil. The USA is the main importer, absorbing, on average, almost 30% of total world imports in recent years. In 2001, according to provisional figures from the FAO, world production of coconut oil was 3,594,686 tons, including 3,183,103 tons from Far East Asia and 106,744 tons from Oceania. The major producing countries in that year were the Philippines (1,489,440 tons) and Indonesia (930,000 tons). The Philippines is the world’s largest exporter of all coconut products, and about onethird of its population is directly or indirectly dependent on the coconut sector for a livelihood. In 1979 the Philippine Government agreed to the operation of a monopoly of the coconut industry by a group of private producers who controlled 80% of the country’s coconut-milling capacity, and accounted for more than 50% of coconut exports. The monopoly was dismantled in 1985, and the export of coconut products was opened to private enterprises. At that time, 10 coconut trading co-operatives were established, with a common majority shareholder, the government-controlled United Coconut Planters Bank. This has, however, given rise to criticism that the abolition of the former monopoly was more apparent than real, and coconut farmers have been reluctant to conduct business with the new trading firms. Government financial support for coconut-replanting ceased in 1986. In the mid-1990s about 3.1m. ha in the Philippines was planted with coconuts.
94 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
International promotion of biodegradable products during the late 1990s generated a revival of demand for coir products, of which India is the largest producer and exporter, principally to markets in the EU and the USA, which account for almost 85% of world imports of coir products. Sri Lanka, although a considerable producer of coconut, lacks coir textile production facilities, although it is an exporter of de-husked fibre and coir yarn. Indonesia and the Philippines, each of whose coconut output exceeds that of India, both lack the facilities to carry out coir production. In Africa Mozambique and Tanzania have traditionally been the largest producers of coconuts, coconut oil and copra, although in 2000 and 2001 output of coconuts by Ghana overtook that of Mozambique. Côte d’Ivoire is also a significant producer of coconuts and their derivatives. Annual output of coconuts by Mozambique has averaged about 400,000 metric tons in recent years, while that of Tanzania has averaged some 360,000 tons. Mozambique produces, on average, about 30,000 tons of coconut oil and 60,000 tons of copra each year, while for Tanzania the corresponding figures are about 20,000 tons and 30, 000 tons. In Latin America Brazil is by far the largest producer of coconuts, with estimated output of almost 2m. metric tons in 2001, compared with only about 600,000 tons in 1995. Production increased abruptly and substantially in the late 1990s, but Brazil remains, nevertheless, a relatively minor producer of both copra and coconut oil. Mexico, the second largest Latin American producer of coconuts, is also the largest regional producer of copra and coconut oil. In 2001 the country’s output of coconuts amounted to about an estimated 1.2m. tons, while that of copra was estimated at about 210,000 tons and that of coconut oil at some 80,000 tons. The nature of the tree means it is little grown outside tropical regions. The Asian and Pacific Coconut Community, with headquarters in Jakarta, was established in 1969. Its 14 members account for most of the world’s production of coconut oil. In January 2002 the index of export prices for copra stood at 49, while that for coconut oil was 52. The import price of Philippine copra in Europe has varied widely in recent years. In 1997 the price of copra at European ports averaged US $433.75 per metric ton, but this declined to $411.03 in 1998. In 1999 the price averaged $462.27 per ton, but this declined steeply in 2000, to only $308.92 per ton. In 2001 the average price fell sharply again, to only $195.55 per ton. During the first quarter of 2002 the average import price of Philippine copra at European ports recovered to $228.29 per ton. The average price rose further, to $245.23 per ton, in April, and again, to $263.26 per ton, in May. The import price of Philippine coconut oil has also fluctuated considerably. The quotation (c.i.f. Rotterdam) rose from US $720 per ton in September 1996 to $810 in December. It declined to $550 per ton in August 1997, but recovered to $670 in September. The price of coconut oil was reduced to $510 per ton in January 1998, but rose to $755 in May. It subsequently eased, but advanced to $777.5 per ton by the end of the year. In May 1999, with coconut oil supplies very scarce, the price increased to $945 per ton, its highest level since December 1984. The surge in prices was short-lived, and in July 1999 the Rotterdam quotation fell to $625 per ton. The price of coconut oil recovered in October to $780 per ton and ended the year at $700. The market for coconut oil was depressed in the first half of 2000, with plentiful supplies of the commodity (and of palm oil) available. In July coconut oil was traded in Europe at only $380 per ton. The average import price of coconut oil of
COMMODITY SURVEYS 95
Export Price Index for Copra (base: 1980=100)
Export Price Index for Coconut Oil (base: 1980=100)
Philippine origin (c.i.f. Rotterdam) was $450.3 per ton in 2000, and fell further in 2001, to only $318.1 per ton. During the first six months of 2002 the average price ranged between $362.0, recorded in January, and $446.0, recorded in June.
Coffee
This is an evergreen shrub or small tree (Coffea), generally 5–10 m in height, indigenous to Asia and tropical Africa. Wild trees grow to 10m, but cultivated shrubs are usually pruned to a maximum of 3 m. The dried seeds (beans) are roasted, ground and brewed in hot water to provide the most popular of the world’s non-alcoholic beverages. Coffee is drunk in every country in the world and its consumers comprise an estimated one-third of the world’s population. Although it has little nutrient value, coffee acts as a mild stimulant, owing to the presence of caffeine, an alkaloid also present in tea and cocoa. There are about 40 species of Coffea, most of which grow wild in the eastern hemisphere. The species of economic importance are C. arabica (native to Ethiopia), which, in the early 2000s, accounted for about 60%–65% of world production, and C. canephora (the source of robusta coffee), which accounted for almost all of the remainder. Arabica coffee is more aromatic but robusta, as the name implies, is a stronger plant. Coffee grows in the tropical belt, between 20°N and 20°S, and from sea-level to as high as 2,000 m above. The optimum growing conditions are found at 1,250 m–1,500 m above sea-level, with an average temperature of around 17°C and an average annual rainfall of 1,000 mm–1,750 mm. Trees begin bearing fruit three to five years after planting, depending upon the variety, and give their maximum yield (up to 5 kg of fruit per year) from the sixth to the 15th year. Few shrubs remain profitable beyond 30 years. Arabica coffee trees are grown mostly in the American tropics and supply the largest quantity and the best quality of coffee beans. In Africa and Asia arabica coffee is vulnerable in lowland areas to a serious leaf disease and consequently cultivation has been concentrated on highland areas. Some highland arabicas, such as those grown in Kenya, have a high reputation for quality. The robusta coffee tree, grown mainly in East and West Africa, and in the Far East, has larger leaves than arabica, but the beans are generally smaller and of lower quality and, consequently, fetch a lower price. However, robusta coffee has a higher yield than arabica as the trees are more resistant to disease. Robusta is also more suitable for the production of soluble (‘instant’) coffee. About 60% of African coffee is of the robusta variety. Soluble coffee accounts for more than one-fifth of world coffee consumption. Each coffee berry, green at first but red when ripe, usually contains two beans (white in arabica, light brown in robusta) which are the commercial product of the plant. To produce the best quality arabica beans—known in the trade as ‘mild’ coffee—the berries are opened by a pulping machine and the beans fermented briefly in water before being dried and hulled
COMMODITY SURVEYS 97
Production of Green Coffee Beans (’000 bags, each of 60 kg, coffee years, ICO members only)
* Estimated production. Source: International Coffee Organization.
into green coffee. Much of the crop is exported in green form. Robusta beans are generally prepared by dry-hulling. Roasting and grinding are usually undertaken in the importing countries, for economic reasons and because roasted beans rapidly lose their freshness when exposed to air. Apart from beans, coffee produces a few minor by-products. When the coffee beans have been removed from the fruit, what remains is a wet mass of pulp and, at a later stage, the dry material of the ‘hull’ or fibrous sleeve that protects the beans. Coffee pulp is used as cattle feed, the fermented pulp makes a good fertilizer and coffee bean oil is an ingredient in soaps, paints and polishes. More than one-half of the world’s coffee is produced on smallholdings of less than 5 ha. In many producing countries, and especially in Africa, coffee is almost entirely an export crop, with little domestic consumption. Green coffee accounts for some 96% of all the coffee that is exported, with soluble and roasted coffee comprising the balance. Tariffs on green/raw coffee are usually low or non-existent, but those applied to soluble coffee may be as high as 30%. The USA is the largest single importer, although its volume of coffee purchases was overtaken in 1975 by the combined imports of the (then) nine countries of the European Community (EC, now the European Union—EU). After petroleum, coffee is the major raw material in world trade, and the single most valuable agricultural export of the tropics. Latin America (with 56.7% of estimated world output, excluding minor producers, in 2001/02) is the leading coffee-growing region. Africa, which formerly ranked second, was overtaken in 1992/93 by Asian producers. In
98 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
2001/02 African producers accounted for 17.7% of the estimated world coffee crop, compared with 25.1% for Asian countries. Brazil and Colombia are among the world’s main producers of coffee beans, together consistently accounting for more than 32% of world trade in green (unroasted) coffee during the 1990s. In 1998/99 their share of the world coffee trade rose to 39%, reflecting the bumper crop from Brazil. In 2001/02, once again, 39% of all coffee traded world-wide emanated from Brazil and Colombia. Coffee was formerly Brazil’s most important agricultural export, but its relative importance has declined in recent years. In 1991 coffee (including extracts and essences) provided 4.8% of the country’s total exports, but in 1992, when prices were lower (see below), the proportion was only 3.1%. Coffee provided 5.9% of Brazil’s total exports in 1997, 5.1% in 1998, and 5.1% again in 1999. In terms of volume, Brazilian coffee exports reached a record level of 23.1m. bags (each of 60 kg) in 1998/99. In 2001/02 Brazilian coffee exports totalled 24.3m. bags. After a devastating frost in 1975, Brazil initiated a major programme to replant coffee trees. This concentrated on the state of Minas Gerais, north of another important coffee-growing area, Paraná state, which is more prone to frost. Replanting on a smaller scale took place after the less severe frost damage which coffee plantations suffered in 1981, although efforts have continued to move the centre of production further northwards. In the late 1990s Minas Gerais usually accounted for more than 50% of total Brazilian coffee production. In 2001/02, according to official estimates, Minas Gerais accounted for 45.3% of total Brazilian coffee production. The Colombian economy continues to depend heavily on coffee. ‘Colombian Mild’ arabica coffee beans, to which the country has given its name, are regarded as being of a superior quality to other coffee types and are grown primarily in Colombia, Kenya and Tanzania. (Colombian Milds are one of four internationally designated coffee groups, the others being Other Milds, which are produced primarily in Central America, Unwashed Arabicas, which are produced primarily in Brazil and Ethiopia, and Robustas, of which the main producers are Viet Nam, Indonesia and Brazil.) Shipments of raw coffee from Colombia accounted for 19.6% of total export earnings in 1997, and 17.4% in 1998. An earthquake in Colombia in January 1999 caused heavy damage to coffee-processing facilities, although plantations were largely unaffected. In that year raw coffee accounted for only 11.4% of total export earnings. There were fears in mid-2000 that heavy rainfall in Colombia would adversely affect that year’s coffee harvest. In 1999/ 2000, according to official sources, Colombian production of coffee totalled 9.5m. bags. Production was estimated to have risen to 10.5m. bags in 2000/01. According to official estimates, Colombian exports of coffee totalled 9.0m. bags in 1999/2000, and 9.4m. bags in 2000/01. The USA is consistently the most important American market for Colombian coffee, accounting for an estimated 31.2% of total shipments in 2000/01. Overall, however, Europe, in particular the countries of the EU, is the most important market for Colombian coffee. In 2000/ 01, Germany was the most important European destination for shipments, accounting for an estimated 19.0% of Colombia’s total exports of coffee. In the early 1990s coffee was the principal export crop in El Salvador, Guatemala, Haiti, Mexico, Nicaragua and Peru, and the second most important crop in Costa Rica, the Dominican Republic, Ecuador, Honduras and Puerto Rico. Sales of coffee contributed 33. 2% of El Salvador’s total export earnings in 1996, and 38.2% in 1997. Unfavourable
COMMODITY SURVEYS 99
weather, disease (rust), civil war and falling prices, however, have reduced production in recent years. Sales of coffee contributed 25.8% of El Salvador’s export revenue in 1998, and 21.2% in 1999. Sales of coffee (including soluble/instant coffee) accounted for 22.9% of Guatemala’s export earnings in 1999, while sales of Nicaraguan coffee accounted for 27.8% of that country’s export revenue in the same year. In Costa Rica coffee ranks second to bananas as the principal export commodity, supplying 10.8% of total export revenue in 1997. In 1998, however, coffee’s contribution to Costa Rica’s total export revenue declined to 7.4%, and in 1999 to only 4.3%. In 2000 coffee accounted for 4.7% of Costa Rica’s total export earnings. Coffee was the principal agricultural export commodity in Honduras in 2000, contributing 25.8% of export revenue. Coffee provided 23.1% of Haiti’s export earnings in 1989/90, but only 4.1% in 1997/98. The neighbouring Dominican Republic earned only 1.4% of its total export revenue from coffee (including exports from free-trade zones) in 1997. Coffee’s share in Ecuador’s export revenue, which was 10.8% in 1994, declined to 3.3% in 1996 and 2.2% in 1997, before rising to 2.5% in 1998. In 1999, however, the contribution of coffee to Ecuador’s total export earnings declined to only 1. 8%. Coffee accounted for 4.5% of Peru’s total export earnings in that year. According to the FAO, lower harvests in Brazil, Colombia and Guatemala would account, to a large extent, for a forecast 1 % decline in coffee production world-wide in 2001/02, compared with 2000/01. Harvests in those countries were expected to fall as producers responded to the depressed world market for coffee. Reduced Latin American production was also cited as the principal reason for the 6% reduction in stocks of coffee held by producing countries in 2000/01. In recent years Latin American arabica production has been inhibited by the coffee berry borer beetle, which has been described as the most damaging pest to coffee world-wide. The beetle has been estimated to cost Latin American producers US $500m. annually in lost production. Infestation has been particularly acute in Colombia, where the beetle, which cannot be effectively eliminated by pesticides, infests about 680,000 ha of the 900,000 ha under coffee. During the late 1990s experimental research, aimed at eliminating the beetle through biotechnological methods, was proceeding in Ecuador, Guatemala, Honduras, Jamaica, Mexico and India. In every year during 1970–90, except in 1974 and 1984, Côte d’Ivoire was Africa’s leading coffee producer, although since 1980 cocoa has overtaken coffee as its most important export crop. In the early 1990s more than three-quarters of the coffee trees in Côte d’Ivoire had passed their most productive age. A programme of extensive replanting was begun in the mid-1990s: the total area under coffee cultivation was projected to increase by 270,000 ha to 1.3m. ha by the year 2000. Higher prices for coffee also contributed to a very substantial increase in Ivorian production from 1995. In 2001/02 production was estimated to have totalled 246,000 metric tons The African countries which are most dependent on coffee as a source of foreign exchange are Burundi and Uganda. Coffee sales generally account for 70%–85% of Burundi’s total export revenue, and in 1997 the proportion was 88%. In 1998 coffee accounted for 79.8% of Burundi’s total export earnings, and for 75.7% in 1999. In Uganda coffee provided about 57% of export earnings in 1999. Ethiopia is also a significant regional producer, challenging Côte d’Ivoire in output in each of the years 1991–95. Despite high
100 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
domestic consumption and widespread smuggling, coffee accounted for 61.6% of Ethiopia’s total export earnings in 1991, and for 70.7% in 1997/98. The coffee sector in Rwanda, which contributed more than 60% of export revenue in 1991, has been severely affected by internal unrest, and in 1994 the bulk of the coffee crop was lost. Rwanda’s coffee output in 1997 was the smallest since 1974. Among other African countries where coffee is a major export are Cameroon, the Central African Republic, the Democratic Republic of the Congo (DRC), Kenya, Madagascar and Tanzania. Angola was formerly the world’s leading exporter of robusta coffee, but production during the period 1975–95 was severely disrupted by civil conflict. In 1995 the resumption of production in three provinces produced a crop of 2,300 tons, while plans proceeded during the late 1990s for the transfer to private-sector ownership of the country’s major plantations. In 1997 the government commenced the transfer of the state-controlled marketing monopoly to the private sector, and began to prepare for the sale of all state-owned coffee-producing companies. However, the full rehabilitation of Angola’s coffee industry depends on an enduring political and military settlement, and is expected to span many years. In the late 1990s plans were announced for the initial rehabilitation of 50,000 ha of coffee estates over a five-year period to 2002, with the aim of achieving an annual coffee output of 60,000 tons. However, estimated production in the 2001/02 crop year, at less than 8,000 tons, was still far below that target. In the Far East and Australasia Viet Nam has emerged, in a very short period of time, as a major producer and exporter of coffee. In 1980 coffee was grown on only 20,000 ha, but by 1998 the area cultivated had been increased to 300,000 ha. (Over the same period the yield obtained per hectare rose from 0.6 to 1.6 metric tons.) The increase in the area cultivated has taken place in the context of a programme of economic reforms that, with regard to the agricultural sector, has emphasized the expansion of cash crop production. Viet Nam planned to increase the area sown to coffee by a further 100,000 ha by 2005 and was proceeding, in the early 2000s, with a project to bring into production of arabica coffee 40, 000 ha in the north of the country. However, it is as an exporter of robusta that Viet Nam has achieved its importance to world markets. In 1998 the country was the largest exporter of robusta in the world, with shipments (mainly to the USA and the EU) of some 400,000 tons, equivalent to 7.7% of the total quantity of coffee exported world-wide. In that year Viet Nam was the third largest exporter of all coffees, after Brazil and Colombia. In 1999 exports increased to about 460,000 tons, equivalent to some 9% of all coffee exported world-wide, and, again, in 2000, when, at almost 700,000 tons, they represented 13% of global coffee exports. In 2000 exports of coffee contributed 3.5% of Viet Nam’s total export earnings. In the 1999/2000 crop year, with production of 11.6m. bags, Viet Nam overtook Indonesia as the world’s largest producer of robusta, and Colombia as the world’s second largest producer of coffee overall, and maintained those ranks in the two subsequent crop years, although production declined by 14.7%, to 12.6m. bags, in 2001/02. Viet Nam has been accused of contributing, by rapidly increasing its output, to the glut of supplies available for export that has plunged coffee production into crisis world-wide (see below). In mid-2002, as part of global attempts to resolve that crisis, the Vietnamese Government was reportedly pursuing an initiative to reduce the area sown to coffee, a direct reversal of its established policy, with the aim of lowering output to about 10m. bags by around 2005.
COMMODITY SURVEYS 101
Until the 1999/2000 crop year, when it was overtaken by Viet Nam, Indonesia was the largest producer of coffee in the Far East and Australasia. Production, mainly of robusta varieties, had, by the late 1990s, risen approximately threefold since the late 1960s, although it continued to be based on smallholdings rather than large estates. Until 1999/ 2000, Indonesia was the world’s largest producer of robusta. In that crop year output of all coffees (Indonesia also produces high quality arabicas) amounted to about 324,000 tons, a decline of almost 36% compared with 1998/99. In 2000/01 production recovered to about 400,000 tons, but was estimated to have fallen to about 380,000 tons in 2001/02. In 1998 Indonesian exports of coffee totalled about 336,000 tons. In 1999 they declined to some 306,000 tons, but rose to 312,000 tons in 2000. The importance of coffee in Indonesia’s total foreign trade has declined as that of petroleum and manufactured goods has risen. In 1999 exports of coffee contributed 1% of the country’s total export earnings. Indian production of coffee rose fairly steadily during the 1990s, although it remained, in the early 2000s, subject to quite substantial annual fluctuations. In the late 1990s output was divided approximately equally between arabicas and robustas, although production of robustas was increasing at a faster rate than that of arabicas. In 1999/2000 only, during the 1990s, Indian production, totalling some 330,000 tons, surpassed that of Indonesia. Output declined to about 294,000 tons in 2000/01, but was estimated to have risen, in 2001/02, to some 318,000 tons. By the late 1990s India’s exports of coffee had doubled since the mid-1970s. Exports varied considerably in the late 1990s, rising by almost 35%, to about 204,000 tons, in 1998, compared with the previous year. In 1999 exports amounted to some 216,000 tons, and increased further, to around 270,000 tons, in 2000. In 1998 exports of coffee accounted for 1.2% of India’s total export earnings. Papua New Guinea ranks as the fourth largest producer of coffee in the Far East and Australasia. In the 2001/02 crop year production amounted to about 72,000 metric tons, compared with some 60,000 tons in 2000/01. In the late 1990s arabicas accounted for about 97% of all coffee cultivated. Production, initially based on large estates, but subsequently dominated by smallholdings, began to expand in the early 1950s. In the mid-1990s Germany was the principal export market for Papua New Guinea’s coffee, followed by Australia, the United Kingdom and the USA. In 1998 Papua New Guinea exported some 78,000 tons of coffee, and about the same quantity, again, in 1999. In 2000 exports declined to 60,000 tons. In 2000 exports of coffee accounted for 5.2% of Papua New Guinea’s total export earnings. In the 2000/01 and 2001/02 crop years the Philippines produced about 48,000 metric tons of coffee. (Production has declined somewhat since the late 1990s. In 1997/98, for instance, output totalled 54,000 tons.) Robusta accounts for about 90% of all coffee produced in the Philippines. Output was adversely affected by drought in the 1998/99 crop year. The Philippines had already, in the previous crop year, become a net importer of coffee, and imports rose substantially in 1998/ 99. In 2000 exports amounted to only about 30,000 tons. Elsewhere in the Far East Sri Lanka is a minor producer of coffee, with output of some 2.4m. tons in 2001/02. Effective international attempts to stabilize coffee prices began in 1954, when a number of producing countries made a short-term agreement to fix export quotas. After three such agreements, a five-year International Coffee Agreement (ICA), covering both producers and consumers, and introducing a quota system, was signed in 1962. This led to the
102 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
establishment, in 1963, of the International Coffee Organization (ICO), with its headquarters in London. In June 2002 the International Coffee Council, the highest authority of the ICO, comprised 63 members (45 exporting countries, accounting for 97% of world supplies, and 18 importing countries, accounting for 66% of world imports; until the USA withdrew from the ICO in 1993 importing members accounted for more than 81% of world imports). Successive ICAs took effect in 1968, 1976, 1983, 1994 and 2001 (see below), but the system of export quotas to stabilize prices was abandoned in July 1989. During each ICA up to and including that implemented in 1994, contention arose over the allocation of members’ export quotas, the operation of price support mechanisms, and, most importantly, illicit sales by some members of surplus stocks to non-members of the ICO (notably to the Soviet Union and to countries in Eastern Europe and the Middle East). These ‘leaks’ of low-price coffee, often at less than one-half of the official ICA rate, also found their way to consumer members of the ICO through free ports, depressing the general market price and making it more difficult for exporters to fulfil their quotas. The issue of coffee export quotas became further complicated in the 1980s, as consumer tastes in the main importing market, the USA, and, to a lesser extent, in the EC moved away from the robustas exported by Brazil and the main African producers in favour of the milder arabica coffees grown in Central America. Disagreements over a new system of quota allocations, taking account of coffee by variety, had the effect of undermining efforts in 1989 to preserve the economic provisions of the ICA, pending the negotiation of a new agreement. The ensuing deadlock between consumers and producers, as well as among the producers themselves, led in July to the collapse of the quota system and the suspension of the economic provisions of the ICA. The administrative clauses of the agreement, however, continued to operate and were subsequently extended until October 1993, pending an eventual settlement of the quota issue and the entry into force of a successor ICA. With the abandonment of the ICA quotas, coffee prices fell sharply in world markets, and were further depressed by a substantial accumulation of coffee stocks held by consumers. The response by some Latin American producers was to seek to revive prices by imposing temporary suspensions of exports; this strategy, however, merely increased losses of coffee revenue. By early 1992 there had been general agreement among the ICO exporting members that the export quota mechanism should be revived. However, disagreements persisted over the allocation of quotas, and in April 1993 it was announced that efforts to achieve a new ICA with economic provisions had collapsed. In the following month Brazil and Colombia, the two largest coffee producers, were joined by some Central American producers in a scheme to limit their coffee production and exports in the 1993/94 coffee year. Although world consumption of coffee exceeded the level of shipments, prices were severely depressed by surpluses of coffee stocks totalling 62m. bags, with an additional 21m. bags held in reserve by consumer countries. Prices, in real terms, stood at historic ‘lows’. In September 1993 the Latin American producers announced the formation of an Association of Coffee Producing Countries (ACPC) to implement an export-withholding, or coffee retention, plan. The Inter-African Coffee Organization (IACO, see below), whose membership includes Côte d’Ivoire, Kenya and Uganda, agreed to join the Latin American producers in a new plan to withhold 20% of output whenever market prices fell below an
COMMODITY SURVEYS 103
agreed limit. With the participation of Asian producers, a 28-member ACPC was formally established. (Angola and Zaire, now the DRC, were subsequently admitted to membership.) With headquarters in London, its signatory member countries numbered 28 in 2001, 14 of which were ratified. Production by the 14 ratified members in 1999/ 2000 accounted for 61.4% of coffee output world-wide. The ACPC coffee retention plan came into operation in October 1993 and gradually generated improved prices; by April 1994 market quotations for all grades and origins of coffee had achieved their highest levels since 1989. In June and July 1994 coffee prices escalated sharply, following reports that as much as 50% of the 1995/96 Brazilian crop had been damaged by frosts. In July 1994 both Brazil and Colombia announced a temporary suspension of coffee exports. The onset of drought following the Brazilian frosts further affected prospects for its 1994/95 harvest, and ensured the maintenance of a firm tone in world coffee prices during the remainder of 1994. The intervention of speculative activity in the coffee ‘futures’ market during early 1995 led to a series of price falls, despite expectations that coffee consumption in 1995/96, at a forecast 93.4m. bags, would exceed production by about 1m. bags. In an attempt to restore prices, the ACPC announced in March 1995 that it was to modify the price ranges of the export withholding scheme. In May the Brazilian authorities, holding coffee stocks of about 14.7m. bags, introduced new arrangements under which these stocks would be released for export only when the 20-day moving average of the ICO arabica coffee indicator rose to about US $1.90 per lb. Prices, however, continued to decline, and in July Brazil joined Colombia, Costa Rica, El Salvador and Honduras in imposing a reduction of 16% in coffee exports for a one-year period. Later in the same month the ACPC collectively agreed to limit coffee shipments to 60.4m. bags from July 1995 to June 1996. This withholding measure provided for a decrease of about 6m. bags in international coffee exports during this period. In July 1997 the ACPC announced that the export withholding programme was to be replaced by arrangements for the restriction of exports of green coffee. Total exports for 1997/98 were to be confined to 52.75m. bags. Following the withdrawal, in September 1998, of Ecuador from the export restriction scheme (and subsequently from the ACPC) and the accession of India to membership in September 1999, there were 14 ratified member countries participating in the withholding arrangements. The continuing decline in world coffee prices (see below) prompted the ACPC to announce in February 2000 that it was considering the implementation of a further scheme involving the withholding of export supplies. In the following month the members indicated their intention to withdraw supplies of low-grade beans (representing about 10% of annual world exports), and on 19 May announced arrangements under which 20% of world exports would be withheld until the ICO 15-day composite price reached 95 US cents per lb (at that time the composite price stood at 69 cents per lb). Retained stocks would only be released when the same indicator price reached 105 cents per lb. Five non-member countries, Guatemala, Honduras, Mexico, Nicaragua and Viet Nam, also signed a so-called London Agreement pledging to support the retention plan. Implementation of the plan, which had a duration of up to two years, was initiated by Brazil in June, with Colombia following in September. In December 2000 the ACPC identified a delay in the full implementation of the retention plan as one of the factors that had caused the average ICO composite indicator price in November to fall to its lowest
104 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
level since April 1993, and the ICO robusta indicator price to its lowest level since August 1969. In May 2001 the ACPC reported that exchange prices continued to trade at historical lows. Their failure to recover, despite the implementation of the retention plan, was partly attributed to the hedging of a proportion of the 7m. bags of green coffee retained by that time. On the physical market, meanwhile, crop problems and the implementation of the retention plan had significantly increased differentials for good quality coffees, in particular those of Central America. In April 2001 the ICO daily composite indicator price averaged 47.13 cents per lb (compared with an average of 64.24 cents per lb for the whole of 2000, the lowest annual average since 1973), the lowest monthly average since September 1992. In October 2001 the ACPC announced that it would dissolve itself in January 2002. The Association’s relevance had been increasingly compromised by the failure of some of its members to comply with the retention plan in operation at that time, and by some members’ inability to pay operating contributions to the group owing to the depressed state of the world market for coffee. Upon its dissolution, the group’s members announced that they would consider establishing a successor organization if prices returned to a level permitting this. In June 1993 the members of the ICO agreed to a further extension of the ICA, to September 1994. However, the influence of the ICO, from which the USA withdrew in October 1993, was increasingly perceived as having been eclipsed by the ACPC. In 1994 the ICO agreed provisions for a new ICA, again with primarily consultative and administrative functions, to operate for a five-year period, until September 1999. In November of that year it was agreed to extend this limited ICA until September 2001. A successor ICA took effect, provisionally, in October 2001. By late May 2002 the new ICA had been endorsed by 37 members of the International Coffee Council (25 exporting members and 12 importing members). Among the principal objectives of the ICA of 2001 were the promotion of international co-operation with regard to coffee, and the provision of a forum for consultations, both intergovernmental and with the private sector, with the aim of achieving a reasonable balance between world supply and demand in order to guarantee adequate supplies of coffee at fair prices for consumers, and markets for coffee at remunerative prices for producers. In February 1995 five African Producers (Burundi, Kenya, Rwanda, Tanzania and Uganda) agreed to participate in coffee price guarantee contract arrangements sponsored by the Eastern and Southern Africa Trade and Development Bank under the auspices of the Common Market for Eastern and Southern Africa (COMESA). This plan seeks to promote producer price guarantees in place of stock retention schemes. The contract guarantee arrangements would indemnify producers against reductions below an agreed contract price. International prices for coffee beans in the early 1990s were generally at very low levels, even in nominal terms (i.e. without taking inflation into account). On the London Commodity Exchange (LCE) the price of raw robusta coffee for short-term delivery fell in May 1992 to US $652.5 (£365) per metric ton, its lowest level, in terms of dollars, for more than 22 years. By December the London coffee price had recovered to $1,057.5 per ton (for delivery in January 1993). The LCE quotation eased to $837 (£542) per ton in January 1993, and remained within this range until August, when a sharp increase began. The coffee price
COMMODITY SURVEYS 105
advanced in September to $1,371 (£885) per ton, its highest level for the year. In April 1994 a further surge in prices began, and in May coffee was traded in London at more than $2,000 per ton for the first time since 1989. In late June 1994 there were reports from Brazil that frost had damaged the potential coffee harvest for future seasons, and the LCE quotation exceeded $3,000 per ton. In July, after further reports of frost damage to Brazilian coffee plantations, the London price reached $3,975 (£2,538) per ton. Market conditions then eased, but in September, as a drought persisted in Brazil, the LCE price of coffee increased to $4,262.5 (£2,708) per ton: its highest level since January 1986. In December 1994, following forecasts of a rise in coffee production and a fall in consumption, the London quotation for January 1995 delivery stood at $2,481.5 per ton. The coffee market later revived, and in March 1995 the LCE price reached US $3,340 (£2,112) per ton. However, in early July coffee traded in London at $2,400 (£1,501) per ton, although later in the month, after producing countries had announced plans to limit exports, the price rose to $2,932.5 (£1,837). During September the LCE ‘spot’ quotation (for immediate delivery) was reduced from $2,749 (£1,770) per ton to $2,227.5 (£1,441), but in November it advanced from $2,370 (£1,501) to $2,739.5 (£1,786). Coffee for shortterm delivery was traded in December at less than $2,000 per ton, while longer-term quotations were considerably lower. In early January 1996 the ‘spot’ price of coffee in London stood at US $1,798 (£1,159) per ton, but later in the month it reached $2,050 (£1,360). The corresponding quotation rose to $2,146.5 (£1,401) per ton in March, but declined to $1,844.5 (£1,220) in May. The ‘spot’ contract in July opened at $1,730.5 (£1,112) per ton, but within four weeks the price fell to $1,487 (£956), with the easing of concern about a threat of frost damage to Brazilian coffee plantations. In November the ‘spot’ quotation rose to $1,571 (£934) per ton, but slumped to $1,375.5 (£819) within a week. By the end of the year the London price of coffee (for delivery in January 1997) had been reduced to $1,259 per ton. In early January 1997 the ‘spot’ price for robusta coffee stood at only US $1,237 (£734) per ton, but later in the month it reached $1,597.5 (£981). The advance in the coffee market continued in February, but in March the price per ton was reduced from $1,780 (£1,109) to $1,547.5 (£960) within two weeks. In May coffee prices rose spectacularly, in response to concerns about the scarcity of supplies and fears of frost in Brazil. The London ‘spot’ quotation increased from $1,595 (£986) per ton to $2,502.5 (£1,526) by the end of the month. Meanwhile, on the New York market the price of arabica coffee for short-term delivery exceeded $3 per lb for the first time since 1977. However, the rally was shortlived, and in July 1997 the London price for robusta coffee declined to $ 1,490 (£889) per ton. In the first half of November the coffee price rose from $1,445 (£862) per ton to $1, 658 (£972). During December the price for January 1998 delivery reached $1,841 per ton, but a week later it decreased to $1,657. The coffee market rallied in January 1998, with the London ‘spot’ quotation rising from US $1,746.5 (£1,066) per ton to $1,841 (£1,124). Coffee prices for the corresponding contract in March ranged from $1,609 (£977) per ton to $1,787 (£1,065). Following reports of declines in the volume of coffee exports by producing countries (owing to inadequate rainfall), the upward trend in prices continued in April, with the price of robusta for short-term delivery reaching $1,992 per ton. In the first half of May there was another
106 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
surge in prices (partly as a result of political unrest in Indonesia, the main coffee-producing country in Asia at that time), with the London quotation rising from $1,881.5 (£1,129) per ton to $2,202.5 (£1,351). Later in the month, however, the price was reduced to $1,882.5 (£1,155) per ton. Coffee prices subsequently fell further, and in late July the London ‘spot’ contract stood at only $1,505.5 (£909) per ton, before recovering to $1,580 (£963). The quotation per ton for September delivery reached $1,699.5 at the beginning of August, having risen by $162 in a week. In September the ‘spot’ price advanced from $1,640 (£974) per ton to $1,765 (£1,036) a week later. In late October a further sharp rise in coffee prices began, following storm damage in Central America, and in November the London ‘spot’ quotation for robusta increased from $1,872.5 (£1,123) per ton to $2,142.5 (£1,278). Meanwhile, trading in other contracts continued at less than $1,800 per ton until December, when the London price of coffee (for delivery in January 1999) rose to $1,977. Coffee prices retreated in January 1999, with the London ‘spot’ quotation falling from US $1,872.5 (£1,131) per ton to $1,639 (£995). During March the price was reduced from $1,795.5 (£1,111) per ton to $1,692.5 (£1,030), but recovered to $1,795 (£1,112) within a week. As before, the market for longer-term deliveries was considerably more subdued, with coffee trading mainly within a range of $1,490–$1,590 per ton. Thereafter, a generally downward trend was evident, and in May the ‘spot’ price declined to $1,376.5 (£850) per ton, although it reached $1,536.5 (£962) by the end of the month. The advance was shortlived, with prices for most coffee contracts standing at less than $1,400 per ton in late June. The ‘spot’ price in July fell to only $1,255 (£805) per ton. In August the London quotation for September ‘futures’, which had been only $1,282.5 per ton in July, rose to $1,407. However, the ‘spot’ price in September retreated from $1,323 (£825) per ton to $1,212.5 (£754). In October the price for short-term delivery was reduced to less than $1,200 per ton. The ‘spot’ quotation in November advanced from $1,212 (£736) per ton to $1,399.5 (£866). Prices strengthened further in December, with the London quotation for short-term delivery reaching $1,557 per ton. Meanwhile, the market for longer-term contracts was more stable, with prices remaining below $1,400 per ton. In that month the Brazilian government’s forecast for the country’s coffee output in the year beginning April 2000 was higher than some earlier predictions, despite fears that the crop would have been damaged by the unusually dry weather there since September 1999. For 1999 as a whole, average prices of robusta coffee declined by 18.3% from the previous year’s level, while arabica prices fell by 23.2%. In January 2000 the ‘spot’ price of coffee in London rose strongly towards the end of the month, increasing from US $1,401.5 (£848) per ton to $1,727.5 (£1,067) within a week. However, prices of coffee ‘futures’ continued to be much lower: at the end of January the quotation for March delivery was $1,073.5 per ton. In February prices of robusta coffee ‘futures’ were below $1,000 per ton for the first time for nearly seven years. In March the ‘spot’ quotation eased from $993 (£628) per ton to $944 (£593). Prices continued to weaken in April, with the quotation for short-term delivery falling to less than $900 per ton. The ‘spot’ price in May declined to $891.5 (£602) per ton, but recovered to $941 (£639). Another downward movement ensued, and by early July the London ‘spot’ quotation stood at only $807 (£532) per ton. Later that month, prices briefly recovered, owing to concerns about the possible danger of frost damage to coffee crops in Brazil. The ‘spot’
COMMODITY SURVEYS 107
quotation rose to $886.5 (£585) per ton, while prices of coffee ‘futures’ advanced to more than $ 1,000. However, the fear of frost was allayed, and on the next trading day the ‘spot’ price of coffee in London slumped to $795 (£525) per ton: its lowest level, in terms of US currency, since September 1992. The weakness in the market was partly attributed to the abundance of supplies, particularly from Viet Nam, which has substantially increased its production and export of coffee in recent years (see above). By mid-2000 Viet Nam had overtaken Indonesia to become the world’s leading supplier of robusta coffee and was rivalling Colombia as the second-largest coffee-producing country. Viet Nam and Mexico were the most significant producers outside the ACPC, but their representatives supported the Association’s plan for a coffee retention scheme to limit exports and thus attempt to raise international prices. The plan was also endorsed by the Organisation africaine et malgache du café (OAMCAF), a Paris-based grouping of nine African coffee-producing countries. In the first week of September 2000 the ‘spot’ market quotation rallied to US $829 (£577) per ton, remaining at this level until 21 September, when another downward movement occurred. Towards the end of the month the ‘spot’ quotation declined to $776 (£530) per ton. At the beginning of November 2000 the London ‘spot’ quotation stood at only US $709 (£490) per ton and was to decline steadily throughout the month, reaching $612 (£432) on 30 November. High consumer stocks and uncertainty about the size of the Brazilian crop were cited as factors responsible for the substantial decline in November, when the average ICO robusta indicator price fell to its lowest level since August 1969. In early January 2001 the ‘spot’ quotation on the London market rallied, rising as high as US $677 (£451) per ton. This recovery, which was attributed to concern about the lack of availability of new-crop Central American coffees and reports that producers in some countries were refusing to sell coffee for such low prices, was sustained, broadly, until March, when the downward trend resumed. On 23 March the London ‘spot’ quotation declined to only $570 (£399) per ton. On 17 April the London price of robusta coffee ‘futures’ for July delivery declined to a life-of-contract low of $560 per ton, the lowest second-month contract price ever recorded. By May 2001 the collapse in the price of coffee had been described as the deepest crisis in a global commodity market since the 1930s, with prices at their lowest level ever in real terms. The crisis was regarded, fundamentally, as the result of an ongoing increase in world production at twice the rate of growth in consumption, this over-supply having led to an overwhelming accumulation of stocks. During May the London ‘spot’ quotation fell from US $584 (£407) per ton to $539 (£378) per ton. In June 2001 producers in Colombia, Mexico and Central America were reported to have agreed to destroy more than 1m. bags of low-grade coffee in a further attempt to boost prices. The ACPC hoped that this voluntary initiative would eventually be adopted by all of its members. By this time the ACPC’s retention plan was widely regarded as having failed, with only Brazil, Colombia, Costa Rica and Viet Nam having fully implemented it. In early July 2001 the price of the robusta coffee contract for September delivery fell below US $540 per ton, marking a record 30-year low. At about the same time the ICO recorded its lowest composite price ever, at 43.80 US cents per lb. Despite a recovery
108 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Export Price Index for Coffee (base: 1980=100)
beginning in October, the average composite price recorded by the ICO for 2001 was 45.60 cents per lb, 29% lower than the average composite price (64.25 cents per lb) recorded in 2000. In 2001 coffee prices were at their lowest level since 1973 in nominal terms, and at a record low level in real terms. The decline in the price of robusta coffees was especially marked in 2001, the ICO recording an average composite price of only 27.54 cents per lb, compared with 41.41 cents per lb in 2000, and 67.53 cents per lb in 1999. In 1996–98 the ICO average composite price for robusta varieties had averaged 81.11 cents per lb. The composite price reached its highest point since November 2000 in April 2001, averaging 50. 19 cents per lb in that month, but a further sharp decline thereafter, amid the weakening of the Brazilian currency, the real, and a surplus of Brazilian coffee supply, left the monthly average at 42.28 cents per lb in July 2002. The price of the September contract in London at the end of that month was US $492 (£319) per ton. The IACO was formed in 1960, with its headquarters at Abidjan in Côte d’Ivoire. In 1995 the IACO represented 25 producer countries, all of which, except Benin and Liberia, were also members of the ICO. The aim of the IACO is to study common problems and to encourage the harmonization of production.
Copper
Copper is a reddish metal, used since ancient times, alone and in alloys, in the manufacture of tools and receptacles. The principal ores of the metal are copper sulphide and copper oxide. They are mined both underground and by open-cast or surface mining. After breakup of the ore body by explosives, the lumps of ore are crushed, ground and mixed with reagents and water in the case of sulphide ores, and then subjected to a flotation process by which copper-rich minerals are extracted. The resulting concentrate, which contains about 30% copper, is then dried, smelted and cast into anode copper, which is further refined to about 99.98% purity by electrolysis (chemical decomposition by electrical action). The cathodes are then cast into convenient shapes for working or are sold as such. Oxide ores, less important than sulphides, are treated in ways rather similar to the solvent extraction process described below. Two alternative processes of copper extraction, both now in operation in Zambia, have been developed in recent years. The first of these techniques, and as yet of minor importance in the industry, is known as ‘Torco’ (treatment of refractory copper ores) and is used for extracting copper from silicate ores which were previously not treatable. The second, and relatively low-cost, technique is the solvent extraction process. This is suited to the treatment of very low-grade oxidized ores and is currently being used on both new ores and waste dumps that have accumulated over previous years from conventional copper working. The copper in the ore or waste material is dissolved in acid and the copperbearing leach solution is then mixed with a special organic-containing chemical reagent which selectively extracts the copper. After allowing the two layers to separate, the layer containing the copper is separated from the acid leach solution. The copper is extracted from the concentrated leach solution by means of electrolysis to produce refined cathodes. Copper is ductile, resists corrosion and is an excellent conductor of heat and electricity. For this reason its use expanded greatly in the 19th and 20th centuries as electrical infrastructure developed throughout the world, and its principal uses remain in the electrical industry (about 60% of copper is made into wire for use in power cables, telecommunications, domestic and industrial wiring). It is also important to the building, engineering and chemical industries. Bronzes and brasses are typical copper alloys used for both industrial and decorative purposes. There are, however, substitutes for copper in almost all of its industrial uses, and in recent years aluminium has presented a challenge in the electrical and transport industries.
110 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Copper Ore (copper content, ’000 metric tons)
* Estimated production. Source: US Geological Survey.
The current world reserve base (the totality of identified resources, including those whose extraction would be uneconomic under prevailing conditions) of copper has been estimated by the US Geological Survey (USGS) at 650m. metric tons. Since 1982, when it overtook the USA, Chile (in which, according to the USGS, about 26% of world copper reserves are located) has been the world’s leading producer of copper. It is also the biggest exporter, and within the country are located the world’s three largest copper mines (Chuquicamata, El Teniente and La Escondida). In 1996 La Escondida surpassed Chuquicamata as the world’s largest copper mine, with an annual production capacity exceeding 800,000 tons. With the opening of new, large-scale mines in the north of the country, Chilean copper production rose to 3.7m. tons in 1998 and to 4.4m. tons in 1999. In 2000, according to the USGS, Chile’s output of copper amounted to 4.6m. tons, rising again, in 2001, to an estimated 4.7m. tons. The Chilean economy relies heavily on the copper industry, which accounted for an annual average of 44.1% of the country’s exports in the period 1984–88, and in 1999 was the source of 37.7% of Chile’s export revenue. Although the industry has been vulnerable to labour unrest in recent years, foreign investment in Chilean mining development has been rising: during 1989–95 more than onehalf of all foreign investment was directed towards this sector. In 1999 the share of private mines in total copper output was 63.1%, while the proportion represented by the stateowned copper corporation, CODELCO, was 36.9%, compared with about 84% in 1980. Among the principal externally financed ventures is the Zaldivar deposit in northern Chile, believed to be one of the richest undeveloped copper ore bodies in Latin America. Chile has six refineries for processing copper, with a combined annual capacity of 1.1m. tons. After Chile, the Latin American country to which the copper industry is most important is Peru. Over a decade until the mid-1990s, however, the industry was adversely affected by
COMMODITY SURVEYS 111
the country’s economic instability and guerrilla attacks on the mines. The restoration of relative internal stability, however, together with the phased privatization of the stateowned mining corporation, Centromín, has stimulated foreign investment in mining exploration ventures. In June 1999 it was announced that financing had been secured for the proposed development of the Antamina copper-zinc mine in Peru. The Antamina scheme, involving Canadian interests, is the country’s largest investment project, with an estimated cost of US $2,260m. The open-pit mine in the Andes mountains, began operating in late 2001, and is expected eventually to yield about 270,000 tons of copper annually for 20 years. By April 2002 the Antamina mine was already the most productive in Peru. Earnings from sales of copper (mainly in the form of unwrought metal) represented 12.2% of Peru’s total export revenue in 1999. The development of deposits of copper in Argentina, estimated to total 700m. tons, commenced in 1997; production totalled 30,000 tons in that year. In 2000 output amounted to 145,197 tons, some 27% lower than in 1999. Brazil, a relatively minor producer of copper in the mid-1990s, was preparing in 2000 to bring into production a new project at Marabá in the state of Para, with potential output of 250,000 tons of refined copper annually from 2002. In 1997 one of the world’s largest undeveloped copper deposits, estimated to contain some 1,750m. tons, was identified in the Chiriqui province of western Panama. Assessment of the deposit’s economic viability commenced in 2000. Reserves located within the Democratic Republic of the Congo (DRC, formerly Zaire) and Zambia jointly account for about 11% of the world’s total. Copper production is the mainstay of Zambia’s economy, and copper sales normally account for about 85% of the country’s export earnings. In the late 1990s, however, owing to the low price of copper on the world market, the contribution of the metal to export revenues declined substantially. In 1998 sales of copper were estimated to have accounted for only 49.3% of total export earnings. Mining operations are conducted by Mopani Copper Mines plc (MCM), a consortium comprising Glencore International AG of Switzerland (51%) and First Quantum Minerals Ltd of Canada. MCM emerged through the purchase of assets of Zambia Consolidated Copper Mines (ZCCM), which was privatized in early 2000. Konkola Copper Mines plc (KCM), in which Anglo American plc (65%) has a majority interest, likewise emerged through the purchase of ZCCM assets, including open-cast facilities at Nchanga and Chingola. In January 2002, however, Anglo American was reported to be considering the sale, transfer of assets or closure of KCM. Before being overtaken by Canada in 1983, Zambia ranked second only to Chile among the world’s copper exporters. Zambian copper exports are virtually all in refined but unwrought form. About 43% of its sales were to European Union (EU) countries in the late 1990s. Production of refined copper in Zambia entered a gradual decline in the mid-1980s; dwindling ore grades, high extraction costs, transport problems, shortages of foreign exchange, equipment and skilled labour, lack of maintenance and labour unrest combined to make the copper industry seem an unstable basis for the Zambian economy. However, following the country’s change of government in 1991, a number of remedial measures, including the restructuring of ZCCM, were carried out. Even before the civil conflict, which began in 1993 and was renewed in 1998, led to the suspension of much of the country’s normal mining activity (in 1999 La Générale des Carrières et des Mines (GÉCAMINES), the state-owned minerals enterprise, was reported
112 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
to be operating at only 5%–10% of its production capacity), the copper industry in the DRC had become increasingly vulnerable to competition from other producers, such as Chile, which have established new open-cast, low-cost mines. The DRC had placed greater emphasis on efforts to increase refined production capacity, and in the late 1980s about onehalf of the country’s copper exports were in the form of refined copper leach cathodes and blister copper. About 70% of copper exports by the DRC are to EU countries. In 1998 GÉCAMINES negotiated an agreement with a consortium of foreign mining companies for the exploitation of substantial deposits of copper in the southern Kolwezi region. In 2002 numerous foreign mining ventures had an interest in the production and processing of copper in the DRC, and in the exploration of potential reserves, but many had been forced to suspend operations as a result of the civil conflict. It was hoped that a definitive settlement of the conflict had been reached in that year, however, and that foreign interest might return gradually as stability could be re-established. South Africa is Africa’s other main producer, although since the 1980s copper output has been affected by declining grades of ore, leading to mine closures and a reduction in the level of operations to about 75% of capacity. In 2000 mine production of copper reportedly totalled 137,092 metric tons. The value of South Africa’s copper exports in 1999 was US $227m. Namibia derived more than 10% of its total export revenue from copper in the late 1980s, although by 1997 this proportion had dwindled to less than 4%. Mining operations there were conducted at four mines by a South African-owned company, the Tsumeb Corpn Ltd (TCL), prior to its liquidation in 1999, when TCL’s mineral rights reverted to the Namibian government. Some of TCL’s former operations were taken over, from 2000, by a new company, Ongopolo Mining and Processing Ltd, a partnership, reportedly, between former managers of TCL and the National Union of Namibian Workers (NUNW). They included copper mining at Kombat, Khusib and Otjihase and smelting at the former Tsumeb facility, which had been refurbished. In 1998 TCL had had a number of new copper-mining projects in prospect: prominent among them was an Australian-promoted venture at Haib, with a production potential of more than 80,000 metric tons of cathode copper annually. In 1999, however, the Haib development, which would have formed the largest single mining project ever undertaken in Namibia, was suspended, pending an improvement in world copper prices. Initial agreement to resume development of the Haib site was reached between a number of parties in mid-2002. In Botswana copper and nickel are mined at Selebi-Phikwe, and high-grade copper ore deposits have also been identified in the Ghanzi area. The Sanyati copper mine in Zimbabwe, with estimated ore reserves of 5.5m. tons, entered production in 1995. Targeted output was 5,000 tons annually during the mine’s expected life of eight to 10 years. In the Far East and Australasia Indonesia is the largest producer of copper. In 2001, with estimated mined production of 1.1m. metric tons, the country was the third largest producer in the world. Indonesia’s reserves of copper were estimated at 19m. tons in that year. Copper mining operations in the country are undertaken by PT Freeport Indonesia Co (in which Freeport-McMoRan Copper & Gold Inc. of the USA has a 81.28% share) in West Papua, and by PT Newmont Nusa Tenggara, a consortium comprising Newmont Gold Mining Co of the USA (45%), Sumitomo Corpn of Japan (35%) and PT Pukuafu Indah (20%), on Sumbawa Island. PT Smelting Co produces copper metal in East Java. In 2000
COMMODITY SURVEYS 113
Indonesia’s output of primary refined copper totalled 173,800 tons. In 1999 exports of copper ore and concentrates accounted for 2.5% of Indonesia’s total export earnings. In 2001 Australia was the world’s fourth largest producer of copper, with mined output estimated at 900,000 tons. In that year the country’s reserves of copper were estimated at 9m. tons. New South Wales and Queensland are the principal producer states, although South Australia is the location of the country’s largest mine, the Olympic Dam operated by WMC Olympic Dam Operations Pty Ltd. There has been considerable investment in copper mining activity in recent years and this was expected to lead to growth of about 3% in production in 2002. Mined output increased by an estimated 8.6% in 2001. Smelter production of copper metal totalled 393,000 tons in 2000, while output of copper metal (primary and secondary) from refineries amounted to 528,000 tons. In 2001 and 2002 output of primary refined copper was forecast to rise by 16%. In 1999 exports of copper contributed 1.0% of Australia’s total export earnings. In 2001 the People’s Republic of China ranked as the third largest producer of copper in the region, and, jointly, with Canada, as the fifth largest producer world-wide, with estimated mined output of 620,000 tons. In 2000 China had facilities for smelting/refining copper metal at some 15 locations, with an estimated combined annual capacity of 1.3m. tons. Actual production of refined metal (primary and secondary), originating from both smelters and refineries, in 2000 was estimated at about 991,000 tons. In that year Chinese exports of copper (metals and alloys) were estimated at 118,739 tons (unwrought metal) and 144,484 tons (semi-manufactures). Papua New Guinea’s output of mined copper was reported to have totalled 200,900 tons in 2000. In that year the exclusive location of production was the Ok Tedi mine on Mount Fubilan in the Star Mountains. Ok Tedi Mining Ltd, in which BHP Billiton has a 52% share, the government 30% and Inmet Mining Corpn of Canada 18%, is the country’s sole copper miner. In 2000 exports of copper accounted for 10.7% of Papua New Guinea’s total export earnings. Mined output of copper in Mongolia was reported to have totalled 124,800 tons in 2000,while output of refined metal amounted to 641 tons. Copper mining has, hitherto, been undertaken exclusively by state-owned operators, although foreign enterprises were engaged in exploration activities in 2000. The copper mining sector is of major importance to the Mongolian economy. In 2000 almost all copper concentrate produced was exported, principally to Russia and the People’s Republic of China. In 1998 exports of copper concentrate contributed 27% of Mongolia’s total export earnings. India, the Philippines and Myanmar are notable producers of mined copper, with estimated output in 2000, respectively, of 35,500 tons, 32,000 tons and 26,811 tons. India is also a significant producer of copper metal, with output of primary metal from both smelters and refineries reportedly totalling more than 500,000 tons in 2000. The Philippines’ output of copper metal, from both smelters and refineries, was estimated at more than 275,000 tons in 2000. Myanmar also produces copper metal, but on a much smaller scale. In 2001, with estimated output of mined copper of 1.3m. metric tons, the USA ranked as the second largest producer in the world after Chile. In that year the USA’s reserves of copper were estimated at 45m. tons. In 2000, according to the USGS, 14 mines, located, in descending order, in the states of Arizona, Utah, New Mexico and Montana, accounted for more than 99% of US mined output of copper. Production has been in decline since 1998, falling, in 2000, to its lowest level since 1988. Output has declined partly as a result of
114 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
depressed domestic prices and the high cost of energy inputs. In 2000 US production of copper metal (primary and secondary) was reported to have totalled 1m. tons, compared with 1.3m. tons in 1999. Production of copper metal from both smelters and refineries has, like that of mined copper, declined since 1998. In 1999, according to the USGS, three of the USA’s seven primary smelters were closed owing to reductions in mine output and low prices. Operations at the three smelters in question remained suspended in 2000, and in that year, consequently, the USA became a net exporter of copper concentrates. In 2000 US exports of copper ore and concentrates amounted to 107,000 tons, compared with 63,100 tons in 1999. Exports to Canada, the largest market, totalled 45,000 tons, while ore and concentrates exported to Mexico amounted to 31,500 tons. Outside of North America, China was the principal destination for US exports of copper ore and concentrates, receiving 8,500 tons in 2000. US exports of refined copper totalled 93,600 tons in 2000, compared with only 25,200 tons in 1999. China was by far the most important market, taking 52,700 tons, followed by Taiwan, which received 20,400 tons. Amid domestic oversupply in 2000 US imports of copper ore and concentrates fell to only 53 tons, compared with 143,000 tons in 1999. Imports of refined copper, meanwhile, rose to 1.1m. tons in 2000, compared with 837,000 tons in 1999. Peru, Canada and Chile were the principal suppliers of refined copper in 2000, delivering, respectively, 311,000 tons, 268,000 tons and 258,000 tons. In 2001, with estimated mined output of 620,000 metric tons, Canada ranked, jointly with the People’s Republic of China, as the world’s fourth largest producer of copper. In that year Canada’s reserves of copper were estimated at 10m. tons. Copper mining is undertaken mainly in the provinces of British Columbia, Manitoba, Ontario and Québec. Weak prices for copper on the world market in the late 1990s resulted in the suspension of a number of operations in British Columbia. Canadian production of copper metal (primary and secondary) from smelters was estimated at 609,200 tons in 2000, while output (primary and secondary) from refineries was estimated at 552,200 tons. Canada is a major exporter of copper, both in the form of concentrates, for which Japan is an important market, and of refined metal, for which the principal destination is the USA. In 1999, according to data cited by the USGS, the value of Canadian copper exports was US $1,960m. Of the former Soviet republics, Russia, with estimated output of 550,000 tons in 2001, was the eighth largest producer of mined copper in the world. Russia’s reserves of copper in that year were estimated at 20m. metric tons. According to data cited by the USGS, some 70% of these reserves are located in East Siberia, and a further 20% in the Urals. In 1999 Russian production of copper metal (blister) was estimated to have totalled 576,000 tons, of which 540,000 was primary metal. In the same year production of copper metal from refineries amounted to 699,000 tons, of which 642,000 was primary metal. Russia’s exports of all minerals have risen significantly since the disintegration of the Soviet Union owing to a sharp decline in domestic demand, in particular of defence procurements. In 1999 exports of copper contributed 1.4% of Russia’s total export earnings. After Russia, Kazakhstan is the largest producer of copper among the former Soviet republics. In 2001, with estimated mined output of 470,000 tons, Kazakhstan was the ninth largest producer in the world, and also disposed of reserves of the metal estimated at 14m. tons. In 1999 production of copper metal (primary and secondary) from smelters was reported to have totalled 384,234 tons, while output of primary copper from refineries reportedly amounted to 361,889 tons. In
COMMODITY SURVEYS 115
1999 exports of copper accounted for 9.7% of Kazakhstan’s total export earnings. Uzbekistan’s mined output of copper in 1999 was estimated at 66,000 tons, while the country’s production of copper metal, blister and refined, was estimated, respectively, at 77,000 tons and 72,000. In 1995 exports of copper contributed 4.3% of Uzbekistan’s total export earnings. In the Middle East Iran is a significant producer of copper, with mined output estimated at 145,000 tons in 2000. In that year Iranian production of copper metal from smelters (blister/anode) amounted to an estimated 154,000 tons, while the corresponding figure for refinery (cathode) output was 132,000 tons. Several foreign mining companies were involved, through joint ventures, in the exploration of Iranian copper reserves in 2000. In neighbouring Turkey mined output of copper totalled an estimated 76,253 tons in 2000. Estimated production of copper metal from refineries was 78,000 tons in that year. Smelter production appeared to have declined very substantially in 2000, to only an estimated 954 tons, compared with 19,159 tons in 1999. According to the USGS, the value of Turkey’s copper exports in 2000 was US $221m., compared with $180m. in 1999. Poland is the most important European producer of mined copper, with estimated output of 450,000 metric tons in 2001. In that year Polish reserves of the metal were estimated at 20m. tons. In 1999 Polish output of copper metal from smelters amounted to an estimated 466,000 tons, of which 457,225 was primary metal. Refinery production of primary and secondary metal totalled an estimated 470,494 tons in that year. In 1999 Polish exports of copper and copper alloys amounted to 230,000 tons, compared with 193,000 in 1998. In 1999 exports of copper accounted for 9.1% of Poland’s total export earnings. Elsewhere in Central and South-Eastern Europe, Bulgarian mined output of copper amounted to an estimated 75,000 tons in 2000. In addition, Bulgaria produced an estimated 115,000 tons of copper metal (primary and secondary) from smelters, and, reportedly, 32,500 tons of copper metal from refineries. Serbia and Montenegro produced an estimated 41,000 tons of mined copper in 2000, compared with 51,700 tons in 1999, and 70,900 tons in 1998. In 2000 production of primary copper metal (blister and anodes) totalled an estimated 45,000 tons, while output from remelted metal amounted, likewise, to 45,000. Refinery production of primary metal in the same year was 45,632 tons, while production of secondary (remelted) metal was estimated at 40,000 tons. Sweden and Portugal are the most important Western European producers of mined copper. In 2000 Portuguese output was estimated at 76,200 metric tons, compared with an estimated 99,500 tons in 1999 and 114,637 tons in 1998. Portugal was the largest producer of mined copper within the EU in 2000, in spite of the decline in production that resulted from labour disputes. In 1998 Portuguese exports of copper ore and concentrates totalled 447,370 tons, for which Germany (128,186 tons), Finland (120,854 tons), and Spain (101, 772 tons) were the principal markets. Sweden reportedly produced 75,600 tons of mined copper in 2000. In the same year output of copper metal (primary and secondary) from smelters was estimated at 130,000 tons, while production of metal from refineries totalled 130,000 tons, of which 105,000 tons was primary metal. The major copper-importing countries are the member states of the EU, Japan and the USA. At the close of the 1980s, demand for copper was not being satisfied in full by current production levels, which were being affected by industrial and political unrest in some of the
116 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
non-African producing countries, notably Chile, with the consequence that levels of copper stocks were declining. Production surpluses, reflecting lower levels of industrial activity in the main importing countries, occurred in the early 1990s, but were followed by supply deficits, exacerbated by low levels of copper stocks. In 2001, according to provisional figures from the International Copper Study Group (ICSG), world-wide consumption of refined copper declined by 3.4% from its 2000 level, falling to 14,738,000 metric tons, while production, including secondary output (recovery from scrap), advanced by 4.3%, to 15, 425,000 tons. There was consequently a copper surplus for the year of 687,000 tons, compared with a deficit of 478,000 tons in 2000. Identified stocks of refined copper throughout the world increased by 779,000 tons in 2001, to total 2,097,000 tons at the end of the year. Accumulations of copper stocks, especially when of such magnitude as that of 2001, tend to depress prices (see below). Provisional data from the ICSG indicate that world-wide consumption of refined copper during January-February 2002 reached 2,347, 000 tons, a decline of 4.4% on the level for the corresponding period of 2001. Over the same period, total production (primary and secondary) was 2,544,000 tons: 3.1% higher than in January-February 2001. As a result, there was a surplus of 198,000 tons in world copper supplies for the first two months of 2002. Identified stocks of refined copper also increased, and at the end of February they stood at 2,275,000 tons. There is no international agreement between producers and consumers governing the stabilization of supplies and prices. Although most of the world’s supply of primary and secondary copper is traded directly between producers and consumers, prices quoted on the London Metal Exchange (LME) and the New York Commodity Exchange (COMEX) provide the principal price-setting mechanism for world copper trading. On the LME the price of Grade ‘A’ copper (minimum purity 99.95%) per metric ton declined from £1,563. 5 (US $2,219) in February 1993 to £1,108.5 ($1,746) in May. From 1 July 1993 the LME replaced sterling by US dollars as the basis for pricing its copper contract. In September the London copper quotation increased to $2,011.5 (£1,304) per ton, but in October, with LME stocks of copper at a 15-year ‘high’, the price slumped to $1,596 (£1,079). The copper price subsequently revived, with the LME quotation exceeding $1,800 per ton by the end of the year. The market remained buoyant in January 1994, although, during that month, copper stocks in LME warehouses reached 617,800 tons, their highest level since February 1978. However, stocks were quickly reduced, and the London copper price moved above $2,000 per ton in May 1994. It continued to rise, reaching $2,533.5 (£1,635) per ton in July. In December, with LME stocks of copper below 300,000 tons, the London price of the metal exceeded $3,000 per ton (a level not recorded for more than five years). In January 1995 the London copper price reached US $3,055.5 (£1,939) per ton, but in May it fell to $2,721.5 (£1,728), although LME stocks were then less than 200,000 tons. However, in July, with copper stocks reduced to about 141,000 tons, the LME price advanced to $3,216 (£2,009) per ton, its highest level, in terms of US currency, since early 1989. The LME’s holdings of copper rose to 356,800 tons in February 1996, when the price of the metal eased to US $2,492.5 (£1,609) per ton. After increasing again, the copper price fell in April to $2,479.5 (£1,624) per ton, although in early May it recovered to $2,847.5 (£1,872). In late May and June the copper market was gravely perturbed by reports that the
COMMODITY SURVEYS 117
world’s largest copper-trading company, Sumitomo Corpn of Japan, had transferred, and later dismissed, its principal trader, Yasuo Hamanaka, following revelations that he had incurred estimated losses of $1,800m. in unauthorized dealings (allegedly to maintain copper prices at artificially high levels) on international markets over a 10-year period. This news led to widespread selling of copper: in late June the LME price was reduced to $1,837. 5 (£1,192) per ton, although it quickly moved above $2,000 again. In July, after LME stocks had declined to 224,100 tons, the copper price reached $2,102.5 (£1,352) per ton. The London price of copper advanced in November to $2,547.5 (£1,522) per ton, following a decline in LME stocks of the metal to 90,050 tons, their lowest level since July 1990. The copper price at the end of 1996 was $2,217 (£1,304) per ton. Meanwhile, the extent of the losses incurred in the Sumitomo scandal was revised to $2,600m. (In March 1998 a Japanese court sentenced Hamanaka to eight years’ imprisonment, after he had pleaded guilty to charges of fraud and forgery.) In January 1997 the London quotation for high-grade copper reached US $2,575.5 (£1, 594) per ton, despite a steady increase in LME stocks, which rose to 222,500 tons in February. In June, with copper stocks reduced to 121,550 tons, the price of the metal reached $2,709.5 (£1,644) per ton. However, LME stocks were soon replenished, rising by 82% (to about 235,000 tons) in July and exceeding 300,000 tons in September. The LME’s holdings of copper increased to more than 340,000 tons in October. By the end of that month the London price of copper had fallen below $2,000 per ton, and in late December it stood at $1,696.5 (£1,015). At the end of the year the copper price, in US currency, was 23. 4% lower than it had been at the beginning. For 1997 as a whole, however, the average price per ton ($2,276) was only slightly less than in the previous year ($2,294). The copper market remained depressed in the early weeks of 1998. In February the LME’s copper stocks reached 379,325 tons (their highest level since June 1994), while the London price of the metal was reduced to US $1,601.5 (£973) per ton. The copper price recovered to $1,878 (£1,122) per ton in April. LME stocks of copper decreased to less than 247,000 tons in July, and in that month the price advanced from $1,571 (£963) per ton to $1,756.5 (£1,058). London copper prices remained within this range until late October, when LME stocks exceeded 450,000 tons. At the end of November the COMEX price of high-grade copper for short-term delivery fell below 70 US cents per lb for the first time since 1987. In December 1998, with LME stocks amounting to about 550,000 tons, the London price of copper was reduced to $1,437.5 (£851) per ton. The average London copper price for the year was $1,653 per ton: 27% lower than in 1997 and, in real terms, the lowest annual price level since 1935. The decline in copper prices was attributed to a reduction in imports by some Asian countries, affected by severe financial and economic problems. In late January 1999 the LME’s stocks of copper surpassed the previous record of 645, 300 tons, established in January 1978. In March 1999, with these holdings standing at more than 700,000 tons, the London price of copper fell to US $1,351.5 (£832) per ton: its lowest level, in terms of dollars, since 1987. In the same month the COMEX price slumped to only 61 cents per lb. Despite a continuing rise in stocks, the London copper quotation increased in May 1999 to $1,581.5 (£964) per ton, although later in the month, when the LME’s holdings reached 776,375 tons, the price retreated to $1,354.5 (£845). Copper
118 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
prices subsequently recovered, and in July, following reports of proposed reductions in refinery output, the London quotation reached $1,689.5 (£1,085) per ton. In August the LME’s copper stocks increased to 795,375 tons, but in September the price exceeded $1, 700 per ton. The advance in copper prices continued, and at the end of the year the London quotation was $1,854 (£1,150) per ton. For 1999 as a whole, however, the average London price of copper was $1,572 per ton: 4.9% lower than in 1998 and the lowest annual level, in real terms, for more than 60 years. On 21 January 2000 the LME’s stocks of copper exceeded 800,000 tons for the first time. Nevertheless, on the same day, the London price of the metal rose to US $1,893.5 (£1,147) per ton: its highest level for more than two years. The accumulation of stocks continued, and in early March the LME’s holdings reached a record 842,975 tons. The copper price was reduced to $1,619 (£1,021) per ton in April, but recovered to $1,859 (£1, 228) in July. Throughout this period the LME’s stocks of copper steadily declined, falling to less than 700,000 tons in April, under 600,000 tons in June and below 500,000 tons in July. At the end of July copper stocks were 487,750 tons: less than 58% of the level reached in March. By the end of August the LME’s holdings had fallen further, to 449,050 tons, while the price of copper had continued to recover, reaching $1,900.0 per ton on 31 August. On 13 September the price rose above $2,000 per ton, and closed, on the following day, at $2, 009.0 per ton. The LME’s holdings of copper fell steadily throughout September, and on 2 October stood at 399,300 tons. On 3 October the London price of the metal closed at $1, 919.0 per ton. During the remainder of October the cash price for copper weakened somewhat, falling to $1,810.0 per ton on 27 October, and closing on the final day of the month at $1,839.0 per ton. During November the LME’s holdings of copper and the London quotation declined in tandem, the cash price for the metal closing at a ‘low’ of $1, 759.0 per ton on 23 November, but recovering to $1,820.5 per ton on 28 November. On the final day of the month the LME’s stocks of copper stood at 349,300 tons. By the end of December there had been little change in either the London cash price or the level of stocks held by the LME. The London quotation for the metal closed at a ‘high’ of $1,903.5 per ton on 11 December, but had fallen back to $1,808.5 per ton on the final trading day of 2000, by which time the LME’s copper holdings had risen slightly, to 357,225 tons. During January 2001 the London quotation for copper moved within a range of $1,720.5 per ton, recorded on 3 January, and $1,837.0 per ton, the closing price on 23 January. Stocks of the metal, meanwhile, rose as high as 370,225 tons on 10 January, but had declined to 349,825 tons by the end of the month. The LME’s holdings of the metal declined steadily during February, and stood at 327,900 tons on the final day of the month. At the same time, the price of the metal weakened, falling to $1,736.0 per ton on 26 February. On 6 March, when the LME’s holdings of copper declined to 322,775 tons, the London quotation for the metal rose to $1,822.5 per ton. From 7 March, however, stocks recovered steadily, reaching 400,325 tons on 30 March, while the price of copper fell to $1, 664.5 per ton on 29 March. By 29 June the price of the metal had fallen to $1,550.5 per ton, while the LME’s stocks of copper had recovered to 464,550 tons. The price of copper fell steadily during July, closing at $1,465.0 per ton on 25 July. The LME’s holdings of the metal increased rapidly during July, reaching 654,325 tons on 25 July, and 673,225 tons on 10 August, before declining during the remainder of the month, to 662,825 tons on 30
COMMODITY SURVEYS 119
Export Price Index for Copper (base: 1980=100)
August. The London quotation for copper closed at a ‘low’ for the month of $1,426.0 per ton on 14 August, but had recovered to $1,507.0 per ton on the final trading day of the month. During September, however, the price declined sharply, descending to $1,403.0 per ton on 20 September, as stocks continued to rise, reaching 707,100 tons on 24 September. By the end of October the London price of copper stood at only $1,360 per ton, and closed at only $1,319.0 per ton on 7 November. The price of copper ‘futures’ was boosted in late October by the announcement by US producer Phelps Dodge of its intention to reduce output of the metal by some 220,000 tons per year, in an attempt to stem losses incurred as a result of the price of the metal falling below the price of production. Stocks rose as high as 780,225 tons on 30 November, and, on the final trading day of 2001, stood at 799,225 tons, by which time the London price of copper had recovered to $1,462.0 per ton. The ICSG, initially comprising 18 producing and importing countries, was formed in 1992 to compile and publish statistical information and to provide an intergovernmental forum on copper. In 1999 its membership comprised 24 countries, accounting for more than 80% of world trade in copper. The ICSG, which is based in Lisbon, Portugal, does not participate in trade or exercise any form of intervention in the market.
Cotton
This is the name given to the hairs that grow on the epidermis of the seed of the plant genus Gossypium. The initial development of the cotton fibres takes place within a closed pod, called a boll, which, after a period of growth of about 50–75 days (depending upon climatic conditions), opens to reveal the familiar white tufts of cotton hair. After the seed cotton has been picked, the cotton fibre, or lint, has to be separated from the seeds by means of a mechanical process, known as ginning. Depending upon the variety and growing conditions, it takes about three metric tons of seed cotton to produce one ton of raw cotton fibre. After ginning, a fuzz of very short cotton hairs remains on the seed. These are called linters, and may be removed and used in the manufacture of paper, cellulose-based chemicals, explosives, etc. About one-half of the cotton produced in the world is used in the manufacture of clothing, about one-third is used for household textiles, and the remainder for numerous industrial products (tarpaulins, rubber reinforcement, abrasive backings, filters, high-quality papers, etc.). The official cotton ‘season’ (for trade purposes) runs from 1 August to 31 July of the following year, and quantities are measured in both metric tons and bales; for statistical purposes, one bale of cotton is 226.8 kg (500 lb) gross or 217.7 kg (480 lb) net. The price of a particular type of cotton depends upon its availability relative to demand and upon characteristics related to yarn quality and suitability for processing. These include fibre length, fineness, cleanliness, strength and colour. The most important of these is length. Generally speaking, the length of the fibre determines the quality of the yarn produced from it, with the longer fibres being preferred for the finer, stronger and more expensive yarns. Cotton is the world’s leading textile fibre. However, with the increased use of synthetics, cotton’s share in the world’s total consumption of fibre declined from 48% in 1988 to only 39% in 1998. About one-third of the decline in its market share is attributable to increases in the real cost of cotton relative to prices of competing fibres, and about two-thirds of the loss in market share is attributable to other factors. Expanded use of chemical fibre filament yarn (yarn that is not spun but is extruded in a continuous string) in domestic textiles, such as carpeting, accounts for much of the rest of the loss in market share for cotton. The breakup of the Council for Mutual Economic Assistance (the communist countries’ trading bloc) in 1990, and of the Soviet Union in 1991, led to substantial reductions in cotton consumption in those countries and also contributed to cotton’s declining share of the world
COMMODITY SURVEYS 121
Production of Cotton Lint (’000 metric tons, excluding linters)
* FAO estimate (s). † Unofficial figure (s). Source: FAO.
market. Officially enforced limits on the use of cotton in the People’s Republic of China (which accounts for about one-quarter of cotton consumption world-wide) have also had an impact on the international market. The area devoted to cotton cultivation totalled 31m.–36m. ha between the 1950s and the early 1990s, accounting for about 4% of world cropped area. During the mid-1980s, however, world cotton consumption failed to keep pace with the rate of growth in production, and the resultant surpluses led to a fall in prices, which had serious consequences for those countries that rely on cotton sales for a major portion of their export earnings. In the mid-1990s, despite improvements in world price levels, cotton cultivation came under pressure from food-crop needs, and world-wide the harvested areas under cotton declined from 35.9m. ha in 1995/96 to 33.2m. ha in 1998/99. In 1999/2000 the harvested areas under cotton declined further, to 32.4m. ha, and again, in 2000/01, to 32. 3m. ha. According to the US Department of Agriculture (USDA), the area under cotton world-wide totalled about 34m. ha in 2001/02. The leading producers of cotton lint in the Asia-Pacific region are the People’s Republic of China, India, Pakistan and Australia. Many countries in the region, especially in South and South-East Asia, are also significant exporters of yarn, fabric and garments. The production of cotton in most of the countries in the region has expanded gradually, in parallel with world production, but in China and Australia the rate of growth has been dramatic: in the case of China production rose from around 2m. tons annually in the mid-1970s to a yearly output averaging almost 4.5m. tons in the period 1985–96. Thus, China was transformed from a large net importer of cotton in the late 1970s and early 1980s into a significant net
122 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
exporter. However, with production stable and consumption rising, China has, since the late 1980s, been a regular net importer of cotton. Between 1994/95 and 1996/97 China was the world’s principal importer, accounting for more than 10% of the world trade in cotton. In August 1998, however, the Government announced that guaranteed prices for domestic cotton were to be abolished by late 1999. This measure encouraged the textile industry to reduce its purchases of imported cotton in favour of less costly domestic supplies. Cotton imports into China (excluding Hong Kong) declined from 399,000 tons in 1997/98 to only 78,000 tons in 1998/99, 25,000 in 1999/2000, and to a little more than 50,000 tons in 2000/01 and, it was estimated, in 2001/02. The country’s exports of cotton, which had been at negligible levels during the three years 1995/96 to 1997/ 98, reached 148,000 tons in 1998/99, and in 1999/2000 totalled 368,000 tons, despite a decline in cotton production (to 3.8m. tons) in 1999. Exports subsequently declined, to 98,000 tons in 2000/01, and to an estimated 54,000 tons in 2001/02. In 2002/03 the USD A forecast that Chinese imports of cotton would rise by 700%, compared with the previous year, to 435,000 tons, in response to a predicted 16% decline in production (which had increased to 4.4m. tons in 2000 and 5.3m. tons in 2001) and estimated growth of 3% in consumption. Exports were also forecast to rise, by 200%, compared with the previous year, to 163,000 tons. The depreciation of the US dollar was cited as one factor favouring the competitiveness of Chinese exports, since, compared with its Asian rivals, China restricts fluctuations in the value of its currency. Australia’s annual cotton crop expanded from 99,000 tons in 1980/81 to 560,000 tons in 1996/97. Production increased to 564,000 tons in 1997/98, to 634,000 tons in 1998/99 and to 698,000 tons in 1999/2000. Output was estimated by the FAO to have risen again, to 755,000 tons, in 2000/01. Australian consumption of cotton was only about 40,000 tons per year in the late 1990s, so almost all of the country’s output is exported. In 1999 exports of cotton contributed about 1.7% of Australia’s total export earnings. India and Pakistan were generally net exporters of cotton in the 1980s and early 1990s. India’s cotton production reached 2.9m. tons in 1995/96 and a record 3.0m. tons in 1996/ 97. Annual output was about 2.7m. tons in 1997/98, 1998/99 and 1999/2000, but declined, to 2.4m. tons, in 2000/01. In 2001/02 the USDA estimated Indian production at about 2.7m. tons. In 1998/99 India exported only about 10,000 tons of cotton, but imported some 230,000 tons, partly in response to a reduction in international prices (see below). In 1999/2000 India’s cotton imports totalled about 210,000 tons, while exports were only about 13,000 tons. Meanwhile, Pakistan’s annual cotton crop declined from 1.8m. tons in 1995/96 to 1.4m. tons in 1998/99. According to the USDA, output recovered to 1. 9m. tons in 1999/2000, declined slightly, to 1.8m. tons in 2000/01, and was estimated at 1. 8m. tons in 2001/02. Cotton exports from Pakistan, which reached 311,000 tons in 1995/96, virtually ceased in 1998/99, when the country imported 167,000 tons. Exports amounted to about 160,000 tons in 1999/2000. The USA is the world’s second largest producer of cotton, after China, and the world’s largest exporter. Generally, production increased, if somewhat erratically, during the 1990s, until the 1998/99 season, when it declined by almost 27% to just over 3m. metric tons. In 2001/02 US output of cotton was estimated by the FAO to have increased to about
COMMODITY SURVEYS 123
4.4m. tons, mainly as a consequence of an expansion of the area under cotton from 5.3m. ha to 5.7m. ha. US exports were forecast by the FAO at 1.85m. tons in 2001/02. Among the republics of the former Soviet Union, Uzbekistan is by far the largest producer of cotton, with production that has generally ranged between 1m.–1.3m. metric tons in recent years, according to the FAO. In 2001 Uzbekistan accounted for some 63% of the estimated total output of cotton by the Union’s successor republics. Uzbekistan is a leading exporter of cotton (see below), which constitutes the country’s most important cash crop. In 1995 exports of cotton accounted for 67% of Uzbekistan’s total export earnings, while exports of cotton fibre contributed some 27% of total export revenue in 2000. The dependence of the country’s cotton production on irrigation was reported, in the late 1990s, to have led to serious environmental problems, and to have caused a decline in soil fertility in the major producing regions. Turkmenistan, the second most important producer of cotton among the former Soviet republics, is, like Uzbekistan, heavily reliant on irrigation to maintain output, which ranged between an estimated 131,000 tons and 379,000 tons in 1995–2000, according to the FAO. In 2001, according to estimates by the same source, production rose to almost 400,000 tons, its highest level since 1993. In 1996 exports of cotton accounted for 10.4% of Turkmenistan’s total export earnings. Kazakhstan, where production was estimated at 130,000 tons in 2001, compared with an estimated 77,000 tons in 2000; Tajikistan (with an estimated 96,000 tons in 2001); Azerbaijan (an estimated 30,000 tons); and Kyrgyzstan are the other significant producers of cotton among the former Soviet republics. Russia remains a significant importer of cotton (see below). In Latin America, Brazil is the major producer of cotton. Production was estimated by the FAO to have totalled almost 870,000 metric tons in 2001, compared with about 660,000 tons in 2000, and some 470,000 tons in 1999. Brazil’s imports of cotton have fallen substantially in recent years as domestic production has risen, and were forecast at 114,000 tons in 2001/02 by the International Cotton Advisory Committee (see below), compared with an estimated 140,000 tons in 2000/01, and 259,000 tons in 1999/2000. Production of cotton in Argentina, meanwhile, has been in decline. In 2001/02, according to the USDA, the area harvested, at 163,000 ha, was the lowest for 70 years. The fall has been attributed to a combination of weak international prices, and the relatively high production cost of cotton, which has favoured a transfer to soybean cultivation in the provinces of Chaco and Santiago del Estero, the principal cotton-producing regions. Elsewhere in Latin America, production of cotton by Paraguay has exceeded 100,000 tons in some recent years. Peruvian production ranged between about 40,000–60,000 tons in the late 1990s, while that of Colombia was estimated by the FAO at about 40,000 tons annually. In the Middle East (including North Africa), Turkey is the most important producer of cotton, with output estimated by the FAO at 876,000 tons in both 2001 and 2000, compared with 791,000 tons in 1999, and some 870,000 tons in 1998. Turkey imported virtually no cotton at all until the mid-1980s, but is now a substantial net importer, with imports exceeding exports in every year during 1991–2000. The reason for this reversal has been the development of Turkey’s textiles industry, to the extent that growth in domestic output, which has been achieved almost entirely through improved yields, has not been able to keep pace with demand. In 1997 36% of the country’s mill consumption was reportedly met by imports, and in the mid-1990s cotton accounted for more than 50% of Turkey’s
124 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
total fibre consumption. In 1999 substantially more than 10% of Turkey’s total export earnings were derived from basic manufactures and finished goods of cotton. Syrian production of cotton rose markedly in the late 1990s, totalling an estimated 353,000 tons in 2001, compared with 216,000 tons in 1995. Lacking the necessary mill capacity fully to utilize domestic output, Syria remains an important exporter of cotton, the world’s fifth largest, in fact, in 2000/01, according to the USDA. In 1999 exports of raw cotton accounted for 4.1% of Syria’s total export earnings. The FAO estimated Egypt’s 2001 production of cotton at a level similar to that of 2000, some 210,000 tons, compared with 233,000 tons in 1999. Iran’s production of cotton was estimated at 151,000 tons in 2001, and was thus on a par with average annual output in 1995–2000. Most Iranian cotton is processed domestically into yarn or cloth, the country’s milling industry reportedly disposing of considerable spare capacity. Given the suitability of large areas of Iran for the cultivation of cotton, it has been estimated that production could, realistically, be increased to 500,000 tons annually, thus enabling the textiles industry to make a greater contribution towards economic diversification. Production of cotton by the European Union (EU) has ranged between about 420,000– 450,000 metric tons in recent years, and stems entirely from Greece and Spain. Greece is by far the major producer, with estimated output of 442,000 tons in 2001, approximately the same as in 2000. Greece is a major exporter of cotton, the fourth largest in the world in 2000/01, according to the USDA. In 1999 exports of raw cotton contributed 3.2% of Greece’s total export earnings. EU imports of cotton approached or exceeded 1m. tons in most years during 1995–2000, according to the FAO. Italy usually accounted for about onethird of those imports, followed by either Germany or Portugal, with France generally the fourth largest importer among the EU member states. Cotton is a major source of income and employment for many African countries, both as a primary product and, increasingly, through sales of yarn, fabrics and finished goods. Cotton is the principal commercial crop, in terms of foreign exchange earnings, in Benin, Burkina Faso, the Central African Republic, Chad, Egypt, Mali, Mozambique and Togo, is second in importance in Senegal and Sudan and, in 1999, was fourth in importance in Tanzania. In the late 1990s about 80% of cotton entering the world market from subSaharan Africa came from the francophone countries of the CFA franc zone, in which the total area under cotton cultivation exceeded 2.4m. ha. The largest sub-Saharan African producer in 2001, according to the FAO, was Mali, with an estimated 230,000 metric tons, followed by Nigeria (an estimated 145,000 tons), Benin (reported production of 141,000 tons) and Zimbabwe (unofficially, 128,000 tons, similar to the 2000 figure). For many years Sudan was the largest cotton producer in sub-Saharan Africa. However, from the 1970s the industry was adversely affected by domestic difficulties resulting from climatic factors, an inflexible, government-dictated marketing policy and crop infestation by white-fly. The area under cotton cultivation in Sudan declined from 360,000 ha in the mid-1980s to 136,000 ha in the 1998/99 crop season. In the interim, in the late 1980s, cotton production, classification and marketing had been reorganized and in 1990 special foreign exchange incentives had been offered to producers. However, it was not until the early 2000s that improved levels of output seemed likely to be sustained. This hope was supported by increased production from 49,000 metric tons in 1999 to 77,000 tons in 2000
COMMODITY SURVEYS 125
and an estimated 78,000 tons in 2001. According to the USDA, the area under cotton had recovered, to 150,000 ha, in the 2001/02 season. It was hoped that the decision of the Sudanese authorities, in the previous crop season, to abolish export taxes on cotton would improve the outlook for the sector and for Sudanese textiles in general. In 1999 overseas sales of cotton represented about 5.8% of the total value of Sudan’s exports. The leading exporters of cotton in 2000/01 were the USA (with sales of 1.5m. metric tons), Australia (850,000 tons), Uzbekistan (740,000 tons), Greece (218,000 tons) and Syria (218,000 tons). Other important exporters in that year were Mali (201,000 tons), Benin (142,000 tons) and Burkina Faso (142,000 tons). As noted above, China and Pakistan have also been significant exporters of cotton in recent years. Among the leading importers of cotton in 2000/01 were Indonesia (purchasing 577,000 tons), Mexico (406,000 tons), Turkey (381,000 tons), Russia (359,000 tons), India (341,000 tons, according to the USDA) and Thailand (345,000 tons). In the late 1980s and early 1990s Russia was the world’s major importer of cotton, with an annual intake of more than 1m. tons, but exports declined, generally to less than 350,000 tons annually, in the late 1990s. China (see above) was the foremost cotton-importing country in the mid-1990s, thereby accumulating large stocks of the fibre, but it subsequently reduced these holdings. According to data cited by the FAO, world trade in cotton was expected to increase by 8%, to 6.1 m. tons, in 2001/ 02, stimulated by historically low prices for the commodity. With total imports forecast at 2.1m. tons, Asian countries would account for more than one-third of total world trade. Global demand for cotton was forecast to reach 19.9m. tons in 2001/02, a slight increase compared with 2000/01. An anticipated excess of supply relative to demand was expected to cause stocks to rise by 5%, to 8.7m. tons, compared with the 2000/01 season. Although co-operation in cotton affairs has a long history, there have been no international agreements governing the cotton trade. Proposals in recent years to link producers and consumers in price stabilization arrangements have been opposed by the USA (the world’s largest cotton exporter), and by Japan and the EU. The International Cotton Advisory Committee (ICAC), an inter-governmental body, established in 1939, with its headquarters in Washington, DC, publishes statistical and economic information and provides a forum for consultation and discussion among its 42 members. The British city of Liverpool is the historic centre of cotton-trading activity, and international cotton prices are still collected by organizations located in Liverpool. However, almost no US cotton has been imported through the port of Liverpool in recent years. Consumption in the textile industry in the United Kingdom has fallen to approximately 14,000 tons per year, most of which comes from Africa, Greece, Spain and Central Asia. The price for Memphis cotton, from the USA, quoted in international markets is c.i.f. North European ports, of which Bremen, in Germany, is the most important. The average price for Memphis Territory cotton in North Europe rose to US $2,848 per metric ton in June 1995, owing to an increase in imports by the People’s Republic of China, combined with declines in production in India, Turkey and Pakistan. Prices have trended down since, averaging US $2,175 per ton during all of 1994/95, US $2,088 in 1995/96 and US $1,826 in 1996/97. The average Memphis quote c.i.f. North Europe during December 1997 fell to US $1,756 per ton. The market was depressed further during the next two years. In 1999, according to the World Bank, the price of Memphis cotton (US origin, c.i.f.
126 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Export Price Index for Cotton Lint (base: 1980=100)
north Europe) averaged US $1,228 per ton. In 2000, however, the average price recovered to US $1,463 per ton in response to increased demand and stagnant production. In JanuaryMarch 2001, the price of Memphis cotton averaged US $1,467 per ton, but declined to only US $1,175 per ton in the subsequent quarter. In January-August 2001 the average price was US $1,271 per ton, averaging US $1,126 per ton in the final month of that period. The principal Liverpool index of cotton import prices in North Europe is based on an average of the cheapest five quotations from a selection of styles of medium-staple fibre. In 1999 the index recorded an average offering price of 53.1 US cents per lb: its lowest annual level since 1986. On a monthly basis, the average price in December 1999 was only 44.4 US cents per lb. The decline in prices was attributed to the plentiful availability of cotton, with high levels of production resulting in large stocks (more than 9m. tons world-wide in recent years). In 2000 the index recorded an average offering price of 59.0 US cents per lb. On a monthly basis, the average price in December 2000 was 65.8 US cents per lb. Slow growth in production and strengthened demand for cotton were the main reasons cited for the recovery in prices. In 2001, however, the decline in prices resumed. On a monthly basis, the index recorded an average offering price of only 38.4 cents per lb in November 2001. A modest recovery during 2002 saw prices generally stable, slightly above 2001 levels—the monthly average for June of that year being 41.9 cents per lb. Changes in US government agricultural policies implemented in 1996, combined with reduced barriers to imports and exports of cotton in recent years in several countries, seem to be leading to a period of reduced fluctuation in cotton prices. During the 10 seasons ending in 1995/96 the average spread between the highest and lowest quotes each season for an average-quality cotton in international trade was 36%. During 1996/97 the spread between the highest and lowest quotes fell to 10%.
Diamonds
Diamonds are a crystalline form of carbon, and are the hardest naturally occurring substance. They are of two categories: gem qualities (among the most prized gemstones used in jewellery), which are superior in terms of colour or quality; and industrial quality, about one-half of the total by weight, which are used for high-precision machining or crushed into an abrasive powder called boart. The primary source of diamonds is a rock known as kimberlite, occurring in volcanic pipes which may vary in area from a few to more than 100 ha and volcanic fissures which are considerably smaller. Among the indicator minerals for kimberlite are chrome diopside, pyrope garnet, ilmenite and zircon. Few kimberlites contain diamonds and, in ore which does, the ratio of diamond to waste is about one part per 20m. There are four methods of diamond mining, of which open-cast mining is the commonest; diamonds are also recovered by underground, alluvial and, increasingly, offshore mining. The diamond is separated from its ore by careful crushing and gravity concentration which maximizes the diamond’s high specific gravity in a process called dense media separation The size of diamonds and other precious stones is measured in carats. One metric carat is equal to 0.2 gram, so one ounce avoirdupois equals 141.75 carats. Africa is the major producing region for natural diamonds, although Australia joined the ranks of the major producers in 1983, and the Argyle open-cast diamond mine, in Western Australia, has become the world’s largest producing mine and main source of industrial diamonds. Output is predominantly of industrial-grade diamonds, with some lower-quality gem diamonds and a few pink diamonds. In 1998 Australian diamond output represented almost one-third of world production by volume. In 2000, however, this proportion fell to less than 23%, reflecting a sharp decline in output at Argyle, which has been undergoing enlargement to enable access to deeper ores. This project was expected to depress production further in 2001. In terms of value, Botswana ranks as the world’s largest producer of diamonds, which are the country’s principal source of export earnings, normally accounting for up to 80% of export receipts and 30%–35% of government revenues. Diamond production began in 1971, initially at the Orapa mine, and was supplemented from 1977 by extraction from a nearby mine at Letlhakane. In 1982 a major new mine at Jwaneng entered production. Jwaneng was the richest diamond mine in Africa in 2000, according to the US Geological Survey (USGS). Following the completion in 2000 of a major expansion programme at the Orapa mine, output from this source totalled almost 12m. carats. All diamond mining
128 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Uncut Diamonds (gem and industrial stones, million metric carats)
* Estimated production Source: US Geological Survey
operations in Botswana are currently conducted by the Debswana Diamond Co (Pty), which is owned equally by the Botswana government and De Beers, although several international mining ventures, including BHP Billiton (Australia/United Kingdom), reportedly hold licences to mine for diamonds in the country. About 98% of Namibian diamonds are of gem quality, although recovery costs are high. In 1990 diamond mining commenced at Auchas, and a second mine, at Elizabeth Bay, began in 1991. The expectation that mining operations at the Oranjemund open-cast mine will cease to be economic during the early 2000s has stimulated the exploitation of Namibia’s extensive deposits of ‘offshore’ diamonds, which in the late 1990s were estimated at up to 1, 500m. carats. In 2000 ‘offshore’ recoveries were estimated to have accounted for slightly more than 50% of Namibia’s diamond output. Until 1993, when the government of Namibia granted marine exploration concessions to a new privately-financed venture, the Namibian Minerals Corpn (NAMCO), Consolidated Diamond Mining (CDM), a subsidiary of the De Beers group, held exclusive rights to diamond exploration and mining in Namibia. NAMCO’s concession rights initially covered three offshore areas totalling almost 2,000 sq km, containing an estimated 80m. carats of gem-quality diamonds. Commercial recoveries began in late 1995. In 1999 NAMCO acquired a majority stake in Ocean Diamond Mining Holdings Ltd, thereby becoming Namibia’s second largest producer of diamonds after Namdeb (see below). In 2001, following an accident involving one of its submarine minecrawlers, NAMCO was forced to suspend all mining operations and to seek assistance in order to avoid liquidation. In 1994 the Namibian government and De Beers established the Namdeb Diamond Corpn, to which CDM’s diamond operations were transferred. Namdeb is owned 50% by De Beers and 50% by the government. In early 2001 Diamond Fields
COMMODITY SURVEYS 129
International Ltd of Canada was granted a 15-year mining licence by the Government, and planned, later in the year, to initiate the Sea Diamonds Project in its offshore concession areas as a joint venture with South Africa’s Trans Hex Group. The Government has also granted diamond exploration concessions to other international mining enterprises, including Mount Burgess Gold Mining Co Ltd and Kimberlite Resources Pty Ltd of Australia. In 2000 the diamond sector accounted for 37% of Namibia’s total export earnings and 10% of the country’s gross domestic product (GDP). The Mwadui diamond pipe in Tanzania is one of the world’s largest producing pipes, covering an area of 146 ha. Tanzania’s diamond output was 838,000 carats in 1971, but production later declined, owing to deterioration in diamond grades, technical engineering problems and difficulties in maintaining the mines. By the late 1980s, exports from Mwadui had effectively ceased. New prospecting agreements were signed in 1993 by the government, the De Beers subsidiary that managed operations at Mwadui, and also with Canadian interests, which obtained mining leases and exploration licences covering almost 9, 000 sq km. Following extensive rehabilitation, mining at Mwadui recommenced in August 1995, and exports resumed on a small scale in December. In 1999 and 2000 the refining of tailings brought about a substantial increase in production at the Williamson Mine, Tanzania’s only diamond mine, where gem-quality stones have accounted for more than 80% of total production in recent years. Exploration activities are reportedly focused on the identification of additional economically viable kimberlites in Tanzania, with the aim of bringing them into production before the Mwadui resource is exhausted. The locations of South African diamond production include Kimberley, Finsch (west of Kimberley), Koffiefontein (south of Kimberley), Namaqualand (north of Port Nolloth), the Premier Mine (east of Pretoria), and the Venetia Mine (north of Potgietersrus). The Venetia Mine, discovered in 1980 and opened in 1992, has become the country’s largest producing diamond mine, accounting for about 44% of South African output in 2000. Small-scale marine mining is conducted off Northern Province and Namaqualand. Angola’s diamond output, which totalled 2.4m. carats in 1974, subsequently fell sharply, as a result of the civil war. Official diamond production began to revive after 1990, rising from 1m. carats in 1993 to 3.8m. carats in 1996, before declining to 3.3m. carats in 1997 and to about 3.0m. carats in 1998, reflecting continued internal political strife. Production recovered substantially thereafter, in 1999 and 2000. Angola is known to possess rich diamondiferous deposits, occurring both in kimberlite and alluvial formations, among which particular interest has in recent years been focused on the Catoca kimberlite, 30 km west of Saurimo, in north-eastern Angola. Covering an area of more than 660 ha, its potential reserves have been estimated at least 40m. carats. In 2000, Sociedade Mineira de Catoca Ltda (SMC), a joint venture of state-owned Empresa Nacional de Diamantes de Angola (ENDIAMA, Angola’s national mining organization), Russia’s Almazy Rossii-Sakha Co, Odebrecht Mining Services Inc. of Brazil and Lev Leviev of Israel, was the country’s largest diamond producer. A Canadian exploration company, DiamondWorks, entered commercial production in July 1997 at its initial concession at Luo, in Lunda Norte Province. Operations at Luo were suspended in mid-2000, however. DiamondWorks’ second mine, at Yetwene, also in Lunda Norte, commenced operations in mid-1998 and was expected to raise the venture’s combined output of alluvial diamonds to 15,000 carats per month.
130 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
However, mining activities at Yetwene, together with DiamondWorks’ participation in the development of new operations, were suspended in late 1998 as a result of guerrilla insurgency. Having resumed in early 1999, operations at Yetwene were suspended again later in the year, and throughout the whole of 2000, owing to continued security problems and financial difficulties. Sociedade de Desenvolvimento Mineiro de Angola SARL (SDM), a joint venture uniting ENDIAMA, Ashton Mining Ltd of Australia and Brazil’s Odebrecht, commenced mining alluvial diamonds in north-eastern Angola in the late 1990s. The increasing role of the world diamond trade in the financing of guerrilla insurgencies in Africa, with particular reference to Angola, Sierra Leone and the Democratic Republic of the Congo (DRC), prompted the UN Security Council in June 1998 to adopt Resolution 1173, requiring that international markets ensure that illicitly exported diamonds from these areas did not enter world trade. These ‘conflict diamonds’ were defined as diamonds which had been either mined or stolen by rebels in opposition to the legitimate government of a country. According to estimates by De Beers, about 3.7% of world diamond production in 1999, with a value of US $255m., could be attributed to areas (principally in Angola and Sierra Leone) under guerrilla control. Although considerable technical difficulties exist in the identification of diamonds originating in conflict areas, De Beers, as the principal conduit for African diamond sales, implemented a range of measures to comply with the UN sanction. The company, which had in the mid-1980s discontinued purchases from Sierra Leone and Liberia (into which a large proportion of Sierra Leone’s diamond output is smuggled), announced in October 1999 that it had suspended all diamond purchases in Angola, and that no diamonds of Angolan origin would be purchased by any of its offices world-wide. In order to eliminate risks that illicit Angolan diamonds might be mixed with officially marketed diamonds, De Beers subsequently suspended all purchases of diamonds originating in west and central Africa, other than those produced in its own mines, and announced that it was restricting ‘outside’ purchases to diamonds of Russian and Canadian origin. In March 2000 the company introduced documentation guaranteeing customers that none of its marketed diamonds emanated from conflict areas of Africa. In early 2000 a complete restructuring of the Angolan industry was initiated with the creation of a new state diamond company, Sociedade de Comercialização de Diamantes (SODIAM). The role of ENDIAMA was reduced to that of a prospecting company, retaining its joint ventures with foreign producers. All marketing was transferred to the newly-created Angolan Selling Corpn (Ascorp), in which SODIAM held a 51% interest. All existing marketing licences were terminated and operators were given 30 days to sign agreements with Ascorp. It was also announced that prospecting licences were to be reduced in size to an estimated 3,000 sq km. Pressure on the Angolan diamond industry was intensified following the publication, in March 2000, of a report by the UN sanctions committee ‘naming and shaming’ the presidents of Togo and Burkina Faso, as well as Belgian, Bulgarian and Ukrainian officials, accusing them of involvement in the illicit diamond trade and of providing military assistance to the União Nacional para a Independência Total de Angola (UNITA). As a result, the diamond high council in Antwerp in the Netherlands entered into an origin-verification agreement with the Angolan government. Moreover, De Beers announced a complete restructuring of its own operations (see below). These measures created considerable
COMMODITY SURVEYS 131
uncertainty among those foreign companies active in diamond prospecting in Angola. However, several new diamond fields were explored in 2000 and official production increased, although unofficial production remained at a very high level and smuggling was reported also to have risen. The impact on the diamond trade of the apparent end of the Angolan conflict, following the death of the leader of UNITA, Jonas Savimbi, in 2002, was unclear at the time of writing. In spite of the efforts to stem the trade in conflict diamonds described above, outlets for smuggled stones continued to operate, principally in Antwerp, Mumbai (Bombay) and TelAviv, while illicit output from guerrilla-controlled regions of Angola was marketed under false certification provided, mainly, by outlets in Côte d’Ivoire, Guinea and Liberia. In May 2000 southern African producing countries initiated the ‘Kimberley Process’ with the objective of ending the commercialization of ‘conflict diamonds’. The ‘Kimberley Process’ was endorsed, in December, by the UN General Assembly and subsequently expanded to involve, as of 2002, more than 30 governments, including those of the European Union. Chaired by South Africa, the ‘Kimberley Process’ is working to establish minimum acceptable international standards for national certification schemes relating to trade in rough diamonds. It is hoped fully to implement the proposed control system by the end of 2002. In July 2000 representatives of the World Federation of Diamond Bourses and the International Diamond Manufacturers Association resolved to implement a certification system which would allow rough diamonds to be monitored direct from mines to trading centres. The proposed licensing regulations would require that all rough diamonds be shipped in sealed parcels which had been individually certified by authorities in exporting countries. At the same time, the World Diamond Council (WDC) was established in order to implement and monitor the certification system. In March 2002 the WDC voted in favour of the implementation of a system of warranties that would endorse each transaction of rough diamonds in trading centres world-wide. The WDC scheme was designed to complement the international certification scheme under development by the ‘Kimberley Process’. In Sierra Leone the diamond industry has long been beset by the dual problems of internal instability and widespread illicit digging and smuggling. Legal exports of diamonds have declined steadily since 1970, when 2m. carats of mainly gem-quality diamonds were exported. By the mid-1990s these sales had dwindled to negligible proportions, and in mid-2000 were officially suspended. Plans exist for the eventual rehabilitation of diamond mining in the Koindu region (which had been severely hampered by guerrilla activity), and for diamond exploration in the Kono district. The initial results of exploration for offshore diamonds have also been promising. However, the realization of Sierra Leone’s potential for expanding this resource must await the eventual restoration of internal political stability. Similar problems exist for the diamond sector in neighbouring Liberia, whose exports averaged about 200,000 carats per year in the mid-1980s, although much of this total was attributable to stones smuggled from adjoining countries and attracted to Liberia by its currency link with the US dollar. (In December 2000 the UN recommended that an embargo be placed on all exports of diamonds from Liberia, in order to prevent funds from such sales from being used to finance the conflict in Sierra Leone.) Following the resolution of the civil war that effectively halted the country’s diamond trade during 1989–96, efforts
132 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
have been made to revive the diamond sector and to suppress illegal mining and smuggling. However, diamond production was reportedly confined to artisanal operations in 1999. In 2000 exploration revealed a kimberlite pipe in the west of the country, and the discovery of others has been confidently predicted. About 90% of diamond output in the DRC, which is mainly derived from alluvial mining operations in Eastern Kasai, consists of industrial diamonds, of which the DRC (then known as Zaire) was the world’s principal producer until it was overtaken by Australia in 1986. During 1993–96 the DRC’s combined output of industrial and gem diamonds exceeded that of Botswana; the bulk of its production, however, is smuggled out of the country. The Société Minière de Bakwanga (MIBA), which holds the DRC diamond monopoly, cancelled its marketing agreement with De Beers in mid-1997. During 1998 MIBA announced that De Beers had been granted provisional rights to carry out an aerial exploration survey over areas adjoining the border with Angola. However, it appeared unlikely that this project would proceed in the short term, having regard to subsequent developments involving De Beers’ operations in central Africa (see above). During early 2000 it emerged that senior members of the government of Zimbabwe, which has, since 1998, given significant military support to the DRC in its counter-insurgency operations, had taken substantial shareholdings in Oryx Diamonds Ltd, which was being awarded a 25-year concession in the DRC’s main diamondmining region, in an area guarded by Zimbabwean troops. In July 2000 the DRC government sold International Diamond Industries of Israel the right to become the sole purchaser of all uncut diamonds from state-owned mines, in an effort more effectively to monitor the origins of national diamond output. In the Central African Republic diamonds are found in alluvial deposits, mainly in the west of the country. There has, however, been widespread evasion of export duties, and it has been estimated that during the 1990s upwards of 60% of total diamond production was being smuggled out of the country. In 1998 official sales of diamonds accounted for almost 43% of the republic’s total export revenue. Small-scale mining for diamonds is carried out in Côte d’Ivoire, where illicit production is also widespread. The diamond sector in Ghana, which has been in decline since the 1960s, was estimated in 1993 still to contain reserves of alluvial diamond deposits sufficient for 15 years’ exploitation. Other African producers of diamonds on a small scale are Lesotho and Swaziland. Despite the identification of numerous kimberlite pipes in the south of Zimbabwe, none have yet proved to be economic, and the country’s only operating mine was closed in 1998. Geological assessments of kimberlite pipes located in Mauritania have revealed the presence of diamonds. In 1999 the first licence to prospect for diamonds in Mozambique was granted. In 1996 an Australian-Canadian joint venture announced that it was to develop North America’s first commercial diamond mine, at Lac de Gras, close to the Arctic Circle in the Northwest Territories of Canada. Production at the site, known as EKATI, commenced in 1998 and in 1999 totalled 2.5m. carats (potential output is estimated at 3m.–4m. carats annually). A number of other sites in the Canadian far north have been identified as suitable for diamond exploration. Work began at the Diavik site, some 30 km south-east of EKATI, in 2000, with gem production expected to commence in early 2003. Almost all the major companies involved in diamond exploration have an interest in one of the Canadian projects. Canadian potential has been forecast at 12%–15% of global production. A smaller mine, at
COMMODITY SURVEYS 133
Kelsey Lake in the Rocky Mountains of the USA, began operations in 1996. Output of the mine’s principally gem diamonds was expected eventually to reach 150,000 carats annually. In 2000 Russia was the world’s third largest producer of gem-quality and industrial diamonds. Output is based on the exploitation of kimberlite deposits in Sakha (Yakutia). The quality of these reserves is reported to be deteriorating, but other rich deposits, notably the Lomonosov deposit close to the city of Arkhangelsk, await development. In 1930 the major diamond producers formed The Diamond Corpn to act as the single channel through which most of the world’s rough diamond production would be sold. To stabilize the market, the corporation put surplus output into reserve, to be sold at a time when conditions were favourable. The corporation was one of a group of companies, based in London, United Kingdom, which constituted the Central Selling Organisation (CSO). Until mid-2000, when De Beers announced the abandonment of its monopoly of world diamond supply (see below), the CSO, acting on behalf of producers, handled about 65% of world production. The majority of diamonds produced in Africa, although not those of Ghana and Guinea, were marketed through the CSO, which had about 160 direct clients. The CSO marketed the rough diamond production of De Beers Consolidated Mines Ltd. A reorganization of De Beers’ interests, undertaken in 1990, placed the CSO, together with the group’s diamond stocks and other non-South African-based interests, under the control of a new Swiss-domiciled corporation, De Beers Centenary AG. In 1990 De Beers Centenary entered into an arrangement with Glavalmazzoloto (the diamond monopoly operated by the former Soviet Union), under which 95% of rough gem diamonds destined for export were to be purchased and marketed by the CSO, affording Russia a quota of 26% of all CSO sales on the world market. This agreement, which was to operate until December 1995, was continued by the successor Russian diamond corporation, Rosalmazzoloto, and subsequently by Almazy Rossii-Sakha (Alrosa). In 1992 De Beers negotiated an agreement with the Russian Autonomous Republic of Sakha (Yakutia), which occupies a large part of Siberia and accounts for approximately 98% of Russian diamond output, to market the proportion of its diamond production not procured by the central diamond authority. In January 1993 the functions of this authority were transferred to an independent body, Diamonds of Russia-Sakha. The 1990 agreement, which expired in December 1995, was extended until March 1996, when a new framework was eventually formulated for the sale of Russian diamonds. Under the revised arrangements, which were to operate for a three-year period, Alrosa obtained the right to market approximately 14% of its exports to buyers outside the CSO. The agreement aimed to achieve a substantial reduction in the volume of diamonds circumventing the CSO marketing network, while assisting Russia in its proposed establishment of a domestic diamond-cutting industry. In August 1996, however, it was reported that further meetings were to take place between Alrosa and the CSO to discuss continuing increases in sales of Russian diamonds to purchasers outside the CSO, Meanwhile, the Argyle mine in Australia (see above), whose sales accounted for about 6% of the CSO’s annual intake, announced in June that it was to terminate its marketing agreement with the CSO with effect from 1 July. For the remainder of 1996 the CSO continued to purchase Russian diamonds under the terms of the agreement that had expired in December 1995, while pursuing negotiations with Alrosa. However, the slow progress in finalizing new arrangements, together with the continuing ‘leakage’ of
134 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Russian diamonds onto the open market, prompted De Beers to inform the Russian government that it was to cease purchasing diamonds under the existing arrangements with effect from the end of December 1996. Efforts to formulate new marketing arrangements remained unresolved until October 1997, when a new agreement was signed, under which the CSO was to market Russian diamonds valued at a minimum of US $550m. annually, with provision for further sales up to a maximum of $1,200m. These arrangements were to operate for a one-year period. In November 1998 a new agreement, operating until 31 December 2001, was finalized, awarding the CSO the right to market Russian diamonds with a minimum value of $550m. annually. However, in July 2000, following the announcement by De Beers that it was to cease exercising control over diamond supplies entering the world markets (see below), Alrosa, which supplies about 26% of diamonds sold through the CSO, indicated that it intended to review the terms of the 1998 agreement, with a view to obtaining enhanced financial terms. A new five-year trade agreement concluded between Alrosa and De Beers in December 2001 provided for annual sales to De Beers with a value of $800m., subject to the approval of European competition authorities. In the interim, De Beers and Alrosa were to trade on a ‘willing-buyer willing-seller’ basis. Rough diamonds, of which there are currently more than 5,000 categories, were sold by the CSO in mixed packages 10 times each year at regular sales, known as ‘sights’, in London, Johannesburg and Lucerne, Switzerland. Gems accounted for about 20% of total sales by weight, but, it was estimated, over 90% by value. After being sold by the CSO, gem diamonds were sent to be cut and polished in preparation for jewellery manufacture. The leading cutting centres are in Antwerp, Mumbai (Bombay), New York and Tel-Aviv, which in 1993 opened an exchange for ‘raw’, or uncut, diamonds, with the intention of lessening the dependence of Israeli cutters on allocations from the CSO and purchases from the small, independent diamond exchange in Antwerp. The principal markets for diamond jewellery are the USA and Japan (which account for about 60% of world consumption). In July 2000 De Beers announced that it was to relinquish its monopoly control of world diamond sales, and would henceforth concentrate on strategies to stimulate international demand. This decision was widely ascribed to the strains imposed on the CSO by the entry into world markets of increasing quantities of diamonds mined in Australia, North America and Russia. In addition, the substantial stockpiles of diamonds maintained by De Beers required high levels of capital investment, from which no returns accrued to De Beers’ shareholders. The Diamond Trading Company (DTC) replaced the CSO as the marketing organization of the De Beers group. The CSO provided a guaranteed market to producers and, since 1930, had successfully followed a policy of stockpiling diamonds during times of recession in order to stabilize prices (which were never reduced). At the end of 2000 the value of the stockpile stood at US $3,065m., a decrease of $924m. in 12 months. Following De Beers’ announcement of the termination of its diamond sales monopoly, the CSO forecast that the value of the stockpile would fall to $2,500m. during 2001. Diamond prices (quoted in US dollars) were increased by 15.5% in March 1989, by 5.5% in March 1990 and by 1.5% in February 1993 (mainly in respect of stones of 0.75 carat and above). In July 1995 prices for low-grade rough diamonds were reduced by 10%–15%, while prices for large stones were raised by between 2%–8%. In November prices for
COMMODITY SURVEYS 135
stones weighing 2.0 carats and above were raised by 5%, and in July 1996 prices of rough gem diamonds weighing in excess of 1.0 carat were increased by an average 7%. In September 1999 prices for low-grade rough diamonds were raised by 10%–15%. As there are so many varieties of diamond, the CSO price changes represent averages only. There are wide discrepancies in price, depending on such factors as rarity, colour and quality. The sales turnover of US $3,417m. recorded in 1992 by the CSO represented a six-year ‘low’. Sales volume advanced strongly, however, in 1993, to $4,366m., an increase of 27. 8%. This recovery was, in part, attributable to reductions in producers’ quotas during 1993. Sales turnover declined marginally, to about $4,250m., in 1994, owing in part to an increase of stocks in diamond-cutting centres, and despite Russian sales outside the CSO network. A rise of 6.6% in 1995 sales turnover, to $4,531m., reflected a strong level of demand for quality gem stones, particularly in the USA and Japan. Sales turnover in 1996 advanced by almost 7%, to a record $4,834m., despite the termination of marketing arrangements with the Argyle diamond mine and the impact of direct sales by Russia. In 1997, however, unfavourable economic conditions in east and south-east Asia were responsible for a fall of 4% in sales turnover, to $4,640m. CSO sales in 1998, at $3,350m., stood at their lowest level since 1987, reflecting the weakness of demand from Japan and East Asia, which traditionally account for about 40% of world diamond sales. However, sales turnover achieved a strong recovery in 1999, advancing by 57 % on the 1998 total to a record $5,240m., reflecting the onset of an economic recovery in Japan and East Asia and the continuation of strong demand in the USA, which in that year overtook Japan as the principal market for gem diamonds, accounting for almost one-half of world diamond jewellery sales. In 2000 De Beers’ sales turnover rose by 8%, to a new record level of $5, 670m., compared with 1999. In 2001, however, sales by the DTC totalled only $4,450m., a decline of 21.5% compared with 2000. The decline was attributed to slow growth in the global economy, especially in the USA. Synthetic diamonds for industrial use have been produced since the mid-1950s by a number of companies, including De Beers, using a method which simulates the intense heat present in the geological formation of diamonds. These stones, which are always very small, account for about 90% of all industrial diamond use, and have a wide variety of industrial applications. The USA, which is the main user of industrial diamonds, is also the leading producer of synthetic diamonds.
Gold
Gold (Au) is a lustrous yellow metal. Its properties (attractive appearance, resistance to damage and corrosion) have made it the most prized metal since ancient times, and the vast majority of the gold mined is used for jewellery or other decorative purposes. However, these and other physical and chemical properties (conductivity, malleability, ductility) make it suitable for a wide range of industrial applications. Gold minerals commonly occur in quartz and are also found in alluvial deposits and in rich, thin underground veins. In South Africa gold occurs in sheets of low-grade ore (reefs) which may be at great depths below ground level. Gold is associated with silver, which is its commonest by-product. Uranium oxide is another valuable by-product, particularly in the case of South Africa. Depending upon its associations, gold is separated by cyaniding, or concentrated and smelted. Gold, silver and platinum are customarily measured in troy weight. A troy pound (now obsolete) contains 12 ounces, each of 480 grains. One troy oz is equal to 31.1 grams (1 kg=32.15 troy oz), compared with the avoirdupois oz of 28.3 grams. In modern times the principal function of gold has been as bullion in reserve for bank notes issued. Since the early 1970s, however, the USA has actively sought to ‘demonetize’ gold and so make it simply another commodity. This objective was later adopted by the IMF, which has attempted to end the position that gold occupied for many years in the international monetary system (see below). Gold was discovered near Johannesburg, South Africa, in 1884, and its exploitation formed the basis of the country’s subsequent economic prosperity. For many years, South Africa has been the world’s leading gold producer, accounting in 2001 for 18.6% of world gold output outside the former Eastern bloc and for 64% of that mined in Africa. Since the mid-1980s, however, the South African gold industry has been adversely affected by the rising costs of extracting generally declining grades of ore from ageing and increasingly marginal (low-return) mines. Additionally, the level of world gold prices has not been sufficiently high to stimulate the active exploration and development of new mines. The share of gold in South Africa’s export revenue has accordingly declined in recent years, and in 1989, for the first time, the commercial profitability of South African gold production was exceeded by profits from mining activities other than gold. In 1996 South Africa’s gold production fell to less than 500 tons for the first time since 1956. Output continued to fall in 1997 and 1998, although the gold-mining industry substantially reduced its costs. Production declined further in 1999, to its lowest level for 45 years, and again, by 4.7%, in
COMMODITY SURVEYS 137
Production of Gold Ore (gold content, metric tons)
* Estimated total production. Source: Gold Fields Mineral Services Ltd.
2000. In 2001, at just under 394 metric tons, South Africa’s output of gold was 8.1% lower than in the previous year. Ghana, formerly a significant African producer of gold, has, since 1990, been reversing a long period of decline. Output doubled during 1990–92, and increased in 1993 and 1994 as a result of the continuing rehabilitation of the country’s gold industry. Following a minor set-back in 1996, the country’s gold output advanced each year during 1997–99. In 2000, however, production declined by almost 6%, mainly as a result of technical problems. A further decline in output, of almost 3%, occurred in 2001. The dominant producer in Ghana is Ashanti Goldfields, which operates one of the world’s largest gold-mines (with more than 20m. oz of proven reserves). The company was reopened to private-sector investment in 1994. Its output provided about 60% of the country’s total gold production in 1997. Exports of gold accounted for more than 37% of Ghana’s foreign revenue in 1998. Ashanti Goldfields has developed a major new mine at Bibani, which commenced production in 1997. Together with Bibani, whose output was almost doubled during its second year of operation, other gold-mining enterprises in the country, notably the Tarkwa mine operated by Goldfields Ghana, were generating further expansion in this sector in the late 1990s. Gold was overtaken in 1980 by tobacco as Zimbabwe’s major source of foreign exchange. Gold production in Mali increased substantially during 1997–2001, reflecting the exploitation of deposits at Sadiola Hill, with a projected capacity of 11 metric tons per year. Output rose by almost 20% in 2000, following the commissioning of two new mines during 1999. and again, by almost 47%, in 2001. In 2000 gold was Mali’s most important source of export revenue, accounting for 50% of the country’s total export earnings. Output in
138 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Guinea rose by almost 65% in 1998 with the entry into production of the Siguiri mine, operated by Ashanti Goldfields. The Siguiri mine accounted for more than one-half of Guinea’s total output of gold in 1999. Output by Guinea increased consistently in 1999– 2001. Tanzania’s first large-scale gold-mine began operating in November 1998. Production began in June 2000 at another Tanzanian mine, the Geita project, which is the largest producer of gold in East Africa; and, in 2001, at Bulyanhulu. In 2000 Tanzania recorded an increase of almost 90% in its output, and in 2001 production almost doubled. Generally, however, the sharp decline in world gold prices has led to a fall in the level of exploration activity in Africa, which is estimated to possess about 45% of the world’s recoverable gold reserves, Although South Africa remains the world’s principal gold producer, the relative decline of its position in world gold markets has been accompanied by the prospect of substantial increases in output as new capacity comes into production in Australia, Brazil, Canada, Indonesia, Papua New Guinea and the USA. Following the dissolution of the Soviet Union in 1991, the successor republics, notably Russia (which accounted for about two-thirds of Soviet output) and Uzbekistan (which contains what is reputedly the world’s largest open-cast gold-mine), have assumed an increasingly significant role in international gold trading, particularly following the abolition in 1997 of Russia’s state monopoly on gold purchases. However, the rate of advance of the gold-mining sector has been inhibited by a number of adverse short-term factors (which have included unpaid debts, shortages of mining equipment, transport difficulties and sharp rises in the cost of electric power). During the late 1990s, however, there was an increase in foreign financial participation in the development of gold deposits in Russia, as well as in Uzbekistan, Kazakhstan, Kyrgyzstan and Armenia. In the Far East and Australasia, Australia was the leading producer of gold in 2001, with output estimated at 285 metric tons, compared with 296.4 tons in 2000. Australia was thus the world’s third largest producer of gold after South Africa and the USA. Western Australia is the most important location of the country’s production, accounting for about 70% of total output in 2000. In 2000/01 exports of non-monetary gold, excluding gold ores and concentrates, contributed 4.3% of Australia’s total export earnings. Output of gold by Papua New Guinea rose steadily during the late 1990s, and was estimated in 2001 to have totalled about 68 tons, a decline of about 11% compared with 2000. Foreign sales of gold accounted for about 35% of the country’s total export earnings in 2000, and the metal was, accordingly, Papua New Guinea’s most important export commodity. Indonesia was the principal producer of gold in the Far East in 2001, with estimated output of about 183 tons, an increase of nearly one-third compared with 2000. In 1999 exports of non-monetary gold, excluding gold ores and concentrates, accounted for 0.7% of Indonesia’s total export earnings. After Indonesia, The People’s Republic of China was the second most important producer in the Far East. China had about 1,200 operating gold-mines in 1999, and has been increasing its output of gold, although a 2% decline in production in that year was believed to represent the first set-back in the country’s annual output for about 20 years. In 2000, however, China’s output increased by 5.1%, to about 164 metric tons, and grew by a further 5.1%, to about 173 tons, in 2001.. Elsewhere in the Far East production of gold by the Republic of Korea increased consistently in the late 1990s, although in 2000 output was estimated by the US Geological Survey (USGS) to have declined by about 3% to 25 tons.
COMMODITY SURVEYS 139
The Philippines, meanwhile, produces about 30 tons of gold annually, while output by Mongolia is steady at about 10 tons each year. Of the republics that succeeded the Soviet Union, Russia is the most important producer of gold, with estimated output of some 165 metric tons in 2001, compared with about 154 tons in 2000. Russia thus ranked as the world’s sixth largest producer of gold in 2001. The Russian gold market has reportedly been deregulated in recent years, with the result that commercial banks are now permitted to export gold. After Russia, Uzbekistan is the principal ex-Soviet producer of gold, with estimated output of about 85 tons in 2001, compared with about 88 tons in 2000. In addition to indigenous obstacles (see above), the depressed state of the world market for gold has retarded the development of the sector in Uzbekistan. Production by Kazakhstan was estimated to have totalled about 15 tons in 2001, while that of Kyrgyzstan amounted to an estimated 25 tons. Exports of non-monetary gold, excluding gold ores and concentrates, contributed 3.2% of Kazakhstan’s total export earnings in 1999. In 2001 the USA was the world’s second largest producer of gold, with estimated output of about 335 metric tons, compared with some 355 tons in 2000. The state of Nevada was the location of some 75% of total output in 2000. Exports of non-monetary gold, excluding gold ores and concentrates, accounted for 0.8% of the USA’s total export earnings in 1999. Canada was the fifth largest producer of gold in the world in 2001, with estimated output of about 157 tons, an increase of 1.5% compared with 2000. Non-monetary gold exports, excluding gold ores and concentrates, contributed 0.7% of Canada’s total export earnings in 1999. In Latin America, with estimated output of 134 metric tons in 2001, compared with about 133 tons in 2000, Peru is the principal gold producer, ranking seventh in the world in the former year. Output was boosted in 2001 through the exploitation of the La Quinua deposit in the north of the country. Exports of non-monetary gold, excluding gold ores and concentrates, contributed a little more than 20% of Peru’s total export earnings in 1999. Until it was overtaken by Peru in the mid-1990s, Brazil’s was the most important Latin American producer of gold. The country’s output was estimated about 51 tons in 2001, compared with about 53 tons in 2000. Production, especially that of the informal ‘garimpeiro’ sector, has been adversely affected in recent years by the low world price of gold, but there remains, reportedly, substantial interest, both domestic and external, in exploration of the many regions of the country where undeveloped deposits of gold are known to exist. Exports of non-monetary gold, unwrought or semi-manufactured, accounted for 0.7% of Brazil’s total export earnings in 1999. Elsewhere in Latin America, both Chile and Mexico are important producers of gold. In 2000 output by Chile, at 50.4 tons, was only slightly below that of Brazil. In 2001, however, production declined by more than 20%, to about 40 tons. The so-called Pascua-Lama gold project, which is scheduled for completion in 2003, is expected to elevate Chile to one of the world’s top 10 producers of the metal. In 1999 Chile’s exports of non-monetary gold, unwrought or semimanufactured, accounted for 1.6% of its total export earnings. In 2001 Mexico’s production declined slightly, compared with 2000, to total about 26 tons. Production by Argentina, meanwhile, has increased from only about 1 ton in 1996 to nearly 31 tons in 2001. Production by Colombia was estimated to have totalled about 20 tons in 2001, about the
140 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
same as in 2000. With estimated output of 16 tons in 2001, Bolivia is a more modest producer of gold. Nevertheless, the commodity makes a substantial contribution to the country’s export earnings, foreign sales of non-monetary gold, excluding ores and concentrates accounting for 8.5% of their total value in 1998. Output of gold by Venezuela has fallen somewhat since 1997, when it totalled some 20 tons. In 2001 production was estimated at about 17 tons, this total representing an increase in output of about 18% compared with 2000. World-wide, many other countries produce gold at a level of less than 10 metric tons annually. In the Middle East, for instance, Saudi Arabian output from the Mahd adh-Dhahab and Sukhaybirat mines has risen to about 9 tons annually, according to the USGS, and, in 2000, the feasibility of new gold production projects was being examined. In Western Europe annual output by Sweden usually amounts to 6 tons, while that of Finland and France has ranged, in recent years, between, approximately, 3–6 tons. The supply of gold to Western countries, after allowing for central bank transactions and not including scrap, totalled 2,997 tons in 1995, including Eastern bloc sales of 102 tons and net official sales of 167 tons. In 1996, when sales by the former Eastern bloc ceased to be separately quantified, the world supply of gold totalled 2,889 tons. Net official sales rose to 279 tons. The world supply of gold advanced to 3,614 tons in 1997, with net official sales rising to 326 tons. In 1998, despite a rise in gold output, world supply, other than scrap, declined to 3,015 tons (including net official sales of 380 tons). However, supply from old gold scrap (mostly jewellery) reached 1,088 tons, an increase of almost 75% on the 1997 total. In 1999 the world supply of gold totalled 3,552 tons, an increase of 537 tons on the previous year. Supply from old gold scrap fell by 483 tons to 605 tons. East Asian supply from scrap declined from 631 tons in 1998 to 124 tons in 1999. The main sources of scrap in 1999 were India (82 tons) and Saudi Arabia and Yemen (63 tons). In 2000 the world supply of gold fell by 188 tons to 3,364 tons. Supply from old gold scrap in that year, at 606 tons, was at almost exactly the same level as in the previous year. In 2001 the world supply of gold declined again, by 202 tons, to 3,162 tons. An increase of 100 tons, to 706 tons, was recorded in the supply from old gold scrap in that year. Total world demand for gold, including the former Eastern bloc countries, which totalled 4,157 tons in 1999, declined to 3,970 tons in 2000, and to 3,868 tons in 2001. Requirements for jewellery fabrication, which accounted for 3,140 tons (75.5%) in 1999, increased to 3, 177 tons (80.0%) in 2000, but declined to 3,006 tons (77.7%) in 2001. Fabrication demand from the electronics industry, meanwhile, declined by 28% in 2001. Of total gold fabrication in 2001 (3,490 tons), the principal consuming countries were India (20.3%), Italy (14.1%), the USA (6.6%), China (5.0%) and Turkey (4.6%). The fabrication of official coins is another important use of gold bullion, although the demand for these coins has declined since the mid-1980s. South African ‘krugerrand’ coins, containing exactly 1 troy oz of pure (24-carat) gold, were first issued in 1970 and held about 70% of the world market for gold bullion coins until 1985, when international sales virtually ceased, owing to the prohibition of krugerrand imports (during 1986–90) by Japan, the European Community and the USA. A number of other countries, notably Australia, Austria, Canada, Japan and the USA, entered the gold coin market and subsequently benefited from the krugerrand embargo. However, the popularity of these bullion coins
COMMODITY SURVEYS 141
in general has been declining in recent years. Following exceptional interest in 1995 in an Austrian gold coin issue, together with the minting of a US Olympic commemorative coin, underpinning a demand increase of 20.1%, the official coin sector in 1996 relapsed to its lowest level of fabrication since 1973. Production of the ‘eagle’ bullion coin by the US government led to a substantial revival in 1997, when coin fabrication demand rose internationally by 56%. The maintenance of investment interest in official coins in 1998 raised demand by 28.8%. However, demand for US and Canadian issues of coins commemorating the forthcoming millennium failed to make a significant impact on this sector in 1999, when fabrication demand advanced by only 5.0%. In 2000 international coinfabrication demand fell steeply, by more than 64%, as the result of a collapse in US demand for that purpose. Coin fabrication demand recovered slightly, by about 18%, in 2001. As a portable real asset which is easily convertible into cash, gold is widely esteemed as a store of value. Another distinguishing feature of gold is that new production in any one year is very small in relation to existing stocks. Much of the world’s gold is in private bullion stocks, held for investment purposes, or is hoarded as a ‘hedge’ against inflation. Private investment stocks of gold throughout the world are estimated at 15,000–20,000 tons, much of it held in East Asia and India. During the 19th century gold was increasingly adopted as a monetary standard, with prices set by governments. In 1919 the Bank of England allowed some South African gold to be traded in London ‘at the best price obtainable’. The market was suspended in 1925–31, when sterling returned to a limited form of the gold standard, and again between 1939–54. In 1934 the official price of gold was fixed at US $35 per troy oz, and, by international agreement, all transactions in gold had to take place within narrow margins around that price. In 1960 the official gold price came under pressure from market demand. As a result, an international gold ‘pool’ was established in 1961 at the initiative of the USA. This ‘pool’ was originally a consortium of leading central banks with the object of restraining the London price of gold in case of excessive demand. It later widened into an arrangement by which eight central banks agreed that all purchases and sales of gold should be handled by the Bank of England. However, growing private demand for gold continued to exert pressure on the official price and the gold ‘pool’ was ended in 1968, in favour of a two-tier price system. Central banks continued to operate the official price of $35 per troy oz, but private markets were permitted to deal freely in gold. However, the free-market price did not rise significantly above the official price. In August 1971 the US government announced that it would cease dealing freely in gold to maintain exchange rates for the dollar within previously agreed margins. This ‘floating’ of the dollar against other major currencies continued until December, when it was agreed to raise the official gold price to US $38 per oz. Gold prices on the free market rose to $70 per oz in August 1972. In February 1973 the US dollar was devalued by a further 10%, the official gold price rising to $42.22 per oz. Thereafter the free-market price rose even higher, reaching $127 per oz in June 1973. In November it was announced that the two-tier system would be terminated, and from 1974 governments were permitted to value their official gold stocks at market prices. In 1969 the IMF introduced a new unit for international monetary dealings, the special drawing right (SDR), with a value of US $1.00, and the first allocation of SDRs was made on
142 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
1 January 1971. The SDR was linked to gold at an exchange rate of SDR 35 per troy oz. When the US dollar was devalued in December 1971 the SDR retained its gold value and a new parity with the US dollar was established. A further adjustment was made following the second dollar devaluation, in February 1973, and in July 1974 the direct link between the SDR and the US dollar was ended and the SDR was valued in terms of a weighted ‘basket’ of national currencies. At the same time the official gold price of SDR 35 per troy oz was retained as the IMF’s basis for valuing official reserves. In 1976 the membership of the IMF agreed on proposals for far-reaching changes in the international monetary system. These reforms, which were implemented on a gradual basis during 1977–81, included a reduction in the role of gold in the international system and the abolition of the official price of gold. A principal objective of the IMF plan was achieved in April 1978, when central banks were able to buy and sell gold at market prices. The physical quantity of reserve gold held by the IMF and member countries’ central banks as national reserves has subsequently fallen (see below). The USA still maintains the largest national stock of gold, although the volume of its reserves has been substantially reduced in recent years. At the end of 1949 US gold reserves were 701.8m. oz, but since the beginning of the 1980s the level has been in the range of 261.4m.–264.6m. oz. At the end of 2000 the total gold reserves held by members of the IMF, excluding international financial organizations and countries not reporting, amounted to 950.6m. oz, of which the USA had 261.6m. oz (27.5%). In June 1996 the ‘Group of Seven’ major industrial countries considered proposals by the United Kingdom and the USA whereby the IMF would release for sale between US $5, 000m.–$6,000m. of its $40,000m. gold reserves to finance debt relief for the world’s poorest countries, principally in Africa. The plan, which was opposed by Germany, on the grounds that it could prompt demands for similar gold sales by its central bank, remained the subject of discussion within the IMF during 1997. During 1996 substantial amounts of gold bullion, jointly exceeding 500 metric tons, were sold by the central banks of Belgium and the Netherlands, and the Swiss National Bank announced its intention to allocate part of its gold reserves to fund a new humanitarian foundation. In July 1997 the Reserve Bank of Australia announced that it had disposed of more than two-thirds of its bullion holdings (reducing its reserves from 247 tons to 80 tons) over the previous six months. In October a Swiss government advisory group recommended the sale of more than one-half of Switzerland’s gold reserves, and in December the government of Argentina disclosed that it had sold the bulk of its gold reserves during a seven-month period earlier in the year. During 1997 loans to the market of official stocks of gold were carried out by the central banks of Germany, the Netherlands and Switzerland, and in March 1998 the central bank of Belgium disposed of one-half of its gold reserves. In December the government of Switzerland proposed constitutional changes, implemented in April 1999, removing the requirement for gold to support the national currency. In May the United Kingdom government announced that it intended to reduce its gold reserves by 415 tons (from 715 to 300 tons) over several years, including the offering for sale of 125 tons in the year to March 2000. The initial disposal, of 25 tons, followed in July 1999. In the previous month the ‘Group of Seven’ had endorsed a proposal whereby the IMF would sell about 10% of its holdings of gold to provide debt relief for 36 of the world’s poorest countries. Under the
COMMODITY SURVEYS 143
plan, the proceeds of the IMF disposals would be invested and the resulting revenue used to amortize IMF loans to the designated countries. These disposals by the IMF and central banks were widely expected to depress further the level of world gold prices (see below) and caused serious concern in gold-producing countries. Nevertheless, the second auction of British gold reserves, again offering 25 tons, took place in September. Later that month the European Central Bank, in ajoint statement with the central banks of Switzerland and 13 members of the European Union (Sweden, the United Kingdom and the 11 in the euro area), unexpectedly announced a five-year moratorium on new sales of gold held in official reserves. However, the agreement (announced in Washington, USA, at a meeting of the IMF) allowed impending sales that had already been decided, including those of Switzerland and the United Kingdom, to proceed, although total sales over the five-year period were not to exceed 2,000 tons. The announcement also stated that gold would remain an important element of global monetary reserves. The European agreement was generally welcomed for removing uncertainty from the gold market, although the permitted rate of sales (400 tons per year) is more than 100% greater than the average net sales by the signatory countries in 1989–98. There were also concerns that the agreement could encourage a higher level of gold sales by other countries. At the end of September 1999 the IMF confirmed that it was considering an exceptional operation involving ‘off-market’ sales of as much as 14m. oz (435 tons) of the organization’s gold reserves to members having repayment obligations, with the purchased gold to be used to make repayments, thus returning the gold (now revalued at market prices) to the IMF. Two such sales, involving a total of about 7.7m. oz of gold, were held in December. Most of the proceeds were to be used to finance debt relief in developing countries. Meanwhile, the third British gold auction, with a further 25 tons offered, was held in November. In accordance with the European banks’ September agreement, the Netherlands’ central bank announced in December that it intended to sell 300 tons of gold from its reserves (about one-third of the total) over the next five years. The fourth British gold sale took place in January 2000. Despite continuing protests from the gold industry, further disposals followed in March, May and July. As before, 25 tons were sold on each occasion. Similar auctions were planned for September and November, as part of a British programme to sell a total of 150 tons of gold in the year to March 2001. Meanwhile, in early April 2000 the Austrian National Bank revealed that it had sold 30 tons of gold from its reserves and that it planned to sell a further 60 tons (within the framework of the European agreement) by 2004. In early May 2000 Switzerland’s central bank announced that it had begun to sell gold from its reserves and intended to dispose of 120 tons by the end of September, as part of a programme to reduce its gold holdings by 1,300 tons (about one-half of the total) over at least five years. The unit of dealing in international gold markets is the ‘good delivery’ gold bar, weighing about 400 oz (12.5 kg). The principal centres for gold trading are London, Hong Kong and Zürich, Switzerland. The dominant markets for gold ‘futures’ (buying and selling for future delivery) are the New York Commodity Exchange (COMEX) and the Tokyo Commodity Exchange (TOCOM). A small group of dealers meet twice on each working day (morning and afternoon) to ‘fix’ the price of gold in the London Bullion Market, and the table above is based on the second of these daily ‘fixes’. During any trading day, however, prices may fluctuate above or below these levels. In each of the five years 1988–92 the London price of
144 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
gold bullion was lower at the year’s end than at the beginning. In March 1993 the price fell to US $326.1 (equivalent to £227.6 sterling) per oz, but from April there was a strong recovery in the bullion market, owing partly to speculative activity, and in late July and early August the London price exceeded $400 per oz. The gold price declined to $344 (£222) per oz in September, but ended the year at $390.75 (£264.1). The advance continued in January 1994, with the London price of gold reaching $396.5 (£266.8) per oz. The gold price fell in April to less than $370 per oz, although in June the metal was traded at more than $390 again. In early September the price per oz stood at $391.5 (then £253), and later in the month it moved higher in dollar terms, to $396 (£251). The quotation per oz fell in early November to $383.7, which, owing to the relative strength of the British currency, was equivalent to only £234. In terms of US currency, the price retreated further, standing at $376 (then £240.5) per oz in December. In January 1995 the London gold price declined to US $373.0 (£240) per oz, but in April it advanced to $396.7 (£245). In dollar terms, the price remained within this range for the remainder of 1995, ending the year at $387 (£249) per oz. For 1995 as a whole, the margin between the highest and lowest bullion price was only about 6% of the annual average: the lowest level of price volatility in the gold market since 1968. In January 1996, however, the gold market experienced a surge in prices, with the London quotation exceeding US $400 per oz. In February the price reached $416 (£274) per oz, its highest level, in terms of US currency, since February 1990. However, the rally was not sustained, and in early July 1996 the London gold price stood at $381 (£244) per oz. After a slight recovery, another decline in the price of bullion began in late September. The London quotation in early December was reduced to $367 (£222) per oz. On the morning of the first day’s trading in January 1997 gold was ‘fixed’ in London at US $367.8 (£215.7) per oz. This was only marginally above the lowest gold price recorded during 1996, but it proved to be the highest price in 1997. Later in January the London price of gold was below $350 per oz for the first time since September 1993. The price fell to $339 (£206) per oz in February 1997, recovered to $363 (£224) in March and remained within this range until June. In early July the market was further weakened by the Australian central bank’s disclosure of gold sales from its reserves (see above). A few days later the London bullion price declined to $316 (£187) per oz, its lowest level for 12 years. A modest recovery in the gold market ensued, but later in the year, with severe economic problems affecting countries in eastern Asia, the metal’s price declined further. In November, following the announcement of gold loans by European central banks (see above), the London price of gold was below $300 per oz for the first time since March 1985. The downward movement continued, and in December 1997 the gold price fell to $283 (£171) per oz, an 18-year ‘low’. The price at the end of 1997 was 20.8% below its level of 12 months earlier. Compared with the previous year, the average London price in 1997 represented a decline of 14.6%: the sharpest fall since 1984. The slump in the gold price was attributed mainly to the increase in supply from sources other than mine production and old gold scrap. In 1997 the supply from these components reached 1,179 metric tons, more than double the 1996 total. The main agents in the mobilization of these additional gold stocks were central banks, both through net official sales and through deposits placed with commercial banks. This increase in liquidity neutralized the effects of growth in demand for
COMMODITY SURVEYS 145
gold in 1997. The use of gold (including scrap) in jewellery rose by 17.3 % from the record 1996 level, mainly as a result of increased demand from India and Middle Eastern countries. The gold market remained depressed in January 1998, with the London price of bullion falling to US $279 (£172) per oz. Despite further announcements of official sales, the gold price recovered in April to $313 (£187) per oz, but was reduced in August to $273 (£165), its lowest level for more than 19 years. The London price was above $300 per oz again in early October, following a weakening in the US currency, but declined to $286 in December. For 1998 as a whole, the average price of gold was $294 per oz, compared with $331 in 1997. The output from the world’s gold-mines reached a record total in 1998, but, as in 1997, the main influence on market sentiment was the supply of above-ground stocks, including disposals by central banks and large flows of gold scrap from Asia in the first half of the year. During the early months of 1999 the London price of gold remained generally within the range of US $280–5295 per oz, but from May, when the proposal for official British gold sales was announced (see above), the market moved steadily downward. The first of a planned series of gold auctions by the Bank of England took place in early July, when 804, 000 oz (25 metric tons) were sold at $261.2 (£166.3) per oz. Two weeks later, the London price of gold slumped to $252.8 (£161.1) per oz: its lowest level, in terms of US currency, since May 1979. By the end of July 1999, as the dollar weakened, the sterling equivalent of the US currency price had fallen to only £157.8 per oz. The gold market remained depressed in August, when the London price was again below $253 per oz. In September the sterling equivalent of the dollar price was reduced to £157.0 per oz. Later that month the second Bank of England auction took place, with 804,000 oz (25 tons) of gold sold for $255. 75 per oz. However, by the end of September, following the announcement by European central banks that they would limit sales of gold (see above), the metal’s price had risen to more than $300 per oz, and in early October the London quotation reached $330 (almost £200): its highest level for about two years. However, the surge in prices was short-lived. In late November the third sale of official British gold reserves realized $293.5 per oz for the 25 tons on offer. In early December, following the Dutch central bank’s announcement of plans to sell gold (see above), the London price of the metal eased to $276.1 (£170.5) per oz. The gold price ended a year of extreme fluctuations at $290.8 (£180.4) per oz: 1.1% higher than its level at the end of 1998. For 1999 as a whole, however, the average London gold price was only $278.6 per oz: 5.3% below the 1998 average and the lowest annual level, in nominal terms, since 1978. In real terms (i.e. taking inflation into account), the average price of gold in 1999, measured in US dollars, was the lowest since 1972. Despite the closure of several loss-making mines, global production of gold increased in 1999, although more slowly than in 1998. However, as in other recent years, a major influence on the bullion market in 1999 was the activity of central banks, both through actual sales and lending of gold and through reports of planned disposals. Gold prices remained relatively stable during the opening weeks of 2000, and in late January the Bank of England sold another 25-ton offering at US $289.5 per oz. However, in early February, following the announcement by a leading Canadian gold-mining group that it was suspending ‘hedging’ operations (forward selling of borrowed gold to protect against falling prices), the London price reached $316.6 (£198.2) per oz. The Bank of England’s fifth
146 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
auction of 25 tons of gold, held in March, realized $285.25 per oz., but later that month the London price of the metal declined to $275.9 (£173.1) per oz. At the next sale of British gold reserves, in May, the 25 tons on offer were sold for $275.25 per oz. Later that month the London price of gold stood at $270.5 (£183.3) per oz. In July the Bank of England auctioned a further 25 tons of gold, which sold for $279.75 per oz. At the subsequent auction, held in September, the 25 tons offered by the Bank of England realized an allotment price of $270.60 per oz, compared with the morning ‘fix’ on the day of the sale of $272 per oz. At the time of the auction the strength of the US dollar was reported to be exerting strong downward pressure on the price of gold. For 2000 overall the average London price of gold was $279.1 (£187.04) per oz. Gold traded within a range of $263.8 per oz and $312.7 per oz in 2000, equivalent to 17.5%, compared with 26.1% in 1999. In early February 2001 the London price of gold fell below $260 per oz. The decline was attributed to the deceleration of the US economy, and to a marked increase in forward selling of gold by mining companies. In March the final 25-ton sale of gold by the Bank of England achieved an allotment price of $266 per oz, somewhat lower than the morning ‘fix’ ($267.45 per oz) on the day of the sale. The lowest ‘fix’ of the year, $256.0 per oz, occurred on 2 April. By late April the price of gold had established itself in a range of $250– $270 per oz. On 20 May the price of gold rose increased by 7%, its biggest daily increase for almost two years, closing at $290 per oz, compared with the afternoon ‘fix’ of $291.25 per oz. Rumours that the Bank of China was converting reserves hitherto held in US dollars into gold, and concern about the possibility of the re-emergence of inflation in the USA, were reportedly among the reasons for the sudden increase. By mid-May, however, the London price had declined considerably. The auction at that time by the Bank of England of a 20-ton lot of gold realized a price of $268 per oz. By late June the London price had recovered to $274.55 per oz, and remained at about that level in late August. On 12 September a further 20 tons of gold was auctioned by the Bank of England, achieving a price of $280 per oz, compared with the afternoon ‘fix’ of the previous day of $287 per oz. In the aftermath of the terrorist attacks against targets in the USA that took place on 11 September, the London price of gold rose as high as $294.30. The highest ‘fix’ of the year, $293.3 per oz, was recorded on 17 September. By mid-October, however, the role of gold as a secure ‘haven’ for funds in a period of global political and economic uncertainty appeared to have diminished substantially, the London quotation having fallen to $281.85 per oz on 11 October. For 2001 overall the London price of gold averaged $271.0 per oz, the lowest average price, even in nominal terms, since 1978, and 3 % lower than the average price in 2000. In 2001, as noted above, gold traded within a range of $271.0 per oz and $293.3 per oz, equivalent to 13.8%. The World Gold Council (WGC), founded in 1987, is an international association of gold-producing companies which aims to promote gold as a financial asset and to increase demand for the metal. The WGC, based in London, had 29 members in 2002.
COMMODITY SURVEYS 147
Gold Prices on the London Bullion Market (afternoon ‘fixes’, US $ per troy oz)
Groundnut
The groundnut (Arachis hypogaea), is a low growing annual herb originating in South America. Consequently, it is not a true nut—the underground pod, which contains the kernels, forms a more or less dry shell at maturity. Each groundnut pod contains between two and four kernels, also known as peanuts, monkey nuts or earth nuts, enclosed in a reddish skin. The kernels are very nutritious because of their high content of both protein (about 30%) and oil (40%–50%). In tropical countries the crop is grown partly for domestic consumption and partly for export. Whole nuts of selected large dessert types, with the skin removed, are eaten raw or roasted. Peanut butter is made by removing the skin and germ and grinding the roasted nuts. The most important commercial use of groundnuts is the extraction of oil. Groundnut oil is used as a cooking and salad oil, as an ingredient in margarine and, in the case of lower-quality oil, in soap manufacture. The oil is faced with strong competition from soybean, cottonseed and sunflower oils—all produced in the USA. In 2001 groundnut oil was the fifth most important of soft edible oils in terms of production. A high-protein flour, used chiefly in confectionery, can also be derived from peanuts. An oilcake, used in animal feeding, is manufactured from the groundnut residue left after oil extraction. However, trade in this groundnut meal is limited by health laws in some countries, as groundnuts can be contaminated by a mould which generates toxic and carcinogenic metabolites, the most common and most dangerous of which is aflatoxin B1. The European Union (EU) bans imports of oilcake and meal for use as animal feed which contain more than 0.03 mg of aflatoxin per kg. The meal can be treated with ammonia, which both eliminates the aflatoxin and enriches the cake. Groundnut shells, which are usually incinerated or simply discarded as waste, can be converted into a low-cost organic fertilizer, which has been produced since the early 1970s. About 80% of the world’s groundnut output comes from developing countries. The People’s Republic of China is the largest producer of groundnuts, output totalling 14.6m. metric tons in 2001. India, the second largest producer, has implemented measures to increase production of groundnut oil for domestic consumption, but the growth of domestic demand has so far frustrated the achievement of self-sufficiency in edible oils. Owing to the rise in demand and to disappointing crops of groundnuts and other oilseeds in recent years, India has needed to import large quantities of edible oils (although usually not groundnut oil). During the year to October 1999 India imported more than 4.5m. metric tons of such oils, so overtaking China as the world’s leading importer. In 1999/2000, as a result of
COMMODITY SURVEYS 149
Production of Groundnuts (’000 metric tons)
* Unofficial figure (s). † FAO estimate. Source: FAO.
unfavourable weather, India’s output of groundnuts declined to 5.3m. tons, its lowest annual total for 12 years, necessitating further substantial imports of edible oils. Production recovered to an estimated 6.2m. tons in 2001. Other countries in the region with substantial groundnut cultivation include Indonesia, Malaysia, Myanmar, Thailand and Viet Nam. African groundnut exports have been declining since the late 1970s, and most African countries grow the nut as a subsistence, particularly storage, crop. Nigeria is the largest producer (an estimated 2.9m. tons in 2001). Senegal’s groundnut production suffered from persistent drought, and also from marketing problems, in the early 1980s; however, subsequent output was substantially aided by government incentives to producers. These measures included the establishment of a groundnut price guarantee fund, which also had the unwelcome effect of attracting smuggled groundnut supplies from the neighbouring state of The Gambia. Output increased dramatically in 1999, to more than 1m. metric tons, compared with about 580,000 tons in 1998, and remained at that level in both 2000 and, it was estimated, 2001. The government is reportedly attempting to establish a closer link between its producer prices and international price trends. Groundnuts are the most important of Africa’s oil seeds and form the chief export crop of Senegal and The Gambia. In 1997/98 The Gambia supplied about 1.6% of world export trade, totalling 1.2m. metric tons in that crop year, and in 1999 exports of groundnuts and groundnut products contributed 68.2% of The Gambia’s total export earnings. The crop is widely grown in most countries of Central and West Africa, the largest producers here, apart from Nigeria and Senegal, being the Democratic Republic of the Congo and Chad.
150 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Niger and Mali, formerly significant exporters, have ceased to feature in the international groundnut trade, largely as a consequence of the Sahel drought. However, measures to revive the groundnut export sector in Mali were proceeding in the late 1990s, by which time subsistence output had recovered strongly. In East Africa, Sudan is an important producer (an estimated 1m. tons in 2001), although it is highly vulnerable to drought. Efforts to establish commercial production in Uganda had, by 2000, enjoyed negligible success, although cultivation was well established at subsistence level. Groundnut harvests in southern Africa, notably in Mozambique, South Africa and Zimbabwe, were also affected by drought during the second half of the 1980s. South Africa’s recovery proved the strongest, the country accounting for 6.6% of world export trade in 2000. Subsistence-level production recovered strongly in Zimbabwe in the late 1990s, but the country’s trade in groundnuts remained minimal in the early 2000s. The USA (where the term peanut is more commonly used) ranked third in groundnut production in 2001, with a total of 1.9m. metric tons, grown mostly in Georgia, Texas and other southern and south-eastern states. The majority of US production is destined for edible consumption as ‘dessert nuts’, as an ingredient in processed food, or as peanut butter (40% of total production), the other uses described above being of less significance in the USA than in most major growing countries (only 15% of production is ground into oil). Argentina is the most significant grower in Latin America, production expanding rapidly in the 1990s (some 897,000 metric tons were produced in 1998, compared with less than 272,000 tons in 1989). However, production declined rapidly, to less than 500,000 tons in 1999, and remained below 600,000 tons in the two subsequent years. Brazil and Mexico are the other principal producers, although the crop is grown in most countries of Latin America, and its popularity has increased in Caribbean countries seeking to diversify away from the banana and to exploit marginal agricultural land. Egypt is the principal producer in the Middle East and North Africa, the 2001 crop having been estimated as maintaining the 2000 level of some 187,000 tons. Minor producers in the region include Turkey, Israel, Syria and Morocco, although, again, there is some cultivation in the majority of the region’s countries. The small amount of groundnut production in Europe is concentrated in the south-east of the continent, the largest producer being Bulgaria. Only the Central Asian states, of the former Soviet republics, grow any groundnuts, Uzbekistan, with 2001 production estimated at just 15,000 metric tons, being by far the largest producer of these. In 2001, according to preliminary figures from the FAO, world output of groundnut oil was 5,317,609 tons, including 3,665,317 tons from Far East Asia. The major producing countries in that year were China (2,058,000 tons) and India (1,325,000 tons). The member states of the EU constitute the major market for edible groundnuts and groundnut products. In 2000, for instance, EU imports of groundnut oil, at about 176,000 metric tons, were equivalent to close to 70% of total world imports. The EU was, likewise, the most important market for groundnut cake in that year, when the member states imported about 77% of all imports world-wide. In 2000 the EU accounted for 50% of world imports of edible groundnuts in shells, and for more than one-third of total world imports of shelled groundnuts.
COMMODITY SURVEYS 151
Export Price Index for Groundnuts (base: 1980=100)
In recent years, as the tables above make clear, prices for groundnut oil have generally been more volatile than those for groundnuts. The average import price of groundnut oil at the port of Rotterdam, in the Netherlands, increased from US $897.3 per metric ton in 1996 to $1,010.4 per ton in 1997, but fell to $908.6 in 1998 and to $786.7 in 1999. It declined further, to $712.4 per ton, in 2000, and to $671.8 per ton in 2001. On a monthly basis, the average price of groundnut oil per ton was reduced from $697.0 in December 2000 to $664.0 in August 2001. By June 2002 the average import price of groundnut oil at Rotterdam had fallen to $643 per ton. Meanwhile, the average European import price for groundnuts was $962.0 per ton in 1996, $988.4 in 1997 and $988.8 in 1998, before falling to $834.7 in 1999. In 2000 the average European import price recovered slightly, to $844.0 per ton, but declined to $833.2 per ton in 2001. On a monthly basis, the average price of groundnuts per ton was reduced from $1,030.0 in December 2000 to $830.0 in August 2001. The market for edible groundnuts is particularly sensitive to the level of production in the USA, which provides about one-half of world import requirements. In each of the years 1987–91 the People’s Republic of China was the leading exporter of green (unroasted) groundnuts, but in 1992 the USA was the main exporting country. In 1991 China exported 427,640 metric tons of groundnuts, valued at US $360.3m. Exports of this commodity in 1992 declined to 303,606 tons, earning only $190.3m. The average price per ton fell from $842 in 1991 to $627 in 1992. China regained its leading position in 1993, although its exports of groundnuts increased only slightly, to 315,669 tons (earning $196.2m., equivalent to $622 per ton). In 1994 China’s groundnut exports totalled 480,901 tons, valued at $315.0m. ($655 per ton). The average annual price of edible groundnuts (any origin, US runner, 40%–50% shelled basis, c.i.f. Rotterdam) was US $909 per metric ton in 1995. The average price rose to $962 per ton in 1996, and in both 1997 and 1998 an average price of $990 per ton was recorded. In 1999, however, the annual average price declined by more than 15% to $836 per ton, recovering slightly, to $838 per ton, in 2000. In 2001 the price averaged $835 per ton.
152 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Export Price Index for Groundnut Oil (base: 1980=100)
Iron Ore
Iron (Fe) is a hard, grey metal, occurring naturally in a number of mineral ores. It is, after aluminium, the second most abundant metallic element in the earth’s crust, and its ore volume production is far greater than that of any other metal. Some ores contain 70% iron, while a grade of only 25% is commercially exploitable in certain areas. As the basic feedstock for the production of steel, iron ore is a major raw material in the world economy and in international trade. Because mining the ore usually involves substantial long-term investment, about 60% of trade is conducted under long-term contracts, and the mine investments are financed with some financial participation from consumers. The main economic iron-ore minerals are magnetite (Fe3O4) and haematite (Fe2O3), which are used almost exclusively to produce pig-iron and direct-reduced iron (DRI). These comprise the principal raw materials for the production of crude steel. Most iron ore is processed after mining to improve its chemical and physical characteristics and is often agglomerated by pelletizing or sintering. The transformation of the ore into pig-iron is achieved through reduction by coke in blast furnaces; the proportion of ore to pig-iron yielded is usually about 1.5 or 1.6:1. Pig-iron is used to make cast iron and wrought iron products, but most of it is converted into steel by removing most of the carbon content. In the mid-1990s processing technology was being developed in the use of high-grade ore to produce DRI, which, unlike the iron used for traditional blast furnace operations, requires no melting or refining. Particular grades of steel (e.g. stainless) are made by the addition of ferro-alloys such as chromium, nickel and manganese. The People’s Republic of China was the world’s leading miner of iron ore in 2001, with estimated output of 220m. metric tons. In that year the country’s reserves of the commodity were estimated at 7,800m. tons (iron content). Despite its status as the world’s largest producer of iron ore, high domestic production costs and the low iron content of much domestic ore oblige Chinese steel manufacturers to import substantial quantities. In 2000 the country imported some 70m. tons of iron ore. In 2001 Australia ranked as the third largest producer of iron ore world-wide, with estimated output of 160m. metric tons. The country’s reserves of iron ore in 2001 were estimated at 11,000m. tons (iron content). Australia, which exports up to 90% of the iron ore it produces, is a major supplier of the commodity to Asian steel manufacturers. In 1999 exports of iron ore and concentrates contributed 4.1% of Australia’s total export earnings. India was the third largest regional producer of iron ore in 2001, and the fifth largest producer world-wide, with estimated output of 72m. tons. Indian reserves of iron ore were estimated at 1,800m. tons (iron
154 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Iron Ore (iron content, ’000 metric tons)
* Estimated production. † Includes the metal content of by-product ore. Source: US Geological Survey.
content) in that year. In 1999/2000 exports of iron ore accounted for 0.7% of India’s total export earnings. In 2000 about one-half of these exports emanated from the state of Goa. The Democratic People’s Republic of Korea is the only other sizeable regional producer of iron ore, with output estimated at 7m. tons in 2000. Iron ore is widely distributed throughout Latin America. Brazil is by far the dominant producer in the region, and its ore is of a high quality (68% iron). In terms of iron content, Brazil is the largest producer in the world, accounting for an estimated 20.0% of global output in 2000 (when total ore production is considered, Brazil ranks second). Brazil’s giant open-cast mine in the Serra do Carajás began production in 1986. The project was developed by the Companhia Vale do Rio Doce (CVRD), which also operates several other mines in the state of Minas Gerais. The Carajás deposit has been stated to have 18,000m. tons of high-grade reserves (66% iron), with an estimated lifetime of 500 years at the current extraction rate of 32m. tons annually. Improved rail links have facilitated the transportation of iron ore for export from Carajás, in the country’s interior. Following the construction of the Igarapava dam, in north-east Minas Gerais, the Carajás complex was expected to become partially self-sufficient in energy. Iron ore is the main mineral export commodity in Brazil, which is the major supplier to the world market after Australia. Sales of iron ore and concentrates provided 5.7% of Brazil’s total export earnings in 1999. Brazil also has a major iron and steel industry, accounting for a further 6.5% of exports in 1999. In Venezuela, which has proven reserves of about 2,000m. tons with an iron content of more than 55%, iron ore has been overtaken by aluminium as the second most important export industry, after petroleum. Iron ore output is, however, undergoing expansion, and in the early 1990s there was installed capacity for the production of as much as 20m. tons
COMMODITY SURVEYS 155
annually. In late 1997 construction began on an iron briquette plant at Puerto Ordaz, which, commenced production, on an experimental basis, in 2000. Production of briquettes amounted to a less-than-anticipated 139,000 tons in that year, but the plant is expected eventually to raise Venezuela’s annual output of iron briquettes to 6.4m. tons, and may lead to the establishment of the country as the world’s leading exporter of this product by 2004. Sales of iron ore provided only 0.5% of Venezuela’s total export earnings in 1999. In Mexico construction of the Tehuantepec steel project, in the state of Daxaca, began in 1999. The scheme, which was scheduled for completion in April 2001, at an estimated total cost of US $1,850m., involves the development of the country’s largest iron ore mine, with proven reserves of about 180m. tons (averaging 55% iron). At the planning stage it was envisaged that the mine would have an annual output of about 6m. tons of iron ore, while the associated steel plant, using DRI technology, would produce about 4m. tons of steel per year. Africa, too, has a wide distribution of iron ore deposits, with several countries having substantial reserves of high-grade ore (60%–68% iron). One of the world’s largest unexploited iron ore deposits (an estimated 850m. metric tons, with a metal content of 64. 5%) has been located in north-east Gabon, and in 2000 projects were under way to exploit reserves of ore in Côte d’Ivoire and Senegal. In 2000 Côte d’Ivoire’s total resources of iron ore were estimated at 3,000m. tons. Identified reserves in Guinea include some 350m. tons of iron ore (66.7% iron) at Mt Nimba, near the border with Liberia. The two governments have developed a joint scheme to exploit the deposits for transhipment through Liberia. Ore shipments by rail through Liberia were intended to commence in 1990, but this intention was thwarted by the civil conflict which has caused widespread dislocation of the Liberian economy. The project, which was still pending in 2002, envisaged an annual mine output of 12m. tons. The exploitation by German mining interests of iron ore reserves at Bong, which are believed to contain sufficient ore for 15 years’ output at an annual production rate of 7m. tons, has also been interrupted by internal unrest. Liberia’s largest iron ore producer, the Liberian-American-Swedish Minerals Co (LAMCO), which is jointly-controlled by government and private interests, expects to be able to sustain mine production at Yekepa, in Buchanan County, until 2006. LAMCO’s mining activities have been severely disrupted by civil disorder. Africa’s leading producer of iron ore is South Africa. Mining is undertaken by the formerly state-owned Iron and Steel Corpn Ltd of South Africa (ISCOR), which operates ore mines at Sishen and Thabazimbi, and steel mills at Vanderbijlpark, Newcastle and Vereeniging; by Highveld Steel and Vanadium Corpn Ltd, which operates a mine and a steel mill; and by Associated Manganese Mines of South Africa Ltd, which operates the Beeshoek mine near Postmasburg and has interests in some of South Africa’s many ferroalloys production enterprises. ISCOR was transferred to private-sector control in 1989. South African iron ore exports, particularly to Japan, have been an important source of foreign revenue since the late 1980s, despite declining world demand for steel. Among the African producers, the country most dependent on the mineral as a source of foreign exchange is Mauritania, which derived 58.3% of its total export earnings from iron ore in 1999. In the previous year iron ore exports accounted for more than 10% of Mauritania’s gross domestic product (GDP). In 2000 the Société Nationale Industrielle et
156 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Minière (SNIM), which has sole responsibility for iron ore production and beneficiation, operated three open-cast mines in the Tiris region of northern Mauritania. SNIM’s mine at M’Haoudat exploits deposits which, in the mid-1990s, were estimated to contain recoverable reserves of 100m. metric tons. In 2000 output of iron ore (gross weight) amounted to an estimated 11.5m. tons, most of which was exported to Belgium, France and Italy. The exploitation of iron ore deposits in Nigeria, unofficially estimated in 1999 to exceed 3,000m. metric tons, commenced in 1986, but had ceased entirely by the late 1990s. In 1980 deposits estimated at 20m. tons of ore (50% iron) were identified in the west of Zambia, but these remained unexploited more than 20 years later. In 2000 Tanzania’s National Development Corpn was attempting to attract investment in the development of ore reserves estimated at 45m. tons (52% iron) at Liganga. Tanzania’s other iron ore resources reportedly include deposits in the Uluguru Mountains, estimated at 8m. tons (40% iron). Iron ore mining in Angola was beset by civil conflict and ceased entirely in 1975. Angola holds considerable ore production stockpiles, but the resumption of export trade in the ore depends on the eventual rehabilitation of the 520-km rail link between mines at Cassinga and the coast. The Marampa mine in Sierra Leone has been inactive since the mid-1980s, although plans exist for the eventual resumption of operations to extract its ore deposits, which have an iron content of 69%. In 2001, with estimated output of 60m. metric tons, the USA was the world’s sixth largest producer of iron ore and disposed of reserves estimated at 2,100m. tons (iron content) in that year. In 2000, according to the US Geological Survey (USGS), US production rose to its highest level since 1981 as a consequence of greater demand from the steel industry, which accounted for more than 98.5% of domestic consumption of the commodity. According to the same source, domestic production was sufficient to meet three-quarters of domestic demand in 2000. In that year imports of iron ore amounted to 15.7m. tons, compared with 14.3m. tons in 1999, while exports of the same totalled 6.2m. tons, compared with 6.1m. tons in 1999. Exports were reported to have consisted almost exclusively of iron pellets delivered to Canadian steel producers that were partners in US taconite (the USA’s principal iron-bearing ore, of low-grade) enterprises in the states of Michigan and Minnesota. Canada (51%) and Brazil (39%) were the principal suppliers of iron ore to the USA in 2000. Canadian production of iron ore was estimated at 35m. tons in 2001, while the country’s reserves were assessed at 1,100m. tons (iron content). Russia is the major producer of iron ore among the former Soviet republics, with output estimated at 88m. metric tons in 2001, the country thus ranking as the fourth largest producer in the world. Russian reserves of iron ore were estimated at 14,000m. tons (iron content) in 2001. Production costs are reported to be high, owing to the relatively low iron content of much Russian ore, and this, together with other factors, poses a threat to the longer-term competitiveness of the country’s iron ore industry, which withstood economic difficulties in 1990–99 much more robustly than other Russian metal mining sectors. Exports of iron ore were reportedly steady during that period at about 12m. tons annually, and it was possible to reduce annual imports from a level of some 16m. tons to around 3.5m. tons. In 1999 exports of iron ore and concentrates totalled 10.8m. tons, compared with 13.
COMMODITY SURVEYS 157
8m. tons in 1998. After Russia, Ukraine is the most important producer of iron ore among the former Soviet republics, with output estimated at 55m. tons and reserves assessed at 12, 000m. tons (iron content) in 2001. According to the USGS, Ukrainian iron ore production has declined precipitously, by about 50%, since the disintegration of the Soviet Union. In the late 1990s sections of Ukraine’s iron ore industry were reportedly beset by technical difficulties, such as flooded mines, which compromised the quality of the ore produced. Kazakhstan complements the list of significant ex-Soviet producers of iron ore, with output estimated at 15m. tons and reserves assessed at 4,500m. tons (iron content) in 2001. Exports of iron ores and concentrates contributed 1.9% of Kazakhstan’s total export earnings in 1999. Sweden is the most important western European producer of iron ore, with output estimated at 20m. metric tons in 2001. Sweden’s reserves of the commodity were estimated at 2,200m. tons (iron content) in that year. In the Middle East Iran is a sizeable producer of iron ore, with output estimated at 11m. metric tons in 2000. Turkey produced an estimated 3.5m. tons in the same year and Egypt an estimated 2.5m. tons. Since the early 1970s world trade in iron ore has regularly exceeded 200m. metric tons (iron content) per year. In 2000 the dominant exporting countries were Australia and Brazil, jointly accounting for 67% of iron ore exports world-wide. India and Canada, which jointly accounted for a further 12% of global iron ore exports in 2000, were also important exporters.. The principal importers in 2000 were Japan, the People’s Republic of China, Germany and the Republic of Korea. World iron ore reference prices are decided annually at a series of meetings between producers and purchasers (the steel industry accounts for about 95% of all iron ore consumption). The USA and the republics of the former Soviet Union, although major steel-producing countries, rely on domestic ore production and take little part in the price negotiations. It is generally accepted that, because of its diversity in form and quality, iron ore is ill-suited to price stabilization through an international buffer stock arrangement. The index of export prices for iron ore declined to 109 in January 2001. According to the USGS, the price in the Japanese market in the year to 31 March 2001 of fine Australian ores produced by Hamersley Iron ore Pty Ltd and Mount Newman Mining Co was 27.35 US cents per 1% Fe content per long ton unit, an increase of 4.4% compared with 1999. In the same year, the price for lump ore was reportedly settled at 36.26 US cents per 1% Fe per long ton unit, 5.8% higher than in 1999. According to the World Bank, the average price of Brazilian ores shipped to North Sea ports was 27.6 US cents per 1% Fe content per metric ton in 1999—the corresponding price was 28. Scents in 2000 and 29.9 cents in 2001. The Association of Iron Ore Exporting Countries (known by its French initials as APEF) was established in 1975 to promote close co-operation among members, to safeguard their interests as iron ore exporters, to ensure the orderly growth of international trade in iron ore and to secure ‘fair and remunerative’ returns from its exploitation, processing and marketing. In 1995 the APEF, which also collects and disseminates information on iron ore from its secretariat in Geneva, Switzerland, had nine members, including Algeria, Liberia, Mauritania and Sierra Leone. The UN Conference on Trade and Development (UNCTAD)
158 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Export Price Index for Iron Ore (base: 1980=100)
compiles statistics on iron ore production and trade, and in recent years has sought to establish a permanent international forum for discussion of the industry’s problems.
Jute
Jute is a hard-wearing natural fibre with a number of applications. The fibres are obtained from Corchorus capsularis and C. olitorius, plants favouring hot, damp, tropical conditions. Jute-like fibres include a number of jute substitutes, the main ones being kenaf or mesta and roselle (Hibiscus spp.) and Congo jute or paka (Urena lobata). The genus Corchorus includes about 40 species distributed throughout the tropics, with the largest number of species being found in Africa. However, commercial jute-growing has traditionally been centred on South Asia, most especially the area surrounding the Bay of Bengal. Commercial fibre varies from yellow to brown in colour (jute is often known in South Asia as the ‘Golden Fibre’, as much for its versatility and commercial appeal as for its colour) and consists of tow (bunches of strands), which is pressed into bales of 400 lb (181.4 kg) after it has been retted (softened). About 75% of jute-fibre consumption is in the manufacture of sacking for the storage of grains, cocoa, coffee and other food crops, a use for which its durability makes it particularly suitable. Most of the remainder of the crop is taken by manufacturers of carpet backing and other quality users. The finest jute standards are spun into carpet yarn and woven into curtains and wall coverings; in the area of quality goods jute is less under threat from synthetics. Jute is mixed with wool, after treatment with petroleum-derived softening agents (see below), and processed into cheap clothing fabrics or blankets in developing Asian countries. In its traditional market, however, jute has, despite its biodegradability, encountered strong competition from lighter synthetic materials (a previous major use, as a fibre for rope-making, is now of minor importance). Its use as packaging is under challenge from wood and plywood, and has been diminishing, in response to the trend towards bulk handling containerization. The main jute-producing countries, however, have continued to stress the environmental desirability of jute use, and anxieties about the health aspects of petroleum use in the retting process have been overcome by the introduction of castor oil as the softening agent. Bangladesh and India are the principal producers and exporters of raw jute and fabrics. In both countries, most of the growers of jute are small farmers whose livelihood depends entirely on their annual crop of the fibre. In 2000 more than 90% of world exports of raw jute were supplied by Bangladesh, which exports almost 90% of its jute and jute goods. In 1999/2000 Bangladesh derived an estimated 5.8% of its total export earnings from sales of jute and jute goods. The jute industry has traditionally employed about 45% of the country’s industrial work-force. About one-half of the annual output is exported as raw fibre, while the remainder is processed in local mills for export as jute goods.
160 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Jute, Kenaf and Allied Fibres (’000 metric tons)
* FAO estimate(s) † Unofficial figure. Source: FAO.
Bangladesh is seeking to diversify its agricultural sector, in order to reduce its high dependence on sales of jute and jute products for foreign earnings, but there are few alternatives for export, other than fish and tea. Some farmers have abandoned the cultivation of jute in favour of rice, for its assured market and better price; during 1985/86–1990/91 the area under jute cultivation was reduced from more than 1m. ha to 500,000 ha. The area sown to jute recovered to 647,500 ha in 1997/98, but declined to only 414,800 ha in 1999/ 2000. In 2000/01 jute was sown on a total of 448,000 ha. Bangladesh has attempted, with little success, to strengthen its share of the carpet market by reducing the gap between the country’s capacity of 140,000 sq m and the global demand for 3.5m. sq m per year. As the world’s dominant exporter of jute and jute goods, Bangladesh is far more vulnerable than India to declining world demand for jute, and to growing competition on the international market and from synthetics. This vulnerability was apparent, in mid-2002, in the Government’s announcement of its intention to close the Adamjee jute mill, south of Dhaka, with the loss of 25,000 jobs. The decision to close the mill, the largest in the world, was attributed to a world-wide decline in the jute industry. Adamjee was reported at the time of the Government’s announcement to be losing millions of dollars each year. India, meanwhile, consumes virtually all of its raw jute domestically, supplementing its own production with imports of high quality fibre. (In 2000 India was the world’s largest importer of jute, with purchases of about 130,000 tons.) In 2000/01 the area under jute in India totalled about 870,000 ha, compared with some 1m. ha in 1999/2000. In 1993 the Government of Bangladesh responded to its jute industry’s financial difficulties by announcing plans to create a fund offering low-interest loans to jute mills and to ban the production of polythene bags and other synthetic products threatening the jute
COMMODITY SURVEYS 161
market. Further assistance was sought from the World Bank, which undertook to provide US $250m. to finance a restructuring of the jute industry. The proposals included the closures of loss-making mills, reductions in the labour force and the transfer to private ownership of the majority of the plants operated by the state-owned Bangladesh Jute Mills Corpn. However, delays have occurred in implementing the privatization programme. Heavy floods in September 1998 were reported to have affected more than 70% of the jutegrowing areas of Bangladesh (see above for the effect on the total area under jute in the country). However, following initial expectations that the country’s substantial reserves of jute would avert any immediate shortfall in domestic requirements or exports, the impact of severe drought in early 1999 reduced the crop by about 12%, adversely affecting both domestic mill production and supplies available for export. According to the FAO, world production of jute, kenaf and allied fibres increased by some 12% in 2001/02 to more than 2.9m. tons, reflecting substantial increases in output in India and Bangladesh. Production in India was estimated to have risen by 11%, to 1.8m. tons, while that of Bangladesh, at an estimated 875,000 tons, grew by 21%. World production of jute, kenaf and allied fibres was forecast to decline in 2002/03, if, as expected, in view of high levels of carry-over stocks, prices remained low at the time of sowing. After India and Bangladesh, the People’s Republic of China is the most important regional producer of jute and jute-like fibres, with estimated output of 136,000 metric tons in 2001, compared with about 125,000 tons in 2000. China has been a significant importer of jute in recent years, its annual purchases of raw jute averaging 96,000 tons in 1996–98, although they fell precipitously to only 8,700 tons in 1999 and to only 5,000 tons in 2000, according to the FAO. Exports of jute products averaged 13,000 tons annually in 1996–98, declining to 6,600 tons in 1999 and 5,000 tons in 2000. Myanmar, with estimated output of about 42,000 tons in 2001, Thailand, whose output was estimated at about 34,000 tons in that year, Nepal, with estimated production of 16,000 tons, and Viet Nam, with estimated output of about 12,000 tons, are the other significant producers of jute in the Far East. Thai imports of raw jute rose substantially in 2000, totalling more than 42,000 tons, compared with only about 1,000 tons in 1999, and, on average, 5,000 tons annually in 1996–98. After India, Pakistan is the most important market for jute, in both regional and world terms, with annual purchases that average about 70,000 tons. Elsewhere in the world, there are no other significant producers of jute. In Latin America Brazil has produced, on average, about 8,000 metric tons of kenaf and allied fibres in recent years, while Cuba’s annual output has averaged 10,000 tons. The USA imports about 60, 000 tons of jute products annually. In Africa Sudan’s annual output of jute, kenaf and allied fibres has been no more than 3,000 tons in recent years, while Egyptian production totalled 2,000 tons in 1998/99 but has since ceased. Sudan’s imports of jute products totalled 38, 000 tons in 2000, while Egyptian imports of raw jute totalled 8,500 tons, and its purchases of jute products 14,300 tons, in that year. In the Middle East, Iran, Syria and Turkey are all important markets for jute products. Among the former Soviet republics, Russia and Uzbekistan have, in recent years, produced significant quantities of jute (see table below), which is usually processed domestically for export. The longer-term outlook for the jute industry in Bangladesh, as well as other producing areas, depends, in large part, on the achievement of higher crop yields. Prospects exist for
162 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
an expansion in world demand for jute in the growing market for ‘environmentally-friendly’ jute packaging and products, and for high-quality blended jute fabrics for wall-hangings and furnishings. The average export price of raw jute at Bangladeshi ports increased from US $271 per metric ton in 1993 to $454 per ton in 1996. However, the annual average declined to $302 per ton in 1997 and to $259 in 1998. It recovered to $277 per ton in 1999, and to $279 per ton in 2000. The average jute price increased from $245 per ton in the first quarter of 1998 to $272 in the fourth quarter, averaging $259 per ton for the year as a whole. The average price fell to $250 per ton in the first quarter of 1999, but rose to $305 in September, averaging $276 per ton for the whole of 1999. In 2000 the average price of BWD-grade jute (f.o.b. Mongla) was $279 per ton, and this rose sharply, to $331 per ton, in 2001. During the first quarter of 2002 the price of BWD-grade jute averaged $350 per ton in both January and February, but declined steeply, to only $210 per ton, in March. The FAO and the United Nations Conference on Trade and Development (UNCTAD) provide international forums for the discussion of jute developments. Jute is one of the crops eligible for assistance from the Common Fund for Commodities (CFC, established by an UNCTAD agreement in 1989), which aims to stabilize commodity prices. An international jute (and allied fibres) agreement (IJA) was negotiated in 1982 by 48 producing and consuming countries, but lapsed in 1984, when the requisite number of consumer countries failed to ratify the agreement. A subsequent IJA was negotiated, under the auspices of UNCTAD, in 1989. The International Jute Organization (IJO), which administered the agreement, was based in Dhaka, Bangladesh. It also conducted research and development projects, and promoted the competitiveness of jute in relation to synthetic substitutes. In 1998 the IJO’s membership comprised five exporting countries (Bangladesh, the People’s Republic of China, India, Nepal and Thailand) and 20 importing countries, together with the European Union (EU). In January 1999, however, India announced its withdrawal from the IJO, which had declined to appoint India’s nominee for the post of executive director. Thailand, citing its domestic economic problems, withdrew from the IJO in March. India rejoined the organization in December, but Thailand remained outside. Meanwhile, some EU members believed that the IJO had failed to promote trade in jute, and consequently favoured the organization’s disbandment. Following preparatory meetings at IJO headquarters, the UN Conference on Jute and Jute Products was convened in March 2000, under UNCTAD auspices, in Geneva, Switzerland. However, the EU and its member countries (which together accounted for about 30% of the IJO’s financing) declined to attend this meeting or a resumed session in Dhaka in early April. A draft text for an International Instrument of Co-operation’, to succeed the IJA, was supported by jute-producing countries, but, without the consent of major consumers, no agreement could be concluded. At a subsequent meeting of the IJO’s governing council, the EU rejected adoption of the successor ‘instrument’. As a result, the IJA expired in April, at the end of its term, and the IJO entered a liquidation process. However, a working group, including representatives of producing countries, was formed to consider future international co-operation on jute affairs. It was hoped that these countries would continue to obtain support for jute projects from the CFC. In March 2001, under UNCTAD auspices, the UN Conference on Jute and Jute Products established the
COMMODITY SURVEYS 163
Export Price Index for Jute (base: 1980=100)
International Jute Study Group (IJSG) as the successor entity to the IJO. Inter alia, the objectives of the IJSG are to provide an effective framework for international co-operation among its members with regard to all relevant aspects of the world jute economy; and to promote the expansion of international trade in jute and jute products. Membership of the IJSG, which was to have its headquarters in Dhaka, was to be open to all states (and to the EU) with an interest in the production and consumption of, and international trade in, jute and jute products. The terms of reference of the IJSG were to enter into force once a number of states together accounting for 60% of trade (imports and exports combined) in jute and jute products had given notice of their formal acceptance of the terms. Another forum for jute co-operation is the FAO’s Intergovernmental Group on Jute, Kenaf and Allied Fibres, which normally convenes every two years. The group met in December 2000, and another session was scheduled for December 2002.
Lead
This metal (Pb), whose natural occurrence in the earth’s crust is very common, is usually discovered in ores that also contain zinc, silver and copper, and it is generally extracted as a co-product of those metals. Galena, or lead sulphide (PbS), is the principal lead-bearing mineral, containing 86.6% lead. Other important lead-bearing ores are cerussite (lead carbonate, PbCO3) and anglesite (lead sulphate, PbSO4). They are usually located closer to the earth’s surface than galena. After mining, lead-bearing ores are refined through concentration in order to separate the lead from other metals and any impurities that they may contain. The lead concentrate is then smelted in a blast furnace with coke and limestone. In recent years, traditional smelting methods have, owing to environmental concerns and to their various inherent inefficiencies, been replaced to some extent by so-called direct smelting techniques, such as the Outokumpu and Kivcet processes. Conventional smelting still accounts for about 80% of lead production, but that figure is expected to diminish as direct smelting is perfected. The usefulness of lead derives from its malleability, its low melting point, its resistance to corrosion, its electrical attributes, its density and its durability. Traditional uses of the metal have included for pipes and water containers, for weights, as a roofing material and as a ceramic glaze. Today, among all metals, lead ranks fourth in terms of usage, after aluminium, copper and zinc. Its most important contemporary use is in starting-lighting-ignition (SLI) automotivetype and industrial lead-acid batteries. In the USA, for instance, more than 80% of all lead consumed is for this purpose. It is noteworthy, too, that more than 95% of leadacid batteries produced in the USA use recycled metal. Lead is easily remelted and refined and has a greater recycling rate than any other industrial metal. Other important present-day uses for lead include as a sheathing for cable, for ammunition, for soundproofing, for waterproofing, in chemical compounds and for shielding from radiation emitted, for example, by machinery used in medical imaging diagnostics and by television and computer monitors. Environmental concerns have led to a huge reduction world-wide in the use of lead as an additive to petrol (motor spirit). In the future, lead is expected to be used on a larger scale in storage batteries for the load-levelling of electrical power and in electric transport vehicles. The world reserve base (the totality of identified resources, including those whose extraction would be uneconomic under prevailing conditions) of lead in 2001 was estimated by the US Geological Survey (USGS) at 130m. metric tons, of which just less than 45% was located in the People’s Republic of China (23.1%) and Australia (21.5%), and a further 15.
COMMODITY SURVEYS 165
Production of Lead Concentrates (’000 metric tons)
* Estimated production. Source: US Geological Survey.
4% in the USA. Reserves (that part of the reserve base that could be economically extracted at the time of report) world-wide were estimated by the same source to total 64m. tons. According to the International Lead and Zinc Study Group (ILZSG), world production of lead metal was 6.5m. metric tons in 2001, compared with 6.6m. tons in 2000. ILZSG put consumption of lead world-wide at 6.4m. tons in 2001, compared with 6.5m. tons in 2000. According to the USGS, Australia was the world’s leading producer of mined lead in 2001, the country’s output, at 700,000 metric tons, accounting for almost 24% of estimated global mine production of 3m. metric tons in that year. Lead reserves were assessed at 15m. tons in 2001. In 2000 Australia was the world’s 10th largest producer of refined lead. Australia’s lead-mining industry was founded on deposits discovered at Broken Hill, New South Wales, and Mount Isa, Queensland. The Broken Hill deposit was developed to be Australia’s largest source of lead-zinc-silver. It has become more and more difficult to find surface deposits in Australia, but, since the late 1970s, rich underground deposits have been discovered in Western Australia, northern Queensland, Tasmania and Victoria, in addition to the expansion of exploitation at Mount Isa. Other known rich deposits await development. There is also a large lead-zinc-silver deposit in production at McArthur River in the Northern Territory. Australia’s exports of lead (both metal and contained metal) were reported to have totalled 476,000 tons in 2000. Australia is the world’s leading exporter of refined lead, with most of its production destined for the United Kingdom and, to a lesser extent, the Republic of Korea, in the form of lead bullion. Lead ores and concentrates are exported to Japan for processing, while India, Indonesia, the Republic of Korea, Malaysia and Taiwan are important markets for Australian refined lead. Port Pirie, in South Australia, is the location of Australia’s most important refining and smelting facilities
166 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
—the country has four lead-zinc smelters in total—processing concentrates from various deposits nation-wide. More than 60% of Australia’s lead concentrates are processed domestically, and some 50% of lead that the country consumes has been recycled. The People’s Republic of China, which was estimated by the USGS in 2001 to have the world’s largest reserve base of lead (30m. metric tons), ranked as the second largest producer of mined lead in that year, with its output, at an estimated 560,000 tons, accounting for almost 19% of global mine production. China’s reserves of lead were assessed at 9m. tons in 2001. There are important deposits of lead at (among other locations) Lanping (in the southern province of Yunnan, near the border with Myanmar), Jiawula (in Nei Mongol), and Baiyinna (near the Russian border in Heilongjiang province). Notwithstanding the temporary closure (owing to financial difficulties and environmental concerns) of its Shenyang smelter facility in 2000, China remained a leading producer of refined lead, with output of slightly more than 1m. tons in that year. The country is dependent to a large extent on imports of lead concentrates to meet domestic refining needs. Chinese consumption of lead was reported to have totalled 663,000 tons in 2000, an increase of about 26% compared with 1999. In 2000 the Government implemented significant reforms of the mining sector. The China Copper Lead Zinc Corporation was wound up, while China National Nonferrous Metals Industry Trading Group Corporation was merged with China National Metals and Minerals Import and Export Corporation, which now conducts all trading activity in non-ferrous metals. Chinese exports of lead (both metal and contained metal) were reported to have totalled 510,000 tons in 2000, making it the world’s leading exporter overall in that year. Chinese exports were reported to have inundated markets in early 2000, applying further pressure to prices that were already low. Sales subsequently decelerated, before gathering pace again in late 2000 in response to improved prices. In 2000 the Chinese Government reduced the import duties that would be applied to lead in 2001 to less than 10%. Elsewhere in the Far East, the Democratic People’s Republic of Korea (DPRK, known as North Korea) is an important producer of both mined and refined lead. In 2000 DPRK output from mines was estimated to have totalled 70,000 metric tons, while metal production in that year, from both smelting and refining facilities (primary and secondary) amounted to an estimated 135,000 tons. Japan a major world producer of refined lead, with output of both primary and secondary metal amounting to more than 300,000 tons in 2000. Production of refined lead, again both primary and secondary metal, in the Republic of Korea (known as South Korea) in the same year totalled an estimated 181,000 tons. To the west, annual mined output in India is usually greater than 30,000 tons, and was estimated at 28,900 tons in 2000. Indian refinery production of lead metal (primary and secondary) was estimated at 96,000 tons in that year. In 2001, according to the USGS, the USA, Mexico and Canada accounted for almost 25% of the world’s mined output of lead, the respective contributions of those countries to the regional total being, approximately, 14%, 5% and 5%. At 20m. metric tons, the reserve base of lead in the USA was estimated in 2001 to be the third largest in the world, while the country’s reserves of lead were assessed at 8.7m. tons. In 2001 US mine production of lead was estimated by the USGS to have totalled 420,000 tons, a decline of slightly more than 10% compared with 1999. In 2000 the share of the USA in global production of refined lead
COMMODITY SURVEYS 167
was about 23%. Recycled, or secondary, lead accounted for more than 75% of US refined lead production in that year, and scrap SLI lead-acid batteries were by far the major source of recycled lead. US output of mined lead is largely from deposits in the states of Alaska and Missouri—the locations of the country’s top five lead-producing mines in 2000—and declines in overall production in recent years are largely attributable to declines in output in those states. There are also significant lead resources in the states of Idaho, where output is as a co-product of silver, Arkansas and Montana, among others. Most production of primary refined lead takes place at smelting/refining facilities in Missouri and Montana. Electrical power storage batteries accounted for almost 90% of US consumption of lead in 2000. Ore and concentrates (in terms of lead content) constituted the largest single category of US exports of lead in 2000, accounting for about 42% of the total. (Exports of ore and concentrates were approximately four times greater than imports of the same in 2000.) The main markets for US lead ore and concentrates in 2000 were Japan, Belgium and Canada. Exports of scrap lead represented the second largest category, accounting for just over 25% of the total. Canada was by far the major market for US scrap lead in 2000, receiving more than 90% of total scrap exports. US exports are heavily outweighed by imports of lead for consumption. Lead pigs and bars constituted the largest single category of lead imports in 2000, accounting for almost 90% of the total. Canada was the main supplier, followed by China and Australia. US imports are supplemented by purchases of lead for consumption from the US Defense Stockpile. These purchases accounted for about 22% of US consumption in 2000. With mined output estimated at 150,000 metric tons, Canada ranked as the third largest North American producer of lead in 2001 (the second-ranked country, Mexico, is treated here with Latin America, below). The USGS estimated Canada’s reserve base of lead at 9m. tons in that year, while reserves were assessed at 1.6m. tons. Canadian lead mining takes place, for the most part, in the provinces of New Brunswick (where more than 75% of reserves are thought to be located), Manitoba and British Columbia, and in the Northwest and Yukon Territories. Production was adversely affected in the late 1990s by steep declines in the price of lead itself and, of equal importance, in that of zinc, of which lead is a coproduct in some of the major Canadian mining facilities. Canada produced 145,889 tons of primary refined lead and 117,023 tons of secondary metal in 1999. Production was forecast to decline further in the early 2000s as the Sullivan mine in British Columbia, operated by Teck Cominco Ltd, closed in November 2001, and with the scheduled closure of the Polaris mine (on Little Cornwallis Island in Nunavut Territory, the world’s most northerly metal mining site) in mid-2002. Smelting and refining facilities include those operated by Brunswick Mining and Smelting Corporation Ltd in New Brunswick and those of Teck Cominco in British Columbia (output was restricted at the latter site in 2000, and a temporary halt in production occurred later in that year owing to health and safety concerns). Canada is the world’s largest exporter of minerals and metals, but lead plays a relatively minor role in trade overall. Lead exports (both metal and contained metal) were reported to have totalled 196,000 tons in 2000. Canada is a major supplier of lead pigs and bars to the USA. It is also the most important market for US exports of scrap lead and an important market for Mexican exports of lead ore and concentrates.
168 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Peru is the principal South American producer of lead, with mined output in 2001, at an estimated 270,000 metric tons (the same level as in 2000), accounting for fractionally more than 9% of production world-wide. In 2001 Peru was the world’s fourth largest producer of mined lead. In the same year the USGS estimated the country’s reserve base of lead at 3m. tons, while reserves were assessed at 2m. tons. Peruvian lead production is based on deposits located in the departments of Lima, Junín and Cerro de Pasco. There are, in addition, lead smelting and refining facilities at La Oroya. Peru’s mining sector is its most important source of exports, and in 2000 lead ranked fourth in importance among exports of all minerals after gold, copper and zinc. Exports of lead (both metal and contained metal) were reported to have totalled 167,000 tons in 2000. A relatively small proportion of Peru’s total trade in minerals and metals, including lead, is with the countries with which it is linked through the Andean Community of Nations, and with other South American countries. Peru is a major supplier of lead ore and concentrates to Mexico. With output estimated at 160,000 metric tons by the USGS, Mexico ranked as the second largest producer of mined lead in Latin America in 2001, and accounted for some 5.4% of global output. The country’s reserve base of lead was estimated at 2m. tons in 2001, while reserves were assessed at 1m. tons. Mexican production of lead is dominated by output from the state of Chihuahua, where the country’s two largest mines are located. It is complemented largely by deposits exploited in the states of Zacatecas and Durango. Production of refined lead (sourced from both smelters and refineries), which amounted to 240,000 tons in 1999, is, again, based largely in the state of Chihuahua, in particular at facilities operated by Met-MexPeñoles. Production of primary refined lead declined substantially in 1999 owing to restrictions on output imposed by Mexico’s environmental agency in response to community health concerns. Mexican exports of lead in 1998 were principally in the form of metal (unwrought, including alloys), for which the most important market by far was the USA, followed by Brazil. Lead oxides, for which the USA was again the major market, followed by Japan and Brazil, constituted the second largest export category, followed by lead ore and concentrates, which were destined principally for Canada and the Republic of Korea. Mexican imports of lead were mainly in the form of ore and concentrates in 1998. The quantity imported in that year was approximately double that exported, with the USA and Peru the exclusive suppliers. In 2000 Mexican exports of lead (both metal and contained metal) were reported to have totalled 20,000 tons. Elsewhere in Latin America, exploitation of lead deposits takes place on a fairly small scale in Argentina, Bolivia and Brazil. In Western Europe Sweden is the most significant lead producer, with mined output in 2001, at an estimated 100,000 metric tons, accounting for a little more than 3% of global production. Sweden’s resource base was estimated by the USGS at 1m. tons in 2001, while reserves were assessed at 500,000 tons. Lead deposits are exploited at Garpenberg, Laisvall, Langdal, Petiknas, Renström and Ammeberg, and there are smelting and refining facilities at Rönnskär. Sweden’s exports of lead (both metal and refined metal) were reported to have totalled 77,000 tons in 2000. Elsewhere in Western Europe, in 2000, other notable sources of mined lead were Ireland, where output amounted to an estimated 58,600 tons, and Spain, where it totalled 51,000 tons. On the basis of data cited by the USGS, Spanish output of mined lead appeared to have more than tripled in 2000. France, Germany, Italy, Spain
COMMODITY SURVEYS 169
and the United Kingdom are all major world producers of both primary and secondary refined lead. Among the former Soviet republics, Kazakhstan is the paramount producer of lead. Output of mined lead in Kazakhstan amounted to an estimated 30,000 metric tons in 2001, according to the USGS. In the same year the country’s reserve base of lead was estimated at 2m. tons, almost all of it in economically viable reserves. In the late 1990s Kazakhstan’s most productive lead-mining operations were located in the regions of Leninogorsk, Kentau and Karatau. There are also lead refining facilities at Oskemen. In 1999 Kazakhstan’s production of both primary and secondary refined lead was estimated by the USGS at 160, 000 tons. In Central Europe Poland is the most significant source of mined lead output, with production in that country amounting to 122,000 tons in 1999, according to USGS data. Polish lead output is generally as a co-product of zinc, with mining operations based in the region of Bukowno. There are also mines and concentration facilities near the city of Trzebinia. In 1999 Polish production of primary and secondary refined lead amounted to an estimated 65,000 tons. Polish exports of lead (both metal and contained metal) were reported to have totalled 67,000 tons in 2000. In addition to Poland, Macedonia and Romania are significant regional producers of mined lead. Morocco and South Africa are the two lead producers of note in Africa, with mined output there amounting, respectively, to an estimated 82,000 metric tons and 80,000 tons in 2001, according to the USGS. South Africa’s reserve base of the metal was estimated at 3m. tons in the same year, while reserves were assessed at 2m. tons. The corresponding estimates for Morocco were 1m. tons and 500,000 tons. In Morocco lead is mined at Hazar, Touissit and Zeida. In South Africa’s mined lead is generally a co-product of zinc and Northern Cape Province is the most important location of production. The country also has smelting facilities, and in 2000 secondary smelter production of lead amounted to 46,200 tons, according to the South African Department of Minerals and Energy. According to the same source, South African exports of lead concentrates totalled about 76,000 tons in 2000, an increase of 12.5% compared with 1999. South African imports of refined lead products in 2000 reportedly totalled 13,900 tons, compared with 15,300 tons in 1999. The value of refined lead imports was R43.1m. in 2000. Demand for lead-acid batteries remains the key influence on world demand for lead, and this demand has been forecast by the US-based Battery Council International to continue to grow up to the mid-2000s. Demand for replacement SLI lead-acid batteries in the USA is forecast to grow at the rate of about 2% per year, although demand for new SLI batteries is expected to decline as a consequence of reduced production of passenger cars and light transport vehicles. Demand for industrial batteries is expected to continue to grow at a rate of about 8% per year up to 2005 for motive power batteries and large stationary batteries. Growth in the use of the stationary batteries will be driven principally by their increasing use in the infrastructure supporting the wireless telecommunications markets and uninterruptible power supply systems. However, the rate of growth in the demand for industrial batteries will be tempered somewhat up to 2005, as telecommunications companies begin to reduce capital expenditures.
170 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Export Price Index for Lead (base: 1980=100)
Lead prices, which declined sharply in the early 1990s, recovered from 1993, and in 1996 reached their highest point since 1990. In 1996 the price of the metal on the London Metal Exchange (LME) exceeded 40 US cents per lb in March, averaging 35 cents per lb for the year as a whole. However, another decline began in the last quarter of that year and continued throughout 1997, the average price for the latter year being just 28 cents per lb; the average price for December was below 24 cents per lb. Prices fluctuated around that level in 1998 (the annual average price was, in fact, 24 cents per lb), although a new downward trend began in the third quarter, lasting throughout 1999 (when the annual average price was below 23 cents per lb and the trading year finished with the price below 22 cents), and into 2000 when, in April, the monthly average price fell below 20 cents per lb. The quotation recovered above that level in July, and the annual average remained above 20 cents per lb. A decrease in the LME price in mid-2001 was reversed later in the year, the averages for January, December, and the year as a whole being just less than 22 cents per lb. Prices fell again in 2002, with the quotation again falling below 20 cents per lb in August.
Maize
Maize (Zea mays) is one of the world’s three principal cereal crops, with wheat and rice. Originally from America, maize has been dispersed to many parts of the world, and has thus acquired many alternative names, notably Indian Corn and Mealies. The main varieties are dent maize (which has large, soft, flat grains) and flint maize (which has round, hard grains). Dent maize is the predominant type world-wide. Maize may be white or yellow (there is little nutritional difference), but the former is often preferred for human consumption. Maize is an annual crop, planted from seed, which matures within three to five months. It requires a warm climate and ample water supplies during the growing season. Genetically modified varieties of maize, with improved resistance against pests, are now being developed, particularly in the USA, and also in Argentina and the People’s Republic of China. Ecological and consumer concerns are, however, placing in question the further commercialization of genetically modified varieties. Maize is an important foodstuff in many developing countries, where the climate precludes the extensive cultivation of wheat. It is, however, inferior in nutritive value to wheat, being especially deficient in lysine, and it tends to be replaced by wheat in diets, as disposable incomes rise; maize consumption per caput has been declining in most of the developing countries. In some countries the grain is ground into a meal, mixed with water, and boiled to produce a gruel or porridge. In other areas it is made into (unleavened) corn bread or breakfast cereals. Maize is also the source of an oil, which is used in cooking. The high starch content of maize makes it highly suitable as a compound feed ingredient, especially for pigs and poultry. Animal feed is the main use of maize in the USA, Europe and Japan, and large quantities are now also used for feed in developing countries in Far East Asia, Latin America and, to some extent, in North Africa. Maize also has a variety of industrial uses, including the preparation of ethyl alcohol (ethanol), which may be added to petrol to produce a blended motor fuel. In addition, maize is a source of dextrose and fructose, which can be used as artificial sweeteners, many times sweeter than sugar. The amounts used for these purposes depend, critically, on prices relative to petroleum, sugar and other potential raw materials. Maize cobs, previously discarded as a waste product, may be used as feedstock to produce various chemicals (e.g. acetic acid and formic acid). In recent years world maize output has usually exceeded 550m. metric tons annually; it reached a record 615m. tons in 1998. Following declines in 1999 and 2000, production recovered to 609m. tons in 2001.The USA is by far the largest producer, with annual harvests in the late 1990s that were usually substantially in excess of 230m. tons. It is,
172 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Maize (’000 metric tons)
* Unofficial figure. Source:FAO.
however, subject to occasional major crop reverses in years of drought, as in 1993, when output fell to only 161m. tons (the crop recovered the following year—indeed, the 255m. tons produced in 1994 remains the country’s largest annual total). US maize production in 2001 amounted to 241m. tons (about two-fifths of the world total). The main growing areas are the flat, Mid-Western states, where the hot, humid summer climate and the soil conditions make maize a better choice of grain crop than wheat or rice—six states generally account for over 80% of US production. Canadian production of maize averaged about 8m. metric tons annually in the second half of the 1990s, but declined to only 6.8m. tons in 2000. In 2001 Canadian output was estimated to have amounted to some 8.2m. tons. Canadian imports of maize totalled around 1m. tons annually in the second half of the 1990s, but rose to about 1.5m. tons in 2000. In most recent years Canada has been a substantial net importer of maize, although in 1999 exports, at about 890,000 tons, approached the level of imports—some 990,000 tons— recorded in that year. The cooler Canadian climate and more fertile soils favour wheat and barley production rather than maize, particularly in the ‘prairies’ of the central provinces. Far East Asia accounts, on average, for about one-quarter of world maize production. The major producer in the region, and the world’s second largest, is the People’s Republic of China. Assisted by the expanded use of hybrid varieties, China’s annual maize harvest increased by more than 50% in the 1980s, enabling the country to become, for a few seasons, a significant exporter of maize, until the rapid growth in domestic feed requirements drew level with supplies in the mid-1990s. New efforts to stimulate production, including higher support prices, resulted in a record crop of 127m. metric tons in 1996, and the accumulation of substantial maize stocks, which enabled supplies to be maintained without recourse to imports, following a much smaller harvest in 1997. Output
COMMODITY SURVEYS 173
recovered to a new record level of 133m. tons in 1998, but declined to 128m. tons in 1999 and to only 106m. tons in 2000. In 2001 Chinese production was estimated at 116m. tons. In India much of the maize crop, which averages about 11m. tons annually, continues to be cultivated on marginal lands, but increasing areas are devoted to hybrid varieties, which, when irrigated, yield well. Human food use is diminishing because of an improvement in the supply of foodgrains, but feed use is increasing to satisfy the rapidly expanding poultry industry. The Indian Government’s imposition of import duties on maize in June 2000 led to protests from the poultry sector. Maize is also used for starch production. In Indonesia maize is a secondary crop, usually planted in the dry season after the main rice crop. The high cost of seed and other inputs deters farmers from planting hybrid varieties, although the Government is encouraging the expansion of maize output to meet the country’s rapidly growing requirements for poultry feed. Production averages about 9m. tons annually. Imports of maize for feed were increasing until the Asian economic crisis of 1997 severely reduced meat consumption and feed requirements. Despite a small crop, there was an exportable surplus in 1997/98. About one-half of the Philippine crop (which averages over 4m. tons annually) consists of white flint maize, used for human consumption. Feed use (for pigs and poultry) is increasing rapidly, but rising import costs, following the depreciation of the Philippine peso, inhibited growth in demand in 1997/98. Maize was formerly an important export crop in Thailand, but the areas under maize declined sharply in the late 1980s because of the greater profitability of other crops, such as sugar cane. By the mid-1990s Thailand had to resort to imports in most years to satisfy its domestic feed requirements. In 1996–2001 production was steady at about 4.4m. tons annually, compared with about 3.8m. tons per year, on average, in 1990–95. Maize production in Latin America grew rapidly in the early 1990s, but has subsequently not increased significantly since then. In 2001 production amounted to almost 104m. metric tons. In most years, three countries—Argentina, Brazil and Mexico—between them account for a clear majority of Latin America’s annual maize crop (72% in 2001). Brazil is the largest producer, with output totalling 41.4m. tons in 2001. In the north and north-east of the country, which account for about 10% of Brazil’s production, maize is an important food for human consumption and is largely grown by subsistence farmers. The droughts to which these regions are prone can occasion considerable distress. Most of Brazil’s maize is grown commercially for use as animal feed in the centre and south of the country. Production there varies according to the amount of government support (mostly in the form of subsidized credit) and the prices of alternative crops, especially oilseeds. Although Brazil’s animal feed requirements are growing rapidly, many of the feed mills are located in the far south of the country, where maize supplies may be obtained more cheaply from Argentina than from domestic sources. Brazil’s maize imports totalled 1.8m. tons in 2000. Mexico is Latin America’s second largest maize producer in most years, with harvests averaging 18m. metric tons in the second half of the 1990s. Much of this consists of white corn rather than the yellow variety. The establishment of CIMMYT (Centre Internacional del Mejoramiento de Maíz y Trigo—the International Maize and Wheat Improvement Centre) at Sonora, in northern Mexico, has made that country the testing-ground for many of the technical advances in the development of different maize varieties since the 1960s. Local production, however, has been hampered by the small size of most agricultural
174 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
holdings, competition for irrigated land from other crops, and the inability of small producers to afford enough fertilizers. Shortages of irrigation water commonly result in poor crops. Maize in Mexico is mainly used for human consumption, particularly in the form of tortillas. Domestic maize is mostly reserved for this purpose, animal feed manufacturers traditionally preferring to use sorghum and, increasingly, yellow corn imported from the USA. Recent policy changes will affect maize production and consumption trends in Mexico. The Compañía Nacional de Subsistencias Populares (CONASUPO), the parastatal food distribution company, no longer directly supports the maize market, while controls on tortilla prices have been lifted. Competition between food manufacturers for local maize will benefit the larger commercial farmers and help them finance productivity improvements, but many smaller producers will probably turn to other crops. Under the North American Free Trade Agreement, Mexico’s grain market is increasingly being opened to imports from the USA. In 2000 Mexico’s imports of maize totalled 5.3m. tons. Argentina is Latin America’s only substantial maize-exporting country, and ranks second only to the USA in amounts sold. Market liberalization in the early 1990s, particularly the abolition of export taxes, encouraged maize production. Farmers were able to plan their activities more rationally, and make longer-term investments in land improvement and upto-date equipment. At the same time, privatization and decontrol of the ports and transport systems resulted in much greater efficiency in grain movement. However, farmers are no longer shielded from international price trends, and the low prices of the late 1990s caused many to switch from maize to oilseeds or other more profitable crops. Argentina’s maize production totalled 15.4m. metric tons in 2001, compared with 16.8m. tons in 2000, and 13.5m. tons in 1999. Commercial plantings of genetically modified maize started in 1999. Maize is grown widely as a subsistence crop in Central America. It is one of the most important foods in El Salvador and Guatemala, where consumption per head is around 100 kg per year (in the latter country, 2001 production amounted to 1m. metric tons). In South America food use is generally declining, although it remains important in some countries, notably Bolivia, Colombia, Paraguay and Venezuela, in each of which consumption averages 40 kg–50 kg per year. Africa’s maize production averages about 35m. metric tons annually, and in recent years the trend has been upwards, although annual output varies according to patterns of rainfall. Maize is not grown under irrigation in most of sub-Saharan Africa, as scarce water supplies are reserved instead for higher-value export crops. Yields are therefore low. In many countries commercial farming is hindered by the lack of foreign exchange to buy essential equipment, as well as fuels and fertilizers. In addition, transport difficulties make marketing expensive and uncertain. In much of Africa maize is a subsistence crop. The region’s main producer is South Africa, which grows both white corn (for human consumption) and yellow corn (for animal feed). It was formerly an exporter of both types (except in years of severe drought), but market deregulation in 1997 altered the economic basis of commercial maize production. In the absence of government support, domestic maize is not competitive with imported maize in the feed mills of the coastal regions, with the result that sowings, particularly of yellow corn, have fallen. White corn production usually exceeds local food requirements, the surplus being exported to neighbouring food-deficit
COMMODITY SURVEYS 175
countries. Drought reduced the South African maize crop to only 7.4m. metric tons in 1999, but, with better conditions, the harvest improved to 10.9m. tons in 2000. In 2001, however, production was estimated to have declined to only 7.1m. tons, again as a result of drought. Zimbabwe, too, is vulnerable to drought. After good harvests it exports maize, but recent crops have fallen short of rapidly increasing domestic needs and imports have been necessary to sustain supplies. In Kenya, the influx of large numbers of refugees has added to domestic food requirements, and imports of maize are now required in most seasons. In Nigeria, annual production averages about 5.5m. tons. The potential for output growth has been hindered by marketing difficulties and shortages of essential agricultural inputs. Fertilizer supplies have improved since its procurement and distribution were privatized, but prices remain too high for many farmers to use it. Newly introduced maize varieties have improved yields. In the past, an important enduse of maize in Nigeria was for the brewing of beer, but since the ban on imports of barley and barley malt was lifted in 1998, breweries have used less maize. Maize is grown throughout Central Europe and the Balkans, and Romania is generally the largest producer, although in 2001 the country’s output was outstripped by that of Hungary. In 2001 Romanian production was estimated to have totalled 7.5m. metric tons, compared with only 4.9m. tons in 2000 (a year in which production fell throughout the region) and almost 11m. tons in 1999. Romanian exports of maize totalled about 144,000 tons in 2000, compared with some 181,000 tons in 1999, and about 390,000 tons in 1998. Hungary has emerged, in recent years, as one of the world’s five largest exporters of maize, having overcome infrastructural problems that arose following the disintegration of the Soviet Union. Exports that were traditionally confined to eastern European and the Soviet markets now extend, in substantially greater quantities, to the European Union (EU) and to Mediterranean destinations. In 2001 Hungarian output of maize totalled an estimated 7.7m. tons, compared with about 5m. tons in 2000. Hungary exported about 1m. tons of maize in 2000, compared with 1.7m. tons in 1999 and 2.1m. tons in 1998. (As recently as 1996 Hungary’s exports of maize were less than 130,000 tons.) In 1999 exports of maize contributed about 0.7% of the country’s total export earnings. Yugoslavia’s average production in the late 1990s generally exceeded 5m. tons, although it declined to less than 3m. tons in 2000, before recovering to an estimated 5.8m. tons in 2001. Of the former Soviet republics, Ukraine is, in most years by a very substantial margin, the major producer of maize, and the most significant exporter of the commodity. In 2001 production was estimated to have totalled 3.3m. metric tons, compared with 3.8m. tons in 2000 and 1.7m. tons in 1999. In 1997 output rose as high as 5.3m. tons. Ukraine is the only major exporter of maize among the former Soviet republics. In 2000 exports amounted to some 163,000 tons, compared with an estimated 305,000 tons in 1999 and about 588,000 in 1998. Russia is also a significant producer of maize, with output estimated to have totalled 831,000 tons in 2001, compared with 1.5m. tons in 2000 and about 1m. tons in 1999. By and large, however, maize is cultivated in Russia in order to meet domestic feed requirements, and in recent years it has been unusual for exports to exceed 1,000 tons. Kazakhstan, whose production of maize totalled an estimated 346,000 tons in 2001 is generally a larger exporter than Russia, although its exports do not usually exceed 20,000 tons. Georgia’s production of maize occasionally surpasses 500,000 tons, while that of
176 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Kyrgyzstan usually exceeded 200,000 tons in the late 1990s and early 2000s. Uzbekistan’s output of maize declined substantially in the second half of the 1990s. In 2001 it was estimated to have totalled 118,000 tons, compared with about 400,000 tons in 1993 and some 275,000 tons in 1994. None of Georgia, Kyrgyzstan and Uzbekistan is a significant exporter of maize. In North Africa, both Egypt and Algeria are substantial importers of maize. In 2000 Algeria was the destination for 1.5m. metric tons, while Egyptian imports in the same year rose to 5.2m. tons, having averaged almost 3m. tons annually in the second half of the 1990s. Egypt is also a substantial producer of maize, with output in 2001, as in 2000, estimated at 6.5m. tons, compared with 6.1m. tons in 1999. Imports of maize by Morocco grew steadily during the second half of the 1990s, rising above 900,000 tons in 2000. Over the same period Tunisia’s imports also increased, from about 330,000 tons in 1995 to more than 680,000 tons in 1999. Turkey is largest producer of maize in the Middle East, with production estimated at 2. 1m. metric tons in 2001. Iran is the only other sizeable regional producer. In 2001 Iranian output was estimated to have totalled 800,000 tons, having surpassed 1m. tons in both 2000 and 1999. Iran imported more maize than it produced, however, in both 2000 and 1999, as it has in most recent years. Turkey also constitutes an important market for maize, its imports having totalled almost 1.3m. tons in 2000, compared with some 840,000 tons in 1999. Elsewhere in the region Saudi Arabia, whose imports totalled 1,3m. tons in 2000, Israel, where the corresponding quantity was estimated at about 843,000 tons, and Syria, with imports approaching 1m. tons, are all increasingly important markets for maize. Production of maize by the EU member states increased steadily during the second half of the 1990s, reaching an estimated 41m. metric tons in 2001, compared with about 30m. tons in 1995. The largest single producer is France (16m. tons in 2001), followed by Italy (11m. tons in that year), Spain (5m. tons) and Germany (4m. tons). In every year during 1995–2000 the EU was a net importer of maize, although net purchases declined from 3.6m. tons in 1995 to only 1.2m. tons in 2000. One of the most notable differences between maize production in developed and developing countries is in yields. In the USA, the continual development of new hybrids and the availability of adequate fertilizer and water supplies have resulted in a substantial increase in yields, interrupted only by the occasional years of drought. In good years yields exceed 8 metric tons per ha; a record of 8.7 tons per ha was achieved in 1994. South Africa, Kenya and Zimbabwe usually achieve yields of at least 2 tons per ha, but in much of west and central Africa yields of 1 ton per ha are normal. Although hybrid forms of maize suited to African conditions are being developed, their adoption is hindered in many countries by low producer prices, inefficient marketing arrangements, and, above all, the inability of producers to obtain regular supplies of fertilizers at economic prices. World trade in maize totalled more than 80m. metric tons in 2000, compared with about 79m. tons in 1999, and some 76m. tons in 1998. In the mid-1990s growth in trade was curtailed by adverse economic conditions in eastern Asia, which severely impacted on the region’s meat consumption and, consequently, on its demand for animal feed. Recovery in the Asian economies, together with growing demand from Latin America and North Africa, subsequently led to an improvement. The USA is invariably the largest maize-exporting
COMMODITY SURVEYS 177
country, with an average market share exceeding 70%. US exports reached 60m. metric tons in 1995/96, but were subsequently lower, owing to increased competition from Argentina, the People’s Republic of China and a number of eastern and central European countries. US export volume reached 52m. tons in 1998/99, 48m. tons in 1999/2000 and an estimated 48m. tons in 2000/01. Argentina, usually the second largest supplier, has benefited considerably from liberalized marketing systems and improved port facilities. Argentine exports of maize reached a record level of 12m. tons in 1997/98, but declined to only 8m. tons in 1998/99. Exports recovered to 10.8m. tons in 1999/2000 and were estimated to have increased again, to 12m. tons, in 2000/01. As a result of steeply rising output, China became a leading exporter of maize in the early 1990s, with sales attaining a record 11m. tons in 1992/93. One of its principal markets was Japan, whose coastal feed mills can receive shipments direct from China at low transport costs. The growth in China’s own feed grain needs, together with smaller harvests, subsequently reduced the surplus, although exports continued from southern ports as a result of the high cost of moving grain overland to China’s feed deficit regions. Exports by China were only 4.3m. tons in 1998/ 99, but recovered to 10.5m. tons in 1999/ 2000 and 12m. tons in 2000/01. Japan is usually the world’s leading maize-importing country. Its purchases accelerated sharply in the 1970s, but advanced more slowly in the 1980s, to reach a peak of 16.4m. tons in 1992/93. Japanese purchases have subsequently tended gradually to decline, following a relaxation of import controls on meat, and the consequent pressure on the profit margins of domestic feed-users, which compelled them to economize on costs. Feed users in the Republic of Korea are willing to substitute other grains, particularly feed wheat, for maize when prices are attractive, and maize imports are therefore variable, although averaging about 8. 3m. tons annually. Taiwan imported more than 6m. tons in 1995/96, but the volume subsequently fell, following an outbreak of swine disease that reduced pig numbers by 40%. Nevertheless, the country continues regularly to import about 5.5m. tons of maize annually. Few countries other than the USA and China usually hold more than minimal carry-over stocks of maize. The USA accumulated massive stocks in the mid-1980s, the peak carry-over being 124m. metric tons at the end of August 1987. Government support programmes were successful in discouraging surplus production, but several poor harvests also contributed to the depletion of these stocks, which were reduced to only 11m. tons at the close of the 1995/96 marketing year. Domestic requirements in the USA have continued to increase, although three successive plentiful crops in 1996, 1997 and 1998, together with increased competition from other exporting countries, resulted in an appreciable build-up in US stocks in the second half of the 1990s. Carry-over stocks at the end of the 1998/99 marketing year reached 45m. tons, declined to 44m. tons in 1999/2000 and rose again, to 48.2m. tons, in 2000/01. While China publishes no official estimates of grain carry-over stocks, there is evidence of a considerable build-up of supplies on farms following the rapid growth in production of the early 1990s. This enabled the country to withstand a considerable crop set-back in 1997 without recourse to substantial imports. Export prices of maize are mainly influenced by the level of supplies in the USA, and the intensity of competition between the exporting countries. Record quotations were achieved in May 1996, when the average price of US No. 2 Yellow Corn (f.o.b. Gulf Ports) reached
178 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Export Price Index for Maize (base: 1980=100)
US $204 per metric ton. However, the quotation declined rapidly over the following months, falling as low as $117 per ton in November 1996. For the whole of 1996 the quotation averaged $165 per ton. The average annual quotation declined to $117 per ton in 1997, to $102 per ton in 1998, to $92 per ton in 1999, and to $88 per ton in 2000. In 2001 an average price of $90 per ton was recorded. During the first six months of 2002 the average monthly price of US No. 2 Yellow Corn (f.o.b. Gulf ports) ranged between $86 per ton, recorded in April, and $94 per ton, recorded in June.
Manganese
This metal, the 12th most abundant in the earth’s crust, is obtained from various ores containing such minerals as hausmannite, manganite and pyrolusite. The ore is usually washed or hand-sorted and then smelted to make ferromanganese (80% manganese), in which form it is chiefly used to alloy into steel, manganese steel being particularly hard and tough. Almost 95% of manganese produced is thus used in the manufacture of steel, which, on average, consumes about 6 kg of manganese per metric ton of steel. Electrolytic manganese is used to make stainless steel and in the aluminium industry. Minor uses of manganese as oxides are in dry-cell batteries (a use which developed greatly during the 20th century), paints and varnishes, and in ceramics and glass-making. Developments in steelmaking technology caused a reduction in demand for manganese in the late 20th century; however, it remains an essential material to the ferrous-metals industry and no replacement material with similar properties has been identified. In 2001 the world reserve base of manganese (the totality of identified resources, including those whose extraction would be uneconomic under prevailing conditions) was estimated by the US Geological Survey (USGS) at 5,000m. metric tons, of which more than 80% were located in South Africa and in the republics of the former Soviet Union, principally Ukraine. Gabon, Africa’s second major producer, had an estimated reserve base of 160m. tons. Until overtaken by Gabon in 1990, South Africa was, during the late 1980s, the world’s leading exporter of manganese ore, exporting almost three-fifths of its mine output. Where possible, South Africa’s policy has been to maximize export revenues by shipping as much as possible in processed ferro-alloy form. Export volumes of ferromanganese generally reflect world trends in steel production. The expansion by Gabon of its manganese exports was stimulated by the opening, in 1988, of a new mineral port at Owendo. In 2000 a conglomeration plant, with an annual capacity of 600,000 metric tons, commenced operations at Gabon’s Moanda manganese mine. Ghana, Africa’s third most important producer, has benefited from government measures to revive manganese operations, assisted by loan finance from the World Bank. Burkina Faso has deposits of manganese ore sufficient to establish it as a minor regional producer. These reserves, located at Tambao, 400 km north-west of Ouagadougou, and estimated at 19m. tons, contain an average ore content of 50% manganese. A joint venture between the government and Canadian interests to develop these resources was formed in 1995, but this was reportedly suspended in the late 1990s. The development of the project
180 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Manganese Ore (manganese content, ’000 metric tons)
* Estimated production. † Crude ore. Source: US Geological Survey.
had been impeded by the high cost of overland transport relative to the value of raw manganese ore. In 1994 manganese production was resumed in Namibia after a lapse of almost 30 years. The Ofjosondu mine, 160 km north-east of Windhoek, was reactivated for production of medium-grade ore having a relatively low phosphorus content. Its initial annual output was projected at about 100,000 tons. Operations were suspended in 1998, owing to financial difficulties, but resumed in 2001. Namibia is the focus of much research into potential exploitation of mineral resources located in seabed nodules (see below). The Democratic Republic of the Congo, once a significant source of manganese exports, has mined only on a sporadic basis since 1980. A joint venture between Cluff Mining of the United Kingdom and government-owned Entreprise Minière de Kisenge-Manganese, was working, in 2000, to bring the Kisenge manganese mine, near the frontiers with Angola and Zambia, back into production. The exploitation of manganese deposits in Angola has been interrupted by two decades of civil war. In 2001 Ukraine’s reserve base of manganese was estimated at 520m. metric tons, equivalent to 10.4% of total estimated reserves world-wide. In that year production of manganese ore was estimated to have totalled 920,000 tons, compared with an estimated 930,000 tons in 2000. Ukraine thus ranked as the world’s second largest producer after South Africa in 2001. Output has declined markedly since the mid-1980s as a consequence of lower demand from both the domestic steel industry and those of other former Soviet republics. Almost all production in the country takes place at two sites in the Nikopol basin, some 400 km south-east of Kiev. Ukraine has been disadvantaged in its search for new markets by the generally low grade of the manganese ores it mines relative to those of competitors, such as South Africa. Production of crude manganese ore by Kazakhstan was estimated to have amounted to 280,000 tons in 2000, compared with 240,000 tons in 1999.
COMMODITY SURVEYS 181
As in Ukraine, the manganese ore mined in Kazakhstan is generally low grade. Mining operations were reportedly undertaken at about 20% of capacity in the late 1990s. In 2000 Russia was reported to be planning to initiate production of low-grade ore from its Durnovskoye deposit in order to lessen the reliance of the Siberian steel industry on imports from Ukraine and Kazakhstan. There is a minor production site in Georgia, which had been dormant for several years prior to its reopening in 1999. In 2001 Brazil was the most important producer of manganese ore in Latin America, and the third largest producer world-wide, with estimated output of 880,000 metric tons, compared with an estimated 920,000 tons in 2000. Mexico is Latin America’s second largest producer, with output of 150,000 tons in 2001, according to the USGS. Mexican production is marketed to both domestic and US steel producers. There are also extraction sites in Colombia and Chile. In the Far East, the People’s Republic of China is the main producer of manganese ore, and in 2001 ranked as the world’s fourth largest producer, with estimated output of 830, 000 metric tons, according to the USGS. Although a major producer, many of its deposits are of low grade, and Chinese imports of manganese ore amounted to some 1.2m. tons in 2000, an increase of about 13% compared with 1999. Ghana was a major supplier of carbonate ores to China in 2000. In 2001 India was the world’s sixth largest producer of manganese ore, with estimated output of 600,000 tons. In 1999 India was the largest supplier of ferruginous manganese ore to Japan. Australian production volumes declined in the mid-1990s following the closure of the Woodie Woodie site in Western Australia. The site reopened in 1999, however, and volumes again increased. Australia ranked as the world’s fifth largest producer of manganese ore in 2001, with estimated output of 820,000 tons. In 2000 about 10% of all ore mined world-wide was from the Groote Eylandt open-cast mine in Australia’s Northern Territory. Australia is a major supplier of high-grade ore to the Japanese steel industry. The latter country extracts a small amount of manganese ore domestically, but is a major importer of ores and processed ferro-alloys. There are also minor production facilities in Indonesia, Malaysia, Myanmar and Thailand. Little manganese is extracted in the Middle East and North Africa, although there are some partially exploited deposits in Egypt, Morocco, Iran and Turkey. Europe has no significant deposits, but many of its countries are major importers, by virtue of their large steel industries. Extensive accumulations of manganese in marine environments have been identified. The characteristic occurrences are as nodules on deep ocean floors and as crusts on seamounts at shallower depths. Both forms are oxidic and are often termed ferromanganese because they generally contain iron and manganese. The main commercial interest in both types of deposit derives from the copper, nickel and cobalt contents also present, which represent large resources of these metals. Attention was focused initially on nodules, of which the Pacific Ocean encompasses the areas with the densest coverage and highest concentration of potentially economic metals. Research has also been undertaken off the coasts of south-west Africa, particularly Namibia. However, the exploitation of nodules has, to date, been impeded by legal, technical and economic factors, and is thought to be several decades away from commercial reality.
182 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Export Price Index for Manganese Ore (base: 1980=100)
The index of export prices for manganese ore remained constant at 122 for the duration of 2001. South Africa’s main producer, Samancor, increased its export price (f.o.b., for delivery during the Japanese fiscal year beginning on 1 April 2001) for sales of metallurgicalgrade ore with a manganese content of 48% to Japan by 4%. The price of high-grade lumpy ore from Groote Eylandt in Australia rose, accordingly, from US $2.03 per metric ton unit (0.01 metric ton, or 10 kg) to $2.11. That of South African ore was increased from $1.94 per ton unit to $2.02. The respective prices of contained manganese from each source were thus $101.3 per metric ton and $97 per ton. The increases reflected growth in world steel production, which reached a record level in 2000. As the above implies, Japanese industrial consumers exert the strongest influence on the international benchmark price of manganese through the annual contracts that they conclude with its producers. Settlements between other consumers are generally based on the South Africa/Japan and Australia/Japan models.
Millet and Sorghum
Millet and sorghum are often grouped together in economic analyses of world cereals, not because of any affinity between the two grains—in fact they are quite dissimilar—but because in many developing countries both are subsistence crops which are little traded. Figures for the production of the individual grains should be treated only as broad estimates in most cases. Data cover only crops harvested for grain. Data on millet relate mainly to the following: cat-tail millet (Pennisetum glaucum or typhoides), also known as bulrush millet, pearl millet or, in India and Pakistan, as ‘bajra’; finger millet (Eleusine coracana), known in India as ‘ragi’; common or bread millet (Panicum miliaceum), also called ‘proso’; foxtail millet (Setaria italica), or Italian millet; and barnyard millet (Echinochloa crusgalli), also often called Japanese millet. Sorghum statistics refer mainly to the several varieties of Sorghum vulgare, known by various names, such as great millet, Guinea corn, kafir or kafircorn (caffrorum), milo (in the USA and Argentina), feterita, durra, jowar, sorgo or maicillo. Other species included in the table are Sudan grass (S. sudanense) and Columbus grass or sorgo negro (S. almum). The use of grain sorghum hybrids has resulted in a considerable increase in yields in recent years. Millet and sorghum are cultivated particularly in semi-arid areas where there is too little rainfall to sustain maize and the temperature is too high for wheat. These two cereals constitute the staple diet of people over large areas of Africa, India, the People’s Republic of China and parts of the former Soviet Union. They are usually consumed as porridge or unleavened bread. Both grains have good nutritive value, but are less palatable than maize or wheat, and tend to be replaced by the latter crops when circumstances permit. In many African and Asian countries sorghum is used to make beer or other alcoholic drinks. Sorghum is also produced and used in certain countries in the western hemisphere (particularly Argentina, Mexico and the USA), where it is used mainly as an animal feed, although the high tannin content of some varieties lowers their value as a feed grain. World production of both sorghum and millet has been in decline for many years, as farmers have preferred to cultivate more profitable and higher-yielding crops. Because sorghum is more drought-resistant than most cereals, it tends to be grown in marginal areas, or to be substituted at short notice for maize in dry years. World production of sorghum has averaged about 60m. tons annually, while annual world millet production averages just under 30m. tons. Sub-Saharan Africa has generally accounted for almost 30% of world sorghum production in recent years, and for more than 45% of world millet production. The region’s major
184 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Millet (’000 metric tons)
* Unofficial figure. † FAO estimate. Source: FAO. Production of Sorghum (’000 metric tons)
* Unofficial figure. † FAO estimate. Source: FAO.
Sorghum producers are Nigeria (an estimated 7.7m. metric tons in 2001), Sudan (an estimated 2.5m. tons), Ethiopia (an estimated 1.4m. tons) and Burkina Faso (1.2m. tons). The major millet producers in the region in 2001 were Nigeria (an estimated 6.1m. tons), Niger (2.4m. tons), Burkina Faso (957,000 tons) and Mali (863,000 tons). The largest single producer of millet in the Far East and Australasia (and in the world) is India (9.5m. metric tons in 2001), followed in its region by the People’s Republic of China
COMMODITY SURVEYS 185
(an estimated 2.4m. tons). These two countries, with 2001 production of 7.4m. tons and an estimated 3.0m. tons, respectively, are also the major regional sorghum growers. The latter crop is the more popular elsewhere in the region, Australia producing 1.4m. tons in 2001, and it is the most commonly grown grain in a number of Pacific Island states. The thirdranked producer of millet in the region in 2001 was Nepal (282,000 tons). The USA is the world’s largest producer of sorghum, with output of 13.1m. metric tons in 2001. It is generally grown to the south of the main cereal-producing region. Most US sorghum is used as animal feed, although it is increasingly used for human consumption, and its use as a packaging material is being developed. The USA is also expanding its production of millet, which more than doubled in the decade to 2001, although its importance remains minor (production in that year was 437,000 tons). Sorghum is also grown extensively in numerous Latin American countries, most notably Mexico (production of 6.7m. metric tons in 2001) and Argentina (2.9m. tons). Nearly all Latin American sorghum is used as animal feed. Little millet is grown in the region. The resistance of sorghum to drought and high temperatures makes it more suitable than most grains for cultivation in the Middle East and North Africa. Egyptian production of sorghum was an estimated 940,000 metric tons in 2001, and the crop is also grown in Yemen (an estimated 375,000 tons) and Saudi Arabia (an estimated 204,000 tons), as well as on a smaller scale in a number of other countries. Again, millet is not widely cultivated. Russia is a major producer of millet, with output estimated at 1.3m. metric tons in 2001. Ukraine’s estimated production was 600,000 tons in that year, and the crop is also grown in Kazakhstan and Uzbekistan. Sorghum is not widely grown in the former Soviet Union. France is the leading producer of sorghum in Western Europe, with output of 400,000 tons in 2001. Italy produced 228,000 tons in that year. Both grains are grown on a small scale in Central and South-Eastern Europe, with a slight preference for millet. World trade in sorghum ranges between 6m.–10m. tons per year, but has in recent years been at the lower end of this range, reflecting the small volume of exportable supplies. The principal exporters are the USA, (which in recent years has, on average, accounted for more than three-quarters of total world exports and holds the greater part of world sorghum stocks), Argentina and Australia. China, South Africa, Sudan and Thailand are occasional exporters. Japan normally purchases about 2.5m. tons annually, and is thus one of the principal sorghum markets. Mexico’s yearly sorghum purchases have averaged more than 3m. tons in recent years, but are more variable, as they depend upon the size of the domestic crop and on the relative prices of sorghum and maize. Annual imports of sorghum by sub-Saharan Africa have averaged less than 180,000 tons in recent years. Export prices for sorghum normally closely follow those of maize, although sorghum is generally slightly cheaper. The price of US No. 2 Yellow Sorghum (f.o.b. US Gulf Ports) reached US $200 per ton in May 1996, but has since been in decline. In 1999 it averaged $89 per ton, about $3 per ton less than the average export price of maize for that year. In 2000 the average price of sorghum was about $90 per ton, while the average export price of maize in that year was $88 per ton. In 2001 the average price of sorghum rose by more than 7.5% compared with the previous year, to $97 per ton, while the average price of maize rose to $90 per ton.
186 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Very little millet enters international trade, and no reliable export price series can be established.
Natural Gas
Methane (CH4, 75%–85%) and, in smaller quantities, ethane, propane, butane and other alkanes are the principal chemical constituents of the flammable mixture of hydrocarbons known as natural gas. Gas with a high methane content is referred to as dry gas, while that containing a relatively high proportion of other alkanes, and the heavier hydrocarbons, such as pentane and octane, is classified as wet gas. Natural gas may be diluted by inert gases, such as nitrogen and carbon dioxide. It may also be contaminated by compounds of sulphur. Gas containing a high proportion of sulphur is known as sour gas, while gas without sulphur is referred to as sweet gas. Natural gas is believed to be formed by the compression, within strata of sedimentary rock, of the organic remains of plants and animals. The heat and pressure generated by these rock formations lead, over many thousands of years, to the chemical transformation of the organic remains into gas, and into petroleum (with which natural gas is often ‘associated’), which flow into the pores of the sedimentary rock strata. From this so-called reservoir rock they may travel upwards to reach the earth’s surface, at which gas disperses into the atmosphere and light petroleum gradually evaporates. More frequently, however, such migrating hydrocarbons become trapped on their upward journey by a layer of impermeable rock, known, when this occurs, as a cap rock. Since natural gas weighs less than petroleum, most of it collects above the petroleum as a layer known as a gas cap. It is the presence of gas under pressure in new oil fields that drives petroleum to the surface. Natural gas may also be discovered that has formed independently of petroleum, and is referred to, then, as ‘unassociated’ gas. After extraction through drilling and, if it is not under sufficient pressure to rise automatically to the earth’s surface, pumping, natural gas is cleansed of impurities, such as sand and water, and refined for its useful alkanes. The methane that is separated from the mixture is usually then transported by pipelines, through which its flow is maintained by means of compression stations, to locations close to points of domestic and industrial consumption, where it may be stored, either in tanks or underground. Alternatively, it may be subjected to liquefaction, this occurring at −160°C, and transported by ship as liquefied natural gas (LNG). Methane is naturally colourless and odourless, although it is usually odourized at some stage of the refining process as a safety precaution. It has the advantage of producing fewer pollutants on combustion than either coal or petroleum, and is often used in combination with other fuels to make them more ‘environmentally friendly’. Methane is widely
188 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Natural Gas (’000m. cu m)
Source: BP, Statistical Review of World Energy 2002.
employed for heating, cooling and the generation of electricity. One of its most important industrial applications is as a source of petrochemicals, from which fertilizers, plastics, pharmaceutical products, etc., are manufactured. Ethane may be kept mixed with methane and used as a fuel, or else it may be separated and used as a petrochemical feedstock. There is no international trade in ethane, however. Propane and butane have a large number of industrial and domestic applications as cylinder gases. Both liquefy at higher temperatures and lower pressures than methane, and are known, in their liquid state, as liquefied petroleum gases (LPGs). Pentane and other heavier liquids also have a variety of industrial applications, including use as petrochemical feed-stocks. These hydrocarbons, liquid at normal temperatures and pressures, are known as natural gasolines or condensate. Together, LPGs and natural gasolines are referred to as natural gas liquids (NGLs). At 1 January 2002 the world’s proven reserves of natural gas were estimated at 155,080, 000m. cu m, compared with 150,190,000m. cu m at 1 January 2001, and were thus sufficient to last for 61.9 years at the level of production prevailing in 2001. In 2001, according to the BP Statistical Review of World Energy 2002, consumption of natural gas world-wide increased by 0.3% to total 2,404,900m. cu m. In that year, according to the same source, natural gas accounted for nearly one-quarter of all primary energy (commercially traded fuels only) consumed world-wide. At 1 January 2002, 36.2% of the world’s estimated proven reserves of natural gas lay within the former Soviet republics. The proven reserves of Russia, estimated at 47,570, 000m. cu m, accounted for 30.7% of the global total, and were by far the largest deposited
COMMODITY SURVEYS 189
within any individual country. Iran’s reserves of natural gas, for instance, the second largest in the world, were less than one-half those of Russia. In 2001 Russia’s production of natural gas (excluding flared or recycled gas) amounted to 542,400m. cu m, compared with 545, 000m. cu m. in 2000. Gazprom, the state-controlled natural gas monopoly, is responsible for more than 90% of production, as well as for the development of new fields, and for the country’s pipeline grid. Russia’s most important natural gas fields are those of Urengoy and Yamburg, located in the Yamal-Nenets Autonomous Okrug in Western Siberia, and the development of additional, huge fields, including the Bovanenkovskoye field on the Yamal peninsula, and the Pestsovoye and Zapolyarnoye fields in the Ob-Taz Gulf area, is under way. However, the development of these new fields is behind schedule owing to Gazprom’s lack of sufficient investment resources. (Gazprom is reported to have reduced planned investment in field exploration in 2002 to US $453m., compared with $499m. in 2001.) The accumulation of resources for investment has been hindered, in recent years, by Gazprom’s legal obligation to supply natural gas to the domestic market at regulated (and less-than-cost) prices, and by the indebtedness on a massive scale of domestic gas consumers. In 2001 Russia was the second largest consumer of natural gas in the world, after the USA, utilizing 372,700m. eu m. Nevertheless, the scale of its resource is such that Russia remained the world’s largest exporter of natural gas. In 2001 exports of natural gas by pipeline amounted to 126,860m. cu m, thus representing about 31% of total world exports of natural gas by pipeline in that year. Germany (34,200m. eu m) was the principal market for Russian natural gas in 2001, followed by Italy (19,500m. cu m), France (11, 180m. eu m), Turkey (10,930m. cu m) and Hungary (7,950m. cu m). Through the Russian gas trading company, Itera, Gazprom contracted to purchase about 100m. eu m of gas from Turkmenistan in 2002, in order to compensate for declines in domestic production and to sustain exports. Russia is known to favour the formation of an alliance (the so-called ‘Gas OPEC’) with the developing major regional gas producers (Kazakhstan, Turkmenistan, and Uzbekistan), in order to guarantee the long-term security of natural gas transportation routes. Russia is also pursuing an export diversification strategy, the main focus of which is the construction of the ‘Blue Stream’ pipeline to Turkey, which is expected to become operational in late 2002. In 2001, after Russia, Uzbekistan was the second largest producer of natural gas among the former Soviet republics, with output in that year of 53,500m. cu m, compared with 52, 600m. eu m in 2000. In 2001 Uzbekistan ranked as the world’s 11th largest producer of natural gas. The country’s proven reserves of natural gas were estimated at 1,870,000m. eu m at 1 January 2002. Production has risen substantially since Uzbekistan became independent in 1991. The country’s richest gas fields are located in the remote westerly region of Ustyurt in the Autonomous Republic of Karakalpakstan, separated from the greater part of the country by the course of the Amu-Dar’ya river and the basin of the Aral Sea (both severely desiccated owing to abstraction and pollution). The high sulphur content of most of the natural gas produced in Uzbekistan has obliged it to invest heavily in its gasprocessing infrastructure in recent years. The Government has announced its intention to privatize 49% of Uzbekneftegaz, the holding company established in 1998 to combine the country’s oil and gas industries. Gas deposits in the Ustyurt region are the focus of ongoing exploration activity, and foreign participation has been encouraged, since 2000, through, for
190 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
example, the allocation of production concessions. In 2001 Uzbekistan’s consumption of natural gas amounted to 51,100m. cu m. Although annual production rose consistently during the 1990s, it was matched by growth in domestic consumption, and exports have not increased significantly since the late 1990s. Traditional markets for Uzbekistan’s natural gas are Kazakhstan, Kyrgyzstan, Russia and Tajikistan. The inability of Kazakhstan and Kyrgyzstan to pay for supplies already received has been an issue of contention in recent years, and Uzbekistan is reportedly seeking to gain new markets. The expansion of the Central Asia-Central Russia pipeline, for instance, would allow the former Soviet republics in Central Asia to supply European markets. Uzbekistan also plans to participate in the Central Asia Gas pipeline project to export gas to Pakistan and, possibly, India, although political instability in the region, most notably in Afghanistan, has harmed confidence in this project. In 2001 Turkmenistan was the third largest ex-Soviet producer of natural gas, with output of 47,900m. cu m, compared with 43,800m. eu m in 2000. Among the former Soviet republics, Turkmenistan’s proven reserves of natural gas, estimated at 2,860,000m. cu m, were second to those of Russia at 1 January 2002. These reserves are concentrated in the Amu-Dar’ya basin, with some 50% of the country’s deposits located in the DauletabadDonmez gas field. State-owned Turkmengaz accounted for more than 85% of natural gas output in 2000. In that year Turkmenistan’s production more than doubled, partly in response to the high world price of gas, and partly owing to the resolution of a pricing dispute with Russia. In 2001 Turkmenistan’s consumption of natural gas totalled 12,900m. cu m. Contracted exports to Iran by pipeline reportedly totalled 4,200m. eu m in 2001. Turkmenistan was also reported to have exported some 26,000m. cu m to Russia and about 5,000m. eu m to Ukraine in that year. In 2001 a further dispute over pricing between Turkmenistan and Russia’s gas trading company, Itera, led Russia to contract to purchase less gas from Turkmenistan than had been expected. Trade with Ukraine, meanwhile, has been prejudiced by the huge sum Ukraine owes Turkmenistan for supplies of natural gas already received. Turkmenistan supplies gas to Iran via the Korpezhe-Kurt Kui pipeline, the first Central Asian pipeline that bypasses Russia. Generally, however, Turkmenistan’s export potential is hindered by its need to transport its natural gas across neighbouring territories in order to reach international markets—the country relies almost entirely on Russia’s pipeline network and the pipeline link to Iran. This constraint means that Turkmenistan is forced to market its gas to former Soviet republics that are unable to pay fully in convertible currency, and that carry vast debts for supplies already delivered. The diversification of export markets is, therefore, crucial to realizing the full potential of Turkmenistan’s gas sector. The construction of a proposed Trans-Caspian Gas Pipeline (TCGP), which would convey gas from Turkmenistan under the Caspian Sea to Azerbaijan, Georgia, and Turkey, represents one possible solution. However, this project has encountered a number of obstacles, including a dispute over pricing between Turkmenistan and the international consortium established to support the pipeline, whose economic viability has, in any case, yet to be established. In 2001 Ukraine was the fourth largest producer of natural gas among the former Soviet republics, with output of 17,100m. cu m, compared with 16,700m. cu m in 2000. Ukraine’s proven reserves of natural gas were estimated at 1,120,000m. cu m at the end of
COMMODITY SURVEYS 191
2001. However, by the late 1990s many of Ukraine’s most important gas deposits were approaching complete exhaustion. Domestic consumption outstrips production and imports are necessary to meet as much as 80% of the country’s needs in some years. Russia is Ukraine’s traditional source of imports, supplying some gas in lieu of payment for the right to transport gas across Ukrainian territory to European markets. The supply of natural gas has frequently been an issue of contention between Russia and Ukraine. In early 2000, for instance, Ukraine was reported to owe Russia some US $2,000m. for gas supplies already received. Russia has also accused Ukraine of using Russian gas in transit across its territory without authorization. Ukraine has sought to lessen its reliance on Russia for imports of natural gas by concluding an agreement with Turkmenistan for the supply of up to 60% of its import requirements in 2002–06. In 2001 Kazakhstan ranked as the fifth largest producer of natural gas among the former Soviet republics, with output of 10,800m. eu m in that year. At 1 January 2002 the country’s proven reserves of natural gas were estimated at 1,840,000m. cu m. More than 40% of Kazakhstan’s reserves of natural gas are in the Karachaganak field in the north-west of the country. Kazakhstan is notable, among the former Soviet republics, for the success it has had in attracting foreign investment in the development of its natural gas resources. In spite of reserves that place it among the 10 most richly endowed countries in the world, Kazakhstan has lacked the infrastructure necessary to release their potential. In the late 1990s, for instance, the practice of flaring gas associated with petroleum was still wide- spread. One consequence of Kazakhstan’s inadequate infrastructure is its continued reliance on imports to meet domestic requirements: consumption in southern Kazakhstan is met almost entirely from imported gas. Uzbekistan is the most important supplier, and gas is also purchased from Russia to supply northern regions. Realizing the country’s potential for selfsufficiency in natural gas is a major priority of government energy policy. Once this has been achieved, Kazakhstan is likely to make rapid progress towards becoming a net exporter of natural gas. Azerbaijan was sixth largest producer of natural gas among the former Soviet republics in 2001, with output of 5,200m. cu m in that year, compared with 5,300m. cu m in 2000. At 1 January 2002 the country’s proven reserves were estimated at 850,000m. cu m. The USA is the only other country in the world that produces natural gas on the same scale as Russia. Twice in recent years, in 1997 and 2001, US production has surpassed that of Russia, and in 2000 it was only fractionally lower. In 2001 US output was estimated at 555, 400m. cu m, compared with 544,900m. cu m in 2000. At an estimated 5,020,000m. cu m at the end of 2001, however, the proven reserves of natural gas of the USA are only a little more than one-tenth those of Russia, sufficient, in fact, to last for only another 9.2 years at the 2001 rate of production. Nevertheless, US output is forecast to increase markedly up to about 2020, as a result of continued successful exploration and the employment of improved recovery technology, both onshore, where most of the growth in output is expected to occur, and off shore, especially in the Gulf of Mexico. In 2002 the leading US gas-producing states included, in descending order: Texas, Louisiana, Oklahoma, New Mexico, Wyoming, Colorado, Kansas, Alaska, California and Alabama. In 2001 the USA met about one-quarter of its primary energy requirements from natural gas. Consumption of natural gas in that year totalled 612,200m. cu m, a significant decline compared with 2000, when consumption
192 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
amounted to 647,100m. cu m. Consumption in 2000 was about 4% higher than in 1999, and despite the decline in 2001 growth is forecast to continue, not least because natural gas is ‘environmentally friendly’ compared with other fossil fuels. Canada is the main supplier of US imports of natural gas, and these are expected to rise substantially up to and beyond 2020 in line with projected growth in US consumption. There is already a high degree of interconnectivity between the US and the Canadian gas grids. Recent important expansions of Canadian delivery capacity include the upgrading of the TransCanada pipeline and the new Alliance pipeline, which runs from western Canada to the US state of Illinois. Mexico, which already supplies the USA with LNG, may also emerge as a more important supplier of natural gas up to 2020. The US market for natural gas has been characterized by a marked increase in mergers, acquisitions and strategic alliances in recent years. According to the Energy Information Administration of the US Department of Energy (EIA), the value of mergers and acquisitions in the industry increased from US $10,400m. in 1990 to $39,000m. in 1997. Canada produces natural gas on a much smaller scale than the USA and Russia, but the country nevertheless ranked as the third largest producer in the world in 2001. In 2001 Canada’s output totalled 172,000m. eu m, compared with 167,800m. eu m in 2000. At 1 January 2002 Canada’s reserves of natural gas were estimated at 1,690,000m. cu m, sufficient to maintain production at its 2001 level for a further 9.8 years. Canada’s reserves of natural gas are concentrated in the province of Alberta, complemented by deposits in British Columbia, Saskatchewan, the Northwest Territories and off shore of the provinces of Newfoundland and Labrador and Nova Scotia. The Northwest and Yukon Territories are regarded as the most likely locations for the discovery of significant new deposits. As well as being a major producer, Canada is a major consumer of natural gas. In 2001 Canadian consumption totalled 72,600m. cum, Canada thus ranking as the fifth largest consuming country in the world after the USA, Russia, the United Kingdom and Germany. In that year Canada met about one-quarter of its primary energy requirements from natural gas. Canada is also the world’s second largest exporter of natural gas, after Russia. The USA is by far the most important market for Canadian natural gas: in January-November 2001, according to the EIA, 93% of all natural gas imported by the USA was supplied by Canada. In 2001 Mexico produced an estimated 34,700m. eu m of natural gas, compared with 37, 100m. cu m in 2000. At 1 January 2002 Mexico’s proven reserves of natural gas were estimated at 840,000m. eu m, sufficient to last for a further 24 years at the country’s 2001 level of production. The natural gas industry remains a relatively undeveloped sector of Mexico’s economy. Domestic production is insufficient to meet consumption and, according to the EIA, the country remains a small net importer of US gas, unnecessarily in view of its reserve base. It is planned, however, to increase exploration for natural gas, especially in the Burgos field in the north-east of the country. In regional terms, after the republics of the former Soviet Union, the largest proven reserves of natural gas lie within the countries of the Middle East. At 1 January 2002 these reserves were estimated at 55,910,000m. cu m, equivalent to 36% of the world’s total proven reserves. Within the region, Iran possesses by far the largest share of gas resources, and, in world terms, its proven reserves of 23,000,000m. cu m at 1 January 2002 were second only to those of Russia. Iran’s potential as a producer of natural gas is all the greater
COMMODITY SURVEYS 193
for the fact that the majority of its reserves are not associated with petroleum, and hence remain relatively unexploited. Iran’s South Pars field contains the country’s most important reserves of unassociated gas, and has been the target of huge investment. The phased development of the field has been assisted by the French exploration and petrochemicals group, TotalFinaElf, among other foreign participants, and production there began in early 2002. Iranian production of natural gas totalled 60,600m. cu m in 2001, compared with 60, 200m. cu m in 2000. In 2001 domestic consumption totalled 65,000m. cu m, compared with 22,700m. cu m in 1991. In 2001 Iran met about 51% of its total primary energy needs from natural gas. Domestic consumption has been forecast to increase by more than 70% in 2001–05, but the scale of Iran’s resources ensures that this will not in any way diminish the potential for the growth of exports to Europe, Central Asia and the Far East. Qatar’s proven reserves of natural gas, estimated at 14,400,000m. cu m at 1 January 2002, are the second largest in the Middle East, after those of Iran, and the third largest worldwide. These reserves include those of Qatar’s North Field, the largest resource of nonassociated natural gas in the world. Qatari production, which totalled 32,500m. cu m in 2001, compared with 29,100m. cu m in 2000, is highly export-oriented. Exports are almost exclusively in the form of LNG, this trade being undertaken by Qatar LNG Co and Ras Laffan LNG Co (RasGas). The expansion of the capacity of both companies is under way. RasGas is currently constructing a third LNG production ‘train’ which, with an annual capacity of 4.7m. tons, will be the largest such ‘train’ in the world when it is brought into operation in 2004. Japan and the Republic of Korea have hitherto been the principal markets for Qatari LNG exports. The expansion of Qatar’s capacity to export LNG is regarded by the Government as crucial to Qatar’s future economic development. Among the initiatives that aim to release some of this export potential is Qatar’s planned participation in the ‘Dolphin Project’ of the United Arab Emirates (UAE), which will link the pipeline grids of Qatar, the UAE, Oman and, possibly, Pakistan. After Iran, Saudi Arabia was the second largest Middle Eastern producer of natural gas in 2001, with output of 53,700m. cu m, compared with 49,800m. cu m in 2000. At 1 January 2002 Saudi Arabia’s proven reserves of natural gas were estimated at 6,220,000m. cu m, and thus ranked as the third largest natural gas resource in the region, and the fourth largest world-wide. More than 60% of Saudi Arabia’s reserves of natural gas are associated with petroleum, and about one-third of the total lies within the onshore Ghawar field. A steady rise in domestic consumption of natural gas, which totalled 53,700m. cu m in 2001, has prompted the Government to allow foreign participation in a major ‘Gas Initiative’ that seeks to harness ‘upstream’ production of natural gas to the ‘downstream’ petrochemical and power-generation industries. This initiative represents the first opportunity for foreign participation in Saudi Arabia’s ‘upstream’ energy sector since the 1970s, and is regarded as long-overdue in view of the economic challenges that confront the country. The ‘Gas Initiative’ is designed to further the Government’s strategy of substituting gas for petroleum (for petrochemical production, power generation, desalination, etc.) in order to release greater volumes of petroleum for export. At 1 January 2002 the proven reserves of natural gas of the UAE, estimated at 6,010, 000m. cu m, were the fourth largest in the Middle East, and the fifth largest world-wide. In 2001 the UAE ranked as the third largest producer of natural gas in the Middle East, with
194 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
output of 41,300m. cu m, compared with 39,800m. cu m in 2000. The emirate of Abu Dhabi is the location of the UAE’s largest reserves, including the Khuff reservoirs of unassociated gas, which contain some of the largest deposits in the world. In 2002 the UAE’s estimated proven reserves of natural gas were sufficient to last more than 100 years— up to 170 years, according to some estimates—at the rate of production prevailing in 2001. Domestic consumption rose from 20,400m. cu m in 1991 to 34,300m. cu m in 2001, boosted, not least, by huge investment in a shift towards the use of natural gas for power generation. The UAE is an important exporter of LNG, the vast majority of its exports being destined for Japan. At 1 January 2002 Iraq’s proven reserves of natural gas were estimated at 3,110,000m. cu m. According to the EIA, some 70% of Iraq’s reserves of natural gas are associated with petroleum, lying, for the most part, within the oil fields of Kirkuk, Ain Zalah, Butma and Bai Hassan, Rumaila and Zubair. Iraqi production has declined enormously from peak levels achieved in the late 1970s, as sanctions imposed on the country by the UN effectively prevent commercial production. According to the EIA, Iraq’s aim would be to produce 15, 600m. cu m annually two years after the lifting of UN sanctions, and some 120,000m. cu m after 10 years. In 2001 Iraq agreed to collaborate on a project involving the construction of a natural gas pipeline to Turkey, and possibly beyond, to Europe. Elsewhere in the Middle East, at 1 January 2002, the proven reserves of natural gas of Kuwait were estimated at 1,490,000m. cu m, those of Oman at 830,000m. cu m, and those of Yemen at 480,000m. cu m. In 2001 Kuwait’s production of natural gas amounted to 9, 500m. cu m, while that of Oman totalled 13,400m. cu m. Kuwait is reportedly pursuing a strategy to increase the proportion of electric power it derives from natural gas, in order to release more petroleum for export; and to boost domestic production by utilizing associated gas that has hitherto, largely, been flared. In 2000 Oman commenced exporting LNG to the Republic of Korea, whose national Gas Corporation is under contract to purchase Omani LNG for 25 years. Japan is another destination for exports of Omani LNG. As of March 2002, according to the EIA, Yemen’s production of natural gas was minimal, but the country had the potential to produce and export in proportion with the scale of its reserves. At 1 January 2002 Africa’s proven reserves of natural gas were estimated at 11,180,000m. cu m, equivalent to 7.2% of global reserves. Of the African total, 4,520,000m. cu m were estimated to lie within Algeria, whose production of natural gas in 2001 amounted to 78, 200m. cu m—far greater than that of any other African country-compared with 84,400m. cu m in 2000, and 53,200m. cu m in 1990. Algeria’s reserves, which consist largely of associated gas, include those of the Hassi R’Mel field, the source of about 25% of the country’s total dry gas production, according to the EIA. In 2001 Algerian consumption of natural gas amounted to 21,600m. cu m, much of which was used to generate electricity, and as a petrochemical feedstock. In 2000, according to the EIA, Algeria supplied about 20% of the EU’s total imports of natural gas. Algeria exports gas to Europe via the TransMediterranean pipeline (to Italy), and via the Maghreb-Europe Gas pipeline (to Spain and Portugal). Western Europe is the most important destination for exports of Algerian natural gas, and it is hoped that these can be increased through the development of gas fields that are already in production in the In Salah region. Algeria pioneered the production of LNG and, in 2001, was its second largest exporter in the world, after Indonesia. According to the EIA,
COMMODITY SURVEYS 195
the most important markets for Algerian LNG in 2000 were Belgium, France, Spain, Turkey and the USA. In 2001, after Algeria, Egypt was the second largest African producer of natural gas, with output of 21,000m. cu m, compared with 18,300m. cu m in 2000. At 1 January 2002 Egypt’s proven reserves of natural gas were estimated to total 1,000,000m. cu m. These reserves have been boosted very substantially in recent years by the discovery in the Mediterranean, the Nile Delta and the Western Desert of such rich deposits that natural gas is now regarded as the most likely spur to future growth in the Egyptian energy sector. According to the EIA, production was expected to double in as short a term as 1999–2002. In 2001 estimated production was already more than 40% higher than in 1999. Further exploration and development activity is currently being undertaken by the International Egyptian Oil Co (which belongs to Italy’s ENI-Agip), in partnership with foreign interests. In 2001 Egyptian consumption of natural gas totalled 21,000m. cu m, compared with 18, 300m. cu m in 2000, and only 7,700m. cu m in 1991. Growth in consumption has occurred largely as the result of the conversion of Egypt’s thermal power plants to the use of gas for generation. With reserves and production both regarded as ample to meet growing domestic demand in the near term, the priority of the Government is to realize the export potential of the natural gas sector. Development of that potential has begun on a modest scale with the construction of an export pipeline to Jordan that is expected to be completed in 2003. The extension of the pipeline, to allow exports to Syria, Turkey and Lebanon, may also occur in future. In addition to the pipeline project, foreign partners, including Grupo Unión Fenosa of Spain and Royal Dutch/Shell are involved in projects to initiate exports of LNG. Estimated at 3,510,000m. cum at the end of 2001, Nigeria’s proven reserves of natural gas were the second largest in Africa, after those of Algeria, and the ninth largest worldwide. In 2001, however, at only 13,400m. cu m, Nigeria’s production of natural gas was far lower than that of Algeria. Output has more than doubled since 1999, when it totalled only 6,000m. cu m, but even so the country’s reserves are vastly underexploited: in 2002, according to the EIA, some 75% of Nigeria’s natural gas was being flared and a further 12% reinjected in order to facilitate the extraction of petroleum. Associated gas is, however, expected to be utilized more economically in the near future, in order to supply Nigeria’s recently constructed LNG facility on Bonny Island. A second LNG facility—not yet constructed—is scheduled to commence production by 2005. Projects that aim to boost Nigeria’s consumption of national gas include a proposed Ajaokuta-Abuja-Kaduna pipeline, to supply central and northern regions, and the Aba-Enugu-Gboko to convey gas to parts of eastern Nigeria. At 1 January 2002 Libya’s proven reserves of natural gas were estimated at 1,310,000m. cu m. In 2001 Libyan production totalled 5,400m. cu m. There was little annual variation in output—which ranged from 5,500m.–6,100m. cu m—in the 1990s. Official Libyan sources regard current estimates of proven reserves as an inadequate indication of the country’s wealth in this resource. Until very recently, exploration has been largely neglected, but where it has been pursued the results have been dramatically successful. Exploration is likely to intensify greatly up to 2010 as Libya pursues a policy of substituting, where possible, gas for petroleum for domestic consumption purposes—in order to release
196 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
greater quantities of petroleum for export—and of increasing its exports of natural gas to European markets. As of mid-2001, Spain was Libya’s only European market for natural gas, but a joint venture has reportedly been formed between Agip-ENI of Italy and Libya’s National Oil Company, with the aim of supplying natural gas to Italy on a large scale. Libya was the second country, after Algeria, to commence exporting LNG. Italy, Spain and Turkey are potential customers for Libyan LNG, exports of which have hitherto been restricted owing to technical difficulties. At 1 January 2002 the proven reserves of natural gas of the Asia-Pacific region were estimated at 12,270,000m. cu m, equivalent to 8% of all reserves world-wide. Of the regional total, 2,620,000m. cu m were estimated to lie within Indonesia, and 2,120,000m. cu m within Malaysia. Indonesia is, by a considerable margin, the largest regional producer of natural gas, with output of 62,900m. cu m in 2001, compared with 67,300m. cu m in 2000. The country’s most important reserves of natural gas are located in North Sumatra, East Kalimantan, and offshore of Java. The Natuna D-Alpha field, situated off Natuna Island in the South China Sea, is the largest gas field in the region. The Government’s plans to substitute natural gas for petroleum for power generation have been obstructed by the inadequacy of the country’s infrastructure for consumption. Indonesia’s consumption of natural gas totalled 29,700m. cu m in 2001, compared with 30,600m. cu m in 2000, and 21,700m. cu m in 1991. In 2001, Indonesia met about 27% of its primary energy needs from natural gas. Indonesia is the world’s largest exporter of LNG, mainly to Japan and the Republic of Korea. New LNG projects, yet to move beyond the planning stage, envisage the eventual supply of Indonesian LNG to the Philippines and the People’s Republic of China. In 2001 Malaysia’s production of natural gas totalled 47,400m. cu m, compared with 40, 800m. cu m in 1999, and 20,400m. cu m in 1999. In recent years the Malaysia-Thailand border has been the focus of much exploration activity. However, the implementation of an agreement to link the domestic gas grids of Malaysia and Thailand has been delayed by unfavourable economic circumstances. In 2001 Malaysia’s consumption of natural gas amounted to 21,600m. cu m. Malaysia is one of the world’s most important exporters of LNG, accounting in 1999, according to the EIA, for about 17% of LNG exports world-wide. Taiwan, the Republic of Korea and Japan are the most important destinations for Malaysian LNG exports. The upgrading of the country’s Bintulu LNG liquefaction facility is currently under way. Upon completion (scheduled for the mid-2000s) it will be the largest such facility in the world, with an annual capacity of some 30,000m. cu m. Malaysia also exports natural gas by pipeline to Singapore. At 1 January 2002 Australia’s proven reserves of natural gas were estimated at 2,550, 000m. cu m, more than double the 2000 figure, as the capacity of new exploration sites in the Northern Territory and, offshore, in the Timor Gap, are accurately estimated. The country’s most important gas project to date exploits resources from the North West Shelf. These are complemented by deposits in the Gorgon field in Western Australia and the Palm Valley field in the Northern Territory, among others. Australia’s production of natural gas totalled 32,700m. cu m in 2001, compared with 21,700m. cu m in 1991. Production is forecast to continue to rise, to the extent that by 2005, according to data cited by the EIA, Australia will meet 22% of its primary energy needs from natural gas. (In 2001 Australia met about 18.5% of its primary energy requirements from natural gas.) Australia’s consumption
COMMODITY SURVEYS 197
of natural gas totalled 22,500m. cu m in 2001. According to the EIA, Australia was, in mid-2001, the third largest Asian-Pacific exporter of LNG, the annual value of its exports totalling some US $1,400m. At 1 January 2002 the proven reserves of natural gas of the Peoples’s Republic of China, at an estimated 1,370,000m. cu m, were the fourth largest in the Asia-Pacific region after those of Indonesia, Australia and Malaysia. The country’s most significant reserves are reportedly located in its western regions, and pipeline infrastructure is at present inadequate to carry gas to eastern consumption centres, although construction of a ‘West to East’ gas transit pipeline is planned, provided that its economic viability can be demonstrated. Chinese production of natural gas totalled 30,300m. cu m in 2001, compared with 27,200m. cu m in 2000, and only 14,900m. cu m in 1991. Until recently, natural gas has been a relatively neglected resource, employed only minimally for the generation of electricity. In 2001 China met only about 3% of its total primary energy needs from natural gas, but, according to the EIA, the share of natural gas in the total is expected to increase to about 9% by 2010. Elsewhere in the Asia-Pacific region, India possesses significant reserves of natural gas, estimated to total 650,000m. cu m at 1 January 2002. In 2001 Indian production of natural gas amounted to 26,400m. cu m, compared with only 14,200m. cu m in 1991. Consumption has risen rapidly in recent years, totalling 26,300m. cu m in 2001, compared with 14,100m. cu m in 1991. According to the EIA, India’s domestic production alone is unlikely to keep pace with growth in consumption, and will need to be supplemented by imports, either by pipeline or as LNG. The future scale of LNG imports remains uncertain, however, and the Government is reportedly reassessing the scale of an ambitious LNG import terminal construction project. As for imports by pipeline, proposals to supply India with gas from Iran’s South Pars field, either overland, via Pakistan, or via an undersea link, are reportedly under consideration, as is a plan to connect Bangladeshi supplies to the Indian gas distribution network. The proven reserves of Bangladesh were estimated 300,000m. cu m at the end of 2001, and the country is, accordingly, regarded as an important potential supplier of the growing Indian market, if internal controversy about the diversion of the resource away from the expanding domestic market can be resolved. Pakistan’s proven reserves of natural gas were estimated at 710,000m. cu m at 1 January 2002, and are thus now assessed as greater than those of India. In 2001 Pakistan produced 19,900m. cu m of natural gas, compared with 11,100m.cu m in 1991. At present, Pakistan consumes all of the gas it produces. According to official sources, domestic demand will increase by some 50% in 2002–06, and will continue to rise thereafter as natural gas is increasingly utilized for power generation. Brunei, Papua New Guinea, Thailand and Viet Nam all have significant reserves of natural gas, estimated, respectively, at 390,000m. cu m, 350,000m, cu m, 360, 000m. cu m and 190,000m. cu m, as of 1 January 2002. The proven reserves of natural gas in South and Central America at the beginning of 2002 were estimated at 7,160,000m. cu m, equivalent to 4.6% of the world total. The proven reserves of Venezuela, estimated at 4,180,000m. cu m, the eighth largest in the world, are by far the most significant in the region. In 2001 Venezuelan production of natural gas amounted to 28,900m. cu m, compared with 21,900m. cu m in 1991. According to the EIA, domestic demand is low because the country’s highly developed production of hydropower
198 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
obviates the need to utilize gas for power generation. In 2002 it was estimated that 60% of the associated gas Venezuela produced was either reinjected into oil fields, or else flared. With regard to non-associated gas, in 2001 Venezuela granted licences for the exploitation of proven, and the exploration of potential, reserves. Venezuela currently has no pipeline outlet to export natural gas, although state-owned Ecopetrol of Colombia and the US hydrocarbons concern Texaco have reportedly agreed to assess the practicability of constructing a pipeline linking Venezuela with Colombia, in order to allow exports in both directions. Argentina’s reserves of natural gas, the second largest in South and Central America, were estimated at 780,000m. cu m as of 1 January 2002. In 1999 Argentine production of natural gas, at 34,600m. cu m, outstripped that of Venezuela for the first time. Argentina remained the largest Latin American producer in both 2000 and 2001, output totalling 38, 400m. cu m in the latter year. According to the EIA, Argentine production of natural gas currently exceeds both domestic demand—consumption totalled 33,200m. cu m in 2001— and that of foreign markets for it. Exports to Chile, with which Argentina has four pipeline links, commenced in 1997, and Chile remains the most important market for Argentine natural gas. Argentina has, in addition, a pipeline link with Brazil, and, in the past, imported natural gas from Bolivia via a pipeline link, although this trade ceased in 1999. At 1 January 2002 Bolivia’s proven reserves of natural gas were estimated at 680,000m. cu m. Bolivia’s production, which totalled 4,100m. cu m in 2001, is export-driven, with Brazil having replaced Argentina as Bolivia’s main pipeline outlet. In 2001 a consortium was formed with the aim of developing a US market, and the infrastructure to supply it, for Bolivian LNG. Other countries in South and Central America with significant proven reserves of natural gas, as of 1 January 2002, included Brazil (220,000m. cu m), Colombia (120,000m. cu m), Ecuador (100,000m. cu m) and Trinidad and Tobago (660,000m. cu m). Brazil’s output of natural gas totalled 7,700m. cu m in 2001, compared with 6,800m. cu m in 2000, and 3, 900m. cu m in 1990. A rapid rise in Brazilian consumption of natural gas, which increased by an annual average of more than 10% in 1991–2001, has outstripped domestic production, obliging Brazil to commence importing natural gas in 1999. For how long, and on what scale, imports continue to be necessary will depend on the success of exploration activity, which has recently discovered large deposits of gas. At present, imports reach Brazil via two pipeline links, one with Bolivia and another with Argentina. Additional pipeline links with Argentina are reportedly at the planning stage. However, any increases in demand for natural gas in northern regions of the country are more likely to be met by imports from Venezuela (by pipeline), or from Trinidad and Tobago (as LNG). Colombian production of natural gas totalled 6,100m. cu m in 2001, compared with 5,900m. cu m in 2000. The gas sector in Colombia has reportedly stagnated in recent years, prompting the Government to consider deregulating prices before 2003 in order to encourage new market entrants and expose the current production monopolist, Ecopetrol, to competition. At 1 January 2002 the proven reserves of natural gas of Europe (excluding former Soviet republics) were estimated at 4,860,000m. cu m, equivalent to 3.1 % of the world total. Of Europe’s proven reserves, 1,770,000m. cu m were estimated to lie within the Netherlands, whose production of natural gas amounted to 61,400m. cu m in 2001, compared with 57, 300m. cu m in 2000, and 69,000m. cu m in 1991. Dutch production of natural gas
COMMODITY SURVEYS 199
commenced in the 1960s at the vast onshore Groningen field, the location of more than 60% of the country’s proven reserves. Groningen is operated by the Netherlands’ principal gas producer, Nederlandse Aardolie Maatschappij (NAM, founded jointly by Shell and Exxon), which pioneered the exploration of the North Sea for hydrocarbons. In 2000 offshore fields were the source of almost 60% of total output. The Netherlands is the largest exporter of gas in the European Union (EU), the volume of its sales totalling almost 36,500m. cu m in 2000. Germany, the Netherlands’ most important market, was the destination for 60% of all exports in 2000. Other important European markets for Dutch gas include Belgium, France, Italy and Switzerland. After the Netherlands, Norway possesses the largest reserves of natural gas in Europe, estimated at 1,250,000m. cu m at 1 January 2002. More than 50% of these reserves are located in the Troll field, in the North Sea. In 2001 Norwegian production of natural gas amounted to 57,500m. cu m, more than double the level of production in 1991 and nearly 13% higher than output in 1999. The other gas fields in the North Sea that Norway exploits include Ekofisk and Frigg, but production from both of these has declined to well below its peak levels, that of Frigg to the point that it will terminate in 2002. New fields that have recently been brought into production include Åsgard, in the Norwegian Sea. Norwegian consumption of natural gas totalled only 4,500m. cu m in 2001, when the country met only 9.6% of its primary energy needs from the fuel. Consumption will be boosted in future, however, by planned increases in the utilization of gas for power generation. Norway is the largest western European exporter of gas, conveying supplies via pipeline to destinations that include Austria, Belgium, the Czech Republic, France, Germany, Italy, the Netherlands, Poland and Spain. About 20% of all the natural gas consumed by Germany, the largest continental European market, originates in Norway. According to the EIA, the NorFra pipeline, which at present conveys gas to France and, onwards, to Italy and Spain, will meet about one-third of total French consumption by 2005. The entry into service, in late 2001, of the Vesterled pipeline will allow Norwegian exports to the United Kingdom, about 25% of whose demand they met in the 1980s, to resume. The proven reserves of natural gas of the United Kingdom were estimated to total 730, 000m. cu m at 1 January 2002, and were thus the third largest in western Europe after those of the Netherlands and Norway. Since 1995, when it overtook the Netherlands, the United Kingdom has been the largest European producer of natural gas. Indeed, with output of 105, 800m. cu m in 2001—more than double that of 1991—the United Kingdom was the fourth largest producer in the world, after the USA, Russia and Canada. British reserves of natural gas are, for the most part, located in the Southern Gas Basin in the North Sea and the Morecambe and Hamilton fields in the Irish Sea. In the early 2000s, according to the EIA, the Morecambe field accounted for some 20% of British production. In 2001 the United Kingdom consumed 95,400m. cu m of natural gas, which met about 38% of the country’s primary energy needs in that year. Consumption has been greatly boosted by the privatization of the British gas industry, which has led to the large-scale replacement of coal by natural gas for the generation of electricity. According to the EIA, the share of natural gas in British utility fuels was only 1% in 1988, but this is forecast to rise to about 50% by 2010. The United Kingdom has pipeline links with Belgium (the UK-Continent Gas Interconnecter pipeline, the first gas pipeline linking the United Kingdom with continental
200 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Europe, completed in 1988) and Ireland. However, owing to the size of its domestic market, the United Kingdom exports natural gas on a much smaller scale than Norway and, according to the EIA, will become a net importer once the Vesterled pipeline (see above) becomes operational. At the beginning of 2002 Germany’s proven reserves of natural gas were estimated to total 340,000m. cu m. In 2001 German output totalled 17,000m. cu m. At that level, domestic production is far from sufficient to meet the needs of Western Europe’s second largest consumer of natural gas, after the United Kingdom, most of which must consequently be satisfied through imports. In 2000, according to the EIA, Germany’s import requirements were met by Russia (37%), the Netherlands (26%), Norway (14%) and Denmark (1%). Consumption in that year totalled 79,500m. cu m, rising to 82,900m. cu m in 2001, when natural gas was utilized to meet about 22% of the country’s primary energy needs. The gradual elimination of nuclear power as a source of electricity means that this share is likely steadily to increase up to 2010. As the location of major pipelines from the North Sea to its coastal regions, Germany is pivotal to the distribution of natural gas in both western and eastern continental Europe. Supplies from Russia, the Netherlands, Norway and the United Kingdom all traverse German territory. Elsewhere in Western Europe, Italy’s proven reserves of natural gas were estimated at 230,000m. cu m at 1 January 2001. Production by Italy totalled 15,500m. cu m in 2001, when the country was the third largest consumer of natural gas in Europe, after the United Kingdom and Germany, utilizing 64,500m. cu m to meet about one-third of its total primary energy requirements. In Central and South-Eastern Europe, at 1 January 2002, Romania’s proven reserves of natural gas were estimated to total 100,000m. cu m. In 2001 the country’s production amounted to 12,600m. cu m, a little more than one-half its level in 1991. According to the EIA, since 1983, the year when Romanian production was at its highest, output has declined by almost 65% as a consequence of macroeconomic difficulties that caused domestic demand to fall by more than 50% in 1989–99, and that have discouraged investment in the development of Romania’s hitherto unexploited reserves. In 2001 consumption totalled 17,500m. cu m, compared with 24,700m. cu m in 1991. Even at this reduced level, Romanian consumption can now only be satisfied through imports that Russia has traditionally supplied, although, seeking to expand the range of its suppliers, Romania has also concluded supply contracts with Germany and the Netherlands. Russian supplies have been conveyed to Romania via the Ukrainian gas supply network, and plans to supplement this source of Russian gas through a link via Moldova reportedly reached the implementation stage in 2001. Additional imports will necessitate the revitalization of Romania’s domestic distribution network, and in 2001, among other measures that are being taken to bring this about, Ruhrgas, Germany largest gas transmission company, pioneered foreign investment in the Romanian network. Hungary has proven reserves of 40,000m. cu m and produced 2,700m. cu m of natural gas in 2001. Demand for natural gas is forecast to increase at a faster rate than that for petroleum up to 2020, reflecting its greater availability and increased appreciation of its ‘environmentally friendly’ qualities. Natural gas is increasingly utilized as a fuel for power generation, and this is encouraging companies that have previously confined their activities to the exploration
COMMODITY SURVEYS 201
Export Price Index for Natural Gas (base: 1980=100)
for, and production of, petroleum to diversify into natural gas. However, the economics of natural gas are quite different from those of petroleum. The huge expense of transporting natural gas means that the development of gas fields cannot be considered separately from the development of its transportation infrastructure, whether pipelines or liquefaction systems. As a consequence gas prices and contracts have traditionally been localized to the point of varying quite widely in different regions of the same country. In the USA, however, and in the United Kingdom and Western Europe generally, where gas markets and infrastructure are well developed, deregulation has created a more market-driven trading environment for natural gas. During the 1990s the average annual price of natural gas in the USA (at the wellhead, in terms of 1999 US dollars) ranged between US $1.61 per million British thermal units (mbtu) and $2.32 per mbtu, according to the EIA. In 2000, however, the price rose abruptly, to average $3.45 per mbtu, and was forecast by the EIA to average (again in terms of 1999 US dollars) $4.85 per mbtu in 2001, and $4.43 per mbtu in 2002. This sudden increase was attributed to constraints in US production capacity that had arisen during the preceding decade, when the average price of natural gas was relatively low; abnormally high demand for natural gas in the winter of 2000/01, in response to strong economic growth and unusually cold weather conditions; and the low level of gas in storage at the approach of winter. In response, some policymakers in the USA have begun to examine more critically the country’s growing reliance on natural gas and the possible negative implications of this reliance for long-term economic growth. In a survey of US markets for natural gas published in 2001, the EIA identified the need to restore gas in storage to normal levels, and rapidly to boost domestic production of natural gas, in order to satisfy demand at ‘reasonable’ prices, as key short-term issues facing the US gas industry. The collapse in late 2001 of Enron, the world’s largest energy-trading company, which had particular interest in natural gas, exacerbated concerns as to the state of the US energy market. In Europe, since 1998, in accordance with a directive adopted in that year, the member states of the EU have begun to deregulate their markets for natural gas that were hitherto, for the most part, characterized by legal or de facto monopoly suppliers, long-term supply contracts, and the indexing of the price of natural gas to that of petroleum. While such markets had created security of supply, they had also raised end-user prices to unnecessarily high levels. The key challenge of the deregulation of natural gas markets within the EU, which has relatively few producers and is increasingly dependent on imports, is to create effective competition in supply, while, at the same time, safeguarding its security.
202
Nickel
Nickel (Ni) is a silvery, malleable metal which occurs in various types of ores, the most important being sulphide ores and laterite ores. Sulphide ores are generally mined by underground methods, while laterites are usually mined by open-cast methods. Nickel in sulphide ores is often found in conjunction with copper, cobalt and platinum group metals (PGM); in laterites it is often found with iron, chromium and cobalt. The sulphide ore is subjected to crushing and grinding, with final treatment by the flotation method. The resulting concentrate is roasted and smelted in furnaces to remove the bulk of the sulphur, leaving a matte of nickel and copper. The nickel and copper can then be separated from each other by a variety of processes and sent to an electrolytic refinery. The primary product of processing laterites is ferronickel; a few ferronickel operations also produce limited amounts of matte by the deliberate addition of pyrite or sulphur to the ore at the drying stage. Nickel production is an energy-intensive operation, and the cost of energy to the industry has risen steeply in recent years. During the late 1990s, however, several Australian laterite nickel producers were conducting pilot projects in the processing of ores by high-pressure acid leaching, which, if shown to be successful, could substantially reduce production costs. The world’s land-based reserves of nickel ore in 2001 were estimated by the US Geological Survey (USGS) at 58m. metric tons on an elemental basis, of which about 23m. tons were in sulphide deposits and 35m. tons in laterite ores. The distinction is significant, as sulphide ores are cheaper to process. According to USGS estimates, the largest proportion of nickel reserves are in Australia (34% of the world total), followed by Russia (11%) and Canada (11%), Cuba (10%), New Caledonia (8%), the People’s Republic of China (6%) and Indonesia (6%). While the metal is not especially abundant in the earth’s crust, it is believed to be the fifth most common element in the earth’s core. Nickel is used in a wide range of alloys where it imparts corrosion resistance and hightemperature strength. Its most important use is in steel production, and the majority of hightensile steels contain nickel. On a world-wide basis, the stainless steel industry accounts for more than 60% of nickel consumption. Nickel continues to be a significant constituent of much military equipment. Alloys containing a high proportion of nickel are used in power and chemical plants. The metal also has high-temperature applications, such as gas turbines, and rocket engines for the aerospace industry. Although it accounts for less than 1% of annual nickel demand, perhaps the most frequently encountered use of nickel is in coinage. It is also used in battery cells.
204 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Nickel Ore (nickel content, metric tons)
* Estimated production. Source: US Geological Survey.
Extensive deposits of ferromanganese nodules—also containing nickel, copper and cobalt —are known to exist on the floor of the world’s oceans. A conservative estimate assesses world nodule reserves at 290m. metric tons of nickel, 240m. tons of cobalt and 6,000m. tons of manganese. However, quite apart from the question of rights of recovery tortuously negotiated at the UN Conference on the Law of the Sea, experts believe that the extraction of metals from the nodules is unlikely to be commercially practicable for many years. Nickel prices in Western countries have traditionally been governed by the four companies that, historically, were the largest producers—International Nickel (Inco), Falconbridge (both of Canada), Western Mining (of Australia) and the French-controlled Société Le Nickel (SLN). In 2000 Norilsk Nickel of Russia was the world’s single largest producer, and its output, combined with that of the four aforementioned companies and that of Billiton plc of the United Kingdom (now a part of BHP Billiton), accounted for about 66% of world production. Inco (the Western world’s largest producer) has traditionally supplied almost one-third of the nickel requirements of the major industrial countries. The major nickel-producing countries in the Asia-Pacific region are Australia, New Caledonia and Indonesia. New Caledonia possesses the world’s largest identified deposits of nickel-bearing laterite. Substantial deposits of nickel exist in Western Australia, where the Leinster mine has reserves of 333m. metric tons of underground ore, grading 1.8% nickel, and about 2.9m. tons of open-pit ore, grading 1.5% nickel. Deposits at Mt Keith and Yakabindie are each estimated to contain at least 100m. short tons of reserves, grading about 0.5% nickel. The development of reserves in the Murrin Murrin district, estimated at 119m. metric tons (grading 1.4% nickel), commenced in 1997. The Murrin Murrin opencast mine, which is 60% owned by Anaconda Nickel Ltd of Australia, had a planned initial
COMMODITY SURVEYS 205
capacity to produce 45,000 tons of nickel, and 9,000 tons of cobalt, per year. It is the largest of three projects in Western Australia that have been pioneering the potentially lowcost process of producing nickel and cobalt from laterite deposits by high-pressure acid leaching (see above). During the late 1990s, however, there were problems in developing the necessary technology, leading to delays in bringing the three projects into full production. The value of Australia’s exports of nickel ores and concentrates and of intermediate products of nickel was $A1,470m. in the year ending June 2001. In the longer term Australia’s relatively high-cost production could be faced with a considerable challenge in world nickel markets from the commercial exploitation of vast, and as yet undeveloped, deposits near Voisey’s Bay, in north-eastern Canada. This prospect has been stated to contain as much as 150m. tons of nickel ore, with the estimated low-cost productive capacity to provide one-third of all new nickel mine output within 10 years of its entry into production. However, the development of the Voisey’s Bay nickel deposits, to which Inco acquired the rights in 1996, has been delayed by a dispute between Inco and the Newfoundland provincial authorities regarding the terms on which it should proceed (see below). In 2001, according to provisional data, New Caledonia was the world’s fourth largest producer of nickel in terms of mine output. The territory’s dominant production company is SLN, 60% owned by the French government-controlled mining conglomerate, Eramet, 30% by the three provinces of New Caledonia, and 10% by Nishin Steel of Japan. In 2000 SLN accounted for 47% of New Caledonia’s total mine output of nickel. The company exploits deposits of nickel-bearing ores at four mining centres, all on the main island. Mining at a fifth SLN site has been contracted to an independent company. The output of ore from mines operated by SLN and its sub-contractors totalled 3,710,000 metric tons (wet weight) in 2000, compared with 3,520,000 tons in 1999. Ore from these mines and from sub-contractors operating SLN deposits is sent for processing in the company’s smelter at Doniambo, near Nouméa, in the south of the island. Eramet is the world’s leading company producing ferronickel, and SLN’s Doniambo smelter is the largest ferronickel plant in the world. In 2000 output from Doniambo was a record 57,463 tons of nickel, comprising 43, 914 tons of nickel in ferronickel and 13,549 tons of nickel in matte. SLN reportedly plans to increase the annual capacity of the Doniambo smelter to 75,000 tons before 2006. Products from the Doniambo plant are destined for export. Sales of nickel ore, nickel matte and ferronickel together provided 89.3% of New Caledonia’s total export earnings in 1999. During the late 1990s more than one-half of the nickel ore from the territory’s mines was exported without further processing, and there has been considerable local support for proposals to construct additional smelting facilities. However, New Caledonia’s heavy dependence on the nickel industry has resulted in periods of economic recession, and, since the mid-1980s, mining operations have been intermittently overshadowed by political unrest. During the 1980s and 1990s a major issue in discussions concerning the political future of New Caledonia was the extent of participation by the indigenous Melanesian people (Kanaks) in the territory’s development, including its major industry. The Société Minière du Sud-Pacifique (SMSP), controlled by Kanak interests, is the most important of the six independent nickel-mining companies in New Caledonia. During negotiations over increased autonomy for the territory, local representatives sought an expansion of
206 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
indigenous involvement in the nickel sector. In 1996 the SMSP and Falconbridge formed a partnership aimed at constructing a ferronickel plant in the Kanak-dominated north of the main island. In February 1998, in response to the demands of Kanak political leaders to make such a project viable, the French Government, Eramet, the SMSP and others signed the Bercy accords, whereby Eramet was to relinquish control of its promising site at Koniambo, in the north, in exchange for the Poum mine, operated by the SMSP, in the south. As the Koniambo prospect was estimated to contain about double the volume of nickel at the Poum site, the French Government agreed to pay compensation of about 1, 000m. French francs to Eramet for the reduction in its reserves. In April the SMSP formed a joint venture with Falconbridge to develop the Koniambo nickel deposits. The agreement on exchanging nickel resources helped to facilitate the conclusion of the Nouméa Accord, signed in May and approved by referendum in November, which provided for a gradual transfer of powers from metropolitan France to local institutions. In compliance with the Nouméa Accord, an agreement was reached in February 1999 to enable the transfer of 30% of SLN’s share capital to a newly-created company representing local interests, the Société Territoriale Calédonienne de Participation Industrielle (STCPI), to be owned by the development companies of the three New Caledonian provinces. In July 2000, following two years of negotiations, New Caledonia’s political leaders signed an agreement on the formation of the STCPI. The transfer of shares, reducing Eramet’s interest in SLN from 90% to 60%, took place in September. Meanwhile, in September 1998 Falconbridge began test-drilling at the Koniambo site, and in 1999 the company identified an estimated 132m. tons of ore, grading 2.46% nickel. The eventual aim was to construct a smelter producing 54,000 tons of nickel (contained in ferronickel) per year, and it was hoped that a feasibility study for the project could be completed by the end of 2002. Under the Bercy accords, however, control of the Koniambo deposits will revert to SLN unless construction of the smelter has begun by the end of 2005. Another company, Goro Nickel (controlled by Inco), holds several claims covering nickel-cobalt deposits in the southern part of New Caledonia’s main island, with estimated reserves of more than 200m. tons of ore, averaging 1.6% nickel. In October 1999 Goro inaugurated a pilot plant for nickel processing, to test new technology for treating laterite ore by acid leaching and solvent extraction. If the testing is successful, it was hoped that a full-scale commercial plant, capable of producing 27,000 tons of nickel per year, would be constructed. In Indonesia the main nickel-producing companies are PT International Nickel Indonesia, an Inco subsidiary, and the government-controlled PT Aneka Tambang (PT Antam). The largest of PT Antam’s nickel mines is on Gebe Island, east of Halmahera, in the Maluku (Moluccas) archipelago. This mine has an estimated 27m. tons of reserves, with an average nickel content of 2.2%. Its output is divided, roughly equally, between high-grade saprolitic ore and lower-grade limonitic ore. Further large deposits of potentially exploitable ore containing nickel and cobalt have been located on Gag Island (about 40 km south-east of Gebe), in the province of West Papua (formerly Irian Jaya). In 1996 PT Antam formed a joint venture with BHP Minerals Ltd of Australia to evaluate prospects for developing these reserves. BHP Billiton, which has a 75% interest in the project, has estimated that Gag Island has total reserves (including inferred resources) of about 240m. tons of laterite ore,
COMMODITY SURVEYS 207
grading 1.35% nickel. In July 2000 BHP announced provisional agreement with Falconbridge for the division, on an equal basis, of BHP’s interest in the project and the consequent sharing of development costs. If terms could be agreed, a feasibility study, expected to last two years, was to be conducted to assess the viability of mining the ore. PT Antam is collaborating in a separate joint venture to develop nickel and cobalt deposits at several locations on Halmahera, north of the island’s Weda Bay. Its partner is a Canadian prospecting company, Weda Bay Minerals Inc, which has a 90% interest in the project. In 1999 Weda Bay Minerals reported that tests in the areas of exploration had shown indicated and inferred reserves of 117m. tons of ore, grading 1.36% nickel. (These reserves were subsequently reassessed at 202m. tons of ore, grading 1.37% nickel.) In June 2000 the company announced the commencement of a feasibility study, in which OM Group (OMG) of the USA was also to participate, scheduled for completion in early 2002, to consider exploitation of these deposits. If approved, the Halmahera project is expected to produce 30, 000 tons of nickel per year in intermediate products. The reserves of nickel of the People’s Republic of China were estimated at 3.7m. metric tons in 2001. Mined output of nickel in that year was estimated 50,700 tons. Elsewhere in the Far East, the reserves of nickel of the Philippines were estimated at 410,000 tons in 2001. Philippine mined output of nickel totalled an estimated 23,700 tons in that year. With estimated production of 265,000 metric tons, Russia was the world’s largest producer of nickel in 2001. In that year the country’s reserves of the metal were estimated at 6.6m. tons by the USGS. As noted above, Norilsk Nickel is the world’s largest nickelproducing enterprise, mining deposits at Norilsk, in Eastern Siberia, the location, reportedly, of more than 75% of the country’s reserves of nickel, and on the Kola Peninsula. According to the USGS, Russia’s output of nickel had, by the end of the 1990s, declined by some 40% compared with levels prevailing in the late 1980s. In 1999 exports of nickel contributed 1.7% of Russia’s total export earnings. Elsewhere among the former Soviet republics, Kazakhstan’s mined output of nickel amounted to an estimated 6,000 tons (metal content) in 1998. Ukraine, too, was formerly a significant producer of nickel: in 1999, according to the USGS, the Pobuzhskii mining and metallurgical complex in the Pobuga region of the country had an annual production capacity of 7,000 tons of nickel in ferronickel. Output fell sharply following the disintegration of the Soviet Union, however, and ceased entirely in 1996. In North America production of nickel by Canada in 2001 was estimated at 183,000 metric tons, the country ranking, accordingly, as the world’s third largest producer of the metal after Russia and Australia. At 6.6m. tons, Canada’s estimated reserves of nickel were on a par with those of Russia. In August 2002 it was reported that Inco had concluded an ‘Impact and Benefits Agreement’ with the Innu Nation and Labrador Inuit Association that would allow it to proceed with the development of nickel/copper/cobalt concentrate resources located near Voisey’s Bay in north-eastern Canada. In 2004 Inco plans to begin constructing a hydromet demonstration plant, which, it is hoped, will show, by 2009 at the latest, the viability of hydromet technology for the exploitation of the Voisey’s Bay reserves. The existence of the Voisey’s Bay nickel reserves has led to the intensification of exploration activity in Québec province, where new nickel mining and refining operations commenced
208 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
operations in the late 1990s. New nickel resources have also been discovered in the province of Ontario, which has long been established as Canada’s principal nickel-producing region. In Latin America Cuba possesses the largest reserves of nickel, estimated to total 5.6m. metric tons in 2001. In that year Cuban production of nickel amounted to 71,000 tons, the country thus ranking as the world’s sixth largest producer of the metal. Nickel mining is undertaken by Unión del Niquel in the western part of the island. In 2000 Norilsk was reported to have expressed interest in investing in a nickel project near Holguín, in eastern Cuba. Cuba’s exports of nickel ores and concentrates accounted for about 23% of the country’s total export earnings in 1996. Colombia was the second largest Latin American producer of nickel in 2001, with estimated output of 62,800 tons. According to the USGS, the country’s reserves of nickel totalled 920,000 tons in 2001. In the Cerro Matoso deposit, located in the south-west of the country, Colombia reportedly possesses one of the world’s richest resources of high-grade lateritic nickel. Brazil’s reserves of nickel were estimated at 670,000 tons in 2001, and in that year the country’s output of the metal totalled an estimated 44,900 tons. Brazil exploits nickel deposits at Fortaleza, in the state of Minas Gerais, and at Niquelândia, in the state of Goiás. In 2000 Brazil planned to raise its nickelproducing capacity from 34,000 tons per year to 107,000 tons per year by 2003, in response to stronger global demand for stainless steel, and generally improved prices for the metal world-wide. In 2001 the reserves of nickel of the Dominican Republic were estimated at 750,000 tons, while the country’s output of the metal in that year amounted to an estimated 29,000 tons. At the same time, Venezuela’s reserves of nickel were estimated at 610,000 tons. In 2001 the country’s output of nickel totalled 10,600 tons. South Africa possesses by far the largest reserves of nickel in Africa, estimated at 2.5m. metric tons in 2001. In that year the country’s production of nickel amounted to an estimated 36,300 tons. The Nkomati facility in Mpumalanga is South Africa’s only mine for primary nickel, the metal being otherwise produced as a by-product of platinum. Botswana’s reserves of nickel were estimated at 880,000 tons in 2001, and the country’s output of the metal in that year amounted to an estimated 32,700 tons. Elsewhere in Africa, Zimbabwe’s reserves of nickel were estimated at 240,000 tons in 2001, while output in that year totalled an estimated 7,480 tons. In the Middle East exploration undertaken since 1996 has revealed reserves of nickel to the west of Sana’a, in Yemen. Canadian Mountain Minerals (Yemen) Ltd and a Falconbridge subsidiary were reported to have formed a joint venture in 2000. in order to assess the commercial viability of these reserves. In Europe Greece’s reserves of nickel were estimated at 450,000 metric tons in 2001. Output of nickel amounted to 19,900 tons in that year. The Former Yugoslav Republic of Macedonia was estimated to have produced 1,900 tons of nickel in 1999, compared with 5, 800 tons the previous year. In Western Europe, Finland produced some 2,600 tons of nickel concentrate in 2000, and Norway a similar amount. Japan and the USA are the world’s largest nickel consumers, and Japan is, additionally, a major producer of refined nickel, all from imported materials. The republics of the former Soviet Union and the European Union (EU), especially Germany, are also important consumers. Consumption in the People’s Republic of China, the Republic of Korea and
COMMODITY SURVEYS 209
Taiwan advanced strongly in the 1990s, however, and it was forecast in 1996 that East Asia could account for almost one-quarter of world nickel consumption by 2005. In April 1979 dealing in nickel began on the London Metal Exchange (LME), despite opposition from the major producers, who feared that speculative free-market trading would increase volatility in prices. These fears have proved to be justified, and since the late 1970s nickel-producers have been operating in a highly cyclical trading environment, with wide and unpredictable fluctuations on the free market. However, the amount of nickel traded in this way is still relatively small. Producers typically obtain about 20 US cents per lb more for nickel that they supply than for metal that is traded on the LME. This arrangement, however, has been affected since 1991 by significant sales of nickel cathodes by the leading Russian mining company, Norilsk Nickel, which is the world’s largest nickelproducer (accounting for about 19% of total refinery production in 1998). In the 1990s Norilsk provided about 80% of Russia’s nickel output. In November 1998 the company approved a 10-year development programme, intended to modernize its mining, smelting and refining operations, conducted under licence, in northern Russia. The programme envisages funding of US $1,000m. by January 2003. If financing can be obtained, Norilsk plans to develop new levels in existing mines, to construct new mines, and to expand its exploration activities. On the LME the price of nickel in January 1995 stood at $10,160 (equivalent to £6,376 sterling) per metric ton, its highest level since 1990. The surge in prices occurred despite a rise in LME stocks of nickel to a record 151,254 tons in November 1994. The London quotation was reduced to $6,947.5 (£4,393) per ton in May 1995. It recovered to $9,200 (£5,962) per ton in August, but eased to $7,630 (£4,851) in October. The nickel price advanced to $8,885 (£5,618) per ton in November and ended the year at $7,930 (£5,106). Meanwhile, LME stocks of the metal steadily declined, reaching 44,556 tons in December. The nickel market remained volatile in the first few weeks of 1996, while the LME’s holdings continued to diminish. In early January the London price of nickel fell to US $7, 455 (£4,803) per ton, but at the beginning of February it reached $8,625 (£5,699). Thereafter, prices moved generally lower, and in August the London quotation was $6,837. 5 (£4,426) per ton. In the mean time LME stocks of nickel were reduced to 31,998 tons in July. The price of nickel recovered in September to $7,625 (£4,897) per ton, but declined in December to $6,310 (£3,732). The LME’s holdings of the metal rose to 49,776 tons in January 1997, but decreased to 45,174 tons in February. The London price of nickel advanced to $8,220 (£5,082) per ton in March, but fell to $5,862.5 (£3,480) at the end of the year. Meanwhile, LME stocks steadily expanded, reaching 67,056 tons in November. For 1997 as a whole, the average nickel price was $7,053 (about £4,300) per ton. Nickel prices continued to decline during the early months of 1998, and in May the London quotation fell to less than US $5,000 per ton. In September, despite a decrease in LME stocks of nickel to about 58,300 tons, the price of the metal was reduced to $4,000 (£2,375) per ton. Stock levels later rose, and in October the LME nickel price declined to $3,755 (£2,204) per ton. In November, following a strike at some nickel mines in New Caledonia, the price recovered to $4,230 (£2,549) per ton. However, in December, with LME stocks standing at about 63,500 tons, the London price of nickel fell to only $3,745 (£2,218) per ton: its lowest level, in term of US currency, since 1987. The slump in the
210 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
nickel market was attributed partly to a fall in demand for stainless steel, particularly from Asian countries experiencing financial problems. The LME’s stocks of nickel increased to 66,222 tons in February 1999, but declined to less than 50,000 tons in August. Meanwhile, there was a sustained rally in the nickel market, encouraged by a recovery in demand, and in early September the London price reached US $7,350 (£4,577) per ton. A week later, the LME’s holdings of the metal were reduced to 48,900 tons. After rising somewhat, levels of nickel stocks resumed their downward movement in October and fell to 46,158 tons in November, as demand for stainless steel continued to strengthen. Meanwhile, prices for the metal moved higher, and the LME quotation at the end of the year was $8,470 (£5,553) per ton: a rise of more than 100% in 12 months. The strong advance in nickel prices during 1999 was influenced by the closure of some high-cost production facilities and by technical problems at innovatory laterite nickel developments in Australia. Meanwhile, there was a strike at a major production plant in Canada. These trends in the nickel market continued during the early weeks of 2000. In March, during a seven-week strike at SLN’s operations in New Caledonia, the LME price of nickel (the official closing offer price at the end of morning trading on the LME) reached US $10, 660 per ton: its highest level, in terms of US currency, for more than nine years. While prices of the metal rose, stocks of nickel steadily declined, with the LME’s holdings reduced to less than 40,000 tons in February and to below 30,000 tons in April. The London price of nickel eased to $9,360 per ton in April, but advanced to $10,600 in May. The nickel price subsequently retreated, although demand remained strong, and in late July the LME quotation was $7,500 per ton. This downward price movement occurred despite a continuing decline in LME stocks of nickel, which fell to less than 20,000 tons in June and to only 15,684 tons in July. During the remainder of 2000 LME holdings of nickel continued to decline steadily, falling to only 9,678 tons in December. During August-December the average monthly London quotation ranged between $8,634 per ton, recorded in September, and $7,310 per ton in December. In early 2001 LME holdings of nickel continued to decline, falling to 8,304 tons in March. From April, however, they rose steadily, reaching 12,156 tons in May, 15,984 tons in June, 16,674 tons in July and 17,688 tons in August. In September LME stocks fell as low as 16,272 tons, ending the month at 16,716 tons, but thereafter, for the remainder of the year, they rose consistently, reaching 18,180 tons in October and 19,002 tons in November, ending the year at 19,188 tons. In 2001 the average monthly London quotation for nickel ranged between US $7,057 per ton, recorded in May, and $4,822 per ton in September. LME holdings of nickel increased substantially in January 2002, reaching 24,564 tons at one point. They declined in February, to 21,174 tons, and, again, in March, to 17, 004 tons. During April LME nickel holdings fell as low as 16,674 tons early in the month, but subsequently began to accumulate, rising as high as 20,778 tons. Stocks rose again, to 27,690 tons, in May, and to 29,130 tons in June before declining to 27,984 tons before the end of that month. In July LME holdings declined to 23,670 tons. During the first seven months of 2002 the average monthly London quotation for nickel ranged between $7,139 per ton in July, and $6,026 per ton in February.
COMMODITY SURVEYS 211
Export Price Index for Nickel (base: 1980=100)
Oil Palm
This tree, Elaeis guineensis, which is native to West Africa, is widely cultivated, mainly on plantations, in the tropics. The entire fruit is of use commercially; palm oil is made from its pulp, and palm kernel oil from the seed. Palm oil is a versatile product and, because of its very low acid content (4%–5%), is almost all used in food. It is used in margarine and other edible fats; as a ‘shortener’ for pastry and biscuits; as an ingredient in ice cream and in chocolate; and in the manufacture of soaps and detergents. Palm kernel oil, which is similar to coconut oil, is also used for making soaps and fats. The sap from the stems of the tree is used to make palm wine, an intoxicating beverage. Palm oil can be produced virtually through the year once the palms have reached oilbearing age, which takes about five years. The palms continue to bear oil for 30 years or more and the yield far exceeds that of any other oil plant, with 1 ha of oil palms producing as much oil as 6 ha of groundnuts or 10–12 ha of soybeans. However, it is an intensive crop, needing considerable investment and skilled labour. During the 1980s palm oil accounted for more than 15 % of world production of vegetable oils (second only to soybean oil), owing mainly to a substantial expansion in Malaysian output. Assisted by high levels of demand from Pakistan and the People’s Republic of China, palm oil considerably increased its share of world markets for vegetable oils in the early 1990s. In the late 1990s palm oil exports continued substantially to exceed those of soybean oil in international trade, although in 2000 the difference narrowed to only about 13%, compared with almost 70% in 1999. The increase in output of palm oil has posed a particular challenge to the soybean industry in the USA, which has, since the mid-1970s, greatly reduced its imports of palm oil. In 1988, in response to health reports that both palm and coconut oils tended to raise levels of cholesterol (a substance believed to promote arteriosclerosis in the body), several leading US food-processors announced that they were to discontinue the use of these oils. The scientific validity of these reports, however, has been vigorously challenged by palm oil producers. In 2001, according to provisional figures, world output of palm products totalled 6.8m. metric tons of kernels and a record 23m. tons of palm oil. The Far East was the main producing area, providing 5.3m. tons of palm kernels and 19.6m. tons of palm oil. The leading producer and exporter of palm oil is Malaysia, which, in recent years, has accounted for about 65%–70% of world trade in this commodity. More than 90% of the country’s production is exported, and in 1999 earnings from palm oil exports represented 4. 1% of Malaysia’s total export earnings. The most important markets for Malaysian palm oil
COMMODITY SURVEYS 213
Production of Palm Kernels (’000 metric tons)
* FAO estimate(s) † Unofficial figure(s). Source: FAO.
are India, the European Union, the USA, Japan and Pakistan. The country accounted for 51% of world production of palm oil in 2001, compared with 49.6% in 2000. Malaysia produced 11.7m. metric tons of palm oil in 2001, compared with 10.8m. tons in 2000. Because of continued growing world demand, the Malaysian Government is actively encouraging the industry; in 1977 a Palm Oil Registration and Licensing Authority (PORLA) was established to supervise all aspects of production—research, replanting and marketing. In 1980 a palm oil exchange, offering contracts for trading in fixed amounts at specified dates, was established in Kuala Lumpur—a logical development from Malaysia’s dominant position in the world palm oil trade. Since the early 1990s, however, growth in Malaysia’s palm oil output has been inhibited by severe labour shortages on the oil palm plantations, and government consent has been given to the limited recruitment of foreign workers. As oil palm production costs are low, and sales contracts are denominated in US dollars, Malaysian producers benefited from an upward trend in prices during the Asian economic crisis, attributable in part to restrictions on Indonesian supplies entering world trade (see below). In 1999 a number of growers’ groups merged to form the Malaysian Palm Oil Association. In May 2000 a new statutory body, the Malaysian Palm Oil Board (absorbing PORLA), became operational. In Indonesia, the second largest producer and exporter, the area under oil palm has expanded rapidly in recent years. In 1990 approximately 715,000 ha were harvested and a further 400,000 ha had been planted. In the early 1990s about 100,000–150,000 ha per year were being brought under oil palm cultivation, and production of palm oil, which had been forecast to reach 4.9m. metric tons annually by the year 2000, exceeded this target in 1996, when output reached 5.0m. tons. Production rose to 5.4m. tons in 1997, to 5.9m. tons in 1998, and to 6.3m. tons in 1999. In 2001 Indonesia produced 7.1m. tons of palm oil,
214 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Palm Oil (’000 metric tons)
* FAO estimate(s) † Unofficial figure(s). Source: FAO.
compared with 7.0m. tons in 1999. In 1999 Indonesia derived 3% of its total export revenue from sales of palm oil and of palm kernel oil. The Asian economic crisis, which caused a sharp depreciation in the value of the Indonesian rupiah and led to steep rises in the government-subsidized domestic price of cooking oils, prompted the Indonesian Government to impose a three-month ban on oil palm exports from December 1997. This embargo was renewed in March 1998 and replaced in May by a 40% tax on oil palm exports. The tax was increased to 60% in July, but was reduced to 40% in early 1999. During the 1990s oil palm cultivation was encouraged in Myanmar and Papua New Guinea. In Africa a large proportion of oil palms still grow in wild groves and the bulk of oil production is for local consumption. In export terms, Africa has, since 1980, accounted for less than 3% of world trade in palm oil, and in 2000 African exports comprised only 2.2% of the world market. Nigeria was the world’s leading producer of palm oil until overtaken by Malaysia in 1971. The loss of Nigeria’s market dominance was, in part, a result of civil war and the authorities’ neglect to replace old, unproductive trees. Since the early 1980s, however, measures have been taken to revive palm oil output and to enhance the efficiency and capacity of associated mills and refineries. Foreign investment has been encouraged, as has the transfer of inefficiently managed state-owned plantations to private-sector ownership. A ban by the Nigerian government on palm oil imports, in force since 1986, was partially relaxed in 1990, however, as domestic output (of which an estimated 70% came from smallholder producers) was able to satisfy only two-thirds of a forecast annual demand of 900,000 metric tons. Nigeria’s reliance on imports subsequently increased, and increases in domestic production now tend to be used for import substitution rather than to boost exports. In 2001 production of palm oil was estimated at 670,000 tons. In Benin, where the oil palm has traditionally been a staple crop of the national economy, oil palm plantations and natural palm groves cover some 450,000 ha, although, in volume
COMMODITY SURVEYS 215
terms, the country’s production of palm oil is small on a world scale. In 1997 exports of palm and palm-kernel oil contributed 0.8% of Benin’s total export earnings. Côte d’Ivoire is now Africa’s principal palm oil exporter and has, in recent years, regularly been the fourth largest in the world, behind Malaysia, Indonesia and Singapore. However, more than one-half of Côte d’Ivoire’s palms were planted in 1965–70 and have passed their peak of productivity. Management and financial difficulties during the 1990s, as well as declining world prices for palm oil, led to a scaling-down of the replanting programme. However, following the revival in prices during 1997 and 1998, when Côte d’Ivoire had recourse to imports from Malaysia in order to satisfy domestic demand, plans were announced in 1999 to increase capacity to 600,000 metric tons annually by 2010 (in 2001, palm oil production declined to 205,000 tons, compared with 278,000 tons in the previous year). In 2000 Côte d’Ivoire ranked as the world’s fifth largest exporter of palm oil, having been overtaken by Colombia in that year. The palm oil sector in Cameroon has similarly experienced delays in the implementation of replanting. The state-owned palm oil company, SOCAPALM, was transferred to private-sector ownership (90%) in 1999, and renamed PALMCAM/ SOGEPAR. Other African producers, notably Liberia and Ghana, lack sufficient refinery capacity to service their palm oil output. Tanzania has received proposals for the construction by Malaysian producers of a palm oil refinery to process its crude palm oil, with initial output forecast at 30,000 tons of edible oils annually. In 1999 a palm oil extraction mill, financed by the Netherlands, commenced production in south-east Tanzania. Uganda, which has potential to develop a palm oil sector, has received international aid to promote its establishment. The oil palm industry in Latin America developed strongly during the later decades of the 20th century. Colombia has expanded its industry particularly rapidly, and is the region’s largest producer of palm oil, followed by Ecuador, Costa Rica and Brazil. The nature of the oil palm means that the intensive farming it requires is all but impossible outside a tropical climate. Internationally, palm oil is faced with sustained competition from the other major edible lauric oils—soybean, rapeseed and sunflower oils—and these markets are subject to a complex and changing interaction of production, stocks and trade. In the longer term, prospects for palm oil exporters (particularly the higher-cost producers in sub-Saharan Africa) do not appear favourable. Technological advances in oil palm cultivation, particularly in the introduction of laboratory-produced higher-yielding varieties (HYVs), may also militate against the smaller-scale producer, as, for economic and technical reasons, many HYVs can be produced only on large estates, exposing smallholder cultivators to increasingly intense price pressure. During September 1996 the import price of Malaysian palm oil in the Netherlands (c.i.f. Rotterdam) declined from US $572.5 per metric ton to $502.5 per ton. The price advanced to $585 per ton in February 1997, but fell to $467.5 in July. Subsequently the market revived, and in late December palm oil traded at $565 per ton. The upward movement continued in the early months of 1998, and in May the import price of palm oil reached $800 per ton. In June the price eased to $592.5 per ton. The Rotterdam price of palm oil stayed within this range for the remainder of 1998, ending the year at $605 per ton. For the year as a whole, the European import price (c.i.f. north-west Europe) averaged $671.08 per ton, compared with $545.83 in 1997. However,
216 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Export Price Index for Palm Oil (base: 1980=100)
from January 1999 there was strong downward pressure on palm oil prices, as demand fell while supplies remained plentiful. By early August the Rotterdam import price had been reduced to only $300 per ton. The sharp fall in prices was partly due to a Chinese decision to import oilseeds rather than the oils derived from them, in an attempt to protect China’s domestic processing industry. For 1999 as a whole, the European import price of palm oil averaged $436.00 per ton: 35% below the previous year’s level. In February 2000 the Rotterdam price fell to $290 per ton. For 2000 as a whole, the European import price averaged $310.25 per ton. A further decline, of 7.9%, to $285.67 per ton, was recorded in 2001.
Petroleum
Crude oils, from which petroleum fuel is derived, consist essentially of a wide range of hydrocarbon molecules, which are separated by distillation in the refining process. Refined oil is treated in different ways to make the different varieties of fuel. More than four-fifths of total world oil supplies are used as fuel for the production of energy in the form of power or heating. Petroleum, together with its associated mineral fuel, natural gas, is extracted both from onshore and offshore wells in many areas of the world. From storage tanks at the oilfield wellhead, crude petroleum is conveyed, frequently by pumping for long distances through large pipelines, to coastal depots where it is either treated in a refinery or delivered into bulk storage tanks for subsequent shipment for refining overseas. In addition to pipeline transportation of crude petroleum and refined products, natural (petroleum) gas is, in some areas, also transported through networks of pipelines. Crude petroleum varies considerably in colour and viscosity, and these variations are a determinant both of price and of end-use after refining. In the refining process, crude petroleum is heated until vaporized. The vapours are then separately condensed, according to their molecular properties, passed through airless steel tubes and pumped into the lower section of a high, cylindrical tower, as a hot mixture of vapours and liquid. The heavy unvaporized liquid flows out at the base of the tower as a ‘residue’ from which is obtained heavy fuel and bitumen. The vapours passing upwards then undergo a series of condensation processes that produce ‘distillates’, which form the basis of the various petroleum products. The most important of these products is fuel oil, composed of heavy distillates and residues, which is used to produce heating and power for industrial purposes. Products in the kerosene group have a wide number of applications, ranging from heating fuels to the powering of aviation gas turbine engines. Gasoline (petrol) products fuel internal combustion engines (used mainly in road motor vehicles), and naphtha, a gasoline distillate, is a commercial solvent that can also be processed as a feedstock. Propane and butane, the main liquefied petroleum gases, have a wide range of industrial applications and are also used for domestic heating and cooking. Petroleum is the leading raw material in international trade. World-wide demand for this commodity totalled 75.3m. barrels per day (b/d) in 2001. The world’s ‘published proven’ reserves of petroleum and natural gas liquids at 31 December 2001 were estimated to total 143,000m. metric tons, equivalent to about 1,050,000m. barrels (1 metric ton is equivalent
218 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Crude Petroleum (million metric tons, including natural gas liquids)
Source: BP, Statistical Review of World Energy 2002.
to approximately 7.3 barrels, each of 42 US gallons or 34.97 imperial gallons, i.e. 159 litres). The dominant producing region is the Middle East, whose proven reserves in December 2001 accounted for 65.3% of known world deposits of crude petroleum and natural gas liquids. The Middle East accounted for 30% of world output in 2001. Seven of the 11 members of the Organization of the Petroleum Exporting Countries (OPEC) are Middle Eastern countries, and the region is, accordingly, crucial to the stability of world markets for the commodity. Saudi Arabia possesses by far the largest proven reserves of petroleum in the world. In December 2001 these were estimated at 36,000m. metric tons, equivalent to almost 25% of the total world-wide. Saudi Arabia is also, consistently, the world’s largest producer of crude petroleum, with output in 2001, at 422.9m. tons, equivalent to 11.8% of total production world-wide. In 2000 exports of crude petroleum and petroleum products accounted for almost 92% of total Saudi Arabian export earnings. Petroleum regularly contributes as much as 80% of total government revenues and some 40% of the country’s gross domestic product (GDP). This very high dependence on petroleum persists despite attempts at economic diversification: the country’s economic fortunes thus remain inextricably linked to the vicissitudes of world markets for petroleum. In regional terms, Asian countries constitute the most important market for Saudi Arabian exports of both crude oil and refined petroleum products. However, the country remains the second largest supplier of crude oil and refined products to the USA, and a key supplier to European markets.
COMMODITY SURVEYS 219
In 2001, with output of 182.9m. metric tons, Iran was the second largest producer of crude petroleum in the Middle East, and the fourth largest producer world-wide. At December 2001, Iran’s proven reserves of crude petroleum were estimated to total 12, 300m. tons, equivalent to 8.5% of total reserves world-wide. Like that of Saudi Arabia, the Iranian economy is overwhelmingly reliant on the petroleum sector, with exports of crude oil and refined petroleum products regularly accounting for some 80% of total export earnings and as much as 50% of total state revenues. The reform of the economy, which might reduce its dependence on petroleum, has proceeded unevenly owing to domestic political opposition. Iran, which has discovered considerable new reserves of petroleum since 1999, reportedly plans to double its production by around 2025. At present, however, the terms governing foreign investment, on which the realization of such an ambitious plan would depend, are unattractive by international standards. In spite of its role as a major exporter of crude petroleum, Iran has insufficient refining capacity to meet domestic demand for a range of distillate products, which it has, consequently, been obliged to import since the early 1980s. With output of 117.9m. metric tons, Iraq was the third largest producer of crude petroleum in the Middle East, and, jointly, with the United Kingdom, the 10th largest producer world-wide, in 2001. In December 2001 Iraq’s proven reserves of petroleum were estimated at 15,200m. tons, the second greatest in the world after those of Saudi Arabia. Moreover, the neglect of exploration activities in recent years means that Iraq’s reserves are almost certainly underestimated. Iraq’s exports of petroleum currently take place under the supervision of the UN, with revenues allotted for the purchase of humanitarian supplies, for the compensation of victims of Iraqi aggression during the Gulf War of 1990–91, and for financing the UN’s weapons-monitoring programme in Iraq (suspended in 1998). Since the commencement of the so-called UN ‘oil-for-food’ programme, Iraq has periodically suspended its exports of petroleum, either in protest at the conditions attached to the programme, or at Israeli military action in the Palestinian West Bank. The Government reportedly has ambitious plans to increase crude production capacity once UN sanctions have been lifted. However, in spite of their contractual obligations, international oil companies are reportedly proceeding slowly in the development of Iraq’s upstream capacity, owing to the continuation of the UN sanctions regime. In 2001 the United Arab Emirates (UAE) ranked as the fourth largest producer of crude petroleum in the Middle East, with output of 113.2m. metric tons, equivalent to 3.2% of total production world-wide. In December 2001 the UAE’s proven reserves of crude petroleum were estimated at 13,000m. tons, the fourth largest in the world. The UAE has successfully pursued an economic diversification programme and is considerably less dependent on exports of oil, which account for about 70% of total export revenues, than other major Middle Eastern petroleum producers. Among the seven federated emirates that constitute the UAE, Abu Dhabi possesses more than 90% of the proven reserves of petroleum. They were added to substantially during the 1990s through improved recovery rates and new discoveries. At December 2001 Kuwait’s proven reserves of petroleum, estimated at 13,300m. metric tons, were the third largest in the world. With production of 104.2m. tons, Kuwait was the fifth largest producer of petroleum in the Middle East in 2001, accounting for 2.9%
220 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
of total production world-wide in that year. Like most of the other major Middle Eastern petroleum producers, Kuwait’s economy is overwhelmingly reliant on the petroleum sector. In 1999 exports of petroleum and petroleum products accounted for more than 90% of total export earnings. Asian countries, including India, Japan, the Republic of Korea and Thailand, constitute the most important market for Kuwaiti crude, and the country is also an important supplier of the European and US markets. Like Saudi Arabia and the UAE, Kuwait is unusual among the major oil-producing countries in that it still has substantial excess production capacity. ‘Project Kuwait’, a programme aimed at doubling production at five northern oilfields by about 2010, with the help of foreign investment, has made little progress owing to domestic political opposition, however. Kuwait’s Constitution does not permit foreign ownership of the country’s mineral resources. Oman, Qatar, Syria and Yemen are all relatively small producers of petroleum. At December 2001 Oman’s proven reserves of petroleum were estimated at 700m. metric tons, while production in 2001 amounted to 47.4m. tons. Like those of the larger Middle Eastern producers, Oman’s economy is highly dependent on the petroleum sector: in 1999 exports of crude petroleum and petroleum products accounted for about 77% of the country’s total export earnings. The development of the country’s petrochemicals industry, using natural gas resources as a feedstock, is the focus of attempts to reduce this dependence. Oman is not a member of OPEC, but has co-operated with the Organization in recent years by reducing its production in line with OPEC’s strategy to stabilize world markets for oil. Qatar’s proven reserves of petroleum were estimated at 2,000m. tons in December 2001. Production of petroleum totalled 36m. tons in 2001. Qatar is a significant exporter of petroleum to Asia, with Japan constituting its most important market. In the mid-1990s exports of petroleum and petroleum products accounted for more than 70% of Qatar’s total export earnings. Qatar has invested heavily, since the mid-1990s, in new oil recovery systems, designed to extend the productive capacity of its existing fields, and in exploration to locate new reserves. Attempts to reduce Qatar’s reliance on the petroleum sector are focused on the development of the country’s huge reserves of natural gas. At December 2001 Syria’s proven reserves of petroleum were estimated at 300m. tons. Production amounted to 27.3m. tons in 2001. In 1999 exports of crude petroleum accounted for almost 63% of Syria’s total export earnings. Syria is pursuing an intensive programme of exploration for new reserves of petroleum and natural gas, without which the country may (before 2010) become a net importer of oil as production from its mature oilfields declines. At December 2001 Yemen’s proven reserves of petroleum were estimated at 500m. tons. These were assessed as sufficient to last for another 24.2 years at the rate of production, 21.7m. tons, prevailing in 2001. In 2000 Yemen’s exports of petroleum and petroleum products accounted for 96% of the country’s total export earnings. This high dependence on the petroleum sector has led to an intensification of exploration activities since the late 1990s. In 2002 Yemen was proceeding with the construction of a third petroleum refinery which, on completion, should enable self-sufficiency in, and create an exportable surplus of, refined petroleum products. In North America the USA is a major producer of petroleum, ranking second to Saudi Arabia in 2001, with production of 351.7m. metric tons. The USA’s proven reserves of petroleum, however, estimated at 3,700m. tons in December 2001, were very much
COMMODITY SURVEYS 221
smaller than those of the major Middle Eastern producer countries and were equivalent to only about 55% of Russia’s proven reserves. They were also slightly smaller than those of neighbouring Mexico. The USA is by far the world’s largest consumer of petroleum and petroleum products. In 2001, according to the US Energy Information Administration (EIA), the country’s average daily consumption amounted to 19.6m. barrels, 44% of which was accounted for by motor gasoline. The same source estimated that, in 2001, US total gross oil imports (i.e. both crude petroleum and petroleum products) were 11.6m. b/d, equivalent to some 59% of the country’s total demand for oil. Leading suppliers in 2001 were Canada (1.8m. b/d), Saudi Arabia (1.7m. b/d), Venezuela (1.5m. b/d) and Mexico (1.4m. b/d). At December 2001 Canada’s proven reserves of petroleum were estimated at 800m. metric tons. Production of petroleum in 2001 amounted to 129.1m. tons. In 2000 exports of crude petroleum accounted for 12.5% of Canada’s total export earnings. As noted above, Canada was the leading supplier of petroleum (including petroleum products) to the USA in 2001. In that year Canada was also the third largest supplier of crude petroleum to the USA, with deliveries totalling 1.3m. b/d. Reserves of light oil in Canada’s leading producer state, Alberta, are reportedly declining, and exploration activities are focused on the state’s very substantial deposits of heavy crude petroleum and oil sands, the latter a source of highquality synthetic crude petroleum. The Far East and Australasia, including the People’s Republic of China but excluding Cambodia and Laos (for which separate figures were not available), contained 5,900m. metric tons of proven reserves (4.2% of the world total) at the end of 2001, when the region accounted for some 10.6% of world production. Indonesia, China and Malaysia are the major petroleum exporters in the Far East and Australasia, and Indonesia is the world’s leading exporter of liquefied natural gas (LNG). Japan, the world’s second largest consumer of petroleum, is the dominant importer in the region. China, the Republic of Korea and Taiwan are also substantial consumers of petroleum products. Within the region generally, there has been a rising level of exploration activity by international petroleum companies in recent years. Joint ventures have increasingly been sought by countries committed to policies of state control and central economic planning. These countries include not only China and Viet Nam, but also India, Myanmar and Cambodia. Private-sector exploration operations, which have long been a central feature of the petroleum industry in Australia, Indonesia and Malaysia, were extended in 1991 to onshore, as well as offshore, blocks in India, whose major oilfields are located offshore from Mumbai. Previously, the government-owned Oil and Natural Gas Co of India had retained an exploration monopoly in the more promising onshore areas. However, the maintenance of government regulations on exploration activity has inhibited the participation of foreign investors in the quest for the development of new reserves. Measures to dismantle state controls on the petroleum industry, announced in early 1998, were expected to open the way to a significant increase in foreign investment. Contracts issued in January 2000 permitted companies from the United Kingdom, France, Russia and the USA rights to offshore exploration, in partnership with Indian firms. In December 2001 India’s recoverable reserves of petroleum were estimated at 600m. metric tons, which, at current
222 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
rates of extraction, are expected to be exhausted by about 2017. Thailand has proposed joint-venture arrangements with Cambodia and Viet Nam to explore an offshore field overlapping the coastal waters of the three countries. Viet Nam, whose recoverable petroleum reserves were estimated at 100m. tons in 2001, has granted exploration concessions to more than 30 foreign companies, although many have subsequently withdrawn, owing to disappointing discoveries and difficulties related to regulation. The first producing offshore oilfield, operated by Vietsovpetro (a joint company with the Soviet Union from 1980, and with Russia from 1992), was followed in October 1994 by the coming on-stream of a second site, jointly operated by the state petroleum monopoly, Petrovietnam, and BHP Petroleum of Australia, at the Dai Hung oilfield, located 280 km off the country’s south coast. Dai Hung has been estimated to contain about 370m. barrels of petroleum. The field’s production, however, has fallen short of initial expectations. Viet Nam has asserted exploration claims over a larger area of the South China Sea, but these are disputed by China, the Philippines, Indonesia, Brunei, Malaysia and Taiwan. In 1992 the Chinese Government awarded a contract to a US company to explore for petroleum in a sector of this area, where substantial deposits of hydrocarbons are believed to exist. China has also pursued a dispute with Japan over the sovereignty of the Diaoyu (Senkaku) group of eight uninhabited islands in the East China Sea, which are believed to lie in an area of offshore production potential. The Republic of Korea and the Democratic People’s Republic of Korea are also involved in disputes with China over the demarcation of exploration rights in the Yellow Sea continental shelf. China is the third largest consumer of petroleum in the world after the USA and Japan. Consumption totalled 230.1m. metric tons in 2001, and is forecast to overtake that of Japan by 2010 and, possibly, to rise to more than 500m. tons annually by 2020. China has been a net importer of petroleum since 1993 and domestic production is oriented, primarily, towards meeting domestic consumption. The Daqing oilfield in Heilongjiang Province accounts for almost one-third of domestic production, but output there is declining owing to natural depletion. China has sought foreign participation to assist in the extension of production at its second largest oilfield at Liaohe in the north east of the country, and, in late 2000, attempted to remove some of the regulatory obstacles to the collaboration of foreign oil companies with their Chinese counterparts. Chinese production capacity is currently, by and large, located onshore and the development of offshore reserve is a focus of government energy strategy. Recent exploration activity has reportedly been concentrated on areas in the Bohai Sea, to the east of Tianjin, and the Pearl River mouth. Realizing that its dependence on imports is likely to increase, the state-owned China National Petroleum Corpn (CNPC) has purchased interests in various foreign exploration and production projects. China has also held talks with Russia regarding the feasibility of constructing a pipeline link to allow China to import Russian crude oil. China’s recoverable petroleum reserves were estimated to total 3,300m. tons in December 2001. In early 1998 the Governments of the People’s Republic of China and Taiwan approved an agreement whereby their state-owned petroleum corporations would conduct joint offshore exploration activities in the South China Sea. In the late 1990s, in association with its proposal to seek membership of the World Trade Organization (WTO), the People’s Republic of China
COMMODITY SURVEYS 223
announced moves towards a future liberalization of the operations of its petroleum industry. In 1989 the Governments of Australia and Indonesia established a ‘zone of co-operation’ in an area of the Timor Sea known as the ‘Timor Gap’, to allow petroleum exploration and development to proceed, on a profit-sharing basis, in a disputed maritime area covering 62, 000 sq km. This agreement was unsuccessfully challenged in the International Court of Justice by Portugal, acting on behalf of the people of its former colony of East Timor. Indonesia, whose reserves are becoming depleted and which is consequently expected to become a net importer of petroleum during 2005–10, is actively promoting exploration for new reserves in remote areas of its eastern archipelago. In 1999 it was estimated that total reserves in the ‘zone of co-operation’ exceeded 100m. barrels of petroleum. Following the vote for independence in East Timor, the UN, as the body responsible for a transitional administration there, signed a treaty with Australia in February 2000 to extend the terms of the 1989 agreement, although it appeared unlikely that any significant production would commence before 2003. By 2004 Indonesia is expected to have brought into production three major new petroleum projects, although these are unlikely to increase overall production as output from mature fields declines. The West Seno field, off shore of East Kalimantan, is scheduled to come on stream by the end of 2002, while capacity at the Belanek project on West Natuna in the South China Sea will be raised substantially by 2004. The Banyu Urip oilfield in Java is expected to come on stream in 2003. In 1991 the Government of Cambodia invited foreign tenders for 26 onshore and offshore blocks, and further exploration concessions were granted in the following year. In 1994 foreign capital was sought for the exploration of three additional offshore blocks and for 19 onshore blocks along the Tonl’ Sap lake area and along the Mekong river, and 10 additional blocks were made available in 1996. To date, however, only four wells have been drilled, of which three have been found to contain some petroleum or natural gas. In 1990 Myanmar signed onshore exploration contracts with 10 foreign petroleum companies, although exploration activity had ceased by mid-1994, following disappointing results. Progress has been made, however, in the development of the Yadana offshore field of liquefied petroleum gas, whose recoverable reserves have been estimated at 160,000m. cu m. Initial exports of natural gas from the Yadana field to Thailand commenced in 1998. The offshore Yetagun field, with estimated recoverable reserves of 34,000m. cu m, began production in May 2000. Petroleum consumption in the region (excluding Cambodia and Laos) increased by an annual average of 1.1% during the period 1991–2001. Singapore has become the world’s third largest refining centre (after Rotterdam and Houston), with a capacity of more than 1m. b/d. The Republic of Korea, Indonesia and Thailand have been expanding their refinery capacity to enable them to export refined products. Japan has been increasing its primary refining capacity, in an effort to reduce its reliance on imports, and in 2001 Viet Nam was constructing a refinery with a capacity of some 140,000 b/d in Quang Ngai province in order to lessen its import dependence. About 2m. b/d of new refinery capacity came on stream during 1996–98 from the expansion of existing facilities and the opening of new refinery plants in the Philippines, Thailand, the Republic of Korea, Malaysia, India, Taiwan and China.
224 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
In 1993 China became, for the first time in 30 years, a net importer of crude petroleum and petroleum products. China’s petroleum import requirements have subsequently increased, and have been forecast to reach 100m. metric tons annually by 2010 (compared with an estimated 33m. tons in 1997), unless domestic production can be substantially expanded. In the late 1990s its refineries were operating at less than 80% of full capacity, and more than 100 small refineries were closed down. The development of refining capacity is currently focused on the improvement of existing facilities rather than the construction of new ones. In particular, China needs to expand its capacity for refining heavy Middle Eastern crude petroleums, which will be imported in greater quantities in future. In the mid-1990s the Far East and Australasia region relied upon imports from the Middle East for about 71% of its crude petroleum requirements. The region’s total imports of petroleum were expected to exceed 9m. b/d in the late 1990s, and these requirements were forecast to rise to 19m. b/d by 2010, of which the Middle East was projected to account for about 90%. Regional demand for LNG is also advancing rapidly. It has been forecast that increasing requirements for electricity use, and delays in the development of nuclear and coal-fired power plants, could raise levels of Far East demand to 90m. tons of LNG annually by the year 2010, compared with consumption of 41.9m. tons in 1991. Nigeria’s first petroleum discovery was made in the Niger delta region in 1956, and exports began in 1958. Production and exports increased steadily until output was disrupted by the outbreak of civil war in 1967. After the end of hostilities, in 1970, Nigeria’s petroleum production greatly increased and it became the country’s major industry. Since Libya restricted output in 1973, Nigeria has been Africa’s leading petroleum-producing country. Being of low sulphur content and high quality, Nigerian petroleum is much in demand on the European market. Nigeria’s proven reserves were estimated to be 3,200m. tons at 31 December 2001. A member of OPEC, Nigeria accounted for 7.1% of total OPEC production of 1,460m. tons in 2001. The state petroleum enterprise, the Nigerian National Petroleum Corpn (NNPC), operates refinery facilities at Kaduna, Warri, Port Harcourt and Alesa Eleme. In 2001 their total annual capacity was about 22m. metric tons, although Nigeria occasionally has recourse to imports of refined petroleum products in order to satisfy its domestic requirements. In late 1999 Nigeria commenced exports of liquefied natural gas, while plans proceeded for the construction of a pipeline to convey natural gas from the Escravas field, in Delta State, to Benin, Ghana and Togo. In 2000 Nigeria was the fifth largest exporter of petroleum to the USA. In 1999 exports of crude petroleum and its derivatives provided almost 99% of Nigeria’s total export earnings. Although petroleum sales normally provide about 80% of federal government revenue, considerable official revenue is lost through illegal exports of oil to neighbouring countries, in the form of petrol, kerosene, diesel oil and fuel oil. Angola’s first petroleum discovery was made in 1955 near Luanda. However, the Cabinda province has a major offshore deposit, in production since 1968, which now forms the basis of Angola’s oil industry. Output from Cabinda was briefly disrupted by the country’s civil war, but has proceeded uninterruptedly since 1977, and has risen steadily since 1982. In 2000 Angola obtained 88% of its foreign earnings from exports by the petroleum sector, which in the mid-1990s accounted for about 80% of government revenue. In 2001 Angola’s proven oil reserves were assessed at 700m. metric tons;
COMMODITY SURVEYS 225
however, with a number of oilfields currently under development and continuing discoveries of new deep-water petroleum fields, prospects exist for a considerable expansion in the petroleum sector, given an eventual restoration of internal order. The discovery, in 1997, of an estimated 103m. tons of recoverable offshore reserves has since been undergoing commercial evaluation. Most of Angola’s output is exported in crude form, with exports to the USA accounting for 40% of Angolan production in 2000. Plans exist to augment the capacity of Angola’s sole refinery, at Luanda, which was 2m. tons annually in 2001, by the construction of a second refinery. The Republic of the Congo, with proven recoverable reserves estimated at 200m. tons in December 2001, entered onshore petroleum production in 1957. Subsequent expansion, however, has been in operations offshore, where major new deposits, discovered in 1992, began to augment the country’s petroleum output from 1996. Further significant offshore discoveries have been made since 1998. A petroleum refinery at Pointe-Noire, with an annual capacity of 1.1m. tons in 2002, also processes some Angolan production. In neighbouring Gabon, whose recoverable reserves were estimated at 300m. tons in 2001, the exploitation of petroleum deposits began in 1956, and, as in the Congo Republic, was increased as offshore fields came into production. In 1999 sales of petroleum and petroleum products provided more than 74% of export revenue. A member of OPEC until its withdrawal from the organization in December 1996, Gabon’s output accounted for only 1.4% of OPEC’s total output in that year. Cameroon, which is virtually self-sufficient in oil and petroleum products, derived about 36% of its export income from this source in 1998/99. New exploration and development projects, however, were not actively pursued during the 1990s, and the country’s proven reserves (estimated at 55m. metric tons in 1998) were nearing exhaustion in the early 2000s. The Democratic Republic of the Congo (DRC) entered offshore petroleum production in 1975, operating from oilfields near the Atlantic coast and at the mouth of the River Congo. These deposits became depleted at the end of the 1980s (estimates of its proven reserves fell from 13.2m.tons in 1989 to 7.6m. tons in 1990). The level of these reserves was substantially replenished during 1991, however, raising estimates to 25.6m. tons for each of the subsequent seven years. Although the DRC has an annual refinery capacity of 850,000 tons, its exceptionally heavy-grade petroleum cannot be processed locally and the DRC therefore cannot consume its own output. Côte d’Ivoire, with estimated proven reserves of 13.7m. metric tons in 2001, and Benin, whose proven reserves were estimated at 1.1m. tons in 1998, are among the other smaller sub-Saharan offshore producers. These were joined in 1991 by Equatorial Guinea, where the offshore Zafiro oilfield, north-west of Bioko, commenced production in late 1996. Subsequent output advanced very rapidly, reaching 9m. tons in 2001 and contributing significantly to the country’s economic growth. Deposits of an estimated 52m.–58m. tons of petroleum have been identified off the coast of Senegal, but the development of these reserves (which are overwhelmingly of heavy oil) is not economically feasible at present. The exploitation of identified petroleum reserves of 40m.–50m. tons in south-western Chad, which had been interrupted by prolonged internal unrest, is planned by an international consortium. Output from the field, near Dobra, would be conveyed by a 1, 060-km pipeline, through Cameroon, to the Atlantic coast. Finance for the project, which has provoked widespread concern about its potential for environmental damage, was
226 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
approved by the World Bank in June 2000. In 1998 Sudan, a relatively minor producer with estimated proven reserves of 35.9m. tons in that year, finalized an agreement with four foreign companies to construct a 1,600-km pipeline to convey output from western Sudan to a terminal at Bachair, south of Port Sudan. The pipeline, with the capacity to carry 450, 000 b/d, was inaugurated in mid-1999, and was initially expected to carry about 150,000 b/ d. Commercial deposits of petroleum in Southern Sudan remain unexploited, pending the eventual resolution of internal unrest. Among other sub-Saharan African countries where petroleum reserves are known or believed to exist, but which do not yet produce, are Guinea, Mozambique, Swaziland, Eritrea, São Tomé and Príncipe, South Africa and Tanzania. Exploration has also taken place, or is under way, in Ethiopia, Namibia, Kenya, Madagascar and Zimbabwe. Gabon, which became a full member of OPEC in 1975, terminated its membership with effect from January 1997 (see above). The four African members of OPEC formed the African Petroleum Producers’ Association (APPA) in 1987. Angola, Benin, Cameroon, the DRC, the Republic of the Congo, Côte d’Ivoire, Egypt and Equatorial Guinea subsequently joined the association, in which Tunisia has observer status. Apart from promoting cooperation among regional producers, the APPA, which is based in Brazzaville, in the Congo Republic, co-operates with OPEC in stabilizing oil prices. Latin America contained 17,500m. metric tons of proven petroleum reserves (12.2% of the world total) at the end of 2001, and accounted for 14.8% of world production in that year. Mexico was the world’s leading petroleum producer in 1921 but by 1938, when the industry was nationalized (it remains in the control of a government agency, Petróleos Mexicanos—PEMEX), production had fallen dramatically. The discovery of extensive deposits of petroleum in the states of Tabasco and Chiapas, and off shore in the Bay of Campeche, enabled output to increase significantly in the 1970s. Mexico’s proven reserves of petroleum stood at 3,800m. metric tons at the end of 2001. Mexico was the world’s fifth largest producer of petroleum in 2001 and, in 1999, after Brazil, the second largest producer of refined petroleum products in Latin America, with total output of some 65m. tons. Since the mid-1980s Mexico’s petroleum revenues have been affected by lower levels of exports, together with a series of price reductions authorized by the Government, and the commodity’s contribution to the country’s earnings of foreign exchange has, accordingly, reflected the level of prices in international petroleum markets. Mexico’s sales of petroleum and its derivatives, which provided 17.2% of foreign earnings in 1992, accounted for 10.0% in 1997, 5.9% in 1998 and 7.0% in 1999. The average price of Mexico’s heavy crude petroleum, Maya-22, was $15.82 per barrel in 2001, compared with $20.20 in 2000. In 1999 the average price of Maya-22 was only $6.38 per barrel, its lowest annual level for 12 years. The price of Mexico’s light crude, Isthmus-33, averaged $22.03 per barrel in 2001, compared with $24,75 in 2000. Maya-22 accounts for more than 50% and Isthmus-33 for less than 33% of total production. A third Mexican crude, Olmeca-39, accounts for about 20% of total production. Brazil’s proven reserves of petroleum were assessed at 1,200m. metric tons at the end of 2001. The state-owned petroleum company, Petróleo Brasileiro (PETROBRÁS), operates petroleum refineries whose throughput totalled some 84m. tons in 2001, making Brazil the region’s largest petroleum refiner. The company’s monopoly of the Brazilian petroleum
COMMODITY SURVEYS 227
sector was ended in 1997 by the adoption of legislation allowing private-sector investment in all parts of the industry. By mid-September 2000 foreign companies had signed 50 partnership agreements (with PETROBRÁS) to operate in Brazil’s upstream petroleum sector. The production of petroleum is the dominant economic activity in Venezuela, although the contribution of petroleum and its derivatives to the country’s total export earnings, which had been more than 90% until 1986, declined, to 77% in 1989, before recovering to 80.3% in 1991. The proportion fell to 75.2% in 1994, but rose to 81.0% in 1996. Petroleum’s contribution to total export earnings was 79.0% in 1997, 69.8% in 1998, and 80.8% in 1999. In 2001, when Venezuela accounted for 33.2% of Latin American production, it ranked as the world’s sixth largest producer. In 2001 Venezuela was the third largest supplier of petroleum to the USA. Proven reserves were estimated at 11,200m. metric tons at the end of 2001. Petróleos de Venezuela (PDVSA), the national oil company, was nationalized in 1976. In 1992, for the first time since nationalization, exploration and production were opened up to foreign participation. Since 1998, however, the Government of President Hugo Chávez Prias has apparently reversed this policy, while emphasizing that agreements already concluded with international oil companies will be honoured. New hydrocarbons legislation adopted in late 2001 stipulates that PDVSA must take a 51% share in all new production and exploration agreements. PDVSA planned to invest US $2,500m. in exploration activities in 2000–2009. Ecuador’s petroleum industry has been a significant contributor to the economy since 1972, when petroleum was exported for the first time, after the completion of the 480-km (300-mile) trans-Andean pipeline (capacity 390,000 b/d in 2000), linking the oilfields of Oriente Province with the tanker-loading port of Esmeraldas. In 2001 the construction of a new pipeline, the Oleoducto de Crudos Pesados (OCP), to transport heavy crudes commenced. Costing some US$1,100m. and with a maximum capacity of 518,000 b/d, OCP will link oilfields in the Amazon region with port facilities on the Pacific Ocean. On completion, scheduled for 2003, OCP will raise Ecuador’s potential oil transportation capacity to 850,000 b/d and permit a significant increase in production. In 1993 Ecuador’s proven reserves of petroleum were almost tripled, following discoveries in the Amazon region, and in 1994 and 1995 the Government signed contracts with numerous companies for further exploration and drilling (including rights to explore areas in the Eastern Amazon, which had previously been withheld, owing to indigenous and environmental protests). Ecuador’s proven published reserves at the end of 2001 amounted to 300m. metric tons. Petroleum and its derivatives accounted for 36.3% of export revenue in 1996 but by 1998 the proportion had declined to 23.6%, reflecting lower prices. Petroleum and petroleum products contributed 33.2% of total export earnings in 1999. The economy of Trinidad and Tobago has relied heavily on the petroleum industry since the 1940s. The industry received a fillip from the discovery of offshore fields in 1955, and by the 1970s petroleum accounted for about 50% of the country’s gross domestic product and about 90% of its export income. Until 1998 no significant onshore discoveries had been made since the early 1970s, although there are substantial reserves of natural gas. A series of offshore discoveries in 1998–2000 were reported to constitute the largest discovery of gas and petroleum in the history of the nation, equivalent to 630m. barrels. The petroleum
228 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
industry remains a vital sector of the economy, accounting, with asphalt, for an estimated 27.1% of gross domestic product in 1997. Petroleum and its derivatives accounted for 44. 5% of the country’s export revenue in 1998, 54.1% in 1999, and an estimated 64.8% in 2000. Colombia’s importance as a producer of petroleum increased dramatically in 1984, when vast reserves of petroleum were discovered at Caño-Limón, near the Venezuelan border. This deposit, the largest petroleum discovery ever made in Colombia (with initial proven reserves of 192m. metric tons, of which 80m.–140m. tons were assessed as recoverable), doubled the country’s recoverable petroleum reserves and transformed its prospects as a producer. The Caño-Limón discovery was followed in 1991 by the discovery of the Cusiana field, in the Andes foothills, with reserves estimated at 178m. tons. A further discovery, north of Cusiana at Cupiagua, with reserves estimated at 70m. tons, followed in 1992. Although the reserves at Cusiana and Cupiagua maintained Colombia’s production and export capacity until the end of the 1990s, production declined from its highest ever recorded level of 41.6m. tons in 1999 to 35.3m. tons in 2000, and to 31.0m. tons in 2001. Naturally declining output levels (by mid-2002 reserves at Caño-Limón were reported to be close to exhaustion), technical difficulties and political instability have raised fears that, without new discoveries, for which there is substantial potential, Colombia could become a net importer of petroleum by 2004. Export earnings from petroleum and its derivatives accounted for 35.0% of total foreign revenue in 2000. In December 2001 Colombia’s proven reserves were estimated at 200m. tons. Argentina had estimated proven reserves of crude petroleum totalling 400m. metric tons in December 2001. Production increased substantially during the 1990s and the country, the fourth largest consumer of petroleum in Latin America, is now a significant regional exporter, shipping to Brazil, Chile, Paraguay, Uruguay and, in smaller quantities, to the US Gulf coast. In 1993 the Government relinquished its monopoly in the petroleum sector and transferred the state corporation, Yacimientos Petrolíferos Fiscales (YPF), to private-sector ownership. In 2000 Chile imported more than 90% of its petroleum requirements. The national oil company, ENAP, was reported in 1999 to have begun to search for partners in proposed joint ventures, with the objective of increasing domestic production. Deposits in the Strait of Magellan constitute Chile’s richest reserves, but access to new technology is required in order to maximize their and other fields’ potential. In 2001 proven reserves amounted to 21m. tons. Peru had estimated proven petroleum reserves of up to 50m. tons in December 2001. Production has declined substantially in recent years: in 1994 output amounted to 6.3m. tons, but fell to 4.9m. tons in 2001. Formerly an exporter of petroleum that was surplus to domestic demand, Peru has become a net importer, purchasing from Colombia, Ecuador and Venezuela. Foreign participation in the development of new deposits had, by 2002, failed to check Peru’s increasing reliance on imported petroleum, prompting the Government, in January, to introduce new legislation with the aim of encouraging exploration by improving the terms for investment, Guatemala, the only petroleum producer in Central America, commenced petroleum exports in 1980. The level of published proven reserves was 26m. tons in December 1997. Domestic consumption exceeds both domestic production and the country’s refining capacity, and the country is, accordingly, a net importer of petroleum. Most domestic crude is exported to the USA.
COMMODITY SURVEYS 229
Petroleum accounted for only 3.4% of Guatemala’s export earnings in 1999. Although a minor regional producer, Cuba’s production of 1.7m. tons in 1998 satisfied about 22% of its domestic petroleum requirements in that year. Within the European Union (EU), the United Kingdom is by far the most important producer of petroleum, with output of 117.9m. metric tons in 2001. At December 2001 the United Kingdom’s proven reserves of petroleum were estimated at 700m. tons, sufficient to last for only another 5.6 years at the rate of production prevailing in 2001. Most of the United Kingdom’s reserves are located in the North Sea, the location of the Brent oilfield which yields Brent crude, traded on the London International Petroleum Exchange and to whose price the prices of many other crude petroleums produced worldwide are linked. The United Kingdom’s reserves, deposited almost exclusively in mature fields, are expected to be close to exhaustion by around 2015. For the time being, however, the country remains an important exporter of high quality crude petroleum. In 2000 exports of crude petroleum and petroleum products accounted for 8.3% of the United Kingdom’s total export earnings. Elsewhere within the EU, Denmark and Italy produce petroleum on a smaller scale, their output amounting to only a fraction of that of the United Kingdom. In 2001 Danish production amounted to 16.9m. metric tons, and in December of that year the country’s proven reserves of petroleum were estimated at 200m. tons. Italy’s proven reserves, meanwhile, were estimated at 100m. tons, and the country produced 4.1m. tons in 2001. In 1999, according to the EIA, petroleum accounted for 44% of total energy consumption within the EU. In 2001 the EU’s share of total consumption of petroleum world-wide was about 18%, a proportion exceeded only, in terms of individual countries, by that of the USA, or, in regional terms, by the whole of the Far East and Australasia. As the United Kingdom is the only exporter of petroleum within the EU, the Union is a major net importer of petroleum, mainly from Russia, the Persian (Arabian) Gulf region, Norway, Algeria and Libya. In 2000 Germany was the third largest individual importer of oil in the world. Norway is the most important European producer of petroleum, with output of 162.1m. metric tons in 2001. At December 2001 the country’s proven reserves of petroleum were estimated at 1,300m. tons. With a reserves-to-production ratio of only 7.8 years, based on the 2001 level of production, Norway’s sources of petroleum, like those of the United Kingdom, are likely to be exhausted before 2020. Domestic consumption is low, by world standards, and in 2000, according to the US EIA, Norway ranked as the world’s third largest net exporter of petroleum. In 2000 exports of crude petroleum and petroleum products accounted for 53.7% of Norway’s total export earnings. Romania is the largest producer of petroleum in Central and South-Eastern Europe, with output of 6.2m. metric tons in 2001. At December 2001 the country’s proven reserves of petroleum were estimated at 100m. tons. Production has declined considerably in recent years and the government’s attempt to revitalize the sector by opening it up to foreign participation has not, so far, been successful. Among the former Soviet republics, Russia is by far the leading producer of petroleum. In fact, in 2001, with output of 348.1m. metric tons, Russia ranked as the third largest producer world-wide, and in February 2002 Russian production was reported to have
230 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
overtaken that of Saudi Arabia for the first time in 10 years as a result of the reduction, from January 2002, of Saudi Arabia’s quota within OPEC. At December 2001 Russia’s proven reserves of petroleum were estimated at 6,700m. tons, sufficient to last for a further 19.1 years at the 2001 level of production. High oil prices in recent years have enabled Russian oil companies to improve their infrastructure and to increase their exploratory activities. In 2001, according to the EIA, Russia was the world’s second largest exporter of oil after Saudi Arabia, with net sales of 4.91m. b/d in that year. In 1999 exports of crude petroleum and petroleum products contributed 25.3% of Russia’s total export earnings. Export pipelines reportedly operate at close to their capacity, but it is planned to upgrade the existing network and to construct new pipelines. In the first quarter of 2002 Russia agreed to collaborate with OPEC by reducing its exports of crude oil by 150,000 b/d, in support of OPEC’s oil market stabilization plan. However, some sources indicated that Russian oil companies had compensated for the loss of sales by increasing their exports of refined products, with the result that Russia’s net oil exports in January-March 2002 were expected to have increased. In 2001 Kazakhstan was the second largest producer of petroleum among the former Soviet republics, with output of 39.7m. metric tons. At December 2001 the country’s proven reserves of petroleum were estimated at 1,100m. tons, but potential reserves are believed to be very much larger. Kazakhstan has been very successful at attracting foreign investment in both production and exploration activities. According to some predictions, production may rise as high as 3m. b/d by 2010. In 1999 exports of crude petroleum (including gas condensate) accounted for 36.4% of Kazakhstan’s total export earnings. Kazakhstan currently relies on pipelines traversing Russia in order to export its oil. However, the country is a participant in the Caspian Pipeline project, which commenced operations in late 2001 and has increased export capacity. Kazakhstan may also participate in the construction of other proposed pipeline projects from the Caspian Sea area, with the aim of further increasing its export opportunities. After Russia and Kazakhstan, Azerbaijan is a significant former-Soviet producer of petroleum, with output of 14.9m. metric tons in 2001. At December 2001 the country’s proven reserves of petroleum were estimated at 1,000m. tons, sufficient to last another 64. 3 years at the 2001 level of production. Like Kazakhstan, Azerbaijan has been successful in attracting foreign investment in its petroleum sector, in particular in the exploration of the country’s potentially huge offshore reserves in the Caspian Sea. In 1998, for the first time since 1991, production of petroleum increased, and thereafter, in 1998–2001, rose consistently. Azerbaijan’s exports of petroleum are currently constrained by a lack of pipeline routes, but this problem will be alleviated by the construction of a pipeline running from Baku to Ceyhan in Turkey, with a capacity of 1m. b/d. Turkmenistan is a small regional producer of petroleum with a claim, together with Azerbaijan, Kazakhstan, Iran and Russia, to hydrocarbon reserves in the Caspian Sea region. However, the development of these huge reserves of petroleum and natural gas remains subject to the definition, in law, of territorial and offshore rights, which is proving problematical. Azerbaijan and Kazakhstan are reportedly proceeding with the exploration of reserves they regard as their own, with the assistance of international oil companies.
COMMODITY SURVEYS 231
International petroleum prices are strongly influenced by OPEC, founded in 1960 to coordinate the production and marketing policies of those countries whose main source of export earnings is petroleum. In 2002 OPEC had 11 members (Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the UAE and Venezuela). A number of other producers, including Mexico and Oman, maintained close links with OPEC. The average price of crude petroleum was about US $20 in 1992, declined to only about $14 in late 1993, but recovered to more than $18 in mid-1994. Thereafter, international petroleum prices remained relatively stable until the early months of 1995. The price per barrel reached about $20 again in April and May 1995, but eased to $ 17 later in the year. In April 1996 the London price of the standard grade of North Sea petroleum for short-term delivery rose to more than $23 per barrel, following reports that stocks of petroleum in Western industrialized countries were at their lowest levels for 19 years. After another fall, the price of North Sea petroleum rose in October to more than $25 per barrel, its highest level for more than five years. The price per barrel was generally in the range of $22–$24 for the remainder of the year. Petroleum traded at US $24–$25 per barrel in January 1997, but the short-term quotation for the standard North Sea grade fell to less than $ 17 in June. The price increased to more than $21 per barrel in October, in response to increased tension in the Persian (Arabian) Gulf region. However, the threat of an immediate conflict in the region subsided, and petroleum prices eased. The market was also weakened by an OPEC decision, in November, to raise the upper limit on members’ production quotas, and by the severe financial and economic problems affecting many countries in eastern Asia. By the end of the year the price for North Sea petroleum had again been reduced to less than $17 per barrel. Petroleum prices declined further in January 1998, with the standard North Sea grade trading at less than US$15 per barrel. Later in the month the price recovered to about $16.5 per barrel, but in March some grades of petroleum were trading at less than $13. Later that month three of the leading exporting countries—Saudi Arabia, Venezuela and Mexico (not an OPEC member)—agreed to reduce petroleum production, in an attempt to revive prices. In response, the price of North Sea petroleum advanced to about $15.5 per barrel. Following endorsement of the three countries’ initiative by OPEC, however, there was widespread doubt that the proposals would be sufficient to have a sustained impact on prices, in view of the existence of large stocks of petroleum. Under the plan, OPEC members and five other countries (including Mexico and Norway) agreed to reduce their petroleum output between 1 April and the end of the year. The proposed reductions totalled about 1.5m. b/d (2% of world production), with Saudi Arabia making the greatest contribution (300,000 b/d). In early June, having failed to make a significant impact on international prices, the three countries that had agreed in March to restrict their production of petroleum announced further reduction in output, effective from 1 July. However, petroleum prices continued to be depressed, and in mid-June some grades sold for less than $12 per barrel. A new agreement between OPEC and other producers, concluded later that month, envisaged further reductions in output, totalling more than 1m. b/d, but this attempt to stimulate a rise in petroleum prices had little effect. The price on world markets was generally in the range of $12–$ 14 per barrel over the period July–October. Subsequently there was further downward pressure on petroleum prices, and in December
232 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
the London quotation for the standard North Sea grade was below $ 10 per barrel for the first time since the introduction of the contract in 1986. For 1998 as a whole, the average price of North Sea petroleum was $13.37 per barrel, more than 30% less than in 1997 and the lowest annual level since 1976. In real terms (i.e. taking inflation into account), international prices for crude petroleum in late 1998 were at their lowest level since the 1920s. During the early months of 1999 there was a steady recovery in the petroleum market. In March five leading producers (including Mexico) announced plans to reduce further their combined output by about 2m. b/d. Later that month an OPEC meeting agreed reductions in members’ quotas totalling 1.7m. b/d (including 585,000 b/d for Saudi Arabia), to operate for 12 months from 1 April. The new quotas represented a 7% decrease from the previous levels (applicable from July 1998). At the same time, four non-members agreed voluntary cuts in production, bringing total proposed reductions in output to about 2.1m. b/ d. In May the London price of North Sea petroleum rose to about US $17 per barrel. After easing somewhat, the price advanced again, reaching more than $20 per barrel in August. The upward trend continued, and in late September the price of North Sea petroleum (for November delivery) was just above $24 per barrel. After easing somewhat, prices rose again in November, when North Sea petroleum (for delivery in January 2000) was traded at more than $25 per barrel. The surge in prices followed indications that, in contrast to 1998, the previously agreed limits on output were, to a large extent, being implemented by producers and thus having an effect on stock levels. Surveys found that the rate of compliance among the 10 OPEC countries participating in the scheme to restrict production was 87% in June and July 1999, although it fell to 83% in October. International prices for crude petroleum rose steadily during the opening weeks of 2000, with OPEC restrictions continuing to operate and stocks declining in industrial countries. In early March the London price for North Sea petroleum exceeded US $31.5 per barrel, but later in the month nine OPEC members agreed to restore production quotas to pre-March 1999 levels from 1 April 2000, representing a combined increase of about 1.7m. b/d. The London petroleum price fell in April to less than $22 per barrel, but the rise in OPEC production was insufficient to increase significantly the stocks held by major consuming countries. In June the price of North Sea petroleum rose to about $31.5 per barrel again, but later that month OPEC ministers agreed to a further rise in quotas (totalling about 700,000 b/d) from 1 July. By the end of July the North Sea petroleum price was below $27 per barrel, but in mid-August it rose to more than $32 for the first time since 1990 (when prices had surged in response to the Iraqi invasion of Kuwait), In New York in the same month, meanwhile, the September contract for light crude traded at a new record level of $33 per barrel at one point. The surge in oil prices in August was attributed to continued fears regarding supply levels in coming months, especially in view of data showing US inventories to be at their lowest level for 24 years, and of indications by both Saudi Arabia and Venezuela that OPEC would not act to raise production before September. Deliberate attempts to raise the price of the expiring London September contract were an additional factor. In early September 2000 the London price of North Sea petroleum for October delivery climbed to a new 10-year high of US $34.55, reflecting the view that any production
COMMODITY SURVEYS 233
increase that OPEC might decide to implement would be insufficient to prevent tight supplies later in the year. In New York, meanwhile, the price of light crude for October delivery rose beyond the $35 per barrel mark. This latest bout of price volatility reflected the imminence of an OPEC meeting, at which Saudi Arabia was expected to seek an agreement to raise the Organization’s production by at least 700,000 b/d in order to stabilize the market. In the event, OPEC decided to increase production by 800,000 b/d, with effect from 1 October, causing prices in both London and New York to ease. This relaxation was short-lived, however. Just over a week after OPEC’s decision was announced the price of the New York October contract for light crude closed at $36.88 per barrel, in response to concerns over tension in the Persian (Arabian) Gulf area between Iraq and Kuwait. The same contract had at one point risen above $37 per barrel, its highest level for 10 years. These latest increases prompted OPEC representatives to deliver assurances that production would be raised further in order to curb price levels regarded as economically damaging in the USA and other consumer countries. Towards the end of September the London price of North Sea petroleum for November delivery fell below $30 per barrel for the first time in a month, in response to the decision of the USA to release petroleum from its strategic reserve in order to depress prices. In the first week of October 2000, however, the price of the November contract for both North Sea petroleum traded in London and New York light crude had stabilized at around US $30 per barrel, anxiety over political tension in the Middle East preventing the more marked decline that had been anticipated. This factor exerted stronger upward pressure during the following week, when the London price of North Sea petroleum for November delivery rose above $35 per barrel for the first time since 1990. In early November 2000 crude oil continued to trade at more than $30 per barrel in both London and New York, despite the announcement by OPEC of a further increase in production, this time of 500, 000 b/d, and a lessening of political tension in the Middle East. Prices were volatile throughout November, with those of both London and New York contracts for January delivery remaining in excess of $30 per barrel at the end of the month. During the first week of December 2000 the price of the January ‘futures’ contract in both London and New York declined substantially, in response, mainly, to an unresolved dispute between the UN and Iraq over the pricing of Iraqi oil. On 8 December the closing London price of North Sea petroleum for January delivery was US $26.56 per barrel, while the equivalent New York price for light crude was $28.44. Trading during the second week of December was characterized by further declines, the London price of North Sea petroleum for January delivery falling below $25 per barrel at one point. Analysts noted that prices had fallen by some 20% since mid-November, and OPEC representatives indicated that the Organization might decide to cut production in January 2001 if prices fell below its preferred trading range of $22–$28 per barrel. At $23.51 per barrel on 14 December, the price of the OPEC ‘basket’ of crudes was at its lowest level since May. During the third week of December the price of the OPEC ‘basket’ of crudes declined further, to $21.64 per barrel. Overall, during December, the price of crudes traded in both London and New York declined by some $10 per barrel, and remained subject to pressure at the end of the month.
234 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Continued expectations that OPEC would decide to reduce production later in the month caused ‘futures’ prices to strengthen in the first week of January 2001. The London price of North Sea petroleum for February delivery closed at US $25.18 on 5 January, while the corresponding price for light crude traded in New York was $27.95. Prices remained firm in the second week of January, again in anticipation of a decision by OPEC to reduce production. Paradoxically, prices fell immediately after OPEC’s decision to reduce production by 1.5m. b/d was announced on 17 January. However, it was widely recognized that the reduction had been factored into markets by that time. Oil prices rose significantly at the beginning of February 2001, although the gains were attributed mainly to speculative purchases rather than to any fundamental changes in market conditions. On 2 February the London price of North Sea petroleum for March delivery closed at US $29.19 per barrel, while the corresponding price for light crude traded in New York was $31.19. On 8 February prices rose to their highest levels for two months, the London price for North Sea petroleum for March delivery exceeding $30 per barrel at one point. The upward movement came in response to a forecast, issued by the EIA, that the ‘spot’ price for West Texas Intermediate (the US ‘marker’ crude) would average close to $30 per barrel throughout 2001. During the remainder of the month prices in both London and New York remained largely without direction. During the early part of March 2001 oil prices in both London and New York drifted downwards while it remained unclear whether OPEC would decide to implement a further cut in production, and what the effect of such a reduction might be. On 9 March the London price of North Sea petroleum for April delivery was US $26.33 per barrel, while the corresponding price for light crude traded in New York was $28.01 per barrel. By late March prices in both London and New York had declined further, the London price of North Sea petroleum for May delivery closing near to $24.82 per barrel on 30 March, while the corresponding price for New York light crude was $26.35. During the first week of April 2001 crude oil prices on both sides of the Atlantic strengthened in response to fears of a gasoline shortage in the USA later in the year. On 6 April the London price of North Sea petroleum for May delivery was US $25.17 per barrel, while New York light crude for delivery in May closed at $27.06. Strong demand for crude oil by US gasoline refiners was the strongest influence on markets throughout April as gasoline ‘futures’ rose markedly. Towards the end of April the price of the New York contract for gasoline for May delivery rose to the equivalent of $1.115 per gallon, higher than the previous record price recorded in August 1990. Fears of a shortage of gasoline supplies in the USA remained the key influence on oil markets in early May 2001, with ‘futures’ prices rising in response to successive record prices for gasoline ‘futures’. On 4 May 2001 the London price of North Sea petroleum for June delivery was $28.19 per barrel, while that of the corresponding contract for light crude traded in New York closed at $28.36. Prices were prevented from rising further during the week ending 4 May by the report of an unexpected increase in US inventories of crude oil. A further check came in the following week, when the International Energy Agency (IEA) reduced its forecast of world growth in demand for crude oil by 300,000 b/d to 1.02m. b/d. On 18 May, however, demand for crude oil by gasoline refiners raised the price of New York crude for June delivery to its highest level for three months, while the price of the July contract rose above $30 per
COMMODITY SURVEYS 235
barrel. On 5 June, at an extraordinary conference held in Vienna, Austria, OPEC voted to defer a possible adjustment of its production level for one month, noting that stocks of both crude oil and products were at a satisfactory level, the market in balance and that the yearto-date average of the OPEC reference ‘basket’ of crudes had been $24.8 per barrel (i.e. within the trading range of $22–$28 per barrel targeted by the Organization). OPEC nevertheless decided to hold a further extraordinary conference in early July in order to take account of future developments. At that meeting OPEC oil ministers once again opted to maintain production at the prevailing level, emphasizing that they would continue to monitor the market and take further measures, if deemed necessary, to maintain prices within the Organization’s preferred trading range. The conference appealed to other oil exporters to continue to collaborate with OPEC in order to minimize price volatility and safeguard stability. Towards the end of the month, as prices declined steadily towards (and briefly below) $23 per barrel, the Secretary-General of OPEC, Dr Ali Rodríguez Araque, indicated that he was consulting OPEC ministers regarding the possibility of holding a further extraordinary conference early in August—ahead of the next ordinary OPEC meeting scheduled for September. Two days later, on 25 July, OPEC agreed to reduce production by a further 1m. b/d, to 23.2m. b/d, with effect from 1 September; the Organization reiterated that it was retaining the option to convene an extraordinary meeting if the market warranted it (this latest reduction, which had been agreed without a full meeting of OPEC, had been ratified by oil ministers by telephone). The Organization again expressed confidence that its action in reducing output would be matched by non-OPEC producing/exporting countries, and recognized in particular Mexico’s support for its efforts. While there was general agreement that the production cut would reduce inventories, the consensus remained that demand would also decline in view of the prevailing world economic outlook. The extent of this decline remained the subject of much speculation, with a statement by Rodríguez in mid-July, affirming that growth in demand would average 850,000 b/d in 2001, seeking to counter a forecast by the IEA of demand growth averaging 450,000 b/d. A decline of 1.1% in US inventories of crude oil, reported by the American Petroleum Institute (API) in late July 2001, apparently indicated that US demand was resisting, for the time being, a deceleration in economic growth, and was cited as the main reason for a recovery in the price of Brent blend North Sea petroleum, to US $24.97 per barrel, on 1 August. A further decline of the same order, reported on 7 August, raised the price of Brent to $27.94 per barrel, and that of the OPEC ‘basket’ of crudes to $24.99 per barrel. Throughout most of the remainder of August declining US inventories of both crude and refined products appeared to suggest a strength of demand that belied pessimistic assessments of US (and global) economic prospects in the near term, combining with anticipation of the reduction of OPEC production by 1m. b/d from 1 September, to support the price of the Brent reference blend and the OPEC ‘basket’ of crudes. Immediately following the suicide attacks carried out against US targets in New York and Washington, DC, on 11 September 2001, as the price of Brent blend North Sea petroleum rose above US $30 per barrel, OPEC’s Secretary-General was swift to emphasize the Organization’s commitment to ‘strengthening market stability and ensuring that sufficient supplies are available to satisfy market needs’, by utilizing its spare capacity, if necessary.
236 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
However, there was virtual unanimity among commentators, following the attacks, that their effect would be to worsen the prospects of the global economy, if not plunge it into recession, causing a considerable decline in demand for oil. By mid-October 2001 the price of the OPEC ‘basket’ of crudes had remained below $22 per barrel, the minimum price the Organization’s market management strategy was designed to sustain, since late September, and it was clear that, at the risk of adding to recessionary pressures, OPEC would have to implement a further cut in production if it was to bring the price back into its preferred trading range. In late October Venezuela, Iran, Saudi Arabia, the UAE and non-OPEC Oman all declared themselves in favour of a further cut in production. However, diplomacy undertaken by President Hugo Chávez Frías of Venezuela and Saudi Arabia’s Minister of Petroleum and Mineral Resources, Ali ibn Ibrahim an-Nuaimi, had apparently made no progress in achieving its objective of persuading key non-OPEC producers Mexico, Norway and Russia to support the Organization’s management strategy. In the first week of November 2001 the price of Brent blend North Sea petroleum fell to fractionally above US $19 per barrel, while that of OPEC’s ‘basket’ of crudes declined to $17.56 per barrel. In Vienna, on 14 November, an extraordinary meeting of the OPEC conference observed that ‘as a result of the global economic slowdown and the aftermath of the tragic events of 11 September 2001, in order to achieve a balance in the oil market, it will be necessary to reduce the supply from all oil producers by a further 2m. b/d, bringing the total reduction in oil supply to 5.5m. b/d from the levels of January 2001, including the 3.5m. b/d reduction already effected by OPEC this year. In this connection, and reiterating its call on other oil exporters to co-operate so as to minimize price volatility and ensure market stability, the Conference decided to reduce an additional volume of 1.5m. b/d, effective 1 January 2002, subject to a firm commitment from non-OPEC oil producers to cut their production by a volume of 500,000 b/d simultaneously’. The meeting acknowledged the positive response of Mexico and Oman to OPEC’s efforts to balance the market. However, it was widely recognized that the success of a collaboration of the kind envisaged depended on the co-operation of Russia. Prior to the extraordinary conference held in November, Russia had indicated that it would be willing to reduce its production, estimated at more than 7m. b/d, by no more than 30,000 b/d, far less than would be necessary for OPEC’s strategy to be effective. It was not until early December that Russia’s Prime Minister announced the country’s commitment to reducing its exports of crude by up to 150,000 b/d, and it was uncertain, in any case, whether a reduction of that magnitude could be enforced, owing to the Russian Government’s lack of control over Russia’s oil industry. On 18 December 2001 the price of the OPEC ‘basket’ of crudes fell to US $16.62 per barrel. Thereafter, in December, however, the price recovered, in response to commitments by major non-OPEC producers to collaborate with the Organization by reducing either output or exports. On 28 December, at a consultative meeting of the OPEC conference, convened in Cairo, Egypt, OPEC confirmed its decision to implement a reduction of 1.5m. b/d in its overall production from 1 January 2002, having received assurances that Angola, Mexico, Norway, Oman and Russia would reduce their output, or, in the case of Russia, exports, of crude petroleum by a total of 462,500 b/d. BP’s Statistical Review of World Energy 2002 noted that, for the whole of 2001, the price of Brent blend
COMMODITY SURVEYS 237
North Sea petroleum had averaged $24.77 per barrel. The average price of the reference blend was substantially less than $20 per barrel in October-December 2001, however. In 2001, for the first time since 1993, consumption of oil world-wide declined, albeit marginally. In January 2002 the decline in the price of the OPEC ‘basket’ of crudes was halted for the first time since the suicide attacks in September 2001. According to the Organization’s own data, the ‘basket’ price rose by 4.6% in January 2002, compared with December 2001, but was 24% lower when considered on a year-on-year basis. The price of Brent blend North Sea petroleum, meanwhile, averaged US $19.48 per barrel in January. Reviewing the state of the market in January 2002, OPEC noted that it was still too early to assess the effectiveness of the reduction in output and exports that had begun on 1 January. The recovery in the average price of the OPEC ‘basket’ had been uneven throughout the month. Low demand, as indicated by data published by the EIA and the API, recording rises in US crude inventories, and either rises or lower-than-expected declines in inventories of distillate products, combined, in the second week of January with uncertainty regarding Russia’s commitment to reducing its exports by 150,000 b/d (as it had pledged to do) to exert pressure on prices. During the third week of January, however, prices were supported, according to OPEC, by the strength of product prices, and by the USA’s decision to add 22m. barrels of crude to its Strategic Petroleum Reserve. Among other factors, apparently good adherence by OPEC members to the revised quotas announced in December 2001 helped to sustain the upward trend in the final week of January 2002. In February 2002 the average price of the OPEC ‘basket’ of crudes rose for the second consecutive month, recording an increase of 3.1% compared with January. As OPEC noted in its review of crude price movements in February, however, the average price of the ‘basket’ was 25.7% lower when considered on a year-on-year basis. The price of the OPEC ‘basket’ rose steadily during the first two weeks of February, supported, among other factors, by reports of an explosion at oil-gathering facilities in Kuwait that was initially expected to remove some 600,000 b/d from the market; and by increased political tension between the USA and Iraq. In the third week of February the OPEC ‘basket’ price moved up and down, but, overall, was weaker compared with the previous week. Continued doubts over Russia’s commitment to reducing its exports was one factor that exerted downward pressure on prices. In the final week of the month prices strengthened considerably as a result of the interplay between reportedly higher product inventories, renewed political tension between the West and Iraq, and a dispute between the Venezuelan Government and employees of Petróleos de Venezuela. In early March 2002 a meeting took place between a delegation of senior OPEC representatives and Russian government and energy officials. OPEC’s objective at the meeting was to persuade Russia to continue to limit its exports of crude to 150,000 b/d during the second quarter of 2002. OPEC regarded the continued limitation of Russia exports as imperative if market stability was to be maintained at a time of seasonally weak markets for oil. Russia’s initial commitment to reduce its exports, however, applied only to the first quarter of 2002, with any continuation of the restriction subject to a review of market conditions. Norway had, by this time, already agreed to continue to restrict its production of crude to 150,000 b/d during April–June 2002. Moreover, it was clear in March that the
238 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
market stability measures undertaken since the beginning of the year had been successful. The price of the OPEC ‘basket’ of crudes rose by 20% in March, compared with the previous month, although it was 5% lower when considered on a year-on-year basis. As OPEC noted, in its review of markets for crude in March, prices rose consistently throughout the month. Evidence of economic recovery in the USA was a positive factor in early March—data published by the API indicated declining US inventories of gasoline and distillate products—as was the apparent likelihood of Russia agreeing to carry over into the second quarter the restriction applied to its exports of crude. In the second week of March an intensification of the conflict between Israel and the Palestinians, and OPEC’s announcement that it would maintain production at the prevailing level until the end of June at least, were additional factors that supported prices. In the third week of March prices rose above US $25 per barrel, owing, according to OPEC, to technical factors that were subsequently cancelled out by profit-taking. The upward movement continued towards the end of March, when positive inventory data combined with optimism about the sustainability of economic recovery in the USA to support prices. From late March 2002 the escalating conflict between Israel and the Palestinians was cited as a key factor supporting crude prices. On 1 April, for the first time since 11 September 2001, the price of the OPEC ‘basket’ of crudes rose above US $25 per barrel. On 8 April Iraq added to the increased political tension in the Middle East by suspending its exports of crude for a period of 30 days in response to attacks by Israeli armed forces against Palestinian targets in the West Bank. Although Iraq’s action was of little real consequence for crude markets, since other producers could easily compensate for the loss of its exports if necessary, it came at a time when a number of countries, including Iraq itself, Iran and Libya, had expressed their support for an embargo to be placed on the supply of oil by OPEC, in support of the Palestinian struggle against Israeli occupation. It was generally acknowledged in April that prices were inflated by a so-called war premium of some $4–$6 per barrel, without which they would decline towards the lower end of OPEC’s preferred trading range. Political upheaval in Venezuela also lent a degree of volatility to prices in midApril, when the brief removal of President Chávez from power caused them to decline sharply. Following Chávez’s reinstatement as President, the key market influence for the remainder of the month was the perception, supported by a reported decline in US inventories of crude, that demand for oil was growing in response to improved economic conditions in the USA. A combination of apparently stronger US demand and tighter supplies was regarded as the most significant determinant of the direction of markets for crude in early May 2002. On 7 May the API announced that US inventories of crude had declined by some 4.5m. barrels in the week to 3 May, and on the day of the announcement the price of Brent blend North Sea petroleum reached US $27.14 per barrel, an increase of more than $1 per barrel compared with the previous week. Among other factors contributing to the tightening of supplies at this time was OPEC’s apparent decision not to compensate for the 30-day suspension of Iraqi exports. In the second week of May prices declined somewhat in response to data published by the US Department of Energy that indicated an increase in US inventories of crude. Towards the end of the month prices weakened again, in response to
COMMODITY SURVEYS 239
Export Price Index for Crude Petroleum (base: 1980=100)
the publication of data that appeared to cast doubt on the strength of the US economic recovery. Prices remained under pressure at the beginning of June 2002, owing to the publication of data indicating a further, unexpected increase in US inventories of crude and of distillate products in late May. Iraqi exports had also risen substantially in late May and early June. Most commentators appeared to agree with OPEC, representatives of whose members referred to a balanced market for crude in statements released early in the month, and indicated that OPEC would not alter its production quotas at its forthcoming extraordinary ministerial conference. In its assessment of the oil market in June, the IEA noted that geopolitical factors (i.e. violence in the Middle East) were now perceived as less of a risk to supplies of crude and predicted that prices would continue to weaken. US inventories of crude and gasoline were reported to have declined slightly in the first week of June. Crude stocks fell again during the second week of June, but this decline was balanced by substantial increases in inventories of gasoline and distillate products, indicating the ongoing weakness of economic recovery in the USA. At an extraordinary ministerial conference, held in Vienna on 26 June, OPEC, as expected, agreed to maintain production at the prevailing level until the end of September 2002. The Organization noted that its ‘reduction measures during 2001 and 2002, supported by similar measures from some non-OPEC producers over the first half of the year, had restored relative market balance’. At the same time, OPEC observed that ‘the relative strength in current market prices is partially a reflection of the prevailing political situation rather than solely the consequence of market fundamentals’, and undertook to continue carefully to monitor market conditions and to take further action, if necessary, to maintain market stability.
Phosphates
The non-metallic element phosphorus (P), the 11th most abundant element in the earth’s crust, belongs to the nitrogen family and plays a vital role in plant and animal nutrition. Phosphorus occurs naturally in a combined state in soil and water, but, for practical purposes, phosphate rock and apatite are its only common sources. Phosphorus exists in three principal distinct (allotropic) forms: white phosphorus, red phosphorus and black phosphorus. Only white, or ordinary, phosphorus and red phosphorus are of any commercial value. Phosphate rock is an ore that consists of various pulverulent components, the most abundant among them being that which contains phosphorus itself. Apatite, a mineral whose name derives from the Ancient Greek word for ‘deceit’ (apate), owing to its illusory resemblance to other minerals, occurs in igneous rocks and metamorphosed limestones as calcium fluorophosphate or calcium chlorophosphate, in hexagonal crystalline form. After mining, for fertilizer production, phosphate rock typically undergoes beneficiation, drying, or calcination, and grinding. Beneficiation is a screening process used to separate the rock from sand, clay, etc., and to remove impurities. (The precise details of beneficiation vary according to whether the rock grades as fine or coarse.) After beneficiation, the wet rock is usually dried or calcined before being conveyed to grinding mills, where it is finely pulverized. The above describes the processing of phosphate rock in general terms only. For the production of certain types of phosphoric acid, for instance, refining is more elaborate. The most important use of phosphorus is in the chemical compounds that go to make fertilizers such as diammonium phosphate (DAP), monoammonium phosphate (MAP) and triple superphosphate (TSP). In the USA, for instance, the production of fertilizers and of animal feed supplements typically consumes more than 90% of all phosphate rock mined domestically. The most important chemical compounds of phosphorus are, accordingly, phosphoric acid and its salts, or phosphates. Thermal and purified wet-process phosphoric acid have many other industrial applications. Thermal phosphoric acid may be used directly in detergents and soft drinks; and, as a compound, in herbicides, pesticides, fire retardants and lubrication greases. Purified wet-process phosphoric acid can be used as a less costly substitute for thermal phosphoric acid for practically all phosphorus compounds except those used in herbicides, pesticides and fire retardants. Phosphorus compounds are also used in the alloys phosphor bronze and phosphor copper. Red phosphorus is used to make matches and in pyrotechnics, among other things. Highly toxic white phosphorus is often an ingredient of poisons for exterminating rodents.
COMMODITY SURVEYS 241
Production of Phosphate Rock (gross weight, ’000 metric tons)
* Estimated production. Source: US Geological Survey.
In 2001 the world reserve base (the totality of identified resources, including those whose extraction would be uneconomic under prevailing conditions) of phosphate rock was estimated at 47,000m. metric tons by the US Geological Survey (USGS). Of that total, 21, 000m. tons, or about 45%, lay within Morocco and the disputed territory of Western Sahara, and a further 10,000m, tons, or about 21%, in the People’s Republic of China. The USA was the world’s largest producer of phosphate rock in 2001, with output estimated by the USGS at 34.2m. metric tons, compared with 38.6m. tons in 2000. In 2001 the USA’s reserve base of phosphate rock was estimated at 4,000m. tons, while the country’s reserves (that part of the reserve base that could be economically extracted at the time of report) were assessed at 1,000m. tons. In 2000 the USA was both the largest producer and the largest consumer of phosphate fertilizers. Phosphate rock is mined in the states of Florida, North Carolina, Idaho and Utah. In 2000, according to the USGS, Florida and North Carolina accounted for 86% of marketable phosphate rock production in the USA. As noted above, more than 90% of the phosphate rock mined in the USA is used to produce fertilizers and animal feed supplements. Production of elemental phosphorus and other industrial phosphates accounts for the remainder. In 2000 the principal fertilizer products were DAP, MAP and TSP. Production of wet process phosphoric acid was reported to have declined to 11.4m. tons (as available phosphorus pentoxide) in 2000, compared with 12.2m. tons in 1999. In 2000 US exports of phosphate rock (ground and unground) totalled 299, 000 tons, compared with 272,000 tons in 1999. Shipments to the Netherlands, at 181,000 tons, accounted for more than 60% of total phosphate rock exports in 2000, while shipments to Canada amounted to 33,000 tons. In 2000 US exports of concentrated superphosphates totalled 545,000 tons, compared with 634,000 tons in 1999. The most important markets for US concentrated superphosphates in 2000 were Brazil (162,000
242 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
tons), Australia (110,000 tons), Chile (67,000 tons) and Japan (51,000 tons). US exports of DAP in 2000 totalled 7.2m. tons. The People’s Republic of China (4.1m. tons, compared with 4.6m. tons in 1999) was by far the most important market for US DAP in that year, followed by Australia (413,000 tons), Japan (356,000 tons) and India (345,000 tons, compared with 2.3m. tons in 1999). In 2000 US exports of MAP totalled 2.3m. tons, compared with 1.8m. tons in 1999. The principal markets for US MAP in 2000 were Canada (861,000 tons), followed by Australia (491,000 tons), Brazil (283,000 tons) and Japan (127,000 tons). Exports of phosphoric acid totalled 378,000 tons in 2000, compared with 399,000 tons in 1999. India (149,000 tons) was the most important market in 2000, followed by Australia (65,000 tons). US exports of elemental phosphorus totalled 3,440 tons in 2000, compared with 5,740 tons in 1999. Mexico (1,260 tons) was the principal destination for US exports of elemental phosphorus, followed by Japan (1,210 tons). The USA is also an importer of phosphate rock and phosphatic materials for consumption. Of these, the principal category in 2000 was calcium phosphates, imports of which totalled 1. 9m. tons (including an estimate for data suppressed by the US Census Bureau). In 2000 US production and apparent consumption of phosphate rock declined to their lowest levels since 1993. The decline, which continued in 2001 was attributed to lower production of phosphoric acid as a consequence of reduced demand from China and India, the main U S export destinations, for U S phosphate fertilizers. This decline was, in turn, attributed to increased competition, higher regional production, and high inventories globally. There is minimal annual variation in US domestic demand for phosphate-based fertilizers. Mexican production of phosphate rock was reported to have totalled 1.1m. metric tons in 2000. In 1998 the country’s exports of phosphatic fertilizers totalled 226,555 tons. Chile was the most important market in that year, taking delivery of 134,982 tons, followed by Australia (50,679 tons) and New Zealand (13,710 tons). Mexican imports of phosphatic fertilizers totalled 34,047 tons in 1998. Of that total, the USA supplied 33,939 tons. In regional terms, Africa ranks as the second largest producer of phosphate rock after North America. In 2001, according to the USGS, Morocco and Western Sahara ranked as the world’s second largest individual producer, with output estimated at 22m. metric tons, compared with 21.6m. tons in 2000. As noted above, Morocco was estimated in 2001 to dispose of about 45% (21,000m. tons) of the global reserve base of phosphate rock. In that year the country’s reserves of phosphate rock were assessed at 5,700m. tons. In 2000 Moroccan production of phosphoric acid amounted to 2.7m. tons. According to the FAO, unofficial figures indicated that Morocco produced 1.1m. tons of phosphate-based fertilizers in 2000. Benguerir, Khouribga, Sidi Chenan and Bou Craa are the principal locations of Moroccan phosphate mining, which is under the exclusive control of the state-owned Office Chérifien des Phosphates (OCP). OCP, reportedly the world’s largest phosphate-exporting entity, is also responsible for the production of phosphate-based fertilizers. In 2001 the annual value of Moroccan exports of phosphates, for which the USA is a major market, was reported to be some US $1,500m. The OCP group reportedly contributes some 2.6% of Morocco’s entire gross domestic product and 18.5% of the country’s total exports. In 2000 Morocco’s share of world phosphate exports reportedly rose to 26.2%, compared with 25. 3% in 1999. In 2001–05 OCPplanned to invest about $780m. in its production units and its maritime transport fleet.
COMMODITY SURVEYS 243
After Morocco, Tunisia was the second largest African producer of phosphate rock, and the fifth largest producer world-wide, with output estimated by the USGS to have totalled 8. 1m. metric tons in 2001, compared with record production of 8.3m. tons in 2000. In 2001 Tunisia’s reserve base of phosphate rock was estimated at 600m. tons, while the country’s reserves were assessed at 100m. tons. In 2000 quarry production accounted for almost 90% of Tunisian production of crude phosphates. In that year the country’s most important phosphate mining operations were located at Kef Eddour, Kef Eschfair and Jallabia. The Government is pursuing a strategy of phased closure of underground mines owing to their declining profitability. Tunisia has phosphate processing facilities at M’dhila, Metlaoui, Kef Eddour, Redeyef and Moulares. In 2000, according to the Central Bank of Tunisia, total sales of crude phosphates declined by 2.8% compared with 1999 to 7.3m. tons. The reduction in overall sales was attributed exclusively to diminished domestic demand. In 2000 exports of crude phosphates increased by 13% in terms of volume and by nearly 17% in terms of value to, respectively, 1.1m. tons and 47m. Tunisian dinars. Exports to Brazil, Italy, New Zealand, Turkey and Ukraine were reported to have risen in 2000, while those to traditional markets, such as Indonesia, Malaysia, Poland and Portugal, declined. In 2000 Tunisian production of phosphoric acid, single superphosphate, TSP, dicalcium phosphate and hyperphosphate declined markedly. Production of phosphoric acid fell by 6.9% to 1. 1m. tons, while that of TSP (0.8m. tons) fell by 2.2%, that of single superphosphate (12, 000 tons) by 14.3%, and that dicalcium phosphate by 4.9%. Conversely, production of DAP increased by 6.2% in 2000 to 1.1m. tons, while that of ammonium nitrate rose by 5.8% to 182,000 tons, and that of compound fertilizers by 157.1% to 18,000 tons. Tunisian exports of DAP grew by 7% in 2000, while those of TSP increased by 6.2% to about 825,000 tons. Egyptian production of phosphate rock was estimated at just over 1m. tons in 2000. At the other extreme of the continent, in 2001 South Africa ranked as the third largest African producer of phosphate rock, and the ninth largest producer world-wide, with output estimated at 2.8m. metric tons by the USGS, the same level as in 2000. In 2001 South Africa’s reserve base of phosphate rock was estimated at 2,500m. tons, while the country’s reserves were assessed at 1,500m. tons. In South Africa phosphate rock is mined and processed at Phalaborwa in Northern Province by Foskor Ltd, which is owned by the South African Industrial Development Corporation. In 2000 local sales of South African rock declined by 4.1%, compared with 1999, while exports of phosphate concentrates fell by 21. 6%, the highest annual decline ever. It was forecast in 2000 that exports of phosphate rock concentrates by Foskor would cease altogether by mid-2003, and that Foskor would thereafter market all of its production locally, mainly to its subsidiary, Indian Ocean Fertilizers, which would assume responsibility for beneficiation and export sales. In 2000, nevertheless, South Africa remained the world’s sixth largest exporter of phosphate rock, with shipments amounting to 779,000 tons, or 2.2% of the total exported world-wide. In the same year, South African imports of phosphate rock totalled 331,000 tons. In 2000 South African exports of processed phosphates were as follows (in terms of phosphorus pentoxide content): phosphoric acid, 752,900 tons; MAP, 69,800 tons; DAP, 81,800 tons; TSP, 21,600 tons. In 2001, according to the USGS, Senegal was the fourth largest producer of phosphate rock in Africa, and the eleventh largest producer world-wide, with output in that year
244 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
estimated at 2m. metric tons, compared with 1.8m. tons in 2000. In 2001 Senegal’s reserve base of phosphate rock was estimated at 160m. tons, while the country’s reserves were assessed at 50m. tons. In 2000 phosphate rock was mined at Taiba, but other deposits are known to exist and await development. Industries Chimiques du Sénégal is responsible for the production of phosphates, phosphoric acids and feedstuffs derived from the phosphate rock produced at Taiba. Fertilizers originating from the Taiba deposit tend to be marketed in West Africa, while India is an important market for Senegalese phosphoric acid. Thiès, in western Senegal, is the location of the Lam Lam deposit, which is exploited by means of open pits, or quarrying. Phosphate rock from Lam Lam is used to produce superphosphate and phosphoric acid; and directly, as a fertilizer. At Matam, near the border with Mauritania in the Senegal river region, a deposit containing an estimated 40m. tons of phosphates has been identified as suitable for economic exploitation. In 2000 the phosphate industry was estimated to contribute some 17% of Senegal’s total export earnings. Togolese production of phosphate rock was estimated by the USGS to have totalled 800, 000 metric tons in 2001, compared with 1.4m. tons in 2000, and 2.7m. tons, its highest level ever, in 1996. In 2001 Togo’s reserve base of phosphate rock was estimated at 60m. tons, while the country’s reserves were assessed at 30m. tons. Mining is under the control of the state entity, the Office Togolais des Phosphates, which the government attempted, unsuccessfully, to privatize in 2000. Togo’s two principal orebodies are at Hahotoe and Kpogame. The country’s exports of phosphates have traditionally been shipped to markets in Asia. In the Far East, the People’s Republic of China is the most significant producer of phosphate rock, with output estimated by the USGS at 20m. metric tons in 2001. compared with 19.4m. tons in 2000. In 2001, therefore, China ranked as the third largest producer of phosphate rock world-wide. In that year the country’s reserve base was estimated at 10, 000m. tons, while its reserves were assessed at 1,000m. tons. About 20% of China’s resources of phosphate rock are located in Yunnan province. Foreign companies have reportedly been allowed to participate in the development of production facilities based on five deposits of phosphate rock at Yichang in central China. China National Chemicals Import & Export Corporation (SINOCHEM) is the principal Chinese fertilizer trading organization. Among SINOCHEM’s recent acquisitions are US Agrichemicals Co., the third largest US exporter of phosphate-based fertilizers. Another venture, the Yunnan Sanhuan SINOCHEM Cargill Fertilizer Co. Ltd, in which SINOCHEM has a 25% stake, was due to commence operations in 2002. In 2000 the USA and China concluded an agreement to govern trade in fertilizers between the two countries after China’s accession to the World Trade Organization (WTO). Under the terms of the agreement, tariff rate quotas were to be established for certain fertilizers, and foreign companies would enjoy greater freedom to sell and distribute fertilizers in China. The agreement provides for free trade in fertilizers by foreign companies in China five years after Chinese accession to the WTO. China has traditionally been one of the most important markets for US exports of phosphate-based fertilizers. Since late 1999, however, exports have fallen substantially owing to unfavourable weather conditions at the time of planting certain crops, increased global inventories and, to a lesser extent, foreign competition.
COMMODITY SURVEYS 245
Elsewhere in Asia, India is an important producer of phosphate rock, with output estimated at 1.7m. metric tons in 2000. There are deposits of the mineral and refining facilities in the states of Rajasthan, Uttar Pradesh and Madhya Pradesh. In 2000 DAP production was reported to be insufficient to meet domestic demand, necessitating annual imports of some 1.8m. tons. In 2000 Vietnam produced an estimated 850,000 tons of phosphate rock. Proven reserves in Lao Cai province have been estimated at 505m. tons. Australia was reported to have produced 805,000 metric tons of phosphate rock in 2000. Deposits are located in the state of Queensland. The economy of the Republic of Nauru has depended entirely on the mining and export of phosphate rock, but resources will reportedly be exhausted by 2004. Production in 2000 by the state-owned Nauru Phosphate Corporation was estimated to have totalled 500,000 tons. In the Middle East, Jordan, Israel and Syria are all major producers of phosphate rock. In 2001, according to the USGS, Jordan’s production amounted to 5.5m. metric tons, the same level as in 2000, and the country ranked as the sixth largest producer world-wide. Jordan’s reserve base of phosphate rock was estimated at 1,700m. tons in 2001, while the country’s reserves were assessed at 900m. tons. Jordanian production of phosphatic fertilizers reportedly totalled 409.1m. tons in 2000, while that of phosphoric acid amounted to 178.7m. tons. Mining of phosphate rock in Jordan is undertaken by Jordan Phosphate Mines Company (JPMC), which exploits deposits at El-Hassa, El-Abiad and Eshidiya using open pit techniques. Of the three deposits, that at Eshidiya is the most important, owing to the high quality and high phosphate content of the rock, and it is, accordingly, the object of JPMC’s future development plans. Output from Eshidiya was running at 3.3m. tons in the late 1990s, and JPMC planned to raise this to 10m. tons per year by 2003–05. In the late 1990s Jordan was the world’s second largest exporter of phosphate rock, with a 15% share of the world market. More than 80% of Jordan’s phosphate rock output was exported to more than 30 countries, the most important markets being in South-East Asia. In 1999 Jordan’s exports of phosphate rock totalled almost 6m. tons, compared with 3.9m. tons in 1998. The value of phosphate rock exports in 2000 was US $128.2m., while that of exports of phosphoric acid was $104m. In 2001 Israel was the second largest producer of phosphate rock in the Middle East, and the eighth largest producer world-wide, with output estimated by the USGS at 4m. metric tons, compared with 4.1m. tons in 2000. In 2001 Israel’s reserve base of phosphate rock was estimated at 800m. tons, while the country’s reserves were assessed at 180m. tons. Deposits of phosphate rock are located in the Negev region, the largest being that at AradRotem, complemented by substantial resources at Zohar, Zin and Arava. Mining operations are undertaken by Rotem Amfert Negev Ltd, which is owned by Israel Chemicals Ltd. and is also responsible for beneficiation (at plants located at Zin, Oron and Rotem) and production of phosphoric acids, phosphate salts and fertilizers. Production of phosphoric acid in 1999 amounted to some 600,000 tons, while output of fertilizers totalled about 1. 6m. tons. Rotem’s principal export markets for phosphoric acid have traditionally been India, Italy and Turkey, while Brazil, France, Ireland, Italy, the Netherlands, Spain and the United Kingdom are the most important destinations for exports of phosphate rock. Exports of phosphate rock reportedly totalled some 1.1m. tons in 2000, compared with 1.2m. tons in 1999.
246 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
After Jordan and Israel, Syria is the third largest regional producer of phosphate rock, and the 10th largest world-wide, with output estimated by the USGS at 2.1m. metric tons in 2001, as in 2000. In 2001 Syria’s reserve base of phosphate rock was estimated at 800m. tons, while the country’s reserves were assessed at 100m. tons. Most of Syria’s known reserves of phosphate rock are located to the north east of Damascus. In 2000, in addition, there were facilities for the production of phosphate-based fertilizers at Homs, while a plant for the manufacture of TSP was under construction. In that year Syrian production of phosphate-based fertilizers was sufficient to meet only about 63% of domestic demand for them. In 2000 Syria ranked as the world’s third largest exporter of phosphate rock after Morocco and Jordan. Production of beneficiated phosphate rock (with estimated phosphorus pentoxide content of 30%) by Iraq was estimated at 1m. tons in 1999. Among the former Soviet republics, Russia was the most important producer of phosphate rock in 2001, and the fourth largest producer world-wide, with output estimated by the USGS at 10.5m. metric tons, compared with 11.1m. tons in 2000. In 2001 Russia’s reserve base of phosphate rock was estimated at 1,000m. tons, while the country’s reserves were assessed at 200m. tons. Very substantial deposits of apatite ore on the Kola Peninsula form the basis of Russian reserves, and these are supplemented by numerous smaller sedimentary deposits. The Kola Peninsula is also the location of Russia’s most important beneficiation facilities. In 1999 the Kola Peninsula was the source of more than 90% of total Russian output of phosphate rock. Quarrying has been the traditional method of producing phosphate rock in that location, but open pits are gradually being superseded by underground mining operations, owing to declining ore quality. In 1999 production of apatite concentrate was reported to have totalled 9.1m. tons. Exports generally run at about one-third of the amount of apatite concentrate produced. Production of phosphate rock by Kazakhstan was estimated at 1m. metric tons in 2000. The country’s reserves of the mineral, located in the Karatau basin, were reported in the early 1990s to total some 2,600m. tons. Kazakhstan was formerly one of the most important producers of phosphate rock in the world, but, as with output of many of its other mineral resources, production declined very sharply following the disintegration of the Soviet Union, as a result of the collapse of regional markets. Production of phosphate rock by Uzbekistan totalled an estimated 300,000 tons in 2000. Prior to the dissolution of the Soviet Union, Uzbekistan was an important market for phosphates mined in Kazakhstan, but was reported, in the late 1990s, to be unable to pay for continued deliveries. Finland is the only significant western European producer of phosphate rock, with output estimated to have totalled 700,000 tons in 2000. Finnish apatite is mined and refined at Siilinjärvi, near the central city of Kuopoi. In South America, Brazil was the largest producer of phosphate rock in 2001, and the seventh largest producer world-wide, with output estimated by the USGS at 5m. metric tons, the same level as in 2000. In 2001 Brazil’s reserve base of phosphate rock was estimated at 370m. tons, while the country’s reserves were assessed at 330m. tons. Brazilian deposits of phosphate rock are exploited in the states of Minas Gerais and Goiás, and the state of São Paulo is the location of many refining facilities. By far the majority of mining operations are undertaken by four companies: Fosfértil, Ultrafértil, Fertilizantes Serrana S.A. and Copebrás S.A. In 2000 Brazilian production of phosphoric acid amounted to 1.8m. tons (in
COMMODITY SURVEYS 247
terms of available phosphorus pentoxide). In 2000, according to the Departamento Nacional de Produção Mineral, Brazil exported 244,000 tons of phosphate chemical compounds, representing an increase of some 60% compared with the previous year. The value of all phosphate exports increased by 48.4% in 2000, to some US $50m. All of Brazil’s phosphate exports were to countries with which it is linked in economic association through Mercosul/ Mercosur (the Southern Common Market), with Paraguay accounting for the largest share (79%), followed by Argentina (20%) and Uruguay (1%). Brazilian imports of phosphates in 2000 included: diammonium dihydrogen-orthophosphate, 1.22m. tons; primary goods (natural phosphate concentrate), 981,000 tons; phosphoric acid, 270,000 tons; and superphosphates, more than 712,000 tons. The total value of Brazilian imports of phosphates in 2000 was $573.8m. f.o.b., compared with $466.6m. f.o.b. in 1999. Expenditure on imports of primary phosphatic goods (natural phosphate concentrate) amounted to $53,9m., while the values of imports of phosphoric acid for fertilizers and for chemical compounds were, respectively, $56.7m. and $463m. The main sources of imports of natural phosphate concentrate in 2000 were Israel (47%), Morocco (30%), Tunisia (10%), Togo (4%) and Algeria (4%). The USA supplied 30% of imports of phosphate chemical compounds, Russia 26%, Israel 12%, Morocco 10% and Tunisia 5%. In 2000 Brazilian consumption of phosphoric acid grew by 13.7%, that of intermediate phosphate products by 53.4%, and that of phosphate rock concentrate by 13.7%. As most of the phosphate rock produced world-wide is used for fertilizer and animal feed supplement production, market trends are closely linked to the gamut of factors affecting crop and livestock production. Low prices for a particular agricultural commodity, for instance, may discourage its planting or lead to the decision to reduce fertilizer input at the expense of its yields, and thus influence demand for the range of phosphate products and the raw material. As noted above, US exports of phosphate fertilizers to China and India have suffered as a consequence of unfavourable weather conditions at the time of planting certain crops, although that is not the only reason for their decline. According to data cited by the USGS, world consumption of phosphate fertilizers fell by more than 3% in 1999–2001. The expectation that this trend will reverse, however, is reflected in the expansion and planned expansion by major consumers of fertilizers, such as China and India, of their own production facilities. World demand for fertilizers, again according to analysis cited by the USGS, is forecast to increase at an average annual rate of 2.3% in 2000–10 as growth in the world population necessitates increased food production. China, India and the developing economies of Asia and Latin America have been identified as the principal sources of this growth. According to the USGS, the average price per metric ton of phosphate rock imported into the USA increased from US $50.19 in 1997 to $52.66 in 1998 and $56.54 in 1999, before declining to $51.75 in 2000 and $49.30 in 2001. A similar pattern was observed in phosphate rock mined in the USA (f.o.b at mine), with the price increasing from $24.40 per ton in 1997 to $25.46 per ton in 1998 and $30.56 per ton in 1999, before decreasing sharply, to $24.14 per ton, in 2000. The price recovered to $25.00 in 2001, however.
Platinum
Platinum (Pt) is one of a group of six related metals known as the platinum-group metals (PGM), which also includes palladium (Pd), rhodium (Rh), ruthenium (Ru), iridium (Ir) and osmium (Os). In nature, platinum is usually associated with the sulphides of iron, copper and nickel. Depending on the relative concentration of the PGM and copper and nickel in the deposit, platinum is either the major product or a by-product of base metal production. PGM are highly resistant to corrosion, and do not oxidize in air. They are also extremely malleable and have a high melting point, giving them a wide range of industrial uses. Although widely employed in the petroleum-refining and petrochemical sectors, the principal industrial use for platinum is in catalytic converters in motor vehicles (which reduce pollution from exhaust emissions), now usually accounting for more than one-third of total platinum consumption by Europe (including Eastern Europe), Japan, North America and other Western countries (an estimated 41%, or 2,520,000m. troy ounces (allowing for 520,000 oz in recovery from scrapped autocatalysts), in 2001). The USA, Canada, Japan, Australia, Taiwan, the Republic of Korea, the European Union (EU) and certain Latin American countries have implemented legislation to neutralize vehicle exhaust gases, and this necessitates the fitting of catalytic converters, using platinum, rhodium and palladium, to vehicles. In 1989 the Council of (Environment) Ministers of the European Community (subsequently the EU) decided to oblige vehicle manufacturers within the Community to fit three-way catalytic converters as compulsory features in passenger cars with an engine capacity of less than 1,400 cc, effective for all new models from mid-1992 and for all new cars from January 1993. It was predicted that the new measures would reduce emissions of exhaust gases by 60%–70%. The Commission of the European Community subsequently extended similar anti-pollution requirements to larger cars, and to heavy trucks, with effect from 1995. The resultant increase in demand for automotive emission control catalysts (autocatalysts) generated a rising trend in the consumption of platinum, rhodium and palladium during the 1990s. In 1996 the EU announced proposals, implemented in 1998, for stricter limits on emissions, which took effect in 2000. Further restrictions on levels of emissions are due to take effect in 2005. In the USA, regulations to reduce emissions of exhaust gases by 50%–70% will require full compliance by vehicle manufacturers from 2001. The increasing use of palladium-rich catalysts, principally by US and European motor vehicle manufacturers, was reflected in a strong advance in autocatalyst demand for palladium of 990,000 oz (more than 20%) in 1999, to 5,880,000 oz (allowing for 195,000 oz in recovery from scrapped autocatalysts). In 2000, however, autocatalyst demand by
COMMODITY SURVEYS 249
Production of Platinum (kg)
* Estimated production. Source: US Geological Survey. Production of Palladium (kg)
* Estimated production. Source: US Geological Survey.
motor vehicle manufacturers declined by 240,000 oz (4.1%) to 5,640,000 (allowing for 230,000 oz in recovery from scrapped autocatalysts), as stocks were drawn upon in favour of new purchases. In 2001 there was a further decline in autocatalyst demand for palladium, which fell by 530,000 oz, or 9.4%, to 5,110,000 oz (allowing for 290,000 oz in recovery from scrapped autocatalysts). The decline in 2001 was attributed to the continued utilization of stocks in favour of new purchases, and to the high price of the metal, which led some manufacturers to substitute platinum or rhodium in autocatalysts. Also of considerable potential significance to demand for PGM has been the development of fuel cells incorporating platinum catalysts which produce pollution-free electricity from a controlled chemical reaction between oxygen and hydrogen. The only by-products of this reaction are carbon dioxide and water, so that the fuel cell avoids environmental damage, in contrast to the disposal of radioactive waste products from nuclear plants and the production of sulphur and nitrogen oxides at coal- and oil-fired power stations. The use of these cells in power generation, assuming that their operating costs would approximate those of conventional electricity-generating plant, could substantially increase world demand for platinum and palladium.
250 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Other Platinum-Group Metals (kg)
* Estimated production. Source: US Geological Survey.
Alloyed platinum is very heavy and hard. Platinum’s white colour makes it popular for jewellery, which accounts for the other principal source of consumption (41.5%, or 2,550, 000 oz, in 2001). Japan is the world’s main consumer of platinum, and its jewellery industry absorbed 1,060,000 oz in 2000. In 2001, however, Japanese demand for platinum for jewellery was estimated to have fallen by one-third, to 710,000 oz. Industrial and other miscellaneous applications accounted for the balance of platinum consumption; these uses include platinum for minting coins and small bars purchased as an investment, petroleum refining, production of nitric acid, glass manufacture, electrical applications and dentistry. Demand by industrial consumers, particularly in the motor vehicle industry and requirements for jewellery fabrication, raised international demand for platinum from 5, 370,000 oz in 1998, 5,590,000 oz in 1999, 5,680,000 oz in 2000, and 6,150,000 oz in 2001. Supplies entering the market in 2001 increased to 5,860,000 oz from 5,290,000 oz in 2000. This increase in sales was mainly due to considerable increases in South African and Russian shipments. The US Geological Survey (USGS) has estimated world reserves of PGM to be more than 2,00m. oz, of which almost 90% are located in South Africa. According to the USGS, world palladium production exceeded that of platinum in 2000, although in most recent years the reverse has been the case. Production is dominated by South Africa, which normally accounts for about threequarters of supplies of platinum and about one-third of supplies of palladium to the international market. In 2000, according to the USGS, South Africa produced 114 metric tons of platinum (71.1% of world output), 56 tons of palladium (33.6% of the world total) and 36 tons of other PGM (71.0%). South African production capacity was substantially increased in 1993, following the completion of a number of expansion projects which had been under development since the mid-1980s. However, the level of world platinum prices, together with rises in production costs, led to the subsequent postponement or cancellation of several of these projects and to the closure of unprofitable operations. From the mid-1990s, however, improved productivity in the platinum industry, together with the prospect of increasing demand for PGM and continued uncertainty regarding Russian
COMMODITY SURVEYS 251
exports, encouraged South African producers to undertake a number of new expansion programmes. South Africa’s platinum sales advanced from 3,680,000 oz in 1998 to 3,900, 000 oz in 1999, but declined to 3,800,000 oz in 2000, owing to operational problems. In 2001 growth resumed, with sales rising to 4,100,000 oz. With increased productive capacity and the prospect of a sustained high level of prices during the early 2000s, it has been forecast that the value of South Africa’s PGM output could eventually exceed that of gold. In 1999 South Africa’s exports of PGM (unwrought, unworked, or semimanufactured) contributed 9.4% of the country’s total export earnings. Zimbabwe, the only other African platinum producer, has significant deposits of PGM. Although operations at the Hartley platinum mine, developed by Australian interests, were suspended in June 1999, control of its assets was subsequently transferred to new ownership. The construction began in 2001 of a new mine at Ngezi, whose output would be processed at the existing Hartley plant. In 2000, however, Zimbabwe’s Mimosa mine was the country’s only PGM-producing facility in operation. Elsewhere in Africa, there are known or probable deposits of platinum in Ethiopia, Kenya and Sierra Leone. Russia produces much more palladium than platinum. The country normally accounts for more than 50% of the world’s palladium supplies, for about one-fifth of platinum production and 25%–35% of production of the other PGM. In 2000 Russia produced an estimated 35 metric tons of platinum, 84 tons of palladium and 14 tons of other PGM. In 1997, according to estimates by the USGS, Russia exported about 140 metric tons of palladium, while its mine production was only about 62 tons. The excess in supplies was provided from accumulated Russian stockpiles, which have steadily diminished, to compensate for the continuing global production shortfall, in recent years. The size of Russia’s palladium stocks has not been officially disclosed, but in 1998 it was estimated that, at current rates of depletion, they would be exhausted by 2002. In 1991 South African technical assistance was made available to the Soviet Union (and subsequently to Russia) for the development of its platinum industry. Russian PGM are produced mainly as by-products of coal and nickel mining (see below) in the far north of Siberia. Following the break-up of the Soviet Union in 1991, these operations were adversely affected by deterioration in plant and equipment, as the result of a lack of funds for essential maintenance. Production began to stabilize, however, in 1994, although it was estimated that in 1995 and 1996 about 1,000,000 oz of marketed shipments were supplied from Russian government platinum stocks. No supplies of PGM were exported by Russia during the first six months of 1997, and shipments were again interrupted during the first three months of 1998, owing to delays in authorization by the Russian government, for which the central bank acts as marketing agent. During 1999, owing to a change in Russian legislation which prevented exports by Norilsk Nickel, the country’s principal producer of PGM, most, if not all, of the 540,000 oz of platinum sold by Russia in that year were believed to come from central government stocks. Palladium exports were not affected by this legislation, which was amended in 2000, allowing Russian exports of platinum to resume. In 2001 Russian exports of platinum were reported to have risen, and the transfer in that year of responsibility for fixing export quotas from the President to the government ought, theoretically, to have accelerated the process of quota approval. However, this was not apparent in early 2002. Meanwhile, Russian exports of palladium declined markedly in
252 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
2001 as a consequence of Norilsk Nickel’s decision, in August, to suspend ‘spot’ sales of the metal in view of weak world demand for it and, accordingly, falling prices. In 1998 Russia’s exports of PGM (unwrought, unworked, or semi-manufactured) accounted for 2.8% of the country’s total export earnings. Control of Norilsk Nickel was transferred in 1995 to a bank, in preparation for full privatization. Subsequently, however, the enterprise encountered severe financial problems and underwent further restructuring in 1998. In April 1999 Norilsk Nickel announced plans to invest US $3,500m. during the period to 2010 in mine and infrastructural development. Canada is the third largest producer of platinum, the metal being a by-product of its nickel production. Its 2000 production of 6.3 metric tons was some 4% of the world total. In the same year, Canadian output of palladium was 9.9 tons, some 6% of the global total. In recent years the USA has been the world’s fourth largest producer of platinum (3.1 tons in 2000) and the third largest producer of palladium (10 tons in that year). Australia is a minor producer of both platinum and palladium. Japan is a significant producer of palladium (less so of platinum), although it does not mine PGM domestically, and is a substantial importer of ores. Although their output is not reported, the People’s Republic of China, Indonesia and the Philippines are believed to produce PGM. In early 1999 it was reported that significant deposits of PGM had been identified in Mongolia. Whereas PGM are produced in Canada and Russia as by-products of copper and/or nickel mining, PGM in South Africa are produced as the primary products, with nickel and copper as by-products. Another fundamental difference between the platinum deposits in South Africa and those in Russia and Canada is the ratio of platinum to palladium. In South Africa the percentage of platinum contained in PGM has, to date, exceeded that of palladium, although the ratio is expected to favour palladium in new mines that were brought into production from the early 1990s. In Russia, Canada and the USA there is a higher proportion of palladium than platinum. Minor producers of either or both of the two most significant PGM include Colombia, Finland and Yugoslavia. South Africa and Russia are the principal producers of the other PGM. For more than 17 months from mid-1994 the London price of platinum remained above US $400 per troy oz. In April 1995 the price rose to $461 per oz (equivalent to £285 sterling, the currency in which the London quotation had been given until mid-1993), following reports that a US group had developed a new catalyst system for motor vehicles that was claimed to reduce pollution in the atmosphere. In December, however, the platinum price fell to $398 (£256.5) per oz. There was a revival of interest in precious metals during the early weeks of 1996, with the London price of platinum reaching US $433 (£285) per oz in February. As before, the advance was not sustained, and in June the platinum price was reduced to $389 (£251.5) per oz. The London quotation rose to $404.5 (£260) per oz in August, but declined to $367 (£219) in December. During 1997, owing mainly to the erratic nature of supplies from Russia, the market for platinum and other PGM was characterized by extreme fluctuations in prices. At the start of the year, despite the suspension of Russian sales, the platinum market remained depressed, and in early February the London price fell to US $349.5 (£217) per oz. Later in February, however, the platinum price increased to $393.5 (£242) per oz, in response to fears of a
COMMODITY SURVEYS 253
prolonged interruption to previously plentiful supplies of Russian PGM, owing to a threatened strike at Norilsk and to Russia’s failure to settle the terms of its annual agreement to supply platinum and palladium to Japan. In May, amid continuing delays in the release of Russian platinum exports, the metal’s price rose above $400 per oz. In early June the London quotation surged to $497 (£305) per oz: the highest dollar price of platinum since 1990. In July 1997, following reports that Russian sales had resumed, the platinum price eased to $396 (£235) per oz. In August, however, it rose to $457 (£281) per oz, partly in response to a surge in the palladium price (see below). By late October the London price of platinum had fallen below $400 per oz again, and in December it stood at only $342.5 (£210). The platinum market was depressed by the decline in the price of gold (to its lowest level for 18 years) and by reports that Russia was exporting large quantities of PGM to fulfil its 1997 sales quota before the end of the year. Sentiment was also influenced by the effects of economic and financial problems in several countries of eastern Asia. Platinum was perceived to be particularly vulnerable to an economic downturn in this region. The London price of platinum advanced to US $429 (£255) per oz in April 1998 (after Russian shipments were again delayed), but declined to $345.5 (£211) in June. The platinum price rose in July to $394 (£240) per oz, but fell in October to only $334 (£200), its lowest level, in terms of US currency, for more than six years. Market sentiment was influenced by the continued Japanese recession and economic problems in other Asian countries. However, the London price of platinum increased to $383 ($240) per oz in February 1999. Prices remained within this range until September, when the London quotation rose to more than $400 per oz. The platinum price advanced in November to $457 (£282) per oz, as uncertainty over Russian supplies continued. A renewed surge in the early weeks of 2000 took the London price of platinum to US $573 (£357) per oz in February. The price eased in April to $470 (£297) per oz, following the resumption of Russian exports of platinum, but it rose in June to $579 (£386): its highest level since 1989. The platinum price reached $582 (£389) per oz at the end of July 2000. On 2 August a shortage of Russian supplies raised the London quotation for platinum to $612 (£377.5) per oz, its highest level since December 1988. However, this rally was short-lived, with the quotation falling to $564 (£374.0) per oz on 7 August and remaining at around $570 (£382.0) per oz for most of the remainder of the month. On 30 August, however, strong demand brought about a recovery in the price to $598 (£411.0) per oz. In early September 2000 the London quotation for platinum rose back to its previous high of US $612 (£419.0) per oz on several trading days. From mid-September, however, the price began to decline, owing, apparently, to concerns about the possible impact of rising fuel prices on global economic growth. Prices subsequently stabilized in October, generally trading within the range of $575 (£392.5)–$585 (£399.3) per oz. The London price of platinum rose to US $600 (£414.0) per oz on 3 November 2000, remaining close to this level until around the middle of the month. The rally appeared to be due to reports that Gokhran of Russia did not intend to export any PGM in 2001. In late November the London quotation once again rose above $600 per oz, reaching $605 (£426.7) on 30 November owing to fund buying in the USA. The London quotation rose higher still in early December, attaining a new high for the year of $623 (£428.8) per oz on 4 December. Once again the rise was attributed to concerns about a possible shortage of
254 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Russian PGM supplies in 2001. On 13 December the London quotation achieved a new peak for the year of $625 (£430.7) per oz, its highest level for 13 years. The London quotation remained above $600 per oz for the rest of the month, trading for the year closing at $611 (£409.0) per oz on 29 December. In January 2001 the London price of platinum attained its highest level for 14 years, rising to US $645 per oz in the middle of the month. The abrupt increase came about as a result of physical buying that was prompted by rumours that Russia’s PGM export quotas would not be fixed until February, and of the sharp rise in the London price of palladium (see below). By the end of January, however, the price had declined to $604 per oz as a result of profittaking by market participants. By 13 February the London price had fallen to $592 per oz, partly as a consequence of a fall in the value of palladium. By the end of February, however, firm physical demand had caused the price of platinum to recover to $610 per oz. In early March, the price of palladium continued to decline, and that of platinum followed in its wake, falling to only $576 per oz on 5 March. On 30 March renewed selling by investment funds prompted a further decline, the London price of platinum falling as low as $563 per oz. A fall weakening of the London price of platinum to $555 per oz on 2 April was succeeded by a recovery lasting two weeks, during which the quotation for the metal attained $630 per oz. By the end of the month, however, the price had slipped back to $594 per oz. Twice during May the price was driven back to $622 per oz, but both rallies were of short duration and at the end of the month platinum traded at $607 per oz. By 13 June the price had fallen to $574 per oz, and, thereafter, declined further, in response to the deceleration of the US economy and a forecast recession of Japanese demand, reaching $558 per oz at the end of June. On 18 July 2001, having traded in a range of US $550–$560 per oz since the beginning of the month, the London price of platinum plunged abruptly, to $520 per oz, as a consequence of the liquidation of ‘long’ positions on the Japanese futures market, and the closure, in response, of corresponding positions on the New York ‘futures’ market. By the end of the month, owing to further sales, the value of the metal had fallen to only $476 per oz. On 9 August the continued closure of ‘long’ positions by Japanese investors, combined with weak physical demand, depressed the London price of platinum to its lowest level, $433 per oz, for more than 18 months. Further sales on the Japanese ‘futures’ market caused the price to decline to only $422 per oz on 16 August. Delayed Russian exports, the result of reforms to domestic legislation, raised the London price of platinum above $460 per oz on 25 August, but, by the end of the month, concerns about Russian shipments had subsided and the London price fell to $446 per oz. The terrorist attacks against US targets in New York and Washington, DC, on 11 September had little immediate effect on the price of platinum. By 20 September the price of the metal had risen to $495 per oz, but on 25 September, in response to predictions of slower US economic growth, among other factors, the London quotation sank to $447 per oz. On 2 October the price of the metal fell to its lowest level, $406 per oz, for the whole of 2001 in response to the decline of prices on the Japanese ‘futures’ market by their maximum permitted daily limit. On 15 October ‘short covering’ on the Japanese ‘futures’ market, in response to a substantial increase in onemonth loco Zurich lease rates, brought about a recovery, to $462 per oz. By the end of October, however, the London ‘fix’ had fallen to $425 per oz. During November London
COMMODITY SURVEYS 255
platinum traded within a range of $416–$443 per oz. By 10 December, however, more positive assessments of economic prospects for 2002 had lifted the price of platinum to $470 per oz. The price of the metal remained above $450 per oz for the remainder of the month, ending the year at $477 per oz as concerns about Russian export quotas in 2002 surfaced. Trends in the price of palladium have shown even greater volatility in recent years. The London price of the metal rose to US $175 per oz in April 1995, but declined to $127.5 in December. During 1996 the palladium price fluctuated between $114 and $144 per oz, with a declining trend towards the end of the year. However, as in the case of platinum, Russia (the leading supplier of palladium) suspended sales for the first six months of 1997. In response, the price of palladium advanced from $ 118 per oz in January to $240 in June. Following the resumption of Russian shipments in July, palladium was traded at $162 per oz. However, in August, as a result of speculative activity on the futures market in Japan, the metal’s price rose to $245.5 per oz, its highest level since 1980. The London price of palladium stayed above $180 per oz for the remainder of 1997. For the year as a whole, the average price was $178.3 per oz, nearly 40% higher than in 1996. In addition to the restricted availability of supplies, the palladium market was influenced by the strong rise in demand for the metal from industrial consumers, particularly for use in vehicle catalysts (see above). There was a further interruption to Russian sales of palladium from the beginning of 1998, leaving the market severely undersupplied. This scarcity was the main cause of another upward surge in prices. In April the London price of palladium exceeded the gold price for the first time ever and continued to advance to a succession of record levels, with a peak of US $390 per oz. In early May the palladium price eased to $321 per oz, but one week later, as Russian supplies continued to be delayed, it rose to a new record of $417, equivalent to £257 sterling. By the end of the month, however, palladium was traded at less than $300 per oz, after Russian sales resumed. In early June the price fell to $258 (£158) per oz, but in July, amid renewed concerns over Russian supplies, it increased to $347 (£210). The palladium price stayed within this range for the remainder of 1998, ending the year at $329 (£198) per oz. The average London price of palladium in 1998 was $284.2 per oz: 59% higher than in 1997. During the early months of 1999 the price of palladium surged again, owing to uncertainty concerning Russian supplies, and in April the London quotation reached US $384 (£238) per oz. However, by early May (only two weeks later) the price had retreated to $285 (£176) per oz, following reports of a large Russian shipment of palladium. Prices in US currency remained within this range until September, when the London quotation rose to $385 (£234) per oz. The upward trend continued, with the price of palladium rising to a succession of new records, ending the year at $454 (£281) per oz. The surge in palladium prices was maintained during the opening weeks of 2000, and in February the London quotation reached US $785 (£491) per oz. In April the price of palladium eased to $554 (£350) per oz, but at the end of July it reached a new record of $822 (£549). As in the case of platinum, the main influence on market sentiment was the delay in Russian shipments. On 2 August the London quotation for palladium attained a new record level of $855 (£574.0) per ton. This level was not sustained, however, and by the end of August the London quotation for palladium had fallen to $716 (£492.1) per oz.
256 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Heavy industrial demand caused the price to rally again in early September, but once again the rally was not sustained, the London quotation for palladium declining to $711 (£490.3) per oz on 28 September. From the end of October 2000 the London quotation for palladium rose sharply once again, reaching $794 (£548.0) per oz on 3 November in response to concerns about the level of Russian PGM supplies in 2001. The Russian supply situation brought about further substantial increases in the London quotation in December. On 12 December the price rose to $940 (£649.2) per oz, a fifth consecutive all-time high. On 27 December palladium attained a new all-time record price of $972 (£652.8) per oz, before declining to $954 (£638.6) per oz at the final fix of the year. On 8 January 2001 the London price of palladium rose above US $1,000 per oz for the first time ever. As in December 2000, the Russian supply situation was the key to the successive all-time record prices recorded in January 2001. On 26 January the London price of palladium reached a zenith of $1,094 per Between 8–11 February, however, the value of the metal declined to $975 per oz as concerns about supplies from Russia were allayed. From 21 February ‘spot’ sales of palladium in London commenced that would cause the value of the metal to decline relentlessly until October. Already, by the end of February, the London price had fallen to $839 per oz, and on 5 March it fell to $750 per oz, its lowest level for four months. Rising physical sales depressed the London ‘fix’ for palladium to less than $700 per oz on 4 April, and on 12 April the London quotation declined to $650 per oz. These falls were succeeded by a period of volatility during which the London ‘spot’ price rose above $700 per oz and the London ‘fix’ recovered to as high a level as $765 per oz at one point. This rally was short-lived, however, and by the end of the month the London price had fallen back to $682 per oz. A further weakening occurred during the first two weeks of May. On 14 May the London ‘fix’ was $630 per oz. Thereafter, for the remainder of the month, palladium traded in a range of $640–$660 per oz. Weak demand had depressed the price of the metal further, to below $600 per oz, by late June. On 13 July 2001 the price of palladium declined to US $559 per oz. Thereafter the market was characterized by an abundance of supplies from a variety of sources, which, combined with an absence of demand, caused the London price of palladium to fall to $543 on 16 July, thus trading at a discount to platinum for the first time since May 2000, and to less than $500 per oz on 20 July. On 31 July the London price fell as low as $438 per oz, but subsequently recovered to $457 per oz. On 7 August a further sharp fall, to $438 per oz, in the price of palladium occurred in response to a substantial fall in the value of platinum. From 24 September palladium was depressed further by a decline in the price of platinum, the London quotation for the former falling to only $400 per oz on 26 September. In spite of this loss of value, demand remained weak and on 28 September the London price of palladium fell to $360 per oz. On 2 October the London quotation declined to $315 per oz, its lowest level for 24 months, in response to heavy selling of physical metal. However, the new ‘low’ spurred industrial buyers to enter the market and palladium traded in a range of $340–$360 per oz until 17 October when the value of the metal began, once again, to decline in line with that of platinum, falling to $317 per oz on 22 October. During November, amid subdued market activity, palladium generally traded at around $330 per oz. By 10 December industrial purchases, combined with an absence of Russian
COMMODITY SURVEYS 257
Platinum Prices on the London Platinum and Palladium Market (morning and afternoon ‘fixes’, US $ per troy oz)
‘spot’ sales, had raised the London quotation to $423 per oz. Thereafter, for the remainder of December, palladium traded at close to $400 per oz, rising to $440 per oz at the final ‘fix’ of the year in response to speculation that Russian PGM export quotas for 2002 would be delayed.
Rice
Rice (Oryza) is an annual grass belonging to the same family as (and having many similar characteristics to) small grains such as wheat, oats, rye and barley. It is the staple food in most of the countries of monsoon Asia, and about 90% of the total world area under rice lies within that region. Rice is the main food crop there because it is well suited to Asian climatic conditions, producing high yields of a nutritious grain where other cereal crops will not readily grow. Wet rice cultivation is typically associated with the alluvial lowlands of monsoon Asia, but rice will tolerate a wide range of geographic, climatic and ecological conditions and is even grown under upland cultivation. It is also a staple in Madagascar and in areas in the east and west of the African continent. There are two cultivated species of rice, Oryza saliva and O. glaberrima. O. saliva, which is native to tropical Asia, is widely grown in tropical and semi-tropical areas, while the cultivation of O. glaberrima is limited to the high rainfall zone of West Africa. In Asia and Africa, unmilled rice is referred to as ‘paddy’, but ‘rough’ rice is the common appellation in the West. After removal of the outer husk, it is called ‘brown’ rice. After the grain is milled to remove the bran layers, it is described as ‘milled’ rice. As rice loses 30%–40% of its weight in the milling process, most rice is traded in the milled form, to minimize shipping expenses. It is principally the semi-aquatic nature of rice that distinguishes it from other grain species, and this is an important factor in determining its place of origin, its dominant role in monsoon Asia and its extension to other environments. Rice varieties may broadly be classified into two main groups: indica and japonica. (There is also an intermediate or Java type, cultivated in parts of Indonesia.) However, many rice varieties currently being grown are improved crosses of indica and japonica rices. The indica group, prevalent in South and South-East Asia, and covering a high proportion of the total rice area of Asia, has been associated with low yields and primitive production techniques. The japonica types (which predominate in East Asia), while not inherently more productive than the indica types, are more responsive to natural and artificial fertilizers and give higher average yields. Underlying the low average rice yields in South and South-East Asia (including India, Bangladesh, Sri Lanka, Laos, Cambodia, Viet Nam and Thailand), compared with those in East Asia (the People’s Republic of China, the Koreas, Japan and Taiwan), are the lack of modern varieties which are adapted to local conditions, and the shortage of associated technology, including fertilizers and pesticides, and of adequate and timely supplies of water.
COMMODITY SURVEYS 259
Production of Paddy Rice (’000 metric tons)
* Unofficial figure. Source: FAO.
Conventional rice varieties respond to increased fertilizer usage by producing more leaf and stalk instead of grain, causing the plant to lodge (fall over), decreasing net yields. During the 1960s the International Rice Research Institute (IRRI), based in the Philippines, developed a series of stiff-stemmed, semi-dwarf varieties, bearing upright leaves, that respond positively to high rates of fertilizer application and other improved cultural practices. These improved varieties may yield as much as 10 tons of paddy rice per ha, while old varieties may yield less than 1 ton per ha. Most of the newly-developed varieties are resistant to insect pests, diseases and some soil problems, although much work remains to be done in the selection of resistant varieties. Agronomists at the IRRI, and in national programmes, are continually developing varieties that will tolerate drought, flood, deep water and sub-optimum temperatures, and high-yielding varieties (HYVs) which are designed for areas without costly irrigation or where water is scarce. Farmers cultivating these varieties may expect a reduced risk of crop failures, and are more likely to invest in other production inputs. In the late 1990s the IRRI was developing new HYVs that, it believed, could increase harvest yields by 20%–30% by 2003. It was forecast by the IRRI in 1997 that annual world rice production would have to advance by 70% by 2025 in order to keep pace with current rates of population growth. China developed its own high-yielding semi-dwarf varieties in the late 1950s, and these were widely disseminated in the country by the mid-1960s, prior to the release of the first IRRI varieties. Of recent interest has been the development in Hunan Province of a true hybrid rice which increases yields by as much as 20%. In 1999 it was reported that a new HYV, which could increase yields by 30%, had been developed in China. Hybrid varieties are
260 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
planted on more than 10m. ha throughout southern China. A major limitation of the hybrids (apart from the high cost of seed production) is their rather long maturation period, which limits their suitability for intensive cropping patterns. The area under rice in China declined by 2.3m. ha during 1991–95 (owing to factory construction, road construction and urban development, which necessitated the use of land previously used for rice cultivation). However, volume output has been assisted by incentives for growers, such as the reduction of required quotas and permission for families and individuals to conduct business with production units. Although China was exporting more than 1m. metric tons of rice annually in the late 1980s, short-comings in the country’s internal transport structure necessitated imports, mainly from Thailand, of more than 200,000 tons per year. Serious floods in China in 1998 reduced rice production in that year by some 2m. tons, necessitating a substantial increase in rice imports. In 2000, as the result of a severe drought, China’s rice production declined by 5.3%, to about 188m. tons. In 2001 China’s output of rice was estimated by the FAO to have declined again, by 4.4%, to about 180m. tons. The world’s leading exporter of rice in recent years has been Thailand. The average export price of Thai milled white rice increased from US $320.8 per metric ton in 1995 to $338.1 per ton in 1996, but declined to $302.5 in 1997. The price averaged $305.4 per ton in 1998, but subsequently slumped: to $249.0 in 1999, $203.7 in 2000, and $172.7 in 2001. On a monthly basis, the average fell from $301.7 per ton in January 1999 to only $235.5 in April. The price recovered to $255.8 per ton in July, but declined to $217.0 in October. It rose to $247.0 per ton in January 2000, but fell to only $198.8 in May and to $197.9 in June. The decrease in prices was partly attributable to the plentiful supply of rice, with abundant stocks available, particularly in China and India. By April 2002 the average export price of Thai milled white rice had recovered somewhat, to $189.5 per ton. In May the FAO reported that international rice prices displayed unusual strength, reflecting, among other factors, an anticipated tightening of the availability of supplies from Pakistan and Viet Nam. Thailand became the world’s leading rice exporter in 1981, and rice has remained the country’s principal agricultural export commodity, accounting for 3.3% of its export income in 1999. Owing to the depressed state of the world rice market since the early 1980s and the achievement of self-sufficiency by a number of Asian countries, Thailand increased its exports of rice largely at the expense of the USA. However, the decision by the USA to include rice in its Food Security Act, which came into operation in 1986 (making US-grown rice eligible for subsidized export credits), significantly affected the level of sales from Asian rice producers by undercutting the price of their exports. During the late 1980s, however, Thailand substantially expanded sales of its high quality rice to the European Community (now the European Union—EU), Russia, South Africa, Saudi Arabia and Iran. Thailand’s dominance in the world rice market, in which it accounted for about 6.8m. metric tons in 1999 and 6.1m. tons in 2000, according to the FAO, has come under increasing pressure in recent years from India and Viet Nam. In 2001, according to the US Department of Agriculture (USDA), Thailand’s exports of rice rose to a record level of 7. 5m. tons in 2001. India, whose rice production has increased markedly since the late 1980s, emerged as a major exporter during 1993–95, when the relaxation of government restrictions led to a rise in export sales from 767,681 metric tons in 1993 to 4.9m. tons in 1995. However, the
COMMODITY SURVEYS 261
volume of India’s exports is subject to the maintenance of rice stocks for domestic use at a statutory minimum of 10m. tons. In 1998, owing to poor crops in a number of importing countries, India’s rice exports approached 5m. tons. The return of more favourable growing conditions in 1999 had an adverse effect on this trade, particularly with Bangladesh, which is normally a substantial importer of Indian rice. Export sales declined to an estimated 1. 9m. tons in that year, and again, in 2000, to 1.5m. tons, according to the FAO. In 2001, according to the USDA, India exported 1.6m. tons of rice. In 2002 the FAO has forecast that India will resume the role of a major supplier to the international rice market, reporting that unprecedentedly high stocks have exerted pressure on the government to subsidize foreign sales. Bangladeshi production increased steadily throughout the 1980s and 1990s, despite the country’s vulnerability to flooding. Its production of 39m. metric tons in 2001 made it the fourth largest producer in the region in that year. The country remains a net importer of rice, however. Viet Nam’s harvests have been greatly stimulated by the government’s recent willingness to grant long-term land tenure to farmers. In 1989 Viet Nam became the world’s third largest rice exporter, after Thailand and the USA, and in that year sales by Viet Nam of lowgrade rice at prices substantially below those of Thai exporters prompted the Thai Government to introduce a programme of domestic rice subsidies. Vietnamese rice exports, which totalled 1.6m. metric tons in 1990, advanced to almost 2m. metric tons in 1992. In 1993/94 the Government of Viet Nam temporarily suspended rice exports, following serious floods in the country’s major rice-growing area. These restrictions, however, were lifted in April 1995, and exports for that year, at about 2m. metric tons, positioned Viet Nam as the world’s fourth largest exporter of rice, after the USA, India and Thailand. In 1996 exports of rice provided 16.7% of Viet Nam’s foreign revenue, and in 1997 the country became, after Thailand, the world’s second largest exporter of rice. In early 1998, however, the Vietnamese Government imposed temporary controls on rice export volumes in order to maintain the security of domestic supplies. Nevertheless, exports for the full year were, at 3.7m. tons, more than 4% higher than those of the previous year, and, in 1999, rose to a record level of 4.5m. tons, contributing 8.9% of Viet Nam’s total export earnings. In 2000, however, Viet Nam’s exports of rice declined by more than 20%, to only 3.5m. tons. The FAO has forecast that the Vietnamese rice export sector is likely to benefit, in 2002, from an expansion of the international rice market. Exports of rice have, in recent years, constituted a key component of the economy of Myanmar, accounting for 10.9% of export revenue in 1995/96. In 1998/99, however, this proportion fell to only 2.4%. The total area under paddy rice in 1995/96 was estimated at 6.2m. ha, accounting for 47.5% of all land under cultivation. Production advanced strongly during the 1990s, largely as a result of the increased use of HYVs. Export growth, however, has been inhibited by the relatively low quality of Myanmar’s rice in relation to that of competitors such as Thailand, and to the enforced curtailment of exports by the Myanmar Government in order to avert domestic shortages. Myanmar’s exports of rice totalled only 28,000 metric tons in 1997, but rose to more than 100,000 tons in 1998. In l999 exports declined substantially, to only about 60,000 tons, but rose in 2000 to about 142,000 tons. In
262 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
view of the favourable outlook for international trade in rice, Myanmar’s exports of rice were forecast by the FAO to increase in 2002. Indonesia, the third largest rice producer in the Far East and Australasia, sustained a fairly sharp fall in output, to about 49m. metric tons, during 1997/98, following a severe drought brought about by the climatic phenomenon known as ‘El Niño’. Production remained at about 49m. tons in 1998/99. The country’s rice imports, principally from Thailand and Viet Nam, accordingly rose from about 350,000 tons in 1997 to about 2.9m. tons in 1998. They increased further, approaching 5m. tons, in 1999, but declined in 2000 to only 1.4m. tons. Indonesia, which maintained self-sufficiency in rice during 1984–93, experienced a rapid advance in domestic rice requirements during the 1990s, and became the world’s principal rice importer. The country is expected to remain a net importer of rice for the foreseeable future. In recent years Australia has emerged as a significant exporter of rice, especially to Japan, although its trade is on a much smaller scale than the major exporters of the Far East. In 2001 Australia’s exports of rice totalled 613,000 tons, according to the USDA, compared with 617,000 tons in 2000, and 667,000 tons in 1999. Japan is a significant net importer of the grain. In Africa rice is grown mainly as a subsistence crop. Methods of cultivation differ from region to region and yields tend to be low by world standards. Rice is a staple food in several African countries, including Madagascar and Tanzania, and especially in West African countries, where rice is a staple food of 40% of the population. African rice production accounts for less than 3% of total world output. As the bulk of rice production is consumed mainly in the producing countries, international trade accounts for less than 5% of world output. The market is subject to great volatility and fluctuating prices. Less than 1 % of the African rice crop enters international trade and more than 90% of African rice exports usually come from Egypt (see below). Africa has, especially in recent years, been a substantial net importer of rice, although the volume growth in imports has been held in check by the impact of higher world rice prices on the depleted foreign exchange reserves of many African importing countries. The major producing countries in sub-Saharan Africa in 2001, according to FAO estimates, were Nigeria (3.3m. metric tons), Madagascar (2.3m. tons) and Côte d’Ivoire (1.0m. tons). The major African importers include these three countries, Guinea, Sierra Leone and Senegal. Despite the completion in 1995 of the rehabilitation of its main rice-growing areas, Madagascar (which ranks as the world’s greatest rice-consumer per caput) has yet to achieve its goal of self-sufficiency in rice. In 2000 Madagascar had almost 1.2m. ha planted with rice. Nigeria had about 2m. ha under rice in 1997, and Côte d’Ivoire 650,000 ha. According to the FAO, imports of rice by African countries gave considerable impetus to international trade in rice in 2001, but they were forecast to decline substantially in 2002, especially those of Nigeria, which, the FAO reported, raised the import duties it applied to rice to 150% in April 2002. Because most of the varieties of rice cultivated in Africa originated in Asia and are relatively new to the region, suitable HYV have only just begun to be propagated. The development of HYV is among the activities of the 17-member West Africa Rice Development Association (WARDA), formed by the producing countries in 1970. Based in M’bé, near Bouaké, Côte d’Ivoire, WARDA maintains research centres in Nigeria, Senegal, Sierra
COMMODITY SURVEYS 263
Leone and Côte d’Ivoire, from which it conducts scientific research on crop improvement and provides technical assistance, with the aim of advancing the region towards eventual selfsufficiency in rice production. In 2000 it was planned to proceed with several New Rice for Africa (NERICA) cultivation projects. The NERICA varieties have been developed by WARDA, and it is hoped that their adaptation to West African growing conditions will increase their yields by at least 25%, compared with conventional rice crops. In Latin America, Brazil, Argentina, Chile, Ecuador and Uruguay are all significant regional producers of rice. Argentina and, in particular, Uruguay, however, are the region’s only major exporters. According to the USDA, Brazilian output of rice rose substantially, to 11.6. metric tons, in 1998/99, compared with only 8.5m. tons in 1997/98. Production declined slightly, to 11.4m. tons, in 1999/2000, and, again, to 10.4m. tons in 2000/01. As production has increased, so Brazilian imports have declined, although the country remains by far the most important regional market for rice. In 1997/98, according to the USDA, Brazilian imports of rice totalled 1.6m. tons, but declined to only 781,000 tons in 1998/99, 700,000 tons in 1999/2000, and 673,000 tons in 2000/01. In 2001/ 02 the USDA estimated that Brazilian imports would decline to only 500,000 tons. Cuba is also one of Latin America’s most important markets for rice, with purchases that have exceeded 400, 000 tons in most years recently, according to the USDA. As noted above, the USA ranks as one of the world’s top five exporters of rice, but efforts in recent years to increase the country’s share of trade in markets where Thailand and Viet Nam have traditionally been dominant, and India has emerged as a powerful competitor, have been hampered by the price of Asian supplies, which fell to its lowest level for 30 years in late 2000 and early 2001. The USDA has noted that even in 2002, as the prices of high-quality, competing US and Thai rices have tended to converge and, occasionally, moved to the advantage of US supply, the USA has nevertheless failed to increase its share of markets including those for speciality rices in Nigeria, Saudi Arabia and South Africa, and East and West African markets for low-quality rice. In addition to their lack of price competitiveness, growth in US exports has been impeded by a disadvantageous freight rates to markets in Africa and the Middle East, and by the unwillingness of some importers of high-quality rice, such as Iran and Iraq, to trade with US suppliers (see below). Conversely, the USDA noted that US exports to small, geographically natural markets in Central America, such as El Salvador, Guatemala, Honduras and Nicaragua, have increased as production in those countries has failed to keep pace with growth in consumption. In the Middle East and North Africa, Egypt is the major rice producer, 2001 output being estimated by the FAO at 5.7m. metric tons. Iran is the other producer of significance in the region, with an estimated 2.2m. tons in 2001. Many of the countries in the region are significant net importers of rice, however, the grain’s use exceeding the amount which can be feasibly grown in the prevailing semi-arid conditions of much of the region. Iran, Iraq and Saudi Arabia are the three most important importers in the region. With production of 1.2m. metric tons in 2001, Italy is the principal rice-grower in Europe. Climatic conditions confine the crop to the countries on the continent’s Mediterranean fringe. Similarly, rice is a minor crop in the former Soviet republics, the principal producer in the region being Russia.
264 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Export Price Index for Rice (base: 1980=100)
World trade in rice (usually in a milled or semi-milled form), which averaged about 20m. metric tons annually in the mid-1990s, fell from 28.8m, tons in 1998 to 25.2m. tons in 1999 and to only 23.2m. tons in 2000. The FAO has forecast that international trade in rice will total 24.6m. tons in 2002, owing, mainly, to increased imports by Indonesia, China and, on a smaller scale, Iran. The bulk of rice production is consumed in the producing countries, and international trade generally accounts for less than 5% of world output. Governments are the principal traders, and five countries dominate the export market in most years: Thailand, Viet Nam, the USA, China and India. Middle Eastern and African countries have traditionally been the most important markets for exports of rice from the Far East. Japan, a substantial producer of rice, has customarily enforced a strict policy of self-sufficiency, and domestic production receives substantial government subsidies. The Government’s total prohibition on commercial imports of rice, which was strongly challenged by leading exporters (notably the USA), was temporarily relaxed in September 1993, following a substantial shortfall in the domestic rice harvest. However, as part of the Uruguay Round of negotiations under the General Agreement on Tariffs and Trade, Japan and the Republic of Korea accepted provisions (with effect from 1 January 1995) allowing foreign access to their rice markets. Rice imports by Japan accounted for only about 4% of domestic requirements in 1995 and, according to the USDA, for about 7.5% in 2000/01. Imported rice supplied 1% of consumption requirements by the Republic of Korea in 1995, accounted for less than 3% in 2000/01, according to the USDA, and was not expected to meet more than 4% of domestic needs by 2004.
Rubber
Rubber is a tough, elastic substance made from an emulsion (latex) produced by the rubber tree (Hevea brasiliensis). Cuts are made in the tree trunk, the latex flows out and is collected, and coagulated, most usually with the aid of a dilute acid, into ‘cakes’ of raw rubber. These cakes, once dried, are then usually treated with wood smoke and rolled into sheets ready for transport to industrial consumers. Rubber cultivation is suited to both estate and smallholder methods of farming, though productivity on rubber estates is greater as it is the estates that have pioneered both the development of cultivation techniques and the improvement of the clones, or selected high-yield strains. These may either be planted as seedlings or propagated by grafting on to seedlings of ordinary trees (root stock) and planted out subsequently. Natural rubber can be produced from plants other than Hevea. One of these is guayule, a desert shrub found in Mexico and the south-western USA. Commercial rubber production from guayule has been undertaken at various times, notably during periods of restricted supplies of Hevea. The US Department of Agriculture (USDA) has conducted research into the development and commercialization of guayule as a domestic source of natural rubber. In 2001, according to the International Rubber Study Group (IRSG), natural rubber accounted for some 40% of world consumption of new rubber, the remainder being met by petroleum-based synthetic rubber. Almost 75% of total rubber output, both natural and synthetic, is used in motor vehicles, particularly tyres, which themselves account for about 70% of synthetic rubber demand. Epoxidized natural rubber (ENR), which is natural rubber treated with peracids (which are made by treating acetic acid with hydrogen peroxide and formic acid) to enhance its ability to resist stress, was developed in the United Kingdom and Malaysia as an alternative to synthetic rubber for use in the manufacture of car tyres. Of total estimated world production of 7,001,217 metric tons of natural rubber in 2001, Asian countries accounted for more than 90%. The principal producers are Thailand, Indonesia, Malaysia, India, the People’s Republic of China, Viet Nam and Sri Lanka. In terms of export revenue, rubber is of particular significance to Indonesia, Thailand, Malaysia and Sri Lanka. In 2001, according to the IRSG, world consumption of natural and synthetic rubber declined by 4.3% to 17.4m. metric tons. Output of natural rubber in that year increased by 5.3%, compared with 2000, to 7.1m. tons, according to the same source, while that of synthetic rubber declined by 3.5% to 10.5m. tons.. In early 2002 the IRSG forecast that world rubber consumption would increase by 5.3% in 2002 to surpass the record level of
266 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Natural Rubber (’000 metric tons)
* Unofficial figure. † FAO estimate(s) Source: FAO.
18.2m. tons recorded in 2000. Consumption of natural rubber was forecast to increase by 6. 3% in 2002, while it was estimated that that of synthetic rubber would grow by 4.6%. At the same time, the IRSG suggested that production of natural rubber might increase by as much as 10% in 2002, thus causing stocks to accumulate and exerting downward pressure on prices. In 1975 the Association of Natural Rubber Producing Countries (ANRPC), whose members (Malaysia, Thailand, Indonesia, Singapore, Sri Lanka, India, Viet Nam and Papua New Guinea) account for more than 80% of world rubber output (according to the FAO), initiated plans to establish a buffer stock of natural rubber and to ‘rationalize’ supplies by keeping surplus stocks off the market. The operation of the buffer stock and the supply rationalization scheme was to be entrusted to an International Natural Rubber Council (INRC), which was established in 1978. Action to implement this plan was deferred, however, in the hope that discussions under the auspices of the UN Conference on Trade and Development (UNCTAD) would result in a more broadly-based price stabilization agreement involving both producers and consumers. In 1979 the UNCTAD conference of 55 countries reached accord on the terms of an International Natural Rubber Agreement (INRA), which became fully operational in 1982, administered by an International Natural Rubber Organization (INRO), with headquarters in Kuala Lumpur, Malaysia. The first INRA (which, with two extensions, remained in force until January 1989, when a successor agreement, operating on similar principles, took effect) provided for an adjustable price range (quoted in combined Malaysian/ Singaporean dollars and cents),
COMMODITY SURVEYS 267
maintained by means of a buffer stock. In January 1993 negotiations began, under the auspices of the INRO, to seek the formulation of a new agreement, to take effect at the expiry of the current INRA in December 1993. By mid-1993, however, wide areas of disagreement over the operation of pricing provisions of a third INRA remained unresolved. In November, after producers agreed to a 5% reduction in reference prices for buffer stock operations, the INRC decided to resume negotiations for a third INRA and to extend the current agreement by one year. These negotiations, which continued during 1994, resulted in the adoption, in February 1995, of a third INRA, to take effect from late December, on expiry of the current agreement (although full ratification was not expected to be completed until early 1996). Subsequent delays in ratification arrangements, however, caused INRA provisions technically to lapse, although the INRO secretariat continued to exercise administrative functions. At a meeting held in March 1996 the producing and consuming countries agreed to extend the date for ratification until 31 July. Although Indonesia, Thailand, Sri Lanka and Malaysia, jointly accounting for more than 90% of world rubber output at that time, had assented to the third INRA, continuing delays in ratification by a number of consumer countries, notably the USA (which represented about 29% of world rubber consumption), prompted a further extension, to 28 December, of the finalization of the agreement. The third INRA, which entered into force in March 1997, again provided for a guaranteed reference price, maintained by means of a buffer stock, the reference price being subject to review every 12 months. The duration of the agreement was four years, with the option of two extensions of one year each. The effective operation of successive INRAs has been attributable, in large part, to each agreement’s acceptance by virtually all producing and consuming countries. However, only about one-third of rubber consumed is natural rubber, and INRA provisions do not cover trading in synthetic rubber. In June 1992 the membership of ANRPC announced that it was to seek the creation of a single, centralized open market, probably to be based in Singapore, as a means of counteracting the large volume of private transactions between smallholder groups and consumers (estimated to represent more than 70% of the world’s natural rubber trade), which the ANRPC blamed for depressed price levels. During 1993 Indonesia, Malaysia and Thailand expressed dissatisfaction with the operational record of the INRO, which, they stated, had failed to ensure adequate financial returns on rubber sales. The persistence of depressed market conditions for natural rubber (see below) intensified the discontent of these producers with the operation of the third INRA, particularly in relation to the price support and buffer stock arrangements as operated by the INRO. Criticism was led by Malaysia and Thailand, which, during July and August 1998, indicated that they were actively considering withdrawal from the INRO, on the grounds that the guaranteed intervention price provided by the INRA was too low, and that buffer stock increases were insufficient to counteract falling prices. It was reported that Thailand and Malaysia, together with Indonesia, were contemplating withdrawal from the INRO, with the intention of forming a producers’ organization that would implement voluntary supply restriction arrangements, independent of the INRO, under which production of natural rubber would be limited to 20% below world demand. The possibility was also discussed of forming a new regional rubber exchange, and of a co-ordinated marketing system to reduce competition among producers. In October 1998 Malaysia gave the requisite 12 months’
268 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
notice of withdrawal from the INRO. Although Indonesia subsequently affirmed its intention to remain in the organization, Thailand announced in March 1999 that it would terminate its membership with effect from March 2000. It was widely believed that the INRO would be unable to remain in existence without the participation of Thailand, which provided about 40% of the organization’s contributions from producer members. The Government of Thailand, meanwhile, indicated that it was formulating a plan to restructure its national rubber sector, with a view to doubling export revenue from this source during the period 2000–04. It was understood that this plan included a price intervention mechanism, which was to be financed in part from the retrieval of the rubber stocks held by the INRO, whose value in early 1999 was estimated at US $65m. In April 1999 the INRO met in Kuala Lumpur, Malaysia, but was unable to persuade Malaysia and Thailand to reconsider their decision to withdraw, and in August Sri Lanka announced that it was also to terminate its membership, leaving only Indonesia, Nigeria and Côte d’Ivoire as producer members. (At that time the INRO had also grouped 16 importing members, including the European Union (EU), the USA and Japan.) Following a further meeting in September, the INRO announced that it was to disband with effect from midOctober, and scheduled a further meeting for December to determine the means and timing of the disposal of its rubber stockpile, estimated at 138,000 metric tons. The timetable for the disposal was strongly disputed, with Thailand and Malaysia advocating a swift sale, while the other INRO members favoured the gradual disposal of stocks, to prevent price disruption; it was subsequently announced that all INRO-owned rubber would be sold by the end of June 2001. Thailand and Malaysia, meanwhile, announced that they were to coordinate their operations in purchasing rubber direct from growers. It was also intended to harmonize the two countries’ stock disposals, and to maintain a minimum market price. Efforts to include Indonesia in this agreement were, however, unsuccessful. In August 2002 Indonesia, Malaysia and Thailand signed an agreement establishing the International Tripartite Rubber Corpn (ITRC), with the objective of regulating the international price of rubber. This was to be achieved through ITRC purchases of rubber on world markets, and, in the event of prices falling below a certain level, from South-East Asian rubber farmers. In December 2001 the three founding countries had agreed to reduce their exports of rubber by 10% and undertaken to implement further reductions over the next two years. Thailand, the world’s leading producer and exporter of natural rubber since 1993, carried out the replanting of more than 50% of its rubber-producing areas during the period 1961–93. During 1971–2000 Thailand’s annual production of rubber increased at an average annual rate of 6.7%. The emphasis on high-yielding stock has resulted in a substantial improvement in the general quality of latex output, which has increased Thailand’s competitiveness in the production of motor vehicle tyres and has led to the rapid expansion of Thailand’s rubber goods industry. More than 80% of Thailand’s rubber output is consigned for export, principally to Germany, the People’s Republic of China, the USA, Singapore and the Republic of Korea. In 2001 Thailand’s exports of rubber totalled 2.1m. metric tons, about the same level as in the previous year. In 1999 2% of Thailand’s total export earnings were derived from exports of natural rubber. During the late 1990s the Government was implementing pilot schemes to extend the cultivation of rubber into the
COMMODITY SURVEYS 269
eastern and north-eastern regions of the country. As in Malaysia (see below), most rubber production in Thailand is carried out by smallholder farmers. In recent years Malaysia’s output of rubber has generally ranged between 750,000–1.1m. metric tons annually, approximately 10%–15% of world production. Owing to the low international price of rubber, and a consequent acceleration in the conversion of rubber land to other crops, output declined from 1.08m. tons in 1996 to an estimated 700,000 tons in 2001. Estate production has been falling since the 1960s, owing to a shift in emphasis from rubber to oil palm and cocoa. Smallholders have become the principal producers of rubber, as the large estates have expanded the cultivation of these alternative crops, which guarantee a substantially higher return than that of rubber. As a result of government encouragement (in the form of tax incentives and higher replanting grants), average smallholder yields have risen to 700–800 kg per ha, and smallholders now account for about 70% of Malaysian rubber production (about 82% of the area planted with rubber is the property of smallholders). In 1999 the total area under rubber cultivation was estimated to be 1.5m. ha, of which 85% was located in Peninsular Malaysia. Malaysia’s exports have generally accounted for about 15%–20% of the world rubber trade in recent years, according to the FAO. In the mid-1990s the largest market for Malaysian rubber was the EU (accounting for 27% of total rubber exports), followed by the Republic of Korea (14%) and the USA (13%). In 1999 exports of natural rubber latex, natural rubber and gums, and rubber manufactures accounted for 1.2% of Malaysia’s total export earnings. Indonesia, once the world’s main source of natural rubber, has a larger area planted to rubber (3.03m. ha) than Malaysia, but only about 15% of its rubber area was planted to high-yielding varieties, resulting in average yields about 40% of those of Malaysia. More than 90% of Indonesian rubber production has traditionally been exported. In 2001, with production estimated at 1.7m. metric tons by the FAO, Indonesia was the world s second largest producer of rubber after Thailand. In Africa, Nigeria, Côte d’Ivoire and Liberia are the principal producers of natural rubber, jointly accounting for about 80% of the region’s total output in most recent years. In 2001, with estimated production of 135,000 metric tons, Liberia was the largest African producer. The country’s output, decimated by civil conflict in 1989–97 (in 1995 output was only an estimated 13,000 tons), recovered steadily and substantially in the late 1990s. In the mid-1920s the Firestone Plantations Co. of the USA became involved in the large-scale, export-oriented production of rubber in Liberia when it commenced tapping at the former British Mount Barclay rubber plantation; clearing and planting at the Harbel estate, east of Monrovia, which subsequently became the world’s largest continuous rubber plantation; and clearing and planting at Gedetarbo on the Cavallo River. Thereafter, the Firestone Co. became Liberia’s principal private-sector employer and for many years, as a consequence, the USA was able to exert a dominating political and economic influence on the country. In 1988 a Japanese tyre company, Bridgestone, purchased Firestone’s Liberian interests, adopting the name Bridgestone/Firestone. The Harbel plantation, under the management of Firestone Polymers, remained the world’s largest natural rubber plantation in the late 1990s, by which time output, which ceased after the plantation’s workers were put to flight during the civil war, had recovered to about 65% of its pre-conflict level. Other foreign interests involved in the plantation-based production of natural rubber in Liberia include the
270 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Liberian Agricultural Co (LAC), which in 2000 commenced the rehabilitation of its plantation (plundered during the civil war) east of Buchanon, in Grand Bassa County; and Kumpulan Guthrie of Malaysia, which, in the late 1990s, planned a similar restoration of its plantation located north of Monrovia, in Bomi County. The full recovery of the Liberian rubber sector has been impeded by unfavourable market conditions. In November 1999 US AID initiated a US $3.5m. programme of aid to the sector, to be implemented through the Harbel plantation, and Libya has also offered assistance. In 1999 exports of rubber contributed 57% of Liberia’s estimated total export earnings. Rubber plays a much less significant role in the economy of Côte d’Ivoire, although production in 2001, at an estimated 108,000 tons, was approximately double that regularly achieved in the mid-1980s. In 1996 Côte d’Ivoire derived 2.7% of its total export earnings from foreign sales of natural rubber latex, natural rubber and gums. The Government has not yet emphatically fulfilled its stated objective of making the country the leading African producer of rubber, although in 1999, according to the FAO, Côte d’Ivoire tied with Nigeria as the largest regional producer. In 2001 Nigeria’s output of rubber was estimated at 107,000 tons, and the country thus ranked as the third largest African producer after Liberia and Côte d’Ivoire. In 1990 Nigeria had overtaken Liberia as the leading African producer, but output declined in the late 1990s, just as the recovery in Liberian production was taking place. Domestic production is reportedly insufficient to meet internal demand from tyre and footwear manufacturers, and rubber consequently makes a negligible contribution to the country’s export earnings. Elsewhere in Africa Cameroon’s annual production of natural rubber amounts, on average, to about 55,000 tons. Minor producers include Ghana, Gabon, the Democratic Republic of the Congo and the Central African Republic. In Latin America Brazil is the largest producer of natural rubber, with annual output that amounts, on average, to about 70,000 metric tons. All of this rubber is processed domestically. In 1999 exports of rubber manufactures contributed 1.3% of the country’s total export earnings. Guatemala’s production of natural rubber increased significantly in the late 1990s, and was estimated in 2001 to have totalled about 47,000 tons. In 1999 the country’s exports of crude rubber and rubber manufactures accounted for 1.9% of its total export earnings. Annual output of natural rubber by Mexico has been estimated at about 22, 000 tons in most recent years. Bolivia is the only other regional producer of any significance, its yearly output totalling some 11,000 tons. Hevea requires tropical conditions in order to thrive, and, thus, is not cultivated outside the regions already described. Ribbed smoked sheets (RSS) are the principal source of reference for rubber prices in commodity markets. In April 1993 the import price of RSS in the London rubber market stood at £560 (US $841) per metric ton (for delivery in June), but by September it had risen to £620 per ton (for October delivery). After easing somewhat, the London rubber price advanced strongly in 1994, rising in July to £980 ($1,501) per ton (for September delivery). It eased in September to £855 per ton (for October), but increased in October to £952.5 (for November). The price of rubber retreated in early November to £857.5 per ton (for December delivery), but later that month a strong upward movement in prices, resulting from growth in demand, began. In December the London quotation reached £1,000 per ton for the first time. The surge in prices continued in the early weeks of 1995, and in February
COMMODITY SURVEYS 271
rubber traded at a record £1,230 ($1,942) per ton (for March delivery). This peak was matched in March (for April delivery). Thereafter, the rubber price moved generally downward, falling to less than £1,000 per ton in June and to only £837.5 (for September delivery) in early August. The London quotation reached £1,000 per ton again in October, and rose in December to £1,150 (for delivery in January 1996). In April 1996 the London price of rubber was below £1,000 per ton, and in December it declined to £792.5 ($1,238) per ton (for delivery in January 1997). During the first half of 1997 the downward trend continued, and by mid-year the rubber price had fallen to £657.5 ($1,076) per ton (for August delivery). The rubber market remained depressed, and in October the London quotation was reduced to £545 per ton (for December). The price remained at this level for the remainder of the year. For 1997 as a whole, despite the rise in demand (see above), prices for all grades of rubber on the London market declined by an average of 47%. In January 1998 the London price of RSS (for delivery in February) fell to only £427.5 (US $708) per metric ton. The slump in the rubber market was partly a consequence of the economic crisis affecting eastern Asia, including many rubber-producing countries. In February the rubber price recovered to £550 per ton (for March delivery), but in June it was reduced to £450 (for delivery in July or August). The price was maintained within this range for the remainder of 1998, ending the year at £460 per ton (for delivery in January 1999). During the early months of 1999 there was further downward movement in rubber prices, and in March the London quotation (for May delivery) declined to £412.5 (US $668) per ton. The market subsequently recovered, but in early August, with the INRO on the verge of collapse (see above), the price of RSS (for delivery in September) fell to only £397. 5 per ton: its lowest level since early 1976. Later in August 1999 rubber prices in Tokyo, Japan (the world’s largest market for trading rubber ‘futures’ contracts), were at their lowest for 30 years. The London price of rubber advanced in November to £530 per ton (for December delivery), after unfavourable weather had reduced output. On a ‘spot’ price basis, the London quotation averaged £451.3 per ton for the whole of 1999, rising to £511. 0 ($775) per ton, on average, in 2000. In 2001 the London ‘spot’ quotation for RSS averaged £476.3 ($686) per ton. During the first six months of 2002 the average London ‘spot’ price for RSS ranged between £460.0 ($656) per ton in January and £852.5 per ton in June. The very substantial increase in the price of physical rubber in June (in May the price had averaged only £523.5 per ton) occurred, according to the IRSG, as a result of unfavourable weather conditions, defaults by rubber shippers on their forward contracts, and the forced return of buyers to ‘spot’ markets. The IRSG is an intergovernmental body established in 1944 to provide a forum for the discussion of problems affecting the production and consumption of, and trade in, both natural and synthetic rubber. In 2002 the IRSG’s 17 members collectively accounted for 56% of all rubber consumption, 74% of natural rubber production and 69% of synthetic rubber production. Its secretariat, based in London, regularly publishes current statistical information on rubber production, consumption and trade.
272 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Export Price Index for Natural Rubber (base: 1980=100)
Silver
Known since prehistoric times, silver (Ag) is a white metal which is extremely malleable and ductile. It is one of the best metallic conductors of heat and electricity, hence its use in electrical contacts and in electroplating. Silver’s most important compounds are the chloride and bromide which darken on exposure to light, the basis of photographic emulsions. World-wide, about 75% of silver production in 2000 was generated as a by-product, or co-product, of gold, copper, lead and zinc mining operations. Methods of recovery depend upon the composition of the silver-bearing ore. The exploitation of primary sources of silver ore accounted for about 25% of silver output in 2000. In 2000 the world-wide use of silver in fabricated products totalled 920.9m. troy ounces (a rise of 5.3% from the 1999 level). The manufacture of coins and medals absorbed 30.5m. oz (3.2% of total demand) in 2000. Of the remainder, 378.0m. oz were consumed for industrial purposes (compared with 340.6m. oz in 1999). The production of photographic materials (including X-ray film) absorbed 230.6m. oz in 2000 (compared with 233.4m. oz in 1999), while 281.7m. oz (29.8%) went into jewellery and silverware. The manufacture of electronic equipment and batteries in the major industrialized countries absorbed 166.6m. oz of silver (17.6% of world demand) in 2000. Other industrial uses for silver include the production of brazing alloys, mirrors and catalysts. In 2000 the principal user of silver in fabricated products (including coinage) was the USA, which consumed 201.5m. oz (21.9% of the world total), followed by Japan, with 138.0m. oz (15.0%), and India, with 130.9m. oz (14.2%). Other major users of silver in 2000 were Italy (66.0m. oz) and Germany (39. 0m. oz). World mine production of silver was estimated to have increased by 25% during the period 1979–85, as a result of generally higher (although widely fluctuating) prices. However, while output advanced, consumption declined, resulting in a world surplus of silver in each year during 1980–89. In 1990 this trend was reversed, and, according to the Silver Institute (an international association of miners, refiners, fabricators and manufacturers, with its headquarters in Washington, DC, USA), world demand exceeded mine and secondary (recycled and scrap silver) production, creating the first silver market supply deficit since 1978. In each of the years 1991–97 world consumption of silver outpaced mine production, which declined by 13.8% over the period 1990–94. Output recovered by 6.1% in 1995 and by 1.7% in 1996, partly as a result of new mines entering production, together with the reopening of a number of primary silver mines as a result of improved prices. A third consecutive year of increased production was achieved in 1997,
274 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Silver Ore (provisional figures, silver content, metric tons)
*Estimated production. Source: The Silver Institute; Gold Fields Mineral Services Ltd..
when mine output rose by 7.7%, and in 1998 production advanced by a further 4.3% to a record 547.9m. oz. In 1999 the output of silver from the world’s mines rose again, by 0.9%, to a new record level of 552.6m. oz. The most significant change in the balance between supply and demand in 1999 was an increase in net sales of silver from the official sector. In 1998 the volume of these disposals was about 40m. oz, but in 1999 the total reached almost 93m. oz (including estimated sales of 61m. oz, equivalent to 7% of world silver supply, by the People’s Bank of China). In 2000 world output of mined silver rose by 6.7% to 589. 4m. oz, thus attaining a record level for the third consecutive year. The increase was attributed principally to a recovery in Mexican production, and to strong growth in Australian output. Mexico is the world’s leading producer of silver. Output has fluctuated somewhat in recent years, declining from 91.6m. oz in 1998 to 75.2m. oz in 1999. In 2000 production recovered to 88.2m. oz. Mexico’s Proaño mine, near Fresnillo (in the state of Zacatecas), was the second largest primary silver mine in the world (in terms of production) in 1999 and 2000. In 2001 Mexico’s reserve base of silver ore was estimated to represent about 9.3% of the world reserve base. Peru is second to Mexico in terms of silver production, accounting for 13.3% of world silver output in 2000. In the same year Chile, the third most important regional producer, accounted for 6.4% of world production. Although a relatively minor producer, Argentina significantly increased its silver output in 1998 as the result of two new mines entering production. Following a positive feasibility study, development of the world’s largest open-pit silver project was under way in 2000 at the San Cristóbal deposits in the Potosí department of southern Bolivia. Proven and probable reserves at San Cristóbal total 240m. metric tons of ore, containing 2.0 oz of silver per ton. Production was expected to commence by 2005.
COMMODITY SURVEYS 275
In 2000, in the Far East and Australasia, with output of 2,060 metric tons, Australia was the largest regional producer of silver ore, and the third largest producer world-wide. Production of refined metal in the same year amounted to 538 tons, according to the US Geological Survey (USGS). As with lead, silver is mined mainly as a co-product of zinc in Australia. Resources are widely distributed in the country, the most significant being deposits exploited at the Cannington mine in the state of Queensland, where zinc is produced as a co-product of lead and silver. Cannington, operated by BHP Billiton, was the largest primary silver mine in the world (in terms of production) in 2000. The People’s Republic of China was the leading Far Eastern producer of silver ore in 2000, and the sixth largest producer world-wide, with output of 1,500 tons in 2000. With output of 308 tons, Indonesia was the second largest Far Eastern producer of silver ore in 2000. With output of 104 tons in 2000, an increase of 10.4% compared with 1994, Japan is a notable regional producer of silver. Silver is mined mainly as a co-product of lead and zinc at locations in Hokkaido and Gifu prefectures. Imports of silver ore and concentrates amounted to 14,076 tons in 1999. Peru and Chile were the exclusive suppliers in that year. Japan is a major producer of silver metal, with output (primary and secondary, including that recovered from scrap and waste) totalling 2.7m. tons in 2000, according to the USGS. In 2000 the USA was the world’s fourth largest producer of silver ore, with output of 1, 970 metric tons. In that year three US mines were among the world’s 10 largest silver mines (in terms of production): Green’s Creek in the state of Arkansas, which ranked third; Rochester in Nevada, which ranked seventh; and Lucky Friday in Idaho, which ranked ninth. In 2000 US exports of silver ores and concentrates totalled 65.1 tons, while imports of the same amounted to 1.4 tons. According to the USGS, US production of silver metal from refineries, utilizing both domestic and imported ores and concentrates, totalled 2,780 tons in 2000, while production utilizing old and new scrap amounted to 1,680 tons. US exports of refined silver for consumption totalled 279 tons in 2000, while imports of the same were 3,810 tons. Canada is also a leading producer of silver ore, with output of 1,174 tons in 2000. Output is generally as a co-product of gold, or of copper, lead and zinc. Among the former Soviet republics, Kazakhstan was the leading producer of silver ore in 2000, with output of an estimated 927 metric tons, according to the USGS. In the same year, according to the USGS, Russia’s output of silver ore was estimated at 370 tons, occurring mainly as a co-product of gold and other non-ferrous metals. Poland was by far the leading European producer of silver ore in 2000, with output of 1, 140 metric tons, equivalent to about 66% of total European (Eastern and Western, but excluding the republics of the former Soviet Union) production in that year. Polish exports of silver reportedly totalled 1,057 tons in 1999. Sweden was the second largest European producer of silver ore in 2000, with output of 294 tons. Swedish production of silver metal (primary, refined from indigenous ores, excluding scrap) was estimated to have amounted to 250 tons in 2000. Spain produced 117 tons of silver ore in 2000, to rank as the third largest European producer. Other significant European producers of silver ore in 2000 were Romania, with output of 39 tons, Greece (31 tons), Ireland (25 tons), Finland (24 tons) and Portugal (21 tons). Morocco is the leading producer of silver ore in the Middle East and North Africa, with output of 289 metric tons in 2000. In that year the country’s Imiter mine, located close to
276 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Quarzazate, was the world’s fifth most productive silver mine. South Africa is consistently the largest producer of silver ore in sub-Saharan Africa. In 2000 output totalled 142 tons. Namibian production of silver ore declined steadily and substantially during the 1990s. In 1991 output totalled 92 tons, but, as a consequence of mine closures, fell to zero in 1999. Production amounted to 17 tons in 2000. As an investment metal (an estimated 80% of the world’s silver bullion stocks are speculative holdings), silver is highly sensitive to factors other than the comparative levels of supply and demand. Silver, like gold and platinum, is customarily measured in troy weight. The now obsolete troy pound contains 12 ounces (oz), each of 480 grains. One troy ounce is equal to 31.1 grams (1 kg=32.15 troy oz), compared with the avoirdupois ounce of 28.3 grams. Fluctuations in the price of silver bullion traditionally tended to follow trends in prices for gold and other precious metals. However, silver has come to be viewed increasingly as an industrial raw material and hence likely to decrease in price at times of economic recession. Two of the main centres for trading in silver are the London Bullion Market (LBM) and the New York Commodity Exchange (COMEX). Dealings in silver on the LBM are only on the basis of ‘spot’ contracts (for prompt delivery), while COMEX contracts are also for silver ‘futures’ (options to take delivery at specified future dates). Over a 15-day period in January 1992 the LBM price of silver per troy ounce increased from £2.06 (US $3. 87) to £2.41 ($4.335), and until the middle of the year it remained within this range. Thereafter, the silver market slumped, and in August the LBM quotation was reduced to £1. 83 ($3.65) per oz. In terms of sterling, the London silver price later moved sharply higher, but the trend was largely a reflection of the British currency’s depreciation in relation to the US dollar. In February 1993 the LBM price reached £2.65 (then $3.77) per oz, but later in the month it stood at £2.46 (only $3.58). In March the London silver price in US currency was only $3.56 per oz: just above the 17-year ‘low’ of $3.55 recorded in February 1991. However, a vigorous recovery ensued, with the LBM quotation advancing to £3.66 ($5.42) per oz in August 1993, before declining to £2.55 ($3.92) in September. With demand continuing to exceed supply, another advance took the silver price to £3.45 ($5.115) per oz at the end of the year. The recovery in the silver market continued in the early months of 1994, partly as a result of speculative activity, and by the end of March the London price had reached £3.87 (US $5.735) per oz. A week earlier, the price in US currency was $5.75 per oz. After another decline, the LBM quotation stood at £3.62 ($5.71) per oz in September. Thereafter, the price of silver moved generally downwards, declining to £2.965 ($4.64) per oz in December. Silver prices fell further in the early months of 1995, with the metal trading in London at £2.68 (US $4.42) per oz in March. The price later rose sharply, and in May it reached £3.75 ($6.04) per oz. In August the LBM price of silver per oz stood at £3.76, then equivalent to $5.80. As on previous occasions, the surge in prices was attributed mainly to speculative investment. Another advance took the LBM silver quotation to £3.84 (US $5.83) per oz in February 1996, but the price moved generally downward during the remainder of the year, reaching
COMMODITY SURVEYS 277
£2.81 ($4.73) in December. For the year as a whole, the average London price of silver was $5.199 per oz. There were extreme fluctuations in the price of silver in 1997. The London price declined to £2.75 (US $4.66) per oz in January, but recovered to £3.30 ($5.26) in March. However, in early July the London quotation was reduced to £2.51 ($4.25) per oz, and a week later the price in US currency was only $4.22: its lowest level since November 1993. Prices subsequently rallied, and in December 1997, with silver in short supply after a steady decline in stocks (see below), the London quotation rose to £3.76 per oz, equivalent to $6. 27: a nine-year ‘high’ in the US currency price. Despite the strong advance in the second half of the year, the average London silver price in 1997 was $4.897 per oz, nearly 6% lower than in the previous year. The average price of gold in 1997 was 67.6 times that of silver, but by the end of the year the ratio was only 47. During the early weeks of 1998 there was intense speculative activity, amid allegations of manipulation, in the silver market. In early February it was disclosed that one major US investor had purchased 129.7m. oz (more than 4,000 metric tons) of the metal, equivalent to about 15% of annual world demand, during the preceding six months. Three days after this report, the London silver price per oz increased to £4.76, equivalent to US $7.81: its highest level, in terms of US currency, since July 1988. Meanwhile, the price of gold (which had fallen to its lowest level for more than 18 years) was only 38.3 times that of silver: the smallest ratio since 1983. The surge in silver prices was short-lived, despite the continuing scarcity of supplies, and in May 1998, following a sharp fall in demand for the metal from India (the main importing country), the London quotation was reduced to £3.04 ($4.96) per oz. Silver prices remained fairly stable for the next few months, but they declined further in August. At the beginning of September the LBM price per oz was £2.82 ($4.73), although by the end of the month it had recovered to £3.175 ($5.385). After another fall, the price in early December stood at £2.81 ($4.69) per oz, the lowest for the year. The average London price of silver in 1998 was $5.544 per oz: 13.2% above the 1997 average and the highest annual level since 1988. The difference between the maximum and minimum prices per oz in 1998 was $3.12, equivalent to 56.3% of the annual average: the widest trading range since 1987. For 1998 as a whole, the average price of gold was 53.0 times that of silver: the lowest annual ratio since 1985. The London silver price advanced to US $5.75 (£3.525) per oz in February 1999, but declined to $4.88 (£3.044) in June. The price recovered to $5.71 (£3.470) per oz in September and ended the year at $5.33 (£3.298). For the whole of 1999, the London price of silver averaged $5.22 per oz. In late March 2000 the price of silver stood at $4.935 (£3. 094) per oz. In terms of US currency, it was lower in early June, at $4.895 (£3.271) per oz. For the whole of 2000, the London price of silver averaged $4.95 (£3.27) per oz, a decline of 5.1 % compared with the average price recorded in 1999. In 2001 the decline was even greater, the London price of silver averaging only $4.37 (£3.03) per oz, 12% lower than the average recorded in 2000. The price recovered during 2002, exceeding $5 per oz at points in May, June and July, before declining in August—the average price in that month was $4. 54 (£2.95) per oz, compared with an average of $4.92 (£3.16) per oz in July.
278 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Silver Prices on the New York Commodity Exchange (average ‘spot’ quotations, US $ per troy oz)
Sisal
The leaf tissue of this plant (Agave sisalana) yields hard, flexible fibres which are suitable for making rope and twine, cord matting, padding and upholstery. The plant is indigenous to Central America but, following its introduction to Tanganyika (now continental Tanzania) from Mexico at the end of the 19th century, it became widely grown in East Africa. In 2001 sisal accounted for about two-fifths of world production of hard fibres. Traditionally, about three-quarters of sisal consumption has been for agricultural twine. World output of sisal and other hard fibres has generally declined in recent years, owing to competition from nylons and petroleum-based synthetics (in particular, polypropylene harvest twine, which is stronger than sisal and less labour-intensive to produce), although the intensity of the competition and the success of hard fibres depend on fluctuations in the price of petroleum. Brazil increased its production of sisal greatly in the middle decades of the 20th century, and, although production has tended to decline from its peak of 314,000 metric tons in 1975. the country remains by far the largest producer of the fibre in the world, accounting for more than one-half of global production in most years. Brazilian production averaged 220,000 tons in 1982–92, before declining sharply to average less than 123,000 tons in 1993–98. A subsequent recovery in production saw Brazil produce some 194,000 tons in both 1999 and 2000, and 183,000 tons in 2001. The second largest producer in Latin America, and in the world, in 2001, was Mexico, with estimated output of 46,500 tons. Minor Latin American producers include Venezuela and Cuba. The People’s Republic of China produced an estimated 36,800 metric tons of sisal in 2001 (a figure similar to its output for the previous two years), making it the third largest producer of the crop. Sisal is little grown elsewhere in Asia. Until 1970 Tanzania, whose sisal is generally regarded as being of the best quality, was the world’s leading producer—in that year it was surpassed by Brazil. The nationalization of more than one-half of Tanzania’s sisal estates in 1976. together with low prices, inefficient management and lack of equipment and spare parts, contributed to the decline of the Tanzanian crop. During the 1980s, however, the government sought to revive the industry by returning some state-owned estates to private or co-operative ownership, and in 1998 the government completed the transfer of its sisal estates and factories to a consortium of European and Tanzanian entrepreneurs from the private sector. However, prospects remain overshadowed by the longer-term outlook for sisal. According to the FAO, annual world demand for sisal (and henequen) declined from some 800,000 metric tons in the early 1970s to only slightly more than 300,000 tons in the mid-1990s. Over the same period,
280 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Sisal (’000 metric tons)
* FAO estimate(s) Source: FAO.
consumption of sisal in the manufacture of agricultural twine fell from 230,000 tons to only 130,000 tons. The decline of the sisal sector in Tanzania spurred the development of production in Kenya to the extent that the country was able to compete strongly with both Brazil and Tanzania, even though, having no processing industry, it has never exported sisal products. However, Kenyan production peaked, at some 87,000 tons, as long ago as 1974, and totalled only an estimated 25,000 tons in 2001. The contribution of exports of sisal to Kenya’s total export earnings is less than 1%. A small amount of sisal is grown in Morocco. Although sisal producers operate a quota system, in an attempt to improve the pricing structure of the crop, the average price of sisal was in general decline between the early 1980s and the early 1990s, as relatively stable prices for petroleum allowed polypropylene to regain its competitiveness. The average import price of ungraded East African sisal at European ports increased from US $604.6 per metric ton in 1994 to $710.4 per ton in 1995 and to $868.3 in 1996. The annual average was $777.5 per ton in 1997 and $821.3 in 1998, but fell to $695.8 in 1999. During 1998 the average price rose from $776.3 per ton in the first quarter of the year to $809.0 in the second quarter and to $850.0 in the third and fourth quarters. In 1999, however, the price declined from $787.3 per ton in the first quarter to $730.7 in the second quarter, to $649.7 in the third quarter and to only $615.3 in the fourth quarter. The index of export prices fell to 84 in February 2000, but recovered to 98 in November and December, averaging 94 for the whole year. In 2001 the index of export prices averaged 101, rising as high as 106 in July, and falling to a ‘low’ of 96 in September-November. According to the FAO, the export price of African 3L grade sisal (c.i.f. European ports) rose to $880 per ton in July and declined to $800 per ton in October. The corresponding prices for ungraded African sisal were $700 per ton in July and $650 per ton in October. Over the same period the export price of Brazilian No. 3 grade sisal fell from $460 per ton to $440 per ton. In 2000, according to the FAO, imports of sisal and henequen fibres by the member states of the European Union accounted for about 60% of the total imported world-wide. In
COMMODITY SURVEYS 281
the same year, the USA was the major market for sisal and henequen products, accounting for about 45% of total world imports. Export Price Index for Sisal (base: 1980=100)
Soybeans
The soybean plant (Glycine max or G. soja) is a legume, a member of the pea family (fabaceae). Like other legumes it is able to collect its own nitrogen from the air and release it into the soil. The soybean has therefore played an important role in the maintenance of soil fertility under traditional crop rotation regimes. Owing to the plant’s sensitivity to light, it has been possible to optimize cultivation through the selection of varieties adapted, according to the length of their crop durations, to geographical differences in daylight hours. It is the breeding of such varieties that has allowed successful cultivation to extend from northern, temperate zones, where the soybean originated, to, for example, subtropical and tropical regions of the USA and South America. In North America, the main area of cultivation, soybeans are generally planted in the late spring. The plant flowers in the summer, producing 60–80 pods from which two to four pea-sized beans are harvested in the autumn. Cultivation of the soybean plant is thought to have originated more than 5,000 years ago in northern China, and to have spread southwards from there to Korea, Japan and throughout south-east Asia. In the regions of its origin and early dissemination the soybean has for centuries been a primary source of protein for human consumption. Per unit of area planted, soybeans yield more usable protein than any other crop, and are a far less expensive source of protein than any food derived from animals. Although the plant and beans may be eaten fresh, as a vegetable, it was the processed bean, principally in the forms of tofu, tempeh, miso and soy sauce, that formed the basis of traditional East Asian nutrition. However, it was not until the mid-twentieth century that the plant began to acquire any significance in international commerce. During World War II, and into the 1950s and 1960s, US soybean production was greatly expanded. The expansion initially took place in order to substitute domestically produced soybean oil for imported oils and fats, and thereafter the protein-rich meal, which is a byproduct of crushing for oil, was used to boost livestock production in the USA. Today, the soybean is the most important source of vegetable oil world-wide, although it is likely to be superseded by palm oil in the near future. Soybean meal, meanwhile, accounts for almost 70% of the world’s supply of protein-rich animal feedstuffs. The meal (also known as cake), almost all of which is used for livestock feed, is the most valuable product obtained from processing, generally accounting for 50%–75% of total value, depending on the difference in the prices of meal and oil. Moreover, in addition to traditional foods derived from soy for human consumption, the plant’s derivatives are ubiquitous in processed foods marketed in
COMMODITY SURVEYS 283
Production of Soybeans (’000 metric tons)
* Unofficial figure. Source: FAO.
Europe and North America. Among many industrial applications, the soybean also provides a raw material for the manufacture of ink, soap, paint and a fuel for diesel engines. In recent years, broadly, international markets for soybeans and their derivatives have been influenced by high plantings (especially in the USA, where soybeans have enjoyed a higher rate of loan support than maize and other grains), record production and strong competition in export trade. US and international market prices have fallen back to the levels that prevailed in the early 1970s, and these low prices have, in turn, acted as a further stimulant to demand. During the 1990s world soybean production increased at an average annual rate of 4.2%, after having more than doubled in 1970–79, and grown steadily, by an average rate of 3.2% per year, in 1980–89. Average world output of soybeans in 1990–99 was about 130m. metric tons per year, compared with some 61m. tons in 1970–79 and about 93m. tons in 1980–89. During the 1990s the most marked increase in the production of soybeans occurred in the main South American producing countries, Brazil and Argentina, and, to a slightly lesser extent, in the USA. Chinese production also increased, but by a smaller factor. The USA has dominated world production of soybeans since the 1950s, when its output overtook that of China. In 2001 US production amounted to 78.7m. metric tons, equivalent to about 44.6% of total world output of 177m. tons. Production in 2000 was 75.1m. tons, about 47% of the global total of 161m. tons. Despite consistently improving harvests, the US share of world output has been in decline since the 1970s, when the country would regularly produce more than two-thirds of the world total. As stated above, the crop is highly adaptable to variations in climate—this means it is grown in a wide area of the USA. According to the US Department of Agriculture (USDA), 31 states produced soybeans commercially in 2000. The more northerly mid-western states are the focus of production, however—USDA data shows that Iowa (the largest single producer state), Indiana, Illinois
284 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Soybean Cake (‘000 metric tons)
* Unofficial figure. † FAO estimate(s). Source: FAO.
and Minnesota combined accounted for 53.3% of US soybean production in that year. Soybeans are also grown in Canada, which produced 2.0m. tons of soybeans in 2001 (making it the fifth largest producer in the world in that year), compared with 2.7m. tons in 2000. The soybean industry, particularly that of the USA, has been at the forefront of developments in the use of genetically modified (GM) crop varieties. Their use is now common in the USA (in 2001 it was estimated that over 50% of US soybean production was of a variety modified by a biotechnology company to acquire resistance to a particular herbicide produced by that company). The subject of GM crops has proved highly contentious elsewhere in the world, however, as proponents’ claims that the development of varieties with improved resistance to disease, to herbicide, or to extremities of climate is of great potential benefit (particularly for developing countries) are counterbalanced by concerns as to the safety of such varieties and the economic implications for seed prices and replanting costs. Many large-scale food-processors, particularly in Europe, chose to abandon the use of GM crops, amid public concern and opposition from environmental groups fearing crosspollination with non-GM plants. Part of the reason for the decline in the USA’s share of world production has been the very substantial increases in the output of South America, which today ranks as the world’s second largest producer by region. In 2001 South American production totalled 69.1m. tons, equivalent to about 39% of world output. The crop’s versatility and adaptability led to its rapid adoption throughout the continent—production did not surpass 1m. tons until 1969, and 2001 output represented more than double that of 1991. Brazil is the largest
COMMODITY SURVEYS 285
Production of Soybean Oil (’000 metric tons)
* Unofficial figure. † FAO estimate(s). Source: FAO.
producer in the region, and the second largest world-wide, with harvests of 37.7m. tons in 2001, compared with 32.7m. tons in 2000. Argentina, the world’s third largest producer, also exhibited a marked increase in output in 2001, with output of 26.7m. tons, compared with 20.2m. tons in the previous year. Paraguay, with production of 3.6m. tons in 2001, is the other producer of significance in South America. The People’s Republic of China and India complement the list of major world producers, with estimated output, respectively, of 15.5m. metric tons and 5.6m. tons in 2001. Chinese production in that year was equivalent to some 67% of total Asian output, and about 8.7% of world production, ranking the country fourth in world terms. Indian production increased very rapidly, at an average annual rate of 11.3%, in 1990–99, although it declined in both 1999 and 2000, before increasing in 2001, in which year the country was the world’s fifth largest producer of soybeans. The crop is grown on a smaller scale in many of the countries of the Far East and Australasia, notably Indonesia, Japan, the two Korean states and Thailand. Soybean cultivation is increasing in Africa, albeit from a low level. The largest producer on the continent is Nigeria, where output for 2001 was estimated to have maintained its 2000 level of 429,000 metric tons. Although many other African countries grow the crop, only South Africa, Uganda and Zimbabwe produced more than 100,000 tons in 2001. Italy is the leading European producer of soybeans, with output of 885,000 metric tons in 2001. In the same year, France produced 306,000 tons. The crop is also grown in Central and South-Eastern Europe, where Yugoslavia (230,000 tons in 2001) and Croatia (an estimated 116,000 tons) are the principal producers. Russia grew an estimated 262,000 metric tons of soybeans in 2001, compared with 342, 000 tons in the previous year. Very small amounts are grown several other former Soviet
286 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
republics. The leading Middle Eastern producer in 2001 was Iran (an estimated 140,000 tons). The pattern of production of soybean cake is similar to that of unprocessed soybeans. The USA is the dominant world producer, with output in 2000 amounting to 34.1m. metric tons, or 33.0% of total world production, which amounted to 103.3m. tons in that year. Latin America—Brazil, Argentina and, to a lesser extent, Mexico—is a close rival, with production there in 2000 totalling 31.4m. tons, or 30.4% of world output. Soybean cake production in South America has developed in line with the growth in production of soybeans in Brazil and Argentina. South America overtook the European Union (EU) as the world’s second largest producer of soybean cake in the early 1980s. Asia now ranks third in world production of soybean cake, with output there in 2000 amounting to almost 20m. tons, or about 19% of world production. China dominates Asian production, followed by India and Japan. The EU ranked fourth in world production of soybean cake in 2000, with output approaching 12m. tons, equivalent to 11.4% of world production in that year. As with soybean cake, the USA is the world’s leading producer of soybean oil, with output in 2000 totalling 8.1m. metric tons, equivalent to about 34% of total world production of 23.7m. tons in that year. Again, South America—Brazil and Argentina— closely rivals the USA, with output there totalling 7.5m. tons, or about 32% of world production, in 2000. Also as with soybean cake, South American production of soybean oil first overtook that of the EU in the early 1980s. Asia now ranks third in world production of soybean oil, with output totalling 4.2m. tons, or nearly 18% of total world production, in 2000. China, India and Japan are the most important Asian producers. The EU ranked fourth in soybean oil production in 2000, when it accounted for about 11% of world output. Soybeans are the most important oilseed in international trade. In 1990–99 the amount exported ranged between 25.9m. metric tons (1990) and 40.3m. tons, averaging 32.6m. tons per year. In comparison, exports of soybeans averaged 17.7m. tons in 1970–79 and 26. 7m. tons in 1980–89. In 2000 world exports of soybeans totalled almost 48m. tons. The main exporter in that year was the USA, which accounted for 56.8% of the total. South America was the second most important exporter of soybeans in 2000, accounting for 38.0% of the total. Within that region, Brazil, Argentina and Paraguay accounted, respectively, for 24.0%, 8.6% and 4.8% of the total quantity exported world-wide. As for Asia, neither China nor India are particularly significant exporters of unprocessed soybeans. Chinese exports did, for a brief period during the late 1980s, begin to approach 2m. tons, but subsequently declined very substantially. During the 1970s and the 1980s the EU was by far the major market for soybeans. During the 1990s, however, Asian imports began steadily to approach those of the EU and in 1999, for the first time, exceeded them. In 2000, at 24.3m. metric tons, Asian imports were substantially in excess of those of the EU, accounting for 50.3% of total world imports of 48. 3m. tons in that year. EU imports represented 33.3% of the world market in that year. Within Asia in 2000 the major markets for soybeans, and their respective shares of total world imports, were China (52.3%), Japan (19.8%), the Republic of Korea (6.2%) and Thailand and Indonesia (5.3% each). Mexico become a significant market for soybeans in the 1990s,
COMMODITY SURVEYS 287
and in 2000 Mexican imports amounted to almost 4m. tons, or 8.3% of the total worldwide. Exports of soybean cake grew steadily during the 1970s, the 1980s and the 1990s. South America is the leading exporter, accounting for about 63% of total world exports of 37.2m. metric tons in 2000. Within that region, Argentina overtook Brazil as the leading exporter in the late 1990s. In 2000 Argentina and Brazil accounted, respectively, for 34.7% and 25. 3% of total world exports of soybean cake. The USA and the EU ranked second and third as exporters of soybean cake in 2000, accounting, respectively, for 15.9% and 13.7% of total world exports in that year. Asia is the only other significant exporting region, and India now accounts for almost all Asian exports. China was a major exporter until the mid-1990s, after which time its exports declined very substantially. In 2000 the EU was the principal importer of soybean cake, accounting for almost one-half of total world imports. Asia was the second most important market for soybean cake in that year. Within Asia the main markets in 2000 were Thailand, Indonesia, the Republic of Korea, the Philippines, Malaysia and China. Eastern Europe and Africa were also significant importers of soybean cake in 2000. In the early 1990s Argentina overtook the EU as the world’s leading exporter of soybean oil, and it has subsequently consolidated that position to the extent that, in 2000, its exports, representing 42.9% of the world total of 6.9m. metric tons, were almost double those of the EU. Brazil is the world’s third largest exporter of soybean oil, accounting for about 16% of the total exported world-wide in 2000. Brazilian exports thus trail those of both Argentina and the EU by a substantial margin. The USA was the fourth most important exporter of soybean oil in 2000, accounting for 8.7% of the world total. Asian countries account for more than one-half of all imports of soybean oil. In 2000 the major Asian markets were Iran, India and, to a slightly lesser extent, China, which together accounted for 25% of world imports in that year. Indian imports increased enormously, by an average annual rate of 36.9%, in 1990–99. African imports accounted for about 15% of total imports world-wide in 2000. Major markets there are Morocco, Egypt and Tunisia. The EU is also a major importer of soybean oil, accounting for about 9% of total world imports in 2000. EU imports, however, have remained at approximately the same level in most years since the late 1970s. As there are relatively few major producers of soybeans world-wide, and as soybeans are the most important oilseed in world trade, US policy has influenced not only the world market for soybeans, but also the markets for the seven major competing oilseeds— rapeseed (canola), sunflowerseed, cottonseed, groundnuts, flaxseed, copra and palm kernels. Moreover, with regard to unprocessed soybeans, US influence has been reinforced by the fact that international trade has historically been comparatively free of tariffs and other restrictions on imports. (Tariffs applied to protect the oilseed-processing industries of importing countries, however, have typically been fixed at about twice the rate applied to the unprocessed commodity.) Since the mid-1970s, however, the USA’s dominance of the international soybean market has steadily declined, in spite of growth in both production and export volume. Above all, this has been due to the rapid expansion in production and exports by Argentina and Brazil, whose individual exports of soybean meal and soybean oil have both overtaken those of the USA. Lower-cost production of soybeans in Argentina and
288 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Brazil has given those countries a considerable competitive advantage in international markets. South American exports, in particular those of Argentina, are expected to continue to grow and capture most of the increase in world soybean demand in the period up to 2010. However, this is by no means a foregone conclusion, even in the event of a recovery of regional economic stability. Among other things, continued competitiveness will depend on further improvements of transport infrastructure in both Argentina and Brazil, where bulk commodities tend to be moved overland, expensively, prior to export, thus offsetting the higher production costs of the USA. Prices for soybeans and soybean products increased sharply in the mid-1990s as global demand increased. However, the rapid increase was followed by an equally abrupt decline in prices, as world production increased substantially and countries which had previously been significant net importers of the crop moved towards self-sufficiency. The market also experienced volatility as a result of the development of GM varieties of soybeans—from the mid-1990s, published research or media attention suggesting potential dangers in the use of particular genetic alterations tended to have a negative effect on the international market, while research finding no potential harm often boosted prices. The dominance of the USA as a soybean producer and exporter makes US prices the most accurate, and readily available guide to the international market. According to data from the USDA, soybean prices paid to growers reached US $8.42 per 60-lb bushel in May 1997, their highest-ever monthly average. By the end of that year, however, the price per bushel had declined to $6.68. This decline continued throughout 1998, as record harvests were predicted in both northern and southern hemispheres, and the international market approached saturation. The deterioration in the farm price was especially severe in July 1998, with a 77-cent decline in the month, to $5.36 per bushel. Further indications of oversupply in early 1999 caused another sharp decrease, the price per bushel paid to US farmers falling to US $4.55, the lowest monthly price since October 1986. By July the monthly price had declined to $4.04, and the USDA’s index of producer prices for oilseeds was at its lowest point since its inception in 1975. A recovery in August and September was not sustained, and the average price for December was $4.29 per bushel, the annual average price being $4.63 per bushel. Another recovery in the soybean price began in early 2000, as demand for soybeans and soybean products from livestock-rearers appeared to increase to match supply. The monthly average price received by US producers in May was US $5.15 per bushel. However, a sharp decline in prices occurred in July and August, amid reports of a further record US harvest for 2000, and rapidly increasing production elsewhere in the world (see above). This fall was partially countered in the fourth quarter, and the average price for December was $4.84 per bushel, the annual average price being $4.75 per bushel. Prices were depressed in early 2001, but recovered in mid-year as domestic and external demand increased, before forecasts of yet another record harvest caused price decreases in the third and fourth quarters. The monthly average farm price remained in the US $4–$5 range all year, ending it at $4.13 per bushel. Producer prices remained relatively stable in early 2002 before increasing sharply from May, as lower yields and, consequently, a smaller harvest, were predicted. The August price was US $5.65 per bushel.
COMMODITY SURVEYS 289
Fluctuations in prices for soybean products tend to follow variations in the price of unprocessed beans, with an added vulnerability to market conditions for alternatives, particularly in the case of soybean oil. Prices for soybean meal on world markets peaked in early 1997, as did soybean prices, prices obtained rising as high as US $289 per metric ton on some markets. The subsequent decline in soybean prices saw meal prices fall as low as $120 per ton in 1999, before recovering in 2000, meal trading at $196 per ton late in the year. Meal prices were less volatile in 2001, generally remaining within $10 of $175 per ton. Prices remained at the lower end of this range into 2002. Similarly, soybean oil prices were high in the mid-1990s, before declining, although the decline was slightly delayed, relative to unprocessed soybeans and to meal. The international price for soybean oil, according to the World Bank, was US $636 per metric ton in late 1997. The price increased in the first half of 1998, exceeding $650 per ton at one point, before beginning a sharp decline. The deterioration in the quarterly average price was particularly steep in April–June 1999, when the average price was $492.3, compared with $606.3 for the previous three-month period. The decline continued throughout that year, and the average price for 1999 was $428 per ton. Prices were lower still in 2000, at one point appearing to be bound for $300 per ton, but recovering to average $338 per ton for the year as a whole. Again, as with soybeans and meal, the market was less volatile in 2001, the average price of soybean oil being $354 per ton in that year. A strong recovery began in 2002, however, as prospects for other oils deteriorated. By July, the average price, according to the World Bank, was $473 per ton. In the near term, China, the most important Asian market for soybeans, is forecast to remain heavily reliant on imports to meet domestic demand. It remains uncertain, however, how the structure of the Chinese market will evolve in response to the country’s accession to the World Trade Organization (WTO). In recent years China has sought to lessen its reliance on imports of protein meal and vegetable oil in favour of its domestic crushing industry. Strong internal demand has enabled the country to evade the world-wide trend of declining prices for soybeans and their derivatives by constraining imports. (The relative absence of import barriers applied to unprocessed soybeans has, at the same time, given Chinese soybean oil producers a substantial advantage in their domestic market.) One tentative forecast is that China’s integration into the WTO will gradually, through the removal of import barriers, promote imports of soybean oil, at the expense of those of unprocessed soybeans and soybean meal. In the longer term, however, such an increase in Chinese imports of soybean oil is likely to depress the internal price of soybean oil, thus reducing the profitability of the domestic soybean oil industry and favouring imports of oilseed meal at the expense of unprocessed soybeans. The future of trade will also depend on the interplay of regimes applied to competing oilseeds with that pertaining to soybeans. The reform of EU agricultural policy under the ‘Agenda 2000’ programme also has important implications for the future of international trade in soybeans. Historically, EU imports of soybeans and derivatives have been favoured by rapid expansion of livestock production and duty-free access for soybeans. However, ‘Agenda 2000’ reforms, in particular the reduction of intervention prices for cereals, are expected to stimulate demand for internally produced feed grains at the expense of imported soybeans and soymeal up to 2010, a trend that may be reinforced by the weakness of the euro vis-à-vis the US dollar.
290 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Export Price Index for Soybeans (base: 1980=100)
Export Price Index for Soybean Oil (base: 1980=100)
Sugar
Sugar is a sweet crystalline substance which may be derived from the juices of various plants. Chemically, the basis of sugar is sucrose, one of a group of soluble carbohydrates which are important sources of energy in the human diet. It can be obtained from trees, including the maple and certain palms, but virtually all manufactured sugar is derived from two plants, sugar beet (Beta vulgaris) and sugar cane, a giant perennial grass of the genus Saccharum. Sugar cane, found in tropical areas, grows to a height of up to 5 m (16 ft). The plant is native to Polynesia but its distribution is now widespread. It is not necessary to plant cane every season as, if the root of the plant is left in the ground, it will grow again in the following year. This practice, known as ‘ratooning’, may be continued for as long as three years, when yields begin to decline. Cane is ready for cutting 12–24 months after planting, depending on local conditions. Much of the world’s sugar cane is still cut by hand, but rising costs are hastening the change-over to mechanical harvesting. The cane is cut as close as possible to the ground, and the top leaves, which may be used as cattle fodder, are removed. After cutting, the cane is loaded by hand or by machine into trucks or trailers and transported directly to a factory for processing. Sugar cane rapidly deteriorates after it has been cut and should be processed as soon as possible. At the factory the cane passes first through shredding knives or crushing rollers, which break up the hard rind and expose the inner fibre, and then to squeezing rollers, where the crushed cane is subjected to high pressure and sprayed with water. The resulting juice is heated, and lime is added for clarification and the removal of impurities. The clean juice is then concentrated in evaporators. This thickened juice is next boiled in steam-heated vacuum pans until a mixture or ‘massecuite’ of sugar crystals and ‘mother syrup’ is produced. The massecuite is then spun in centrifugal machines to separate the sugar crystals (raw cane sugar) from the residual syrup (cane molasses). The production of beet sugar follows the same process, except that the juice is extracted by osmotic diffusion. Its manufacture produces white sugar crystals which do not require further refining. In most producing countries, it is consumed domestically, although the European Union (EU), which generally accounts for about 13% of total world sugar production, is a net exporter of white refined sugar. Beet sugar accounts for more than onethird of world production. Production data for sugar cane generally cover all crops harvested, except crops grown explicitly for feed. The second table covers the production
292 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Sugar Cane (’000 metric tons)
* Unofficial figure(s). † FAO estimate(s). Source: FAO.
of raw sugar by the centrifugal process. In the late 1990s global output of non-centrifugal sugar (i.e. produced from sugar cane which has not undergone centrifugation) was about 14m. metric tons per year. Most of the raw cane sugar which is produced in the world is sent to refineries outside the country of origin, unless the sugar is for local consumption. Cuba, Thailand, Brazil and India are among the few cane-producers that export part of their output as refined sugar. The refining process further purifies the sugar crystals and eventually results in finished products of various grades, such as granulated, icing or castor sugar. The ratio of refined to raw sugar is usually about 0.9:1. As well as providing sugar, quantities of cane are grown in some countries for seed, feed, fresh consumption, the manufacture of alcohol and other uses. Molasses may be used as cattle feed or fermented to produce alcoholic beverages for human consumption, such as rum, a distilled spirit manufactured in Caribbean countries. Sugar cane juice may be used to produce ethyl alcohol (ethanol). This chemical can be mixed with petroleum derivatives to produce fuel for motor vehicles. The steep rise in the price of petroleum after 1973 made the large-scale conversion of sugar cane into alcohol economically attractive (particularly to developing nations), especially as sugar, unlike petroleum, is a renewable source of energy. Several countries developed alcohol production by this means in order to reduce petroleum imports and to support cane growers. The blended fuel which is used in cars is known as ‘gasohol’, ‘alcogas’ or ‘green petrol’, as it generates fewer harmful exhaust hydrocarbons than petroleum-based fuels. The pioneer in this field was Brazil, which established the
COMMODITY SURVEYS 293
Production of Sugar Beets (’000 metric tons)
* Unofficial figure. † FAO estimate(s). Source: FAO.
largest ‘gasohol’ production programme in the world. By the late 1980s ethanol accounted for about one-half of the fuel consumption of Brazilian motorists. However, the additional costs involved in adapting motor vehicle design and engineering to ethanol consumption, together with the subsequent decline in world petroleum prices, resulted in a sharp fall in Brazil’s output of these vehicles during the mid-1990s. Only about 1,200 alcohol-powered cars were produced in 1998, compared with a record 700,000 in 1986. Moreover, Brazil had large accumulated stocks of the blended fuel (including 24% ethanol) used in such vehicles. In response, the Government adopted a series of measures intended to revive the industry. Increased petroleum prices and the very low price of ethanol caused production of alcohol-powered cars to rise to 7,000 in January-October 1999. A subsequent surge in the price of ethanol, however, threatened to halt this recovery and prompted the Government to end the subsidization of ethanol production and to announce plans to saturate the market with stocks of ethanol-based fuel. After the milling of sugar, the cane has dry fibrous remnants known as bagasse, which is usually burned as fuel in sugar mills but can be pulped and used for making fibreboard, particle board and many grades of paper. As the costs of imported wood pulp have risen, cane-growing regions have turned increasingly to the manufacture of paper from bagasse. In view of rising energy costs, some countries (such as Cuba) are encouraging the use of bagasse as fuel for electricity production in order to conserve foreign exchange expended on imports of petroleum. Another by-product, cachaza, which was formerly discarded, is now utilized as an animal feed.
294 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Centrifugal Sugar (raw value, ’000 metric tons)
* Unofficial figure(s). † FAO estimate(s). Source: FAO.
In recent years sugar has encountered increased competition from other sweeteners, including maize-based products, such as isoglucose (a form of high-fructose corn syrup or HFCS), and chemical additives, such as saccharine, aspartame and xylitol. Aspartame (APM) was the most widely used high-intensity artificial sweetener in the early 1990s, although its market dominance was under challenge from sucralose, which is about 600 times as sweet as sugar (compared with 200–300 times for other intense sweeteners) and is more resistant to chemical deterioration than APM. In the late 1980s research commenced in the USA with the aim of devising a means of synthesizing thaumatin, a substance derived from the fruit of a west African plant, Thaumatoccus daniellii, which is several thousand times as sweet as sugar. If commercialized, thaumatin could obtain a substantial share of the markets for both sugar and artificial sweeteners. In 1998 the US Government approved the domestic marketing of sucralose, the only artificial sweetener made from sugar. Sucralose, which is 600 times as sweet as sugar, was stated to avoid many of the taste problems associated with other artificial sweeteners. By its sheer geographical extent, Latin America offers a wide range of conditions for the cultivation of sugar cane and, to a limited degree, of sugar beet (in Chile and Uruguay). The sugar industries of the region operate a diversity of modern mechanized and labour-intensive cultivation and processing techniques. The highest yields in the region (and among the highest in the world) are obtained in Peru, where intensive use of fertilizers and irrigation
COMMODITY SURVEYS 295
has compensated for the natural disadvantages of light soil and aridity. Producer costs vary from country to country, according to production methods, the availability of labour and the level of wages. Central American and Caribbean countries exported some 7m.–9m. metric tons per year, making theirs the largest exporting region in the world, although this figure declined to 5m.–7m. tons a year from about 1993, chiefly as a result of reduced Cuban exports (see below). The sugar industry in Guatemala has been expanding rapidly in recent years; its milling capacity was targeted to increase by 50% between 1997–2001. Colombia exports about one-third of its annual sugar output, and in 1997/98 ranked, after Brazil and Cuba, as the region’s third largest sugar exporter. Venezuela, however, has become a substantial importer (about 40% of its requirements were imported in 1997), owing partly to the demands of that country’s petroleum industry, which have reduced the availability of labour to other industries and necessitated the introduction of costly mechanized techniques. South America is also a significant producer of non-centrifugal sugar, mainly from Colombia and Brazil, all of which is consumed locally. The area under sugar cultivation in the whole of Latin America has increased in an attempt to satisfy greater domestic consumption and the desire to diversify from predominant industries (e.g. coffee, cocoa) and to reduce the dependence on imported sugar. Brazil is usually the world’s largest producer of sugar cane. The area under sugar cultivation was about 3.2m. ha, or some 6% of the total cultivated area, in 1981, and has been increasing at a rate of 5%–7% per year, reflecting the importance of sugar production to the economy. Production and exports could have been expanded more had it not been for Brazil’s role as a member of the International Sugar Organization (ISO, see below) in attempting to stabilize the world sugar market. Brazil is, however, a substantial exporter of sugar, accounting for about 19% of world sales of all sugar, in terms of quantity (raw equivalent), in 2000. Its principal markets are the Russia, the USA, Egypt and the United Arab Emirates. An accumulation in domestic sugar stocks, resulting from a fall in demand for ethanol (see above), has enhanced Brazil’s share of the export market since 1998. Brazilian sugar exports increased sharply in early 1999, following the devaluation of the country’s currency. Subsequently, the international price of sugar fell to its lowest level for 12 years (see below). Brazil’s foreign exchange earnings from sales of raw and refined sugars amounted to US $1,910.7m. (about 4.0% of total export revenue) in 1999, compared with $1,940.9m. (3.8%) in 1998. The Cuban economy relies heavily on sales of sugar and sugar products. The share of these exports in Cuba’s total earnings from trade has been as high as 90%, but low world prices in the 1980s, occasionally not even covering producers’ costs, affected all sugar exporters. Sugar and sugar products accounted for 73.2% of Cuban export revenue in 1989, compared with about 43% in the late 1990s. Prior to the revolution of 1959–60, Cuba exported more than 50% of its sugar to the USA. Following the trade embargo imposed by the USA, approximately 60% of annual exports were taken by the Soviet Union and other Eastern bloc countries, mostly under long-term trade and barter agreements at preferential prices. (In 1990 the Soviet Union supplied Cuba with 95% of its total petroleum requirements.) Since 1991, however, these arrangements have ceased, and the Cuban sugar trade with the successor republics of the Soviet Union, as well as with Eastern European
296 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
countries and the People’s Republic of China, is now conducted on the basis of full market prices, and Cuba has sought new markets in Canada, North Africa, and in the Middle East and Far East. However, Cuban sugar production has declined sharply since the early 1990s, owing both to adverse weather conditions and to disruptions in the procurement of fuel, fertilizers, mill equipment and other essential production inputs, as a result of the US embargoes. These factors, which resulted in the 1994/95 harvest declining to the lowest level in 50 years, necessitated over-extended harvests and the use of reserves of cane intended for future crops. These factors brought about a temporary suspension of sugar exports in 1993. Difficulties have arisen in meeting subsequent export commitments, which included an agreement to supply Russia with 1m. tons of sugar in the year to March 1996 in exchange for 3m.tons of petroleum products. Russia has remained the principal market for Cuban sugar, absorbing approximately 28% of Cuban sugar exports during 1994–96. Cuba was, however, unable to fulfil a contract to supply China with 400,000 tons of sugar during 1995. In that year the Cuban Government negotiated loans totalling US $100m. from private European sources for the purchase of fertilizers and sugar factory equipment. Additional foreign finance was obtained to assist a further recovery in the 1996/97 season, when exports of sugar were estimated to have earned $950m. in foreign exchange. A disappointing crop in 1997/98, however, was expected to generate only $432m. in export revenue. According to the FAO, revenues earned from the 2001/02 crop, originally forecast at $550m., would decline to only $476m. as a result of damage caused by ‘Hurricane Michele’. Before the 1959 revolution, when the industry passed into state control, about 75% of Cuba’s sugar cane was grown on large mill estates, and the balance was produced by private growers. Areas under sugar cane, which were estimated to cover just over 1m. ha in the mid-1990s, were restructured in 1993 into units of approximately 1,000 ha, as Basic Units of Co-operative Production (UBPC). These UBPC currently comprise about 90% of stateowned sugar plantations. Few mills have been built since the 1930s (and all of these since 1980), but many of the 150 existing mills have been modernized and expanded. Cuba is recognized as a leader in the processing and marketing of sugar, but the country has failed to take adequate measures to control disease and pests, which have a deleterious effect on yields. Cuba’s average yield of raw sugar stood at only 4.3 metric tons per ha in 1996, compared with 8.0 tons per ha in Brazil. Mexico was a sugar exporter until 1979. However, the low domestic price of sugar, which the Government traditionally set below the cost of production, discouraged the purchase of modern equipment and the renovation of sugar plants. The result was stagnation in sugar production, a steady rise in domestic sugar consumption to a level among the highest in the world (45 kg per head per year), and the need to import sugar. Since 1980, as part of a plan to increase production, to slow the rate of increase in demand and to allow the Government to reduce the subsidy on sugar, domestic sugar prices have been set above the level of production costs. During the period 1980–85, as much as an additional 170,000 ha were planted to sugar cane. Under the North American Free Trade Agreement (NAFTA), which entered into operation in January 1994, Mexico was permitted to substantially increase its sugar exports to the USA and Canada after NAFTA arrangements for the dutyfree access of Mexican sugar to the US market took effect in 2001. The decline in
COMMODITY SURVEYS 297
international sugar prices from 1998 had a severe effect on the Mexican sugar industry, and in 2000 the country’s second largest refiner sought protection from its creditors. The Government’s response to the crisis in the industry has been to formulate a National Sugar Policy, which aims to regulate the sector and improve its profitability. The United States Department of Agriculture (USDA) forecast that Mexican production would reach 5.3m. tons (raw equivalent) in 2002/03. The sugar sector in Colombia has undergone a major expansion since the 1960s, in an attempt to diversify the economy away from coffee. In some of the smaller Latin American countries and the Caribbean islands, sugar cultivation is the main bulwark of the economy. In Belize, sugar cane plantations occupy about 50% of the total cultivated area, while the sugar industry employs about one-quarter of the work-force. In 1999 sales of sugar and molasses accounted for 23.4% of total export earnings (excluding re-exports). Sugar cane is the principal commercial crop in the Dominican Republic, but inefficient production techniques, lack of investment and falling international sugar prices depressed the industry throughout the 1980s. The country’s output of raw sugar increased from 580,000 tons in 1995 to 741,000 tons in 1996 and to 813,000 tons in 1997. However, ‘Hurricane Georges’ caused severe damage to cane plantations and sugar mills in September 1998. Raw sugar accounted for only 3.4% of the Dominican Republic’s total export revenue (excluding exports from free-trade zones) in 1997. Sugar is the principal export commodity of Barbados, and is a major export commodity in Guyana and Saint Christopher and Nevis. The member states of the European Union (EU) dominate global production of sugar beet, accounting, in 2001, for 44.4% of estimated total world output of 234.2m. metric tons, compared with 46.8% in 2000 and 47.4% in 1999. Within the EU the principal producers of sugar beet are France, where output totalled an estimated 26.7m. tons in 2001, and Germany, where production amounted to 24.4m. tons. In that year the EU accounted for 12.3% of raw sugar produced by centrifugation world-wide, with output estimated at 15.7m. tons. The FAO has forecast that EU production of raw, centrifugal sugar will total 17.3m. tons in 2002/03. In 2000, at 8.0m. tons, EU exports of refined sugar accounted for some 48% of the total exported world-wide. EU imports of refined sugar in the same year totalled 1.9m. tons. The quantity of sugar beet entering into world trade is relatively small, and has declined very substantially since 1995. In 2000 the EU was the source of 36% of all sugar beet exported world-wide, compared with only 1.5% in 1995. EU sugar production is organized by means of so-called ‘A’ and ‘B’ quotas for sugar beet. Under this regime, producers are remunerated with the intervention price net of producer taxes. The regime is, accordingly, self-financing, because the taxes in question compensate for the difference between the EU market price for sugar and the world market price for exports of ‘B’ sugar. A third category, ‘C’ sugar, constituted by production in excess of the ‘A’ and ‘B’ quotas, is marketed without support. The EU’s sugar regime has been widely criticized for the cost it incurs to EU consumers, and for depressing the world market for sugar, to the cost of non-EU producers. While the EU restricts imports of sugar from third countries, the price guaranteed to EU producers (i.e. the intervention price) has, for many years, been two to three times greater than the prevailing world market price, and is reflected in high prices to the consumer. In accordance with commitments made at the Uruguay Round Agreement on Agriculture, the EU is required to apply limits to the
298 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
quantity of subsidized sugar it exports. The World Trade Organization (WTO) is also likely, in the near future, to seek to apply further limits to the use of export subsidies by the EU. The EU is expected to respond by either reducing the intervention price paid for sugar, or by reducing its sugar beet production quotas. A very small amount of cane sugar is grown in the region’s southern extremities. Eastern European countries accounted for about 11% of total estimated world production of sugar beets in 2001, compared with 8.7% in 2000, and 9.7% in 1999. Poland is a major producer, with average annual output of 14.4m. metric tons in 1995–2001. Production of sugar by centrifugation amounted to an estimated 1.5m. tons (raw value) in 2001, compared with 2.2m. tons in 2000, and 2.0m. tons in 1999. Polish exports of sugar (raw equivalent) totalled 458,962 tons in 2000. In 2001 Russia, with output of 14.5m. tons, accounted for 41.7% of estimated total sugar beet production by the states of the former Soviet Union, compared with 42.7% in 2000, and 44.8% in 1999. Russia is the world’s largest sugar importer, with total purchases of almost 6m. tons (raw value) in 1999, but has recently attempted to check rapid growth in the quantity it imports through the use of a tariff rate quota (TRQ, 3.65m. tons) and seasonal duties. However, this regime is ineffective when the world price of sugar is very low, as it has been in recent years. According to the USDA, total Russian sugar imports were expected to decline by some 15%, to 4.8m. tons, in 2001/02, and by a further 6.2%, to 4.5m. tons, in 2002/ 03. About 75 % of Russia’s refined sugar is produced from imported raw material, but production from domestic beet reportedly rose by 3 %, to 1.6m. tons, in 2001/ 2002, and is expected to continue to rise if the area planted with sugar beet increases as planned. Some sources predict that Russia will raise its sugar import quota for 2003 from 3.65m. tons to 4m. tons. According to the FAO, domestic consumption rose by almost 4.5% in 2001, compared with the previous year, owing, mainly, to continued growth in Russia’s food processing industry. Ukraine is the largest producer of sugar beet among the successor states to the Soviet Union, but its output in 2001, estimated at 15.5m. tons, was almost 50% lower than the 29.7m. tons it produced in 1995. Beet production has declined in recent years owing to its low profitability. An increase in production forecast to occur in 2002 will be due to higher yields and better availability of seed and fertilizers. Formerly a significant exporter, in 1998 Ukraine became a net importer of sugar, with total purchases of some 139,000 tons. High domestic prices partly explain Ukraine’s decline as an exporter of sugar. Another factor is the lack of budgetary resources to subsidize exports. The Government reportedly wishes to eliminate imports of sugar entirely, but has not been able to devise a formula that would both enhance the profitability of sugar produced domestically and enable it to compete, in terms of price, on the internal market with foreign supplies. In 2001, according to the FAO, US production of sugar cane amounted to an estimated 31.6m. metric tons, equivalent to just 2.5% of total world production. (The states of Louisiana, Florida, Texas and Hawaii, and the commonwealth territory of Puerto Rico, are the principal US sugar cane-producing areas.) In the same year, US production of sugar beets was estimated to have totalled 23.4m. tons, representing about 10% of total world output in that year. US production of raw sugar by centrifugation amounted to an estimated 7.1m. tons, or 5.6% of total world output, in 2001. In 2000 the USA imported 1.4m. tons of sugar, exporting just over 100,000 tons. The USA applies a regime of import quotas to
COMMODITY SURVEYS 299
sugar. A higher duty applied to imports in excess of the low-duty TRQ traditionally deterred imports supplementary to that quota, but, in accordance with a commitment made at the Uruguay Round of the General Agreement on Tariffs and Trade, the USA was required to reduce it by 15% in 1994–2000. A further market access commitment guarantees that at least 1,1394m. tons of imported sugar will be allowed to enter the USA each year. South Africa is the principal producer and exporter of sugar in sub-Saharan Africa. In the mid-1990s South Africa ranked as the world’s seventh largest sugar exporter. In recent years, however, South Africa has encountered increased competition from neighbouring countries, in particular Swaziland and Zimbabwe, both major exporters whose production costs are substantially lower than those of South Africa. It was forecast that by the end of the 1990s one-third of domestic demand in South Africa would be supplied by these sources. Sugar is the staple product in the economies of Mauritius and Réunion, although output is vulnerable to climatic conditions, as both islands are subject to cyclones. In Mauritius, where it was estimated that more than 75% (72,750 ha) of cultivated land was devoted to sugar production in the late 1990s, sugar sales accounted for almost 90% of the island’s export revenue in 1999 (excluding exports from the Export Processing Zone). In Réunion 59.1% of the island’s 63,050 ha of cultivable land was planted with sugar cane in 1998, and sales of sugar provided almost 59% of export income in 1998. The expansion of sugar output, however, has been impeded in recent years by unfavourable weather, and by the pressure on agricultural land use from the increasing demands of road construction and housing. Mozambique’s sugar industry, formerly the country’s primary source of foreign exchange, has begun to surmount the effects of many years of disruption and neglect. The resolution of internal civil conflict has made possible the rehabilitation both of cane-growing and of the country’s six sugar complexes. Production of raw sugar has almost doubled since the peace agreement, rising from 234,000 metric tons in 1994 to 440,000 tons in 2000. In 1999 the Mozambique government was reported to be seeking annual export quotas to the US and EU sugar markets. However, considerable foreign aid and investment is still needed to complete the revitalization of this sector. Sugar is Malawi’s third most important export commodity (after tobacco and tea), providing an estimated 7.1% of export earnings (excluding reexports) in 1998. Tanzania sought to develop its sugar sector during the 1990s, with the aim of reducing reliance on imports from Malawi and Zambia. Output of sugar cane totalled 1. 4m. tons in 2000, according to the FAO, and the country’s five sugar factories produced some 120,000 tons of sugar. Although local demand, at about 415,000 tons annually, outstrips production, Tanzania exports about 10,000 tons of sugar each year to the EU. In 2000 the Government banned the import of sugar into all but the country’s three largest ports, in an attempt to suppress the widespread smuggling of cheaper foreign sugar into Tanzania. In Sudan one of the world’s largest single sugar projects was inaugurated in 1981 at Kenana, south of Khartoum. The Kenana Sugar Co (in which the Sudan government has a 50% share), comprising an estate and processing facilities, has been instrumental in the elimination of sugar import costs, which were, until the mid-1980s, Sudan’s single largest import item after petroleum. However, the subsequent imposition by the Sudan government of a regional quota distribution system led to supply shortages and high prices, and during
300 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
the 1990s the renewal of Sudan’s sugar sector was further impeded by drought, inadequate investment and technical and management problems. In 1999 plans were announced for the construction of a sugar production facility in the White Nile region, at a cost of some US $500m. Commercial production is scheduled to begin in 2003, with initial output forecast at 150,000 tons, of which it is planned to export about one-half. Sudanese sugar exports normally total some 185,000 tons annually. In 1999/2000 Sudan produced 630,000 tons of sugar. Output was expected to amount to 870,000 tons in 2000/01. The People’s Republic of China is collaborating with Sudan in the construction of a sixth sugar plant, which will further boost production. Sugar cane grows wild throughout Nigeria, although the country’s sugar industry remains largely undeveloped. However, six sugar complexes are planned, with the aim, ultimately, of achieving self-sufficiency in sugar. Nigeria emerged, in the 1990s, as a consistently significant African importer of raw sugar, with total imports, in terms of raw equivalent, peaking at more than 1m. tons in 1998. In 1999 total purchases of sugar, again in terms of raw equivalent, declined to an estimated 731,719 tons, before rising again, to 774,515 tons, in 2000. The major sugar producers in Asia are India, the People’s Republic of China, Thailand, Pakistan, Indonesia and the Philippines. Of these, only China and Indonesia were net importers rather than net exporters in the late 1990s. The main exporters in the Far East and Australasia are Australia, the Philippines and Thailand; the region’s main importers are Indonesia and Japan. Although India is usually the principal world producer of cane sugar, the country is not a significant exporter, and since the late 1980s it has intermittently had recourse to imports of sugar in order to satisfy domestic requirements. India’s principal suppliers of imported sugar are China and Brazil. In the late 1990s about 4m. ha were planted with sugar cane, but, despite plentiful domestic production, the country’s sugar refineries, which are subject to government levies, are unable to compete effectively with low-cost imports. In 1999/2000 Indian production of sugar was estimated at a record 19. 5m. metric tons (raw value), and in that year exports of sugar were expected to increase to 2m. tons. In 1999 Indian producers had become increasingly concerned about their competitiveness, as a result of the comparatively low cost of imported sugar, and at the beginning of 2000 the Government announced an increase in import duties on sugar from 27.5% to 40%. Indonesia, following unsuccessful efforts to achieve self-sufficiency in sugar, has become a principal buyer of Indian sugar. Indonesia’s total imports were estimated at 1. 7m. tons (raw value) in 2000, having risen as high as 2.3m. tons in 1999. Thailand, after seeking a reduction in sugar production to encourage a change-over to other crops, has promoted a controlled expansion of sugar production. However, sugar exports (both raw and refined) accounted for less than 1% of Thailand’s export revenue in 1999. Thailand’s exports of sugar (raw value) totalled 4.2m. tons, in 2000, compared with 3.4m. tons in 1999. In the case of Australia, sugar is the most important export crop after wheat. The export trade accounts for about 80% of the country’s annual raw sugar production. Sugar (including sugar preparations and honey) accounted for 1.5% of Australian export earnings in 1997/98. In 1998/99 and 1999/2000, however, the contribution of sugar to total export revenues was only 0.2%, as production declined and domestic demand increased. The sugar industry in the Philippines was, for many years, an important source of foreign-exchange earnings. Since 1983, however, the country’s output of raw sugar has reflected depressed
COMMODITY SURVEYS 301
price levels and curbs on production. In the mid-1990s the Government of Viet Nam was seeking foreign investment in the country’s sugar sector, with the aim of reducing domestic dependence on sugar imports. Among the countries of the Middle East and North Africa, Egypt is a major producer of sugar cane (cultivated mainly in Upper Egypt), with some 115,000 ha planted to the crop in the late 1990s. Average yields obtained from sugar cane are among the highest in the world, according to government sources. Egypt’s estimated output of sugar cane was 15.6m. metric tons in both 2001 and 2000, compared with 15.3m. tons in 1999. Egypt also emerged as a significant producer of sugar beet in the late 1990s, and the area planted to beet (located mainly in the northern Nile Delta) continued to rise rapidly in the early 2000s, by which time it was greater than 60,000 ha. In 2000 and 2001 production was estimated to have totalled 2.9m. tons, compared with only about 920,000 tons in 1995. At the end of the 1990s sugar beet accounted for a little more than 20% of Egypt’s total production of sugar. Output of sugar by centrifugation (raw value), which has risen steadily since 1995, totalled an estimated 1.5m. tons in 2001. The country is not a significant exporter of sugar, and relies on fairly substantial imports to meet its domestic consumption requirements. Total sugar imports (raw value) amounted to 573,650 tons in 2000, compared with 1.2m. tons in 1999, and 1.1m. tons in 1998. The decline in imports in 2000 was attributed, in part, to the substantial increase of the two previous years, which had led to an accumulation of stocks. Raw sugar constituted the bulk of Egyptian imports in 2000, with Brazil, the EU and Australia the principal suppliers. In January 2000 the Egyptian Government announced increases in the tariffs applied to imported sugar. For imported raw sugar the tariff was raised from 5% to 24%, while that levied on imports of refined sugar was increased from 10% to 26%. Turkey is a major producer of sugar beet, in world as well as regional terms. In 2001 output was estimated to have totalled 14.5m. tons, a decline of some 19% compared with 2000. In 1998 beet production had risen to almost 22m. tons. Turkish production of sugar by centrifugation was estimated to have totalled almost 3m. tons (raw value) in 2001, compared with only 2.3m. tons in 2000 and, again, about 3m. tons in 1999. Turkish exports of sugar grew rapidly in the second half of the 1990s. In 2000 they totalled some 609,000 tons (raw value), compared with about 527,000 tons in 1999, and only 4,446 tons in 1995. The increase in exports is explained by the decision to resort, in recent years, to the subsidization of sales, at a high level, in order to dispose of substantial stocks. This is necessary, because local production costs are considerably higher than those prevailing world-wide. According to data cited by the USDA, the main destinations for Turkish sugar exports in the 2000 marketing year (September 2000–August 2001) were Azerbaijan, Syria and Georgia. Iran is a significant producer of both sugar cane and sugar beet, though on a much smaller scale than both Egypt and Turkey. In 2001 Iranian production of sugar cane was estimated to have amounted to 2.1m. tons, compared with 2.4m. tons in 2000, and 2. 2m. tons in 1999. Output of sugar beet was estimated at 4.3m. tons in 2001, the same level as in 2000. In 1999 sugar beet production had risen as high as 5.5m. tons. Iranian production of sugar by centrifugation was estimated at 750,000 tons in 2001, compared with an estimated 864,000 tons in 2000, and an estimated 986,000 tons in 1999. Iran is heavily reliant on imports of sugar, which totalled 1.1m. tons (raw value) in 2000, and 1.2m. tons in 1999. Like Iran, Morocco is a significant producer of sugar cane and sugar beet, though
302 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
on a smaller scale than Egypt and Turkey. Production of sugar beet totalled an estimated 3. 1m. tons in 2001, compared with 2.8m. tons in 2000, while output of sugar cane amounted to an estimated 1.3m. tons in 2001, the same level as in 2000. Morocco depends on imports, mainly of raw sugar for local refineries, in order to meet internal consumption, of which the per caput rate is one of the highest in the world. Syria is also a notable producer of sugar beet, with output estimated at 1.2m. tons in 2001, but elsewhere in the Middle East and North Africa production of sugar cane and sugar beet is either minimal or nonexistent, the countries of the region depending on imports to meet domestic requirements. Taken as a whole, these imports are of considerable importance to overall trade in sugar world-wide. Algeria and the United Arab Emirates both imported more than 900,000 tons (raw value) of sugar in 2000, while Saudi Arabian imports are almost always in excess of 500,000 tons annually. Imports by Israel are usually greater than 450,000 tons each year, and those of Yemen approached 500,000 tons in 2000. The first International Sugar Agreement (ISA) was negotiated in 1958, and its economic provisions operated until 1961. A second ISA did not come into operation until 1969. It included quota arrangements and associated provisions for regulating the price of sugar traded on the open market, and established the International Sugar Organization (ISO) to administer the agreement. However, the USA and the six original members of the European Community (EC, now the EU) did not participate in the ISA, and, following its expiry in 1974, it was replaced by a purely administrative interim agreement, which remained operational until the finalization of a third ISA, which took effect in 1978. The new agreement’s implementation was supervised by an International Sugar Council (ISC), which was empowered to establish price ranges for sugar-trading and to operate a system of quotas and special sugar stocks. Owing to the reluctance of the USA and EC countries (which were not a party to the agreement) to accept export controls, the ISO ultimately lost most of its power to regulate the market, and since 1984 the activities of the organization have been restricted to recording statistics and providing a forum for discussion between producers and consumers. Subsequent ISAs, without effective regulatory powers, have been in operation since 1985. Special arrangements for exports of sugar from 15 Caribbean states (including Belize and Guyana) existed in the successive Lomé Conventions, in operation from 1975, between the EU and a group of African, Caribbean and Pacific (ACP) countries, whereby a special Protocol on sugar, forming part of each Convention, required the EU to import specified quantities of raw sugar annually from ACP countries. In June 1998 it was announced that preferential sugar prices paid by the EU to the ACP countries would fall to open-market levels within three years. Under the terms of the Cotonou Agreement (covering the period 2000–2020), the successor convention to the fourth Lomé Convention, the EU has undertaken to purchase and import, at guaranteed prices, specific quantities of sugar originating in ACP states for an indefinite period. In tandem with world output of cane and beet sugars, stock levels are an important factor in determining the prices at which sugar is traded internationally. These stocks, which were at relatively low levels in the late 1980s, increased significantly in the early 1990s, owing partly to the disruptive effects of the Gulf War on demand in the Middle East (normally a major sugar-consuming area), and also as a result of substantially increased production in
COMMODITY SURVEYS 303
Mexico and the Far East. Additionally, the output of beet sugar was expected to continue rising, as a result of substantial producers’ subsidies within the EU, which, together with Australia, has been increasing the areas under sugar cane and beet. World sugar stocks were reduced in the 1993/94 trading year (September-August). However, the prospect of record crops in Brazil, India and Thailand led to an increased level of sugar stocks in 1994/95. World sugar stocks continued to rise in 1995/96 and 1996/97, and advanced further in 1997/98, when world-wide consumption of raw sugar totalled about 123m. metric tons, compared with production of 126m. tons. This trend continued in 1998/99, when, according to provisional ISO data, global sugar production reached 133.2m. tons, while consumption totalled 127.8m. tons. Forecasts for 1999/2000, published in July 2000, projected another world sugar surplus, of 1.5m.–1.7m. tons. Most of the world’s sugar output is traded at fixed prices under long-term agreements. On the free market, however, sugar prices often fluctuate with extreme volatility. In February 1992 the import price of raw cane sugar on the London market was only US $193.0 (equivalent to £107.9 sterling) per metric ton, its lowest level, in terms of US currency, for more than four years. The London price of sugar advanced to $324.9 (£211.9) per ton in May 1993, following predictions of a world sugar deficit in 1992/93. Concurrently, sugar prices in New York were at their highest levels for three years. The London sugar price declined to $237.2 (£157.9) per ton in August 1993, but increased to $370.6 (£237. 4) in December 1994. The rise in sugar prices continued in January 1995, when the London quotation for raw sugar reached US $378.1 (£243.2) per ton, its highest level, in dollar terms, since early 1990. Meanwhile, the London price of white sugar was $426.5 (£274.4) per ton, the highest quotation for four-and-a-half years. The surge in the sugar market was partly a response to forecasts of a supply deficit in the 1994/95 season. Prices later eased, and in April 1995 raw sugar was traded in London at $326.0 (£202.1) per ton. The price recovered to $373.1 (£235.6) per ton in June, but retreated to $281.5 (£179.4) in September. During the early months of 1996 the London price of raw sugar reached about US $330 per ton. In May the price was reduced to $262.9 (£175.3) per ton, but in July it rose to $321.4 (£206.3), despite continued forecasts of a significant sugar surplus in 1995/96. The sugar price fell to $256.3 (£156.4) per ton in December. In January 1997 the London price of raw sugar declined to US $250.8 (£154.0) per ton, but in August it reached $288.5 (£179.1). In terms of US currency, the London sugar price advanced later in the year, standing at $298.5 (£178.3) per ton in December. International sugar prices moved generally downward in the first half of 1998. In June, following forecasts that world output of raw sugar in 1997/98 would be significantly higher than in the previous crop year (leading to a further rise in surplus stocks), the London price was reduced to US $185.0 (£113.1) per ton. In July the quotation for raw sugar recovered to US $222.6 (£135.0) per ton, but in September, following forecasts of a higher surplus in 1998/99, the price fell to only US $168.8 (£100.2). The sugar price stayed within this range for the remainder of 1998, ending the year at $196.9 (£118.3) per ton. In January 1999 the London price of raw sugar reached US $217.2 (£132.4) per ton, but from February the free market was affected by strong downward pressure, as sugar supplies remained plentiful. In April the London sugar price was reduced to only $127.3 (£79.0) per
304 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
ton, its lowest level, in terms of US currency, since late 1986. Meanwhile, the short-term quotation in the main US sugar market declined to about 4.6 US cents per lb, also a 12 year ‘low’. The slump in international sugar prices was partly a consequence of the severe economic problems affecting Russia (normally the world’s leading importer of sugar) and countries in eastern Asia. The decline in demand from these areas coincided with high output, as a result of generally favourable growing conditions, in sugar-producing countries. The London price recovered to $166.2 (£105.1) per ton in June 1999, but declined to $131.4 (£84.4) in July. A renewed advance took the price to $184.3 (£111.4) per ton in October. At the end of the year the London sugar quotation stood at $162.4 (£100.8) per ton. During the early weeks of 2000 the international sugar market was weak, and at the end of February the London price of raw sugar was reduced to US $126.5 (£80.1) per ton, its lowest level, in terms of US currency, for more than 13 years. However, there was subsequently a strong recovery in sugar prices, in response to reports of reductions in output and planting, while demand rose. At the end of July the London quotation was $264. 0 (£176.3) per ton. Meanwhile, the New York price of sugar rose during that month to its highest level for more than two years. The average price for raw sugar on the main New York market was in excess of 11 US cents per lb in August, the first time this level had been achieved since February 1998. These recoveries were not sustained, however, and by 22 September the London quotation for raw sugar had fallen to $226.5 (£155.3) per ton. The London quotation for raw sugar remained within the established range until 10 October, when it rose to $266.5 (£183.9) per ton. On 17 October the London quotation stood at $281.5 (£195.5) per ton, but thereafter the price fell back to and remained within the previously established range, ending the year at $249.4 (£166.9) per ton. A persistent characteristic of the market from October 2000 was the erosion of the premium at which white sugars normally trade above raw supplies. In January 2001 the ISO forecast that the premium would remain depressed for several months to come, owing to the abundance of supplies of white sugar and the availability of substantial quantities for export from India. At the end of the first quarter of 2001 the London quotation for raw sugar stood at $216.7 per ton, declining further, to $205.3 (£143.9) per ton on 3 April. The average New York price for March 2001 was 9.6 US cents per lb. At the end of May the London price had advanced somewhat, to $221.8 per ton. However, prices subsequently declined sharply, particularly in October, when the New York price averaged 7.2 US cents per lb, compared with 8.6 cents in September. Reports of damage caused by ‘Hurricane Michelle’ to the crops of several Caribbean countries, most notably Cuba, supported a brief recovery in November, before the downward trend continued into 2002. The New York price again declined below 6 US cents per lb, before recovering above that level in August. The Group of Latin American and Caribbean Sugar Exporting Countries (GEPLACEA), with a membership of 23 Latin American and Caribbean countries, together with the Philippines, and representing about 66% of world cane production and 45% of sugar exports, complements the activities of the ISO (comprising 55 countries, including EU members, in November 1999) as a forum for co-operation and research. At the end of 1992 the USA withdrew from the ISO, following a disagreement over the formulation of members’ financial contributions. The USA had previously provided about 9% of the ISO’s annual budget.
COMMODITY SURVEYS 305
Export Price Index for Sugar (base:1980=100)
Tea
Tea is a beverage made by infusing in boiling water the dried young leaves and unopened leaf-buds of the tea plant (Camellia sinensis), an evergreen shrub or small tree. Black and green tea are the most common finished products. The former accounts for the bulk of the world’s supply and is associated with machine manufacture and plantation cultivation, which guarantees an adequate supply of leaf to the factory. The latter, produced mainly in the People’s Republic of China and Japan, is grown mostly on smallholdings, and much of it is consumed locally. There are two main varieties of tea, the China and the Assam, although hybrids may be obtained, such as Darjeeling. In this survey, wherever possible, data on production and trade relate to made tea, i.e. dry, manufactured tea. Where figures have been reported in terms of green (unmanufactured) leaf, appropriate allowances have been made to convert the reported amounts to the approximate equivalent weight of made tea. Total recorded tea exports by producing countries achieved successive records in each of the years 1983–90. World exports (excluding transactions between former Soviet republics) declined in 1991 and 1992, but rose by 13.7% in 1993. However, the total fell by 10.3% in 1994. Export volume increased again in 1995 and 1996, rising further, to 1,203, 785 metric tons, in 1997. World tea exports reached a new record of 1,304,896 tons in 1998, but eased to 1,262,790 tons in 1999. In 2000 export volume attained a new record level of 1,331,295 tons, increasing again in 2001 to 1,391,940 tons. Global production of tea reached an unprecedented level in 1998, with record crops in all the major producing countries (India, China, Kenya and Sri Lanka). In 1999, however, world output declined (from 2,989,682 tons in 1998) to 2,902,839 tons, although China and Sri Lanka again reported record crops. In 2000 production increased to 2,922,748 tons, spurred, once again, by record crops in China and Sri Lanka. In 2001 it was estimated that world production of tea had, for the first time ever, exceeded 3m. tons. Record crops in China and Kenya contributed to an increase in global output of 3.4%, to an estimated 3,021,426 tons. India (the world’s largest consumer) and Sri Lanka have traditionally been the two leading tea exporters, with approximately equal sales, but the quantity which they jointly supply has remained fairly stable (350,000–25,000 tons per year in 1977–96, advancing to 458,000 tons in 1997). Their joint export sales rose to 472,947 tons in 1998, but declined to 452, 044 tons in 1999. In 2000 Indian and Sri Lankan joint export sales increased to 484,486 tons, but declined to 467,360 tons in 2001. During the 1960s these two countries together exported more than two-thirds of all the tea sold by producing countries, but in 2001 the proportion was estimated at about 34%. From 1990 until 1995, when it was displaced by
COMMODITY SURVEYS 307
Production of Made Tea (’000 metric tons)
* Provisional figure(s). † Twelve months beginning 1 May of year stated. [1] Mainly green tea (498,057 tons in 2000; 513,154 tons in 2001). [2] Including a small quantity of green tea (about 8,300 tons in 2000; about 8,500 tons in 2001) [3] Including green tea (about 38,000 tons in 2000; about 39,000 tons in 2001). [4] All green tea. [5] Including green tea (about 29,000 tons in 2000; about 32,000 tons in 2001). Source: International Tea Committee, Annual Bulletin of Statistics 2002.
Kenya, Sri Lanka ranked as the main exporting country. Exports by Sri Lanka again took primacy in 1997, when Kenya’s tea sales declined sharply (see below). Sri Lanka remained the principal tea exporter in 1998, despite a strong revival in Kenyan exports, and again in 1999, although tea sales by both countries declined in the latter year. In 2000 Sri Lankan exports retained primacy, while those by Kenya declined for a second successive year, Sri Lankan exports surpassed those of Kenya again in 2001, in spite of a strong recovery in Kenya’s foreign sales. Exports from China (whose sales include a large proportion of green tea) have exceeded those of India in every year since 1996. Almost all of Sri Lanka’s tea exports, which stood at 287,503 metric tons in 2001 (compared with 280,133 tons in 2000 and 262,952 tons in 1999), are in the form of black tea. After clothing, tea is the country’s main source of foreign exchange, accounting for 16. 4% of total export earnings in 1998, 13.7% in 1999, and 12.9% in 2000. The principal buyers of Sri Lankan tea in 2000 were Russia, Dubai (in the United Arab Emirates), Syria and Turkey. Iran, Saudi Arabia, Iraq and the United Kingdom are also significant buyers of tea from Sri Lanka. The country produced 296,301 tons of tea in 2001, compared with the record 306,794 tons in 2000 and 284,149 tons in 1999. Tea is India’s principal agricultural export, but its contribution to total export earnings has diminished in recent years, falling from 4.6% in the year ending 31 March 1987 to 1.4% in 1997/98. Exports of tea contributed 1.6% of India’s total export earnings in 1998/99,
308 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
and only an estimated 1.1% in 1999/2000. India’s tea exports, which totalled 189,092 metric tons in 1999, advanced to 204,353 tons in 2000, but declined to only 179,857 tons in 2001. Since 1985 India has operated an upper limit on annual tea exports of 220,000 tons, regulating the volume of sales in each quarter in order to maximize earnings of foreign exchange. India is the world’s largest consumer of tea, as well as the largest producer, its 853,710 tons in 2001 (compared with 846,483 tons in 2000 and 824,408 tons in 1999) representing about 28.3% of estimated world production in that year; the domestic market expanded steadily during the 1990s. In 1999/2000 prices for Indian tea declined, largely as a result of low domestic demand and the possibility of a high level of imports. As a result, the Government increased import duty on tea from 15% to 35% in May 2000, and in July it announced that restrictions on the foreign ownership of tea companies were to be abolished (thus allowing 100% foreign participation), in an effort to encourage increased investment and productivity. In March 2001 India raised the basic duty applied to imports of tea to 70%. Indonesia is the fourth largest producer in the Far East, with production of 161,202 metric tons in 2001, compared with 157,371 tons in 2000. Japan, which normally produces only green tea, maintained output around the 90,000-ton level for most of the 1990s and early 2000s—its 2001 production figure was 89,809 tons, only a slight increase on the 2000 level of 89,309 tons. In common with its coffee production (though on a much smaller scale), Vietnamese tea production expanded rapidly in the 1990s and early 2000s, reaching an estimated 80,000 tons in 2001, compared with estimated production of 70,000 tons in 2000 and of 36,000 tons in 1992. Bangladesh produced an estimated 57,341 tons of tea in 2001, a significant increase compared with the 2000 figure of 52,369 tons, while other producing states in the Far East included Taiwan, Nepal, Malaysia and Myanmar. In Australasia, both Australia and Papua New Guinea produce small quantities of tea. Australian production is estimated not to have exceeded 1,340 metric tons in any year since 1994, and is consumed domestically. Production by Papua New Guinea was estimated to have risen to 7,500 metric tons in 1996, although estimates for 2001 showed it to have fallen to 6,100 tons, compared with an estimated 6,200 tons in 2000. Papua New Guinea generally exports more than 90% of the tea it produces. Exports of tea by African producers accounted for about one-quarter of world trade during the early 1990s, and successive record shipments of, respectively, 331,874 metric tons and 344,482 tons were achieved in 1995 and 1996. These were succeeded, however, by a decline, to 322,069 tons, in 1997. Exports of African teas reached a record level again in 1998, when shipments totalled 389,499 tons, thus accounting for 29.8% of the world tea trade. African teas accounted for 29.6% of all exports in 1999, despite a decline in shipments, to an estimated 373,176 tons. In 2000, however, the share of African teas in the world tea trade declined to 26.4%, with shipments falling to an estimated 351,672 tons. In 2001 foreign sales of African teas recovered strongly to total an estimated 400,302 tons, equivalent to 28.8% of world trade in tea. Prior to its set-back in 1997, Kenya was one of the fastest-growing exporters, ranking fourth in the world during 1975–92, third in 1993, and second in 1994, when its tea exports exceeded those of China. Kenya was the principal world exporter of tea in 1995 and 1996. Conditions of severe drought during the first seven months of 1997 reduced Kenya’s
COMMODITY SURVEYS 309
position to fourth in terms of world exports, but the expansion of the country’s tea sales was resumed in 1998, when Kenya ranked second, after Sri Lanka, with exports of 263,402 tons, accounting for 68% of African tea exports and more than 20% of all tea traded internationally. Kenya retained the second position in terms of world exports in 1999, although the volume of its sales fell by 8.2%. In 2000, however, Kenya was reduced to the rank of third, after Sri Lanka and China, when its tea sales declined by 10.2% to 216,990 tons. In 2001 Kenyan exports of tea recovered strongly, by almost 19%, to 258,118 tons, and were surpassed only by those of Sri Lanka. In recent years the conservation of tea supplies by India, in order to satisfy rising domestic consumption, has enabled Kenya to replace India as the United Kingdom’s principal supplier. In 1999 Kenya provided 50% of British tea imports, but the proportion declined in 2000 to only about 35%, before recovering to about 44% in 2001. Kenya’s tea sales provided 29% of its total export receipts in 2000, making tea the country’s most valuable export crop. In 2001 about 132, 000 ha in Kenya were planted with tea. The country generally exports about 90% of its production, which totalled 294,631 tons in 2001, compared with 236,286 tons in 2000 and 248,818 tons in 1999. Malawi, with about 19,000 ha under tea in 2001, is Africa’s second largest producer and exporter of tea. The country produced 36,770 metric tons in 2001, a notable decline from the 2000 figure of 42,114 tons. Its exports in 2001 totalled 38,261 tons, accounting for 9. 6% of all African exports. In 1998 exports of tea accounted for 7.6% of Malawi’s total export earnings. Tea was thus the country’s second most valuable export crop after tobacco in that year. Prior to the Amin regime and the nationalization of tea plantations in 1972, neighbouring Uganda was second only to Kenya among African producers. Uganda’s tea exports were negligible by the early 1980s, but, following agreements between tea companies and the subsequent Ugandan governments, exports were resumed. There has been a sustained recovery since 1990, when sales of tea totalled only 4,760 tons. In 1994 Uganda’s exports of tea reached their highest annual total since 1977. Exports in subsequent years have advanced strongly, reaching 26,389 tons in 2000 and 30,427 tons (compared with total production of 33,255 tons) in 2001. In 1996 exports of tea contributed 4.2% of the country’s total export earnings. Uganda appeared, by 2001, to have overcome a challenge by Tanzania for the leading role in East African tea production. During the 1980s, Tanzania’s exports of tea ranged between 10,000–15,000 tons annually. These sales advanced significantly during the 1990s, moving from 20,511 tons in 1995 to 22,218 tons in 1998 and 21,364 tons in 1999, when tea accounted for 4.5% of the country’s total export earnings. Exports increased again, to 22,462 tons in 2000, but declined slightly, to 22,060 tons, in 2001 (production totalling 24,745 tons in that year). Zimbabwe was Africa’s fifth largest exporter of tea in 2001, with foreign sales totalling an estimated 17,154 tons in that year, compared with production of 22,382 tons. In 1999, however, tea accounted for only about 1 % of the country’s total export earnings. Tea has traditionally made a significant contribution to the export earnings of Burundi and Rwanda, whose foreign sales were estimated at 6,500 tons and 11,000 tons, respectively, in 2001. In 1999 exports of tea accounted for almost 20% of Burundi’s total export earnings. Since 1997, Rwanda’s tea industry has recovered from the disruption caused by civil unrest during 1993–96. In 2000 exports of tea accounted for about 39% of the country’s total export earnings.
310 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
In the Middle East, Turkey and Iran are the two notable producers of tea. Output by Turkey rose to 177,838 metric tons in 1998, but subsequently declined, to 170,563 tons in 1999,130,671 tons in 2000, before increasing to 142,900 tons in 2001. Turkish exports of tea totalled 39,611 tons in 1993, but they have not reached 20,000 tons in any year since then up to and including 2001, when they totalled 4,809 tons. Production of tea by Iran was estimated at 50,000–60,000 tons in each year during 1993–2001 (at 46,000 tons in the latter year). In 2001 Iran was estimated to have exported 4,000 tons of tea, compared with 3,500 tons in 2000. Unlike those of Turkey, Iranian exports have increased steadily since 1992, when they amounted to only 1,000 tons. Georgia is the main tea-producing country among the former Soviet republics, although its output has fallen drastically since 1992, when it was estimated to have reached almost 47, 000 metric tons. In 2001 production by Georgia totalled an estimated 13,500 tons, compared with 13,000 tons in 2000. Most of the tea Georgia produces is destined for export, with foreign sales amounting to an estimated 11,500 tons in 2001 and 11,000 tons in 2000. In 2001 Russia was estimated to have produced 2,500 tons of tea for domestic consumption. In Latin America, Argentina, Brazil, Peru and Ecuador are, in descending order, the principal producers of tea. In each year during 1997–2001 Argentina was estimated to have produced 50,000–60,000 metric tons of tea, compared with average annual production of about 40,000 tons during 1992–96. The bulk of Argentina’s output is exported. In 2001, the country’s foreign sales totalled 56,645 tons, equivalent to some 96% of total production. Output of tea by Brazil reached 10,000 tons in each year during 1993–95, but has since fallen, totalling an estimated 7,000 tons in both 2001 and 2000. In 1994 Brazil exported 8,377 tons of tea, but in recent years exports have generally amounted to no more than 3,000–4,000 tons annually, totalling 4,082 tons in 2001. In 2001 Peru was estimated to have produced 2,600 tons of tea, compared with 2,500 tons in 2000. Production has thus declined somewhat since 1992 and 1993, when it totalled 3,000 tons. Most of the tea Peru produces is consumed domestically, with exports estimated at no more than 100 tons in any year during 1999–2001, having reached 388 tons, their highest level in recent years, in 1993. Conversely, Ecuador exports most of its production, with foreign sales estimated at 1, 300 tons in 2001, in which year output was, similarly, estimated at 1,600 tons. For many years the United Kingdom was the largest single importer of tea. However, the country’s annual consumption of tea per caput, which amounted to 4.55 kg in 1958, has declined in recent years, averaging 2.46 kg in 1994–96 and 1995–97, before recovering marginally, to 2.51 kg, in 1996–98. In 1997–99, however, consumption fell back to 2.44 kg, it declined again, to 2.33 kg, in 1998–2000, and to 2.28 kg in 1999–2001. A similar trend has been observed in other developed countries, apart from the Republic of Ireland, the world’s largest per caput consumer of tea, where annual consumption per person advanced from 3.17 kg in 1994–96 to 3.23 kg in 1995–97, before evidencing a slight decline, to 2.95 kg, in 1996–98. Irish annual consumption per person declined again, to 2. 78 kg, in 1997–99, and to 2.69 kg in 1998–2000, before recovering to 2.71 kg in 1999– 2001. From the late 1980s consumption and imports expanded significantly in the developing countries (notably Middle Eastern countries) and, particularly, in the Soviet Union, which in 1989 overtook the United Kingdom as the world’s principal tea importer.
COMMODITY SURVEYS 311
However, internal factors, following the break-up of the Soviet Union in 1991, caused a sharp decline in tea imports by its successor republics; as a result, the United Kingdom regained its position as the leading tea importer in 1992. In 1993 the former Soviet republics (whose own tea production had fallen sharply) once more displaced the United Kingdom as the major importer, but in 1994 the United Kingdom was again the principal importing country. Since 1995, however, imports by the former Soviet Union have exceeded those of the United Kingdom. In 2001 the former Soviet Union imported an estimated 201,000 tons of tea, accounting for 15.6% of the world market, followed by the United Kingdom, with 137,315 tons (10.6%), Pakistan (106,822 tons, or 8.3%) and the USA (96,668 tons, or 7.5%). Other major importers of tea in 2001 were Egypt, Japan, Iraq and Morocco. Much of the tea traded internationally is sold by auction, principally in the exporting countries. Until declining volumes brought about their termination in June 1998 (Kenya having withdrawn in 1997, and a number of other exporters, including Sri Lanka and Malawi, having established their own auctions), the weekly London auctions had formed the centre of the international tea trade. At the London auctions, five categories of tea were offered for sale: ‘low medium’ (based on a medium Malawi tea), ‘medium’ (based on a medium Assam and Kenyan tea), ‘good medium’ (representing an above-average East African tea), ‘good’ (referring to teas of above-average standard) and (from April 1994) ‘best available’. The average price of all grades of tea sold at London auctions stood at £1,238 sterling (US $1, 859) per metric ton in 1993, but fell to £1,192 ($1,826) per ton in 1994 and to £1,036 ($1, 635) per ton in 1995. The annual average price in 1995 was the lowest since 1988. The average rose to £1,135 ($1,773) per ton in 1996 and to £1,351 ($2,213) in 1997. For the first half of 1998, before the auctions ceased, the average price realized was £1,458 per ton. During 1993 the monthly average reached £1,564 per ton in January, but declined to £1, 100 in June and recovered to £1,256 in November. The average was £1,102 per ton in January 1994, but rose to £1,284 in June and September. Quotations then moved generally lower, and in July 1995 the average London tea price was only £907.5 per ton, its lowest monthly level since August 1988. At one auction in September 1995 the price of ‘medium’ tea was reduced to only £780 per ton, its lowest level, even in nominal terms (i.e. without taking inflation into account), since 1976. The monthly average increased to £1,170.5 per ton in December 1995, but fell to £1,031 in July 1996. It moved generally higher in later months, reaching £1,528 per ton in August 1997, following reports that drought had reduced Kenya’s tea crop. After easing somewhat, the average London price of tea rose in January 1998 to £1,905 per ton (its highest monthly level since March 1985), in response to news of serious flooding in eastern Africa. At one of that month’s auctions the price of ‘medium’ tea reached £2,000 per ton, its highest level since 1985. However, the average London tea price retreated in May 1998 to £1,014 per ton. At the end of June, with the prospect of a record Kenyan crop, the quotation for ‘medium’ tea at the final London auction was £980 per ton. Based on country of origin, the highest-priced tea at London auctions during 1989–94 was that from Rwanda, which realized an average of £1,613 per ton in the latter year. The quantity of tea sold at these auctions declined from 43,658 tons in 1990 to 11,208 tons in 1997.
312 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
The main tea auctions in Africa are the weekly sales at Mombasa, Kenya. In contrast to London, volumes traded at the Mombasa auctions moved generally upward during the 1990s, and Mombasa is now one of the world’s major centres for the international tea trade —the Mombasa price became accepted in the late 1990s as the best guide to the international market. The tea sold at Mombasa is mainly from Kenya, but smaller amounts from Tanzania, Uganda and other African producers are also traded. Total annual sales at the Mombasa auctions increased from 173,575 metric tons in 1995 to 189,800 tons in 1996. Owing to Kenya’s drought, the total declined to 166,618 tons in 1997. In 1998, however, volume rose to a record 243,566 tons (including 212,620 tons from Kenya). The volume of tea traded at Mombasa in 1999 declined to 210,786 tons, but increased in 2000 to 221,601 tons. Meanwhile, average prices per ton in Mombasa rose from US $1,290 in 1995 to $1, 420 in 1996 and to $2,000 in 1997. They eased to $l,890 per ton in 1998, and to $1,780 in 1999. In 2000 prices of teas traded at Mombasa averaged $2,020 per ton. On a monthly basis, the average Mombasa price of tea advanced from $1,380 per ton in July 1996 to $2, 027 in May 1997. After some fluctuation, the monthly average increased to $2,817 per ton in February 1998, although it retreated to $1,544 in May. The market later rallied again, and in September 1999 the monthly average advanced to $1,993 per ton. In July 2000 the monthly average rose to $2,111 per ton, the highest level it was to attain that year, having advanced from a ‘low’ of $1,880 per ton in January. In January 2001 the average Mombasa price of tea stood at $1,866 per ton, although it retreated thereafter, reaching a monthly average low of $1,389 per ton in September, and ending the year at $1,483 per ton. The annual average price of tea traded at Mombasa in 2001 was £1,530 per ton. The monthly average price for January 2002 was $1,456 per ton, and the price fluctuated both above and below this level during the first half of the year, averaging $1,451 per ton in June. An International Tea Agreement (ITA), signed in 1933 by the governments of India, Ceylon (now Sri Lanka) and the Netherlands East Indies (now Indonesia), established the International Tea Committee (ITC), based in London, as an administrative body. Although ITA operations ceased after 1955, the ITC has continued to function as a statistical and information centre. In 2001 there were six producer/exporter members (the tea boards or associations of Bangladesh, India, Indonesia, Kenya, Malawi and Sri Lanka), four consumer members and six associate members. In 1969 the FAO Consultative Committee on Tea was formed and an exporters’ group, meeting under this committee’s auspices, set export quotas in an attempt to stabilize tea prices. These quotas have applied since 1970 but are generally regarded as too liberal to have more than a minimal effect on prices. The perishability of tea complicates the effective operation of a buffer stock. India, while opposing the revival of a formal ITA to regulate supplies and prices, has advocated greater co-operation between producers to regulate the market. The International Tea Promotion Association (ITPA), founded in 1979 and based in Nairobi, Kenya, comprises eight countries (excluding, however, India and Sri Lanka), accounting for almost one-third of world exports of black tea.
COMMODITY SURVEYS 313
Export Price Index for Tea (base: 1980=100)
Tin
Tin (Sn) is a grey metal with a variety of industrial uses. The world’s known tin deposits, estimated by the US Geological Survey (USGS) to total 6.9m. metric tons in 2001, are located mainly in the equatorial zones of Asia, in central South America and in Australia. Cassiterite is the only economically important tin-bearing mineral, and it is generally associated with tungsten, silver and tantalum minerals. There is a clear association of cassiterite with igneous rocks of granitic composition, and ‘primary’ cassiterite deposits occur as disseminations, or in veins and fissures in or around granites. If the primary deposits are eroded, as by rivers, cassiterite may be concentrated and deposited in ‘secondary’, sedimentary deposits. These secondary deposits form the bulk of the world’s tin reserves. The ore is treated, generally by gravity method or flotation, to produce concentrates prior to smelting. Tin owes its special place in industry to its unique combination of properties: low melting point, the ability to form alloys with most other metals, resistance to corrosion, nontoxicity and good appearance. Its main uses are in tinplate (about 40% of world tin consumption), in alloys (tin-lead solder, bronze, brass, pewter, bearing and type metal), and in chemical compounds (in paints, plastics, medicines, coatings and as fungicides and insecticides). In the late 1990s a number of possible new applications for tin were under study: these included its use in fire-retardant chemicals, and as an environmentally preferable substitute for cadmium in zinc alloy anti-corrosion coatings on steel. The possible development of a lead-free tin solder was also receiving consideration. According to the USGS, the Far East and Australasia accounted for 71% of world output of tin concentrates in 1999 and for an estimated 70.5% in 2000. Most South-East Asian tin production comes from gravel-pump mines and dredges, working alluvial deposits, although there are underground and open-cast mines working hard-rock deposits. In 2000 all of Australia’s tin production came from the low-cost underground Renison Bell mine that Murchison United operates in western Tasmania. In February 2000 Murchison United and the Tasmanian State Government agreed to fund jointly a six-year programme of exploration and development to secure the long-term future of the Renison operation. Most of Australia’s mine production is sent for smelting to Penang, in Malaysia, and to Thailand. Concentrates from Myanmar and Laos are mainly exported to Malaysia, Europe and the republics of the former Soviet Union. Indonesia, Malaysia and Thailand now smelt virtually the whole of their mine production to produce primary tin metal. An independent tin smelter is in operation in Singapore.
COMMODITY SURVEYS 315
Production of Tin Concentrates (tin content, metric tons)
* estimated production. Source: US Geological Survey.
Since the 1970s, tin has sharply declined in importance as an export commodity in Malaysia and Thailand, which had traditionally been among the region’s main producers. In Thailand, where the metal provided 12.9% of the country’s export earnings in 1967, its share was only 0.6% in 1988, and tin remained at the margin of total exports in the late 1990s. In 1989 exports of tin metal (including tin alloys) provided 1.7% of Malaysia’s total export earnings. The comparable proportion was 1.2% in 1990 and only 0.2% in 1997. By contrast, sales of tin accounted for 23% of Malaysia’s total exports, by value, in 1965. The depressed level of world tin prices since late 1985 (see below) has accelerated the industry’s decline, although Malaysia possesses substantial resources of tin and remains the leading world centre for tin smelting. In 1993, following three years of financial losses on its tinmining operations, Malaysia Mining Corpn, which accounted for the bulk of that country’s tin production, terminated these activities. Malaysia’s tin output subsequently declined sharply, from 10,384 metric tons in 1993 to 5,065 tons in 1997. In 1998, however, the Malaysian Government took action to encourage the reactivation of dormant mines. In that year Malaysia recorded an increase in tin production for the first time since 1990. Output increased further, to 7,340 tons, in 1999, but was reported to have fallen, to 6,307 tons, in 2000. The People’s Republic of China, now by far the world’s largest tin producer, announced in late 1997 that it was to initiate a three-year mining project in Qinghai Province to develop additional tin ore production capacity of 450,000 tons annually. China’s tin output in 1998 rose by about 4%, to 70,100 tons, and again in 1999, by 14.3%, to 80,100 tons. In 2000 production increased for a third consecutive year, this time by 21. 1%, reaching 97,000 tons. According to the USGS, Latin America accounted for 25.9% of world output of tin concentrates in 1999, and for an estimated 26.4% in 2000. In 2000 Bolivia was the world’s
316 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Tin Metal (metric tons, incl. secondary)
* estimated production. Source: US Geological Survey.
seventh largest producer of primary tin, and this commodity accounted for 4.5% of the country’s export revenue in 1999. Since the 1970s output has been in decline, mainly as a consequence of internal economic conditions and depressed levels of world prices. In 1978 tin sales accounted for almost 60% of Bolivia’s export revenues; by 1996 the comparable proportion was only 9.3%. Brazil possesses the world’s largest tin mine, located at Pitinga, in Amazonas State, with identified reserves of 420,000 metric tons, although it was suggested in the late 1990s that the mine’s total reserves could exceed 800,000 tons, As a result of adverse market conditions in the early 1990s, however, Brazilian tin output has declined, and in 1994 Peru emerged as the region’s leading producer and the world’s third largest source, a rank it maintained in 2000, Until recently, almost all of Peru’s tin exports were in the form of ores and concentrates, which provided 1.5% of the country’s total export earnings in 1996. However, Peru’s first tin smelter, at Pisco, began operating in 1997, with an initial production capacity of 15,000 tons of metal per year. An estimated 20, 000 tons of primary tin were smelted at Pisco in 2000, Peru thus ranking as the fourth largest producer in the world. In 1998 plans were announced for the resumption of tinmining in Argentina, but had not been realized as of early 2002. Africa is a relatively minor source of tin, accounting for only 0.3% of estimated total world output of tin concentrates in 2000. Rwanda was the leading African producer in that year, with output of an estimated 344 metric tons, compared with 243 tons in 1999. Most of the tin Rwanda produces is destined for export. Nigeria was the second largest African producer of tin in 2000, with output estimated at 300 tons, compared with 200 tons in 1999. In fact, Nigeria’s output of tin increased steadily during the second half of the 1990s.
COMMODITY SURVEYS 317
Companies engaged in tin mining in 2000 were generally state-owned. Smelter production of primary tin metal in 2000 was estimated to have totalled 100 tons. Among the republics of the former Soviet Union, Russia was the leading producer of tin in 2000, with output estimated to have totalled 5,000 metric tons, the same quantity as in 1999. Russia’s reserves of tin were estimated at 300,000 tons in 2001. In 1999 there were three tin smelters in operation in the country. Russian production of tin metal amounted to an estimated 5,200 tons in 2000, of which 4,700 tons was primary metal. Portugal is the leading European producer of mine tin, with output of tin concentrates estimated at 1,000 metric tons in 2000, the same level of production as in 1999. A considerable decline in Portuguese output has occurred since 1996, when production totalled 4,637 tons. In 1998 Portugal exported 6,257 tons of tin ores and concentrates, for which Malaysia (3,179 tons) and Thailand (2,802 tons) were the principal destinations. Belgium is the most important European producer of secondary tin metal, with output estimated at 8,500 tons in 2000. Over the period 1956–85, much of the world’s tin production and trade was covered by successive international agreements, administered by the International Tin Council (ITC), based in London. The aim of each successive International Tin Agreement (ITA), of which there were six, was to stabilize prices within an agreed range by using a buffer stock to regulate the supply of tin. The buffer stock was financed by producing countries, with voluntary contributions by some consuming countries. ‘Floor’ and ‘ceiling’ prices were fixed, and market operations conducted by a buffer stock manager who intervened, as necessary, to maintain prices within these agreed limits. For added protection, the ITA provided for the imposition of export controls if the ‘floor’ price was being threatened. The ITA was effectively terminated in October 1985, when the ITC’s buffer stock manager informed the London Metal Exchange (LME) that he no longer had the funds with which to support the tin market. The factors underlying the collapse of the ITA included its limited membership (Bolivia and the USA, leading producing and consuming countries, were not signatories) and the accumulation of tin stocks which resulted from the widespread circumvention of producers’ quota limits. The LME responded by suspending trading in tin, leaving the ITC owing more than £500m. to some 36 banks, tin smelters and metals traders. The crisis was eventually resolved in March 1990, when a financial settlement of £182.5m. was agreed between the ITC and its creditors. The ITC was itself dissolved in July. These events lent new significance to the activities of the Association of Tin Producing Countries (ATPC), founded in 1983 by Malaysia, Indonesia and Thailand and later joined by Bolivia, Nigeria, Australia and Zaire (now the Democratic Republic of the Congo, DRC). Immediately prior to the withdrawal of Australia and Thailand at the end of 1996 (see below), members of the ATPC, which is based in Kuala Lumpur, Malaysia, accounted for about twothirds of world mine production. The ATPC, which was intended to operate as a complement to the ITC and not in competition with it, introduced export quotas for tin for the year from 1 March 1987. Brazil and the People’s Republic of China agreed to co-operate with the ATPC in implementing these supply restrictions, which have been renegotiated to cover succeeding years, with the aim of raising prices and reducing the level of surplus stocks. The ATPC membership also took stringent measures to control smuggling. Brazil and China (jointly accounting for more than one-third of world tin production) both initially
318 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
held observer status at the ATPC. (China became a full member in 1994, but Brazil has remained as an observer—together with Peru and Viet Nam.) China and Brazil agreed to participate in the export quota arrangements, for which the ATPC has no formal powers of enforcement. The ATPC members’ combined export quota was fixed at 95,849 metric tons for 1991, and was reduced to 87,091 tons for 1992. However, the substantial level of world tin stocks, combined with depressed demand, led to mine closures and reductions in output, with the result that members’ exports in 1991 were below quota entitlements. The progressive depletion of stock levels led to a forecast by the ATPC, in May 1992, that export quotas would be removed in 1994 if these disposals continued at their current rate. The ATPC had previously set a target level for stocks of 20,000 tons, representing about six weeks of world tin consumption. Projections that world demand for tin would remain at about 160,000 tons annually, together with continued optimism about the rate of stock disposals, led the ATPC to increase its members’ 1993 export quota to 89,700 tons. The persistence, however, of high levels of annual tin exports by China (estimated to have totalled 30,000 tons in 1993 and 1994, compared with its ATPC quota of 20,000 tons), together with sales of surplus defence stocks of tin by the US Government, necessitated a reduction of the quota to 78,000 tons for 1994. In late 1993 prices had fallen to a 20-year ‘low’ and world tin stocks were estimated at 38,000–40,000 tons, owing partly to the nonobservance of quota limits by Brazil and China, as well as to increased production by nonATPC members. World tin stocks resumed their rise in early 1994, reaching 48,000 tons in June. However, the effects of reduced output, from both ATPC and non-ATPC producing countries, helped to reduce stock levels to 41,000 tons at the end of December. In 1995 exports by ATPC members exceeded the agreed voluntary quotas by 10%, and in May 1996, when world tin stocks were estimated to have been reduced to 20,000 tons, the ATPC suspended its quota arrangements. Shortly before the annual meeting of the ATPC was convened in September, Australia and Thailand announced their withdrawal from the organization, on the grounds that its activities had ceased to be effective in maintaining price levels favourable to tin-producers. Although China and Indonesia indicated that they would continue to support the ATPC, together with Bolivia, Malaysia and Nigeria (Zaire had ceased to be an active producer of tin), the termination of its quota arrangements in 1996, together with the continuing recovery in the tin market, indicated that its future role would be that of a forum for tin-producers and consumers. Malaysia, Australia and Indonesia left the ATPC in 1997, and Brazil became a full member in 1998. In June 1999, when the organization’s headquarters were moved from Kuala Lumpur to Rio de Janeiro, Brazil, the membership comprised Brazil, Bolivia, China, the DRC and Nigeria. It was hoped that Peru would join the ATPC following the Association’s relocation to South America. The success, after 1985, of the ATPC in restoring orderly conditions in tin trading (partly by the voluntary quotas and partly by working towards the reduction of tin stockpiles) unofficially established it as the effective successor to the ITC as the international coordinating body for tin interests. The International Tin Study Group (ITSG), comprising 36 producing and consuming countries, was established by the ATPC in 1989 to assume the informational functions of the ITC. In 1991 the secretariat of the United Nations
COMMODITY SURVEYS 319
Conference on Trade and Development (UNCTAD) assumed responsibility for the publication of statistical information on the international tin market. Although transactions in tin contracts were resumed on the LME in 1989, the Kuala Lumpur Commodity Exchange (KLCE), in Malaysia, had become established as the main centre for international trading in the metal. In September 1993 the price of tin (ex-works) on the KLCE stood at only 10.78 Malaysian ringgits (RM) per kg, equivalent to £2,756 (or US $4,233) per metric ton. Measured in terms of US currency, international prices for tin were at their lowest level for 20 years, without taking inflation into account. In October the Malaysian tin price recovered to RM 12.71 per kg (£3,376 or $4,990 per ton), but in November it declined to RM 11.60 per kg (£3,056 or $4,545 per ton). The rise in tin prices continued in the early weeks of 1994, and in February the Malaysian quotation reached RM 15.15 per kg (£3,684 or US $5,449 per ton). In early March the metal’s price eased to RM 14.00 per kg (£3,449 or $5,146 per ton), but later in the month it rose to RM 15.01 per kg (£3,715 or $5,515 per ton). The KLCE price was reduced in August to RM 12.99 per kg (£3,285 or $5,092 per ton), but in early November it stood at RM 16.06 per kg (then £3,896 or $6,265 per ton). The Malaysian tin price advanced strongly in January 1995, reaching RM 16.38 per kg (£4,018 or US $6,407 per ton). However, in early March the price declined to RM 13.33 per kg (about £3,300 or $5,200 per ton). The tin market later revived again, and in August the KLCE price of the metal reached RM 17.60 per kg (£4,569 or $7,060 per ton). International tin prices were then at their highest level for nearly six years. The recovery in the market was attributed partly to a continuing decline in tin stocks, resulting from a reduction in exports from China and in disposals from the USA’s strategic reserves of the metal. However, the KLCE quotation was reduced to RM 15.36 per kg (£3,851 or $6,090 per ton) in October. In the early months of 1996 there was a generally downward movement in international tin prices, and in March the Malaysian quotation fell to RM 15.28 per kg (£3,947 or US $6, 015 per ton). In April the KLCE price of tin recovered to RM 16.24 per kg (£4,294 or $6, 496 per ton). A further decline ensued, and in mid-December tin was traded at RM 14.31 per kg (£3,388 or $5,668 per ton). During the first six months of 1997 the price of tin on the KLCE declined by nearly 8%. The tin market moved further downward in July, with the Malaysian price falling to RM 13. 52 per kg (£3,185 or $5,398 per ton). Later that month, after the value of the ringgit had depreciated, the equivalent of the KLCE tin price (RM 13.76 per kg) was only £3,107 ($5, 199) per ton. In late August the Malaysian price stood at RM 14.70 per kg, but this was equivalent to only £3,134 ($5,061) per ton. In terms of local currency, the Malaysian tin price increased considerably in subsequent weeks, but most of the upward movement was the consequence of a decline in the ringgit’s value in relation to other currencies. By the end of September the KLCE price of tin had risen to RM 18.13 per kg. This price was reportedly maintained over the first eight trading days of October, during which time the ringgit recovered some of its value. At the end of the period the Malaysian tin price was equivalent to £3,656 or $5,927 per ton. The KLCE price of tin continued to move upward in subsequent weeks, but the Malaysian currency’s value declined again. At the end of the year the tin price stood at RM 20.61 per kg, equivalent to £3,218 or $5,295 per ton.
320 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
During the second half of 1997 the tin price, expressed in ringgits, increased by 50.5%, but the equivalent in US dollars was 2.4% lower. The KLCE price of tin reportedly held steady at RM 20.61 per kg for the first nine trading days of January 1998. Meanwhile, the ringgit’s depreciation continued. At the currency’s lowest point, the tin price was equivalent to only £2,722 or US $4,399 per ton. Later in January the tin price advanced to RM 23.43 per kg. It remained at this level for several days, as the value of the ringgit recovered, so that in early February the price was equivalent to £3,557 or $5,843 per ton. Later in February the Malaysian tin price eased to RM 19.27 per kg (£3,122 or $5,120 per ton), but in June it rose to RM 24.50 per kg. This quotation was maintained over three trading days, during which the value of the ringgit rose appreciably. As a result, the equivalent of the KLCE price increased from less than $6,000 per ton to $6,234 (£3,757). Tin prices later eased, and at the end of September the metal was traded in Malaysia at RM 20.02 per kg, equivalent to £3,100 ($5,268) per ton. Earlier that month a fixed exchange rate for the Malaysian currency (US $1= RM 3.8) was introduced. In early November the KLCE was merged with the Malaysia Monetary Exchange to form the Commodity and Monetary Exchange of Malaysia (COMMEX Malaysia), also based in Kuala Lumpur. During the same week the Malaysian tin price rose to RM 20.65 per kg (£3,269 or $5,434 per ton), but in December it declined to RM 19.10 per kg (£2,990 or $5,026 per ton). In January 1999, with tin stocks in plentiful supply, the COMMEX price of the metal was reduced to only RM 18.77 per kg, equivalent to £2,990 (US $4,939) per ton. However, tin prices rose steadily thereafter, and in May the Malaysian quotation reached RM 21.42 per kg (£3,500 or $5,637 per ton). After easing somewhat, the price advanced in November to RM 22.10 per kg (£3,594 or $5,816 per ton). It ended the year at RM 21.41 per kg (£3,496 or $5,634 per ton). In January 2000 the COMMEX price of tin rose to RM 22.84 per kg, equivalent to £3, 664 ($6,011) per ton. By early June the price was reduced to RM 19.94 per kg (£3,488 or $5,247per ton), although later in the month it recovered to RM 20.71 per kg (£3,582 or US $5,450 per ton). For the whole of 2000, the COMMEX price of tin averaged RM 20.38 per kg. In 2001, the average price declined to RM 16.82 per kg. The International Tin Research Institute (ITRI), founded in 1932 and based in London, United Kingdom, promotes scientific research and technical development in the production and use of tin. In recent years the ITRI, whose 12 producer members supply about 60% of world tin output, has particularly sought to promote new end-uses for tin, especially in competition with aluminium. Export Price Index for Tin (base: 1980=100)
321
Tobacco
Tobacco (Nicotiana tabacum) originated in South America and was used in rituals and ceremonials or as a medicine; it was smoked and chewed for centuries before its introduction into Europe, the Middle East, Africa and the Indian sub-continent in the 16th century. The generic name Nicotiana denotes the presence of the alkaloid nicotine in its leaves. The most important species in commercial tobacco cultivation is N. tabacum. Another species, N. rustica, is widely grown, but on a smaller scale, to yield cured leaf for snuff or simple cigarettes and cigars. World-wide, about 4.3m. ha were being farmed for tobacco in the late 1990s. Commercially grown tobacco (from N. tabacum) can be divided into four major types—fluecured, air-cured (including burley, cigar, light and dark), fire-cured and sun-cured (including oriental)—depending on the procedures used to dry or ‘cure’ the leaves. Each system imparts specific chemical and smoking characteristics to the cured leaf, although these may also be affected by other factors, such as the type of soil on which the crop is grown, the type and quantity of fertilizer applied to the crop, the cultivar used, the spacing of the crop in the field and the number of leaves left at topping (the removal of the terminal growing point). Each type is used, separately or in combination, in specific products (e.g. flue-cured in Virginia cigarettes). A number of local research organizations in the major producing areas have developed new cultivars with specific, desirable chemical characteristics, disease-resistance properties and improved yields. Asia is the world’s principal tobacco-growing region, accounting for more than 50% of the leaves harvested in most recent years. Almost all tobacco production in the Far East is from smallholdings; there is no cultivation of the crop on estates, as is common with tea. Emphasis has been placed on improving yields by the selection of cultivars, by the increased use of fertilizers and by the elimination or reduction of crop loss (through use of crop chemicals) and on reducing requirements for hand labour through the mechanization of land preparation and the use of crop chemicals. Harvesting continues to be entirely a manual operation, as the size of farmers’ holdings and the cost of harvesting devices (now commonly used in the USA and Canada) preclude such development in Asia. The flue-curing process requires energy in the form of oil, gas, coal or wood. To ensure that supplies of wood are continuously renewed, the tobacco industry in, for example, Pakistan and Sri Lanka encourages the planting of trees. Following extensive research into the possibility of converting waste materials, such as rice husks, into products generating energy, a wastepelletizing plant entered operation in Mysore, India.
COMMODITY SURVEYS 323
Production of Tobacco Leaves (farm sales weight, ’000 metric tons)
* Unofficial figure. † FAO estimate. Source: FAO.
The principal type of tobacco cultivated by Asian farmers is flue-cured. Of the countries producing this tobacco in the Far East, the most important are the People’s Republic of China, India, Japan and the Koreas. China is the world’s principal producer, as well as the largest consumer, of tobacco, and, while most of its output is still retained for local use, exports expanded by an annual average of 14% in 1990–2000, totalling 120,291 metric tons in the latter year, when China ranked as the world’s fifth largest exporter of unmanufactured tobacco. Production in China in recent years has benefited from significant changes in the organization of, and in the methods of cultivation that are practised in, tobacco-growing areas. The tobacco sector is also a significant domestic employer: according to the International Tobacco Growers’ Association (ITGA, see below), about 16m. people were engaged in tobacco growing in China in the late 1990s. India, which overtook the USA as the world’s second largest producer of tobacco in 1999, normally exports less than 20% of its annual output, which is primarily grown for domestic consumption in the form of chewing tobacco. Exports of tobacco contributed less than 1% of India’s total export earnings in 1999, but, as a relatively low-cost producer, the country could substantially increase its export revenue from tobacco by redirecting its production from non-cigarette tobacco to flue-cured Virginia and burley varieties. The only significant regional producers of burley tobacco are Indonesia, Japan (for domestic consumption) and the Koreas (for domestic consumption and for export), although Thailand is increasing its output of this type. Production of dark air-cured tobacco is limited mainly to India, China, Pakistan and Indonesia. Asia is not a significant producer of fire-cured and oriental tobaccos.
324 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Japan is unable to produce sufficient flue-cured tobacco for domestic consumption, owing mainly to pressure on the availability of land, and thus has to rely on substantial and increasing imports. India continues to be a significant supplier of flue-cured tobacco, while Korean flue-cured is also now accepted on international markets. In both Thailand and the Koreas domestic requirements are likely to maintain pressure on production. The level of exports from these countries has stabilized, and this position is unlikely to be reversed despite the increased supplies of flue-cured tobacco now available on international markets from Brazil (the world’s principal tobacco exporter), Malawi and Zimbabwe, although the price competitiveness of Korean flue-cured does not enhance its prospects as an exporter. Of the other tobacco-producing countries in the Far East, production in Bangladesh, which entered the export market in 1982, remains fairly static. Indonesia is a significant producer and exporter of cigar tobaccos, yet still requires imported flue-cured tobacco to sustain its domestic market, although increasing quantities of domestic flue-cured are being grown on Sulawesi, Bali and Lombok. Domestic tobacco production is increasing in Malaysia, under the aegis of the National Tobacco Board. The Philippines produces both flue-cured and air-cured tobacco acceptable to world markets. Sri Lanka, once solely a producer of tobacco for domestic consumption, now exports quantities of both flue-cured and air-cured tobacco. About one-quarter of world tobacco production is traded internationally. Until 1993, when it was overtaken by Brazil, the USA was the world’s principal tobacco-exporting country. The country’s total earnings from such exports were US $1,301m. in 1999. US production of tobacco declined sharply, by an annual average of more than 4% in 1990– 2000, totalling about an estimated 454,000 tons in 2001. In 1999, as noted above, the USA was overtaken by India as the world’s second largest producer of tobacco after China. In most recent years, however, the country has remained the second largest individual importer of unmanufactured tobacco after Russia, and the second largest consumer after China. In 2002 the US Department of Agriculture (USDA) forecast that exports of unmanufactured tobacco by Zimbabwe, the world’s third largest exporter, at a predicted 185,000 tons, would be only 5,000 tons less than those of the USA. Unlike the USA, Canada’s output of tobacco has remained fairly stable in recent years, averaging about 70, 000 tons annually in 1990–2000. In 2000, however, production fell to about 58,000 tons and was estimated to have remained at about that level in 2001. Canada’s exports of tobacco usually range between 20,000–30,000 tons annually, and thus make only a very small contribution to the country’s total export earnings. In Zimbabwe, Malawi, South Africa and, to a lesser extent, in Zambia and Tanzania, tobacco is grown mainly as a direct-labour crop on large farms, some capable of producing as much as 250 metric tons of cured leaf per year. In other parts of Africa, however, tobacco is a smallholders’ crop, with each farmer cultivating, on average, 1 or 2 ha of tobacco as well as essential food crops and, usually, other cash crops. Emphasis has been placed on improving yields by the selection of cultivars, by the increased use of fertilizers, by the reduction of crop loss (through the use of crop chemicals) and by reducing hand-labour requirements through the mechanization of land-preparation and the use of crop chemicals. Where small farmers are responsible for producing the crop, harvesting remains a manual
COMMODITY SURVEYS 325
operation, as the area under tobacco and their limited financial means preclude the adoption of mechanical harvesting devices. The principal type of tobacco commercially cultivated in Africa is flue-cured, of which Malawi and Zimbabwe are the dominant regional producers. The tobacco sector normally accounts for about 47% of Zimbabwe’s total agricultural earnings and has in recent years provided 25%–35% of export revenue. The Zimbabwean tobacco crop, of which 98% is exported, is highly regarded for its quality and flavour, and its marketability has been assisted by its relatively low tar content. Nevertheless, depressed conditions in international tobacco markets in the early 1990s encouraged some Zimbabwean growers to switch to cotton cultivation. In 1999 tobacco sales accounted for 34.4% of the country’s export revenues. During the 1990s Zimbabwe officially encouraged small-scale producers of burley and flue-cured tobaccos. In 1999, however, Zimbabwean tobacco plantings declined by about 8%, reflecting an accumulation in world levels of stocks held by manufacturers. In the following year and in 2001, the country’s tobacco sector was further overshadowed by political and agrarian unrest, and output fell dramatically (an estimated 175,000 metric tons, compared with 228,000 tons in 2000). Since mid-2001 the government has permitted tobacco farmers to retain 20% of their foreign-exchange earnings in order to purchase essential imports of fertilizers, etc., although tobacco-growing farms are central to the controversial programme of land reform, and the continuing unrest has adversely affected production. In the mid-1990s Malawi obtained up to 70% of its export revenue from the sale of its tobacco, principally the flue-cured, fire-cured and burley varieties. Since then, however, production, especially of burley tobacco, of which Malawi is the only significant African producer, has declined. Until the late 1990s burley tobacco had been able to withstand a general decline for tobacco owing to its suitability for the manufacture of low-tar cigarettes. In 1998 exports of tobacco accounted for about 59% of Malawi’s total export earnings. Production was traditionally limited to commercial estates, but from the early 1990s the government encouraged its cultivation by smallholders, in order to promote a more equitable distribution of agricultural incomes. In the late 1990s Malawi’s tobacco growers were being encouraged to diversify into cotton cultivation. Tanzania contributes a small but significant quantity of flue-cured tobacco to the world market, and in 1999 exports of tobacco contributed 8% of the country’s total export earnings. Tobacco production in Nigeria is fairly static, and its flue-cured crop is entirely reserved for local consumption. Kenya has greatly increased its output of flue-cured leaf since commencing tobacco exports in 1984, and tobacco cultivation has recently been increasing in importance in Uganda, as part of a government programme to offset declining earnings from coffee. Exports of tobacco contributed almost 3% of Uganda’s total export earnings in 1999. There are also small but increasingly important exports of fluecured tobacco from Sierra Leone, to whose total export earnings foreign sales of unmanufactured tobacco and tobacco refuse contributed 2.2% in 1995. Nigeria, Malawi and South Africa account for the African crop of sun- and air-cured types of tobacco. Modest quantities of oriental tobacco are cultivated in Malawi and South Africa. In Latin America, Brazil is by far the major producer of tobacco, with estimated output of some 565,000 metric tons in 2001, compared with about 578,000 tons in 2000, and about
326 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
630,000 tons in 1999. Production takes place, for the most part, on smallholdings of less than 20 ha, involving, in the late 1990s, an estimated 650,000 farmers. Virginia and burley tobaccos have been grown in southern Brazil since the 1950s, but it was not until the 1970s that Brazil began to export tobacco on a significant scale. In 1993, as noted above, Brazil overtook the USA as the world’s leading exporter of unmanufactured tobacco, in terms of volume, and has retained that position since then. In 1999 Brazil’s exports of tobacco and tobacco manufactures accounted for 2% of the country’s total export earnings. After Brazil, Argentina is the largest regional producer of tobacco, with output estimated at about 100, 000 tons in 2001, compared with about 123,000 tons in 1997, its highest level in 1990– 2001. More than 50% of Argentina’s output is usually exported in unmanufactured form, and in 1999 exports of tobacco and tobacco manufactures contributed about 0.9% of the country’s total export earnings. Production of tobacco by Mexico varied widely in the early 1990s, but has subsequently stabilized at, on average, about 44,000 tons annually. In 2001 output was estimated at some 42,000 tons. Mexico’s exports of tobacco are of only very minor significance to the overall value of its foreign trade. In the Caribbean, tobacco remains of some importance to the economies of both Cuba and the Dominican Republic, although neither ranks as a major producer in world terms. Cuban output is generally between 30,000–40,000 tons, and was estimated, in 2001, to have totalled 35,000 tons. In 1996 the country derived 1.5% of its total export earnings from foreign sales of unmanufactured tobacco, and an additional 6% from exports of tobacco manufactures. Output in the Dominican Republic fell from more than 43,000 tons in 1998 to only an estimated 17,500 tons in 2001. In 1999 exports of tobacco and manufactured tobacco substitutes contributed 8.6% of the Dominican Republic’s total export earnings, excluding those derived from exports from free-trade zones. In 1993 production of tobacco by Turkey approached 340,000 metric tons, but it has since declined substantially, if unevenly (output in 1997 was almost 300,000 tons), and was estimated, in 2001, to have amounted to 170,000 tons. Tobacco production is based in the Aegean, Black Sea coast and Marmara-Thrace regions. Turkey generally exports more (in some years substantially more) than 50% of the tobacco it produces, mainly to the USA and to eastern European markets. Nevertheless, the significance of tobacco to the value of Turkey’s foreign trade overall has diminished in recent years. In 1999 exports of unmanufactured tobacco contributed less than 2% of the country’s total export earnings. Elsewhere in the Middle East, production of tobacco by Syria rose in the late 1990s and totalled an estimated 29,000 tons in 2001, compared with only about 17,000 tons in 1997. Only a very small proportion of Syria’s production is traded, however. Iran produces, on average, a little more than 20,000 tons annually, but, as with Syria, most of its output is for domestic consumption. Within the European Union (EU), production of tobacco by Italy in 2001 was estimated at 125,000 metric tons, while that of Greece was assessed at 130,000 tons. In both countries the bulk of output is for export, Italy’s foreign sales totalling about 103,000 tons in 2000, and those of Greece some 83,000 tons. The USDA has forecast that in 2002, at a predicted 105,000 tons, Italy’s exports of unmanufactured tobacco will be on a par with those of India. The member states of the EU constitute, collectively, by far the most important market in the world for unmanufactured tobacco, and were, in 2000, the destination for
COMMODITY SURVEYS 327
shipments of some 826,000 tons. Germany is the most important individual market in the EU, and in 2000 its imports exceeded those of the USA. After Germany, the United Kingdom and the Netherlands are the principal EU markets. In 1999, according to the FAO, Russia overtook the USA as the world’s leading importer of unmanufactured tobacco, receiving shipments of more than 260,000 metric tons. Among the former Soviet republics, Azerbaijan was formerly a substantial producer of tobacco, but its output has declined from more than 50,000 tons in 1992 to only about an estimated 12, 000 tons in 2001. In recent years Kyrgyzstan has been the principal ex-Soviet producer, although its output has also declined considerably, from more than 48,000 tons in 1993 to an estimated 34,500 tons in 2001. In 1999 exports of unmanufactured tobacco accounted for 9.3% of Kyrgyzstan’s total export earnings. In Central and South-Eastern Europe (not including Greece), Bulgaria and Poland are the most important producers of tobacco, although the output of both countries has declined in recent years. In 1990 production by Bulgaria totalled about 77,000 metric tons, but this fell to only about 19,000 in 1995 before recovering, in the late 1990s, to average some 44,000. In 2001 Bulgaria was estimated to have produced 30,000 tons of tobacco. In 1997 exports of unmanufactured tobacco represented only about 25% of Bulgaria’s total trade in tobacco, accounting for only 0.7% of the country’s total export earnings in that year. Polish output of tobacco, like that of Bulgaria, has fallen substantially since 1990, when it totalled 59,000 tons. In 2001 the country’s production was estimated at only about 22,000 tons, compared with almost 30,000 tons in 2000, and some 44,000 tons in 1999. According to the USDA, the average value of US exports of unmanufactured tobacco was US $6,811 per metric ton in 2001. The USDA forecast that their value would decline to an average of $6,600 per ton in 2002. The export price of Zimbabwean tobacco (average of all types) increased from US $2.64 per kg in 1995 to $3.45 in 1996 and $3.77 in 1997, before beginning a decline, falling to $3.18 in 1998, and remaining at or just below $3 in 1999, 2000 and 2001. Sharply lower prices in the early weeks of the 2002 selling season, combined with the legal requirement for growers to use the official exchange rate (substantially lower than the market rate in which most other transactions are conducted), caused disquiet among growers and was considered a potential threat to the continuation of smallholder tobacco farming. The International Tobacco Growers’ Association (ITGA), with headquarters in Portugal, was formed in 1984 by growers’ groups in Argentina, Brazil, Canada, Malawi, the USA and Zimbabwe. In 2002 its members numbered 22 countries, accounting for more than 80% of the world’s internationally traded tobacco. The ITGA provides a forum for the exchange of information among tobacco producers, conducts research and publishes studies on tobacco issues.
328 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Export Price Index for Tobacco (base: 1980=100)
* The monthly index remained constant at 141 throughout 2000 and 2001.
Uranium
Uranium (U) is a heavy metal, principally used as a fuel in nuclear reactors for the production of electricity. It occurs in a variety of ores, often in association with other minerals such as gold, phosphate and copper, and may be mined by open-cast, underground or in situ leach methods, depending on the circumstances. The concentration of uranium that is needed to form an economic mineral deposit varies widely, depending upon its geological setting and physical location. Average ore grades at operating uranium mines vary from 0.03% U to as high as 15% U, but are most frequently less than 1% U. South Africa produces uranium concentrates as a by-product of gold mining and copper mining. Both copper mining and the exploitation of phosphates by wet (phosphoric acid-yielding) processes offer a more widespread potential for by-product uranium production. In mid-2001 more than 440 nuclear reactors generated over 16% of the world’s electricity. Enriched uranium is used as fuel in most nuclear power stations and in the manufacture of nuclear weapons. With regard to the latter, however, the abandonment of EastWest confrontation and the conclusion of a series of nuclear disarmament treaties between the USA and Russia (and other former Soviet republics) has led to the ongoing release from military stockpiles of substantial quantities of uranium for civil energy programmes. In 2001, according to data cited by the World Nuclear Association (WNA), the world’s known recoverable resources of uranium (defined as reasonably assured resources plus estimated additional resources, recoverable up to a cost of US $80 per kg, excluding those of the People’s Republic of China) totalled about 3.1m. metric tons. Because of uranium’s strategic military value, there was intense prospecting activity in the 1940s and 1950s, but the market was later depressed as government purchasing programmes ceased. Uranium demand fell in the late 1960s and early 1970s, until industrialized countries responded to the 1973–74 petroleum crisis by intensifying their civil nuclear power programmes. Anticipated strong demand for rapidly expanding nuclear power further improved the uranium market until the early 1980s, when lower-thanexpected growth in electricity consumption forced nuclear power programmes to be restricted, leaving both producers and consumers with high levels of accumulated stocks requiring liquidation. A number of mining operations were also scaled down or closed. The market was further depressed in the late 1980s, in the aftermath of the accident in 1986 at the Chernobyl nuclear plant in Ukraine (then part of the Soviet Union). In mid-2001 there were 30 new reactors under construction. Significant growth in nuclear power programmes was notable in the Far East, especially in the People’s Republic of China, Japan, the
330 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Uranium (uranium content of ores, metric tons)
*Estimated production. Source: World Nuclear Association..
Republic of Korea and Taiwan. Following nine consecutive years of reduced output, uranium production achieved modest advances in each year during 1995–97. In 1998, however, world production declined by 5.5%, to 33,728 metric tons, which represented only about 53% of annual nuclear reactor requirements, necessitating recourse to inventories to meet a significant portion of world demand. Output declined once more, to 31,065 tons, in 1999, but increased in 2000, to 34,746 tons, and, again, in 2001, when it amounted to 35, 767 tons. Production from world uranium mines in 2001 was thus sufficient to meet about 56% of annual requirements, estimated by the WNA at about 64,000 tons in 2002. Since 2000, according to the WNA, the dilution of 30 tons of highly enriched military uranium has displaced some 9,000 tons of mined uranium oxide (about 14% of world reactor requirements) annually. Nuclear electricity generating capacity has been forecast to grow at an annual compound rate of about 1% during the period 2000–05. Canada accounted for 35% of world uranium production in 2001, and is expected to remain the leading producer in the immediate future. South Africa has Africa’s largest known recoverable resources (estimated at 300,000 metric tons), followed by Namibia (240,000 tons). The ore reserves of Niger have, in the past, been estimated at about 166, 000 tons. In 2001 Niger ranked as the world’s third largest producer of uranium, and it was the fourth largest exporter in 1997. Uranium exploration in the country started in the 1950s, around the Aïr mountains near Agadez, with production commencing at the Arlit mine in 1971. Niger’s other main uranium mine, where operations commenced in 1978, is at Akouta. France purchases most of Niger’s uranium production, with the remainder taken by German, Japanese and Spanish customers. Like Namibia, Niger was compelled in the early 1990s to restructure and streamline its uranium operations, and output has
COMMODITY SURVEYS 331
subsequently risen, totalling 3,096 tons in 2001, compared with 2,895 tons in 2000. In 1999, according to data cited by the US Geological Survey (USGS), exports of uranium ore contributed 41% of Niger’s total export earnings. Uranium production has been an important component of the South African mining industry since uranium extraction began in 1951, with production reaching a record 6,146 tons in 1980. Production has subsequently declined sharply, and South Africa has been supplanted by Niger as the continent’s main producer. Deliveries of ore from the world’s largest open-pit uranium mine, at Rössing in Namibia, began in 1976. Output exceeded its planned level in 1980, but subsequently declined, owing to a reduction in demand and increased competition from low-cost producers. During the second-half of the 1990s production had stabilized at, on average, about 2,500 tons annually. In 2000 output was 2,714 tons, but fell in 2001 to only 2,239 tons. In 2000 the Rössing mine was the world’s fifth largest uranium mine in production. Gabon, which commenced uranium production in 1958, possesses six identified deposits containing sufficient reserves to support 30 years’ output at production rates achieved during the mid-1990s. However, the depressed level of uranium prices in the late 1990s, with little prospect of recovery in the short term, prompted French interests, exploiting the deposits in conjunction with the Government of Gabon, to terminate uranium-mining operations there from early 1999, leaving Namibia, Niger and South Africa as the only regional producers. Uranium has also been found in Algeria, Botswana, the Central African Republic, Chad, the Democratic Republic of the Congo, Egypt, Guinea, Madagascar, Mali, Mauritania, Morocco, Nigeria, Somalia, Tanzania, Togo and Zambia. However, in view of conditions in the world uranium market from the mid-1990s, and into the 2000s, it was uncertain if any of these deposits would be exploited in the immediate future. As noted above, Canada is the world’s leading producer of uranium, accounting for more than one-third of mined output in 2001. By 2005 the country’s production is forecast to double, compared with the level of output prevailing in 1999 (8,214 metric tons), as operations commence at new mines containing high-grade ores. In mid-2001, according to the WNA, Canada’s known recoverable resources of uranium (i.e. reasonably assured resources plus estimated additional resources recoverable up to a cost of US $80 per kg) totalled 511,000 metric tons (433,000 tons uranium content). All of the country’s highgrade uranium resources, on which production will be in future be based entirely, are located in the northern part of Saskatchewan province. US known recoverable resources of uranium have been estimated at 106,000 tons by the WNA. Production of uranium in the USA totalled 1,000 tons in 2001, compared with 1,456 tons in 2000. Output has declined by more than 55% since 1995, when it amounted to 2,324 tons. In 2001 US uranium mining operations were reportedly confined to three in-situ leaching plants. In Latin America, Brazil’s known recoverable resources of uranium, at 197,000 metric tons (75% of in-situ total), are the sixth largest in the world. In 2000 production resumed, after a hiatus of four years, totalling 50 tons in that year. In 2001 output fell to only 30 tons. Production of uranium by Argentina fell to only 4 tons in 1999, compared with 65 tons in 1995, and ceased entirely in 2000 and 2001. At 474,000 metric tons (75% of in-situ total), Kazakhstan’s known recoverable resources of uranium are second only to those of Australia. In 2001, the country’s output of uranium
332 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
totalled 2,018 tons, compared with 1,752 tons in 2000. Output has declined considerably since the disintegration of the Soviet Union and the cessation of Russian demand. However, domestic demand is likely to be stimulated by the planned development of Kazakhstan’s nuclear power industry. In 2001, among the former Soviet republics, Uzbekistan was the leading producer of uranium, with output of 2,400 tons, compared with 2,350 tons in 2000. Uzbekistan’s known recoverable resources of uranium have been estimated at 106, 000 tons. Russia’s reserves, meanwhile, have been assessed at 133,000 tons. The country’s production of uranium was estimated by the Uranium Institute/ WNA at 2,000 tons annually during 1996–2001. In the late 1990s only one Russian uranium mining facility was operational and the country reportedly relied on stockpiled and reprocessed uranium to meet its domestic needs. It appeared unlikely, in the early 2000s, that Russia would be able to meet its future demand without the development of, and concomitant heavy investment in, new uranium reserves. Production of uranium by Ukraine was estimated at 500 tons by the Uranium Institute/WNA in each year during 1995–2001. Australia’s known recoverable resources of uranium have been estimated at 863,000 metric tons, by far the largest in the world. In 2001 Australian output of uranium amounted to 7,720 tons, compared with 7,578 tons in 2000. Production in 2000 was more than double that of 1995. In early 2002 there were three uranium mines operating in Australia and a fourth was under development. Production in the People’s Republic of China was estimated by the Uranium Institute/WNA at 500 tons in each year during 1995–2001. The country’s known recoverable reserves have been estimated at 70,000 tons and were reportedly exploited at five locations in 2002. Elsewhere in the Far East, production of uranium by India was estimated by the Uranium Institute/WNA at 200 tons in each year during 1995–2001. During the same period annual production by Pakistan was estimated at 23 tons. In France uranium mining has declined in recent years, owing to the low price of the metal and to the exhaustion of some of the country’s deposits. In 2001 French output totalled 124 metric tons, compared with 319 tons in 2000, and 980 tons in 1995. German production of uranium from the decommissioning of mining operations conducted in the former German Democratic Republic totalled about 40 tons annually in most years during 1995–2000. Production by Spain totalled only 30 tons in 2001, compared with more than 250 tons in each year during 1995–2000. In Portugal, meanwhile, output in 2001 fell to only 4 tons, compared with 10 tons in both 2000 and 1999. In Central and South-Eastern Europe production of uranium by the Czech Republic totalled 330 tons in 2001, compared with 500 tons in 2000. That of Romania was estimated at 115 tons by the WNA, compared with an estimated 50 tons in 2000, and an estimated 100 tons in each year during 1995–99. The European market price for uranium oxide reached US $8.75 per lb in October 1992, but was reduced to $8.00 per lb in November and to $7.90 in December. Market conditions remained depressed in 1993, with the price moving steadily downward to $7.00 per lb in July. It fell to $6.90 per Ib in August and was maintained at that level for the remainder of the year. The price of uranium oxide was adjusted to $7.00 per lb in January 1994, and to $7.10 in July. The latter remained in effect until October, when the price was reduced to $7.00 per lb again. It was increased to $7.15 per lb in December.
COMMODITY SURVEYS 333
From the beginning of 1995 the price of uranium oxide continued to rise. In a series of upward movements, the price per lb moved from US $7.20 in January to $10.00 in December. The price was maintained at $10.00 per lb for three months, but in March 1996 it was increased to $13.00. Further rises followed, with the price per lb advancing incrementally to $15.50 in August. The surge in prices was attributed to steady demand and to the depletion of uranium stocks. The price of $15.50 per lb was maintained until the end of September, after which the uranium market went into a steep decline. At the end of the year the price of uranium oxide stood at $14.00 per lb. During the first half of 1997 there was a steady series of reductions in the price of uranium oxide, with low volumes of material being traded. The price per lb declined to US $13 in February, to $12 in April and to $10 at the end of June. The uranium price was reduced to $9.70 per lb in July and to $9.20 in August. It rose to $9.65 per lb in November and stayed at that level for the remainder of the year. The average uranium price on the ‘spot’ market (for prompt delivery) in 1997 was $12.05 per lb, compared with $15.62 in 1996. In early 1998 the price of uranium oxide remained at $9.65 per lb. After a renewed decrease, it stood at $9.20 per lb again in May. The final quotation of the year was $8.75 per lb, but in January 1999 the price was increased to $8.85. The uranium price was maintained at this level until March, when it was reduced to $8.50 per lb. After remaining unchanged for more than three months, the price was twice reduced in July, falling to $8.20 per lb. The price of uranium remained at this level until November, when it was reduced to $7.75 per lb. In January 2000 the price of uranium oxide stood at US $7.60 per lb. A further series of reductions followed, with the price falling to $7.50 per lb in February, to $7.40 in March and to $7.25 in April. The uranium price declined in May to only $7.00 per lb: its lowest level since November 1994. The decline in uranium prices continued throughout 2000 and into 2001 as the sale of inventories suppressed demand for mined ores. The ‘spot’ price in January and February of the latter year was US $6.40 per lb. A recovery returned the price to $7.00 in April, and this strengthened during mid-2001, the price reaching $8.00 in July and $9.00 in September. The relative strength of the uranium price was sustained until early 2002, whereupon the price remained relatively stable at around $9.90 per lb for the remainder of the first half of that year. The WNA, which succeeded the Uranium Institute in 2001, is a global industrial organization that seeks to promote the peaceful use of nuclear power world-wide as a sustainable source of energy. The WNA concerns itself with all stages of the nuclear fuel cycle, including the mining of uranium, its enrichment, the manufacture of nuclear plants and the safe disposal of spent fuel.
Wheat
The most common species of wheat, Triticum vulgare, includes hard, semi-hard and soft varieties which have different milling characteristics but which, in general, are suitable for bread-making. Another species, T. durum, is grown mainly in regions bordering the Mediterranean Sea. This wheat is very hard and is suitable for the manufacture of semolina, the basic ingredient of pasta and couscous. A third species, spelt (T. spelta), is also included in production figures for wheat. It is grown in very small quantities in parts of Europe and is used as animal feed. Although a most adaptable crop, wheat does not thrive in hot and humid climates, and it requires timely applications of water (either through rainfall or irrigation). World wheat production declined during the 1990s, albeit only marginally, at an average rate of less than 0.1% a year. The fall was largely due to the sharp decline in agricultural output in the former Soviet Union, excluding which the trend in world production growth has been upward. Wheat production is highly variable from year to year. Part of the variation is attributable to weather conditions, particularly rainfall, in the main producing areas, but national policies on support for producers have also been a major influence. In the 1990s several major wheat-producing countries, including leading exporters, pursued policies of market deregulation, and began to remove the links between producers’ support and the financial returns from particular commodities. This encouraged their farmers more readily to switch between crops according to expected relative market returns. After 1996, for example, when wheat was in short supply on world markets, output was stimulated in many growing areas, and a record 613m. metric tons was harvested in 1997. Unfavourable weather, particularly in Russia and the People’s Republic of China, reduced output to about 593m. tons in 1998, but, owing to low growth in consumption, exporting countries’ stocks remained high, and farmers’ returns fell. This discouraged plantings for the 1999 season, when production totalled only about 589m. tons. Production declined further in 2000, to 585m. tons, and again in 2001, to an estimated 583m. tons. In regional terms, the Far East and Australasia is the largest wheat producer—the most concentrated producing areas in the region are to be found in Pakistan, northern India and eastern parts of the People’s Republic of China. Wheat production in Far East Asia has increased at a considerably faster rate than output in the world as a whole. In 1974–76 the region’s harvest averaged 83m. metric tons per year, or 22% of the world total, but by 1996–98 it averaged 201m. tons (34% of the total). This growth was attributable, in large part, to an accelerated rate of expansion of wheat output in China, brought about by
COMMODITY SURVEYS 335
Production of Wheat (’000 metric tons)
* FAO estimate.. † Unofficial figure. Source: FAO.
extensive irrigation, better supplies of fertilizers and, perhaps most important of all, the introduction of cash incentives to farmers. Local abundance gave rise to storage problems in some areas in the mid-1980s, and, as a result, some producers lost interest in wheat, and, instead, cultivated cash crops. However, the subsequent introduction of stricter marketing regulations, higher prices payable to wheat producers and more abundant fertilizer supplies led to a resumption of growth. By the mid-1990s China, with annual output averaging about 105m, tons, was by far the world’s leading wheat-producing country. In India the introduction of high-yielding and high-response varieties, more extensive irrigation and greater use of fertilizers doubled production in less than 15 years, to 54m. metric tons in 1989. Government support prices have generally maintained interest in wheat-growing, and have encouraged greater use of agricultural inputs. An unbroken succession of favourable monsoons enabled wheat output to advance rapidly in the 1990s, reaching 69m. tons in 1997. Disposal of these abundant crops occasionally proved difficult, and the Indian Government supported prices by means of sizeable procurements, while authorizing exports in some years. None the less, the margin between output and the steady rise in wheat demand has remained narrow, while relatively minor crop set-backs, as in 1998, necessitate imports to safeguard food security and stabilize retail prices. Although largely irrigated, production in Pakistan is vulnerable to hot weather. Production incentives, offered by the government, have resulted in increased levels of output, although fertilizers have not always been readily accessible, and seed availability has
336 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
been variable. Particularly favourable weather conditions helped output to reach a record 19m. metric tons in 1998, and this total was surpassed in 2000, when output amounted to more than 21m. tons. Virtually no wheat was grown in Bangladesh until recently, but government subsidies, together with the conversion of irrigated land to its cultivation and increasing use of fertilizers, have made the country almost 50% self-sufficient in wheat. Australia is one of the world’s major wheat-exporting countries, but production varies considerably from year to year. The incidence of drought in the main producing areas is a major determinant (the 1994 wheat crop was reduced by 45% as the result of drought conditions), but plantings also reflect world market conditions, as Australian wheat-farming receives no government subsidies. Production in 2000 and 2001, at, respectively, 22.2m. metric tons and an estimated 23.8m. tons, was somewhat higher than the average for recent years. The only other country in the Pacific area with significant wheat production is New Zealand, which is usually self-sufficient in wheat. In recent years, Canada has generally vied with Australia for the position of the world’s second largest exporter of wheat after the USA. Canadian output was estimated at about 21m. metric tons in 2001, compared with average annual output of about 26m. tons in 1995–2000. Exports totalled 18.8m. tons in 2000. Production of wheat by the member states of the European Union (EU) increased by an annual average of about 1.7% during 1990–2000, totalling some 105m. metric tons in the latter year. Output of durum wheat accounted for some 8.5% of total output in 2000. Among the member states, France is by far the leading wheat producer, followed by Germany. In 2001 the EU’s total output of wheat was estimated at about 92m. tons, of which France contributed an estimated 32m. tons, Germany an estimated 23m. tons and the United Kingdom an estimated 12m. tons. EU wheat production has been forecast to increase by about 5% during 2000–05. The EU is a major exporter of wheat, with annual shipments of, on average, about 28m. tons in recent years. The policy of subsidizing sales of wheat (and other cereals), owing to the higher price that has generally prevailed on the European market compared with international markets, has, in the past, been criticized as anti-competitive. In accordance with the EU’s commitments to the World Trade Organization (WTO), subsidized exports will in future be limited with respect to both their quantity and their value. In Central and South-Eastern Europe, Poland, Romania, Hungary and the Czech Republic are all important producers of wheat. Annual output by Poland has averaged more than 9m. metric tons in recent years, but exports have been minimal. Hungary, where production totalled an estimated 5.2m. tons in 2001, and the Czech Republic, where the corresponding figure was 4.5m. tons, are the major exporters, with Czech foreign sales amounting to some 866,000 tons in 2000, and those of Hungary about 583,000 tons. As noted above, a decline in agricultural production in the former Soviet Union was the major cause of the slight decline in output of wheat world-wide during the 1990s. By 2001, output in Russia and Ukraine, the principal ex-Soviet producers of wheat, exceeded that recorded in 1992, totalling an estimated 47m. metric tons in the case of Russia and 21m. tons in Ukraine. Russian exports have varied quite widely in recent years, totalling 1.5m. tons in 1998, compared with only about 144,000 tons in 1995. In 1995–2000 Russian imports of wheat averaged 2.3m. tons each year, ranging between about 1m. tons in 1998
COMMODITY SURVEYS 337
and 4.5m. tons in 1999. In 1999 Ukraine exported 4.5m. tons of wheat, compared with only about 194,000 tons in 1995, but exports declined sharply, to only some 200,000 tons in 2000. Kazakhstan is consistently the most important exporter of wheat among the former Soviet republics, with annual sales averaging almost 3m. tons during 1995–2000. By 2001, Kazakhstan’s production of wheat, which totalled more than 18m. tons in 1992, had recovered to an estimated 13m. tons, having fallen as low as 4.7m. tons in 1999. Export potential has been constrained during this recovery period by lack of inputs, such as fertilizers, and the inadequacy of the country’s grain transportation infrastructure. However, exports to non-traditional markets outside the former Soviet republics are forecast to expand in future as Kazakhstan places greater emphasis on utilizing Caspian Sea routes to gain improved access to the Iranian, other Middle Eastern, and North African markets. In the Middle East, Iran’s annual output of wheat has averaged about 9.6m. metric tons in recent year, but this is supplemented by annual imports ranging between 3m.–6.5m. tons. Turkey is the leading regional producer of wheat, with estimated production of 16m. tons in 2001, compared with 21m. tons in 2000, and 18m. tons in 1999. Turkish exports have varied considerably in recent years, falling as low as 7,000 tons in 1996, but recovering to 1. 8m. tons in 2000. Turkey has also been a consistent importer of up to 2.6m. tons of wheat. In Latin America, Argentina is the leading producer of wheat by a substantial margin, with output totalling an estimated 17.7m. metric tons in 2001, compared with some 16m. tons in 2000, and 15.5m. tons in 1999. Annual production by Brazil, meanwhile, has averaged about 2.6m. tons in recent years. Argentina is a major world exporter of wheat, with sales amounting to 11m. tons in 2000. Argentina has traditionally been an important supplier of Middle Eastern markets where it competes with the EU and, to a lesser extent, Australia. Since the late 1980s, however, Argentina’s exports of wheat have increasingly been to the countries with which it is allied economically in the Southern Common Market (Mercosur), at the expense of supplies from the USA, Canada and the EU. Brazil is the most important Latin American market for wheat, with annual purchases of, on average, 6.6m. tons in recent years. Africa’s wheat production is mainly concentrated in a narrow strip along the Mediterranean coast from Morocco to Tunisia, in the Nile valley, and in parts of South Africa. Zimbabwe, Kenya, Ethiopia and Sudan also grow limited quantities, but very little is grown in West Africa. In contrast with some developing countries of Asia, the potential of improved wheat varieties has yet to be realized in much of Africa, especially south of the Sahara. One reason is the undeveloped state of the transport systems in many countries, which hinders both the distribution of production inputs (e.g. seeds and fertilizers) and the marketing of farmers’ surplus produce. Until recently, many governments have also been unwilling to pay sufficiently attractive producer prices to encourage farmers to grow wheat for marketing. Wheat production in sub-Saharan Africa has averaged about 5m. metric tons annually in recent years. It is principally grown in the south and east of the region, often at high altitudes where conditions are less humid. South Africa is the main regional producer, with annual output that averages about 2m. tons. Ethiopia is the second largest regional producer, with average annual output of some 1.3m. tons in recent years. While improved
338 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
fertilizer inputs stimulated production in the late 1990s, the size of Ethiopia’s crop is constrained by insecurity of land tenure and lack of good seed supplies. In some other wheatproducing countries (e.g. Tanzania and Zimbabwe) the crop is grown mainly on large commercial farms, and, with the benefit of irrigation, usually yields well. Efforts to produce wheat in tropical countries, such as the Democratic Republic of the Congo (DRC) and Nigeria, have shown mixed results. In the case of the DRC, production has declined since the mid-1990s, although this is at least partially attributable to the prevalence of civil unrest rather than purely agricultural considerations. In Nigeria, during 1990–2000, output of wheat increased twofold, albeit from the low level of a reported 50,000 tons. World consumption, which has, in the long term, been increasing at a similar rate to production, varies much less from year to year. Food use is increasing at about 1.5% per year. Most of the increase is in Far East Asia. Of approximately 415m. metric tons of wheat used for direct human food world-wide, Far East Asia accounts for about one-half, and China for one-half of that. Wheat food use has been expanding at the expense of rice: its growth is associated with rising consumer incomes and an increasing number of ‘fast-food’ outlets. The trend was sustained in 1997/98, despite the much higher costs of wheat imports in a number of countries such as Indonesia: one reason is that rice became even more expensive, while retail prices of wheat were, in some cases, stabilized by government subsidies. Substantial amounts of wheat are used for feed in Europe and, when prices are favourable, in North America. Significant quantities were also used for feed in the 1980s in the former Soviet Union, but this volume has decreased sharply, in response to the diminution in livestock numbers. Wheat is the principal cereal in international trade. Amounts exported in recent years have ranged between 100m. and 130m. metric tons annually, of which about 10m. tons was in the form of wheat flour, 6m.–7m. tons durum wheat and semolina, up to 3m. tons of feed wheat, and the remainder wheat of bread-making quality (some of which, however, was used to make other food products, such as noodles). The main exporters are the USA (whose share declined from about 30% of the total in the first half of the 1990s to about 25% in 2000), the EU, Canada, Australia and Argentina. Developed countries were formerly the principal consumers, but the role of developing countries as importers has been steadily increasing and they now regularly account for approximately two-thirds of world imports. Japan has been a major importer since the 1960s. Its imports, of about 6m. tons annually, represent an important element of stability in the world wheat trade. Despite the scale of its own production, China is usually a major wheat importer. However, following purchases of about 12m. metric tons in 1995/96, its imports have subsequently averaged only 2.6m. tons per year, owing to large harvests, abundant stocks and a slower rate of growth in wheat consumption. India imports wheat occasionally in order to replenish its stockpiles (as in 1998), but is self-sufficient in most years. Although these stockpiles became particularly large in 1999, low international prices made it uneconomic for India to export wheat. Imports of wheat by Bangladesh vary according to the size of the country’s grain harvest and to the relative prices of wheat and rice on world markets. These imports rose from about 1m. tons in 1998 to some 2.4m. metric tons in 1999, when severe flooding affected rice supplies. They have generally, in recent years, amounted to about 1.4m. tons annually. The Republic of Korea
COMMODITY SURVEYS 339
also buys varying amounts of wheat. Its basic food needs account for more than 2m. tons annually, but it also purchases additional amounts, of up to 4m. tons, for animal feed if the price is competitive with maize and other feed grains. Several countries in the region that grow no wheat, such as Indonesia, Malaysia and the Philippines, are now major importers of wheat. A lengthy period of low international wheat prices, and heavily-subsidized competition among the major exporting countries, was interrupted in 1995–96 after exporting countries’ stocks had fallen to their lowest levels for 20 seasons. Prices rose to record levels, but the resultant stimulus to output led to a rapid accumulation of stocks, and by 1998 prices were again very low as competition intensified between exporting countries. Because direct export subsidies were limited under international trade agreements, much of this competition took the form of offers of credit to importing countries. The export price (f.o.b. Gulf ports) of US No. 2 Hard Winter, one of the most widelytraded wheat varieties, stood at around US $140 per metric ton in mid-1994. At that time, countries benefiting from export subsidies (including much of North Africa) could expect to buy wheat for at least $40 per ton less. The peak, reached in April 1996, was almost $300 per ton, but by mid-1997 the price had fallen by as much as 50%, to around $150 per ton. Subdued import demand, and the disposal of surpluses by a number of countries in Central and Eastern Europe, as well as by Ukraine, further depressed prices in late 1997. Markets remained subdued in 1998 and early 1999, as a consequence of high levels of export stocks and a lack of new markets. In July 1999 US Hard Winter varieties were being traded at the US Gulf at below $105 per ton, although a measure of recovery took place in the early months of 2000, in response to uncertainty regarding crop prospects in the USA, together with some revival in import demand. High-protein wheat varieties, which were not in such abundant supply, continued to command an appreciable premium. US Dark Northern Spring wheat, for example, was quoted at $150 per ton in July 1999. In 1999 as a whole the average export price (f.o.b. Gulf ports) of US No. 2 Hard Winter was $114 per ton, while in 2000 the price averaged $119 per ton, rising to $130 per ton in 2001. During the first seven months of 2002 the average export price rose from $125 per ton in March to $150 per ton in July. Since 1949 nearly all world trade in wheat has been conducted under the auspices of successive international agreements, administered by the International Wheat Council (IWC) in London. The early agreements involved regulatory price controls and supply and purchase obligations, but such provisions became inoperable in more competitive market conditions, and were abandoned in 1972. The IWC subsequently concentrated on providing detailed market assessments to its members and encouraging them to confer on matters of mutual concern. A new Grains Trade Convention, which entered into force in July 1995, gave the renamed International Grains Council (IGC) a wider mandate to consider all coarse grains as well as wheat. This facilitates the provision of information to member governments, and enhances their opportunities to hold consultations. In addition, links between governments and industry are strengthened at an annual series of grain conferences sponsored by the IGC. In early 2001 the IGC had a membership of 29 governments, including the 15 countries of the EU (which are counted as a single member), including nine exporting members and 20 importing members.
340 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Export Price Index for Wheat (base: 1980=100)
A new Food Aid Convention (FAC), replacing an earlier agreement introduced in 1995, was brought into force on 1 July 1999 as one of the constituent instruments of the International Grains Agreement, 1995 (the other being the Grains Trade Convention, 1995). Members of the Food Aid Committee, which administers the FAC, had resolved to renegotiate the existing Convention in accordance with the recommendations relating to Least-developed and Net Food-Importing Developing Countries adopted by members of the WTO at their Singapore Conference in December 1996, and in the light of the Declaration on World Food Security and the Plan of Action adopted by the Rome World Food Summit in the same year. They also took into account that, in recent years, there had been significant changes in the food aid policies of several donor countries. The main objective of the new Convention is ‘to contribute to world food security and to improve the ability of the international community to respond to emergency food situations and other food needs of developing countries’. FAC members will make quality food aid available to developing countries with the greatest needs on a consistent basis, regardless of fluctuations in world food prices and supplies. Particular importance is attached to ensuring that food aid is directed to the alleviation of poverty and hunger among the most vulnerable groups. As a framework of international co-operation between food aid donors, the new FAC aims at achieving greater efficiency in all aspects of food aid operations. FAC members will put greater emphasis on the monitoring and evaluation of the impact and effectiveness of their food aid operations. They are also committed to support the efforts of recipient countries to develop and implement their own food security strategies. Cereals will continue to represent the bulk of aid supplied. However, the list of products which may be supplied has been broadened beyond cereals and pulses to include edible oil, skimmed milk powder, sugar, seeds and products which are a component of the traditional diet of vulnerable groups in developing countries or of supplementary feeding programmes (e.g. micro-nutrients). Members’ total minimum annual commitments are approximately the same as under the previous FAC, amounting to over 5m. tons of commodities in wheat equivalent. The cost of transporting and delivering food aid beyond the f.o.b. stage will, to the extent possible, be borne by the donors.
Wool
This is the name given to the fibres of the fleece sheared from certain animals, most commonly the domesticated sheep (Ovis aries). (Wool may also refer to the fibres of the fleeces of the alpaca, the Angora and Kashmir goats, the camel, the llama and the vicuña.) The fleece of the domesticated sheep, unlike that of wild species, is luxuriant, soft and curly. These properties, in combination with its light weight, its capacity to absorb moisture and its insulating qualities, account for wool’s suitability for, and extensive use in, the manufacture of clothing and textiles. In most wool-producing countries sheep are sheared once a year, either in early spring or early summer. After shearing, the fleeces are sorted according to quality. Fibres are assessed for strength, length (staple), fineness, colour and crimp, or curliness. After sorting scouring with detergents or solvents takes place. The wool is then dried and carded, a process that entails untangling the fibres before arranging them as a flat sheet known as a web, which is in turn arranged into ropes or slivers. Carding is followed by yarn-making. Woolen yarns are woven from carded short-staple fibres, while worsted yarns may be spun from long-, medium-or short-staple fibres. In addition, the transformation of the raw commodity requires facilities for the recycling of waste and disposal of waste water, for the design and production of finished goods, and for product testing. Both woollen and worsted yarns, which may also undergo dyeing and other refinements, can be manufactured into a very wide variety of fabrics, ranging from those suitable for clothing or carpets to those used for soundproofing in industry. Most wool produced— more than 70%—is used for manufacturing clothing and accessories. Some 15% is used for the manufacture of domestic furnishings and the remainder for industrial soundproofing. Byproducts of processing raw wool include lanolin, a base for ointments and cosmetics, which is derived from wool grease. Sheepskins removed from sheep and lambs slaughtered for meat may be manufactured into clothing, domestic textiles, etc. The potential of wool for absorbing hazardous wastes and accidental spillages of, for example, oil, is also being explored. The price of wool, like that of most other commodities, varies with the relationship of supply to demand. Demand may be strongly influenced by the price of competing textile fibres, such as cotton and man-made synthetics. The price of wool also depends on its quality, taking into account fibre length, strength, fineness, crimp, etc., the wool’s suitability for processing into yarn and the quality of the resulting yarn. The four basic classifications of wool are fine, medium, long-staple and carpet. The same fleece may yield
342 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Wool (greasy, ’000 metric tons)
* FAO estimate(s).. † Unofficial figure. Source: FAO.
fibres of varying length and fineness, and thus of differing quality. For example, wool from the sides and shoulders of the sheep is generally of finer quality than that from other parts of the animal. The quality of wool is also determined by the breed of sheep it is taken from. Wool sheared from pure merino sheep is regarded as of the best quality. Traditionally, wool has been sold at auction, but there has been a growing trend in recent years in the major producing countries for farmers to sell wool privately. When auctioned, wool is usually sold through the intermediary of a broker. Exporters may buy wool either privately or at auction, and then sell on to foreign manufacturers. World production of greasy wool declined substantially, by an average of 4.0 per year, in 1990–99, having increased by an average of 1.6% per year in 1980–89, and declined, by an average of 0.8% per year, in 1970–79. During the 1990s output of wool declined in all of the major producer countries, with the exception of the People’s Republic of China, where it increased by almost 20%. (The combined output of minor producers also grew in 1990– 99.) The decline was most marked in Eastern Europe, where production fell by almost 60%; in Argentina, where the reduction was almost 57%; and in the USA, where the fall was of the order of 44%. At 10.6%, the decline in production (among major producing countries) was least marked in the United Kingdom, although production here fell sharply in 2001. As output of wool fell during the decade, so production of man-made fibres increased, causing wool’s share of the world fibre market to diminish.
COMMODITY SURVEYS 343
One reason for the steep decline in world wool production in the 1990s was a superabundance of supply, dating from the beginning of the decade, which combined with lower world demand to depress prices. This phenomenon of over-supply persisted throughout the 1990s and may be traced, in large measure, to Australia’s introduction, in the 1980s, of a price-guarantee mechanism that encouraged farmers to over-produce, and caused wool to be stockpiled when auction prices failed to reach specified levels that were generally higher than those prevailing internationally. (At its peak, Australia’s wool stockpile rose to some 4.7m. bales, causing a debt of $A2,200m. to the Australian Wool Corporation. It was not finally disposed of until 2001.) Although this so-called reserve price scheme was abandoned in 1990, the damage was exacerbated almost immediately thereafter by the collapse of Russian demand for imported wool and, as a consequence of the contraction of that market, a substantial decline in Chinese demand. Increased competition from man-made fibres also exerted pressure on the price of wool throughout the decade, further discouraging production. In 2001 Australia was by far the world’s leading producer of greasy wool, according to the FAO, with estimated production of 700,000 metric tons (compared with the 2000 figure of 685,000 tons) accounting for about 30% of total world output of 2.3m. metric tons in that year. China was the second largest producer, with estimated production of 305, 000 tons (increased from 293,000 tons in 2000) accounting, in turn, for 13% of global output, while New Zealand ranked third, its output of 250,000 tons (a slight decline, compared with the 257,000 tons produced in 2000) contributing about 11% of world production. In regional terms, therefore, the Far East and Australasia dominates world production of wool by a large margin. In fact, the region has regularly accounted for about 50% of world production since the mid-20th century. Elsewhere in the Far East and Australasia, Indian production of wool in 2001 was estimated to have maintained its 2000 level of 47,000 tons. Pakistani production in 2001 was 39,000 tons, while Mongolia and Indonesia each produced 22,000 tons. In regional terms, the Middle East and North Africa (excluding the Maghreb states, considered here with Africa, below) is the second largest producer of wool. Its output of 217,000 metric tons in 2001 was equivalent to 9.3% of global production in that year. Iran is the principal producer, its 2001 output being estimated at 74,000 tons, while that of Turkey was estimated at 44,000 tons. Syrian wool production was estimated at 23,000 tons in the same year. Africa (excluding the portion of North Africa considered with the Middle East, above), produced 196,000 metric tons of wool in 2001, according to the FAO, equating to 8.4% of global production. South Africa was the principal African producer in 2001, with production estimated to have maintained the 2000 level of 53,000 tons. Sudan’s estimated output in that year was 46,000 tons, that of Morocco, 40,000 tons and that of Algeria, 25,000 tons. In the European Union (EU), output in 2001 amounted to 159,000 metric tons, or 6.8% of total world production in that year. The largest producer in the EU is the United Kingdom, where output totalled 47,000 tons in 2001 (a marked decrease compared with the 2000 level of 63,000 tons, partly attributed to the outbreak of Foot and Mouth Disease in the country in early 2001). With estimated output of 30,800 tons in 2001, Spain was the EU’s second largest wool producer. In Central and South-Eastern Europe, the leading
344 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
producer in 2001 was Romania, with an estimated 22,000 tons. Greece produced an estimated 20,000 tons in that year, and Bulgaria an estimated 8,000 tons. South American production reached 168,000 metric tons in 2001, equivalent to 7.2% of world output. Argentina and Uruguay are the major South American producers, with output, respectively, of 58,000 tons (estimated) and 54,000 tons in 2001. In North America, US wool production in 2001 was estimated at 21,000 tons. Wool is of some importance among the former Soviet republics—the region produced 132,000 metric tons of wool in 2001, equivalent to 5.7% of world production. The principal producer in the region is Russia, with an estimated 38,000 tons in both 2000 and 2001. Kazakhstan was the second largest producer, with 23,000 tons in 2001, while Turkmenistan and Uzbekistan had output estimated at 22,000 tons and 16,000 tons, respectively. The fibre is of traditional importance in Azerbaijan and Kyrgyzstan, which produced 11,000 and an estimated 12,000 tons, respectively, in 2001. Exports of greasy wool declined by an average of 2.87% per year in 1990–99. In 2000 Australasia—Australia and New Zealand exclusively—was by far the most important exporting region, with Australian exports of 485,313 metric tons accounting for 69.6% of total world exports of 697,680 tons in that year. Australia’s exports were therefore equivalent to about 71 % of its total production in 2000. To put Australia’s dominance of world trade in greasy wool into perspective, New Zealand, the world’s second largest exporter in 2000, contributed no more than about 7% of global exports in that year. Chinese exports are of little significance, accounting for less than 1% of greasy wool exported world-wide in 2000. In regional terms, the EU was the second largest exporter of greasy wool in 2000, accounting for 6.7% of the total. Within the EU, the United Kingdom was the leading exporter (9,205 tons), followed by Italy (7,524 tons) and France (7,521 tons). Of the other member states, Ireland was also an important exporter during most of the 1990s. In regional terms once more, South America was the world’s third largest exporter of greasy wool in 2000, accounting for 4.8% of the total. Argentina, Uruguay, Brazil and Chile were the principal sources of South American exports in that year. There were few other exporters of global significance. Eastern European exports were equivalent to about 17% of production in 2000, while exports from South Africa accounted for about 3% of the world total. In 2000 the member states of the EU represented the world’s largest market for greasy wool, accounting for 43.7% of total world imports of 710,836 metric tons in that year. Among the EU member states, the most important markets in 2000 were Italy (142,245 tons), France (52,423 tons), Germany (40,776 tons) and the United Kingdom (36,002 tons). China was the world’s largest single importer of greasy wool in 2000, accounting for about 35% of the world total. Other significant markets in 2000 were Eastern Europe (30, 267 tons), India (26,824 tons), Russia (23,330 tons), Turkey (19,804 tons) and the USA (11,734 tons). Trade in scoured wool is likewise dominated by Australia and New Zealand. In 2000 New Zealand’s exports of scoured wool amounted to 136,055 metric tons, or 37.4% of total world exports of 363,996 tons in that year. Australia ranked second, with exports of 108, 759 tons in 2000, equivalent to about 29.9% of total world exports. China, meanwhile, exported 14,217 tons, or 3.9% of the world total. In regional terms, the EU was the second
COMMODITY SURVEYS 345
largest exporter of scoured wool in 2000, accounting for 15.6% of exports world-wide. Among the EU member states, the United Kingdom is the biggest exporter. In 2000, at 28, 606 tons, British exports represented slightly less than 50% of the EU total. France, Germany and Spain are also important exporters of scoured wool, but their trade is on a much smaller scale than that of the United Kingdom. South America (again, in regional terms) was the third largest exporter of scoured wool in 2000, accounting for about 3% of the world total. Argentina and Uruguay accounted for almost all South American exports of scoured wool in 2000, as in most years. Other significant exporters of scoured wool in 2000 were South Africa and Turkey. The EU was the largest market for scoured wool in 2000, with imports by member states accounting for 41.4% of total world imports of 355,998 metric tons in that year. Among the member states, the principal importers in 2000 were the United Kingdom (44,353 tons), Italy (40,355 tons), Germany (14,965 tons) and France (6,528 tons). China was the second most important market, with imports amounting to 41,861 tons, equivalent to 11. 8% of the world total in 2000. India (26,940 tons), Japan (26,385 tons) and the Republic of Korea (18,570 tons) were other significant markets for scoured wool in 2000. Australia has dominated the world wool sector for many decades, with regard to both production and trade. The Australian wool industry is characterized, above all, by its reliance on foreign markets: more than 98% of Australian wool is destined for final consumption abroad. Traditionally, most Australian wool exports have been in the form of greasy and scoured wool and wool top (slivers of long fibres) to countries that process the commodity into finished garments, often for re-export. During the 1990s, however, efforts were made to develop the industry’s processing capacity, with the result that more than 30% of Australia’s wool exports are now processed to some degree prior to shipping. China, the world’s biggest individual consumer of wool, is the most important market for Australian raw wool and wool top, accounting for approximately one-quarter of Australian sales. China also constitutes the most important individual retail market for garments, etc., fashioned from Australian wool. China’s accession to the World Trade Organization (WTO) is of the greatest and, it is generally agreed, positive significance for Australia’s wool industry, as trade in wool between the two countries will henceforth be governed by more stringent rules, pre-determined tariff rates and reduced quota restrictions. WTO accession is also likely to benefit China, whose exports of textiles and garments, as a result of improved access to textile and fabric markets under (until 2005) the WTO’s Agreement on Textiles and Clothing, are predicted to continue to rise after accession. Although its demand for Australian raw wool declined during the 1990s, Western Europe remains Australia’s second largest regional export market for the commodity. Italy is the most important purchaser, taking some 50% of Australian exports of fine wool. The recent loosening of constraints imposed on Indian imports has led to predictions that India will eventually become the third largest market for Australian wool. At present, however, Indian import duties remain high by international standards. While Australia is the world’s largest producer of fine wool for clothing, New Zealand specializes in the production of strong wool for domestic textiles. Some 90% of New Zealand’s wool production is exported as fibre. China is the most important market, and the bulk of its imports consist of wool for blankets, upholstery, etc., and of yarns for hand-
346 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
knitting. Other important markets are Western Europe (in particular the United Kingdom, Italy, Belgium and Germany), Japan and the USA, most of whose wool imports from New Zealand are used for machined carpets. Exports to India and Nepal, two other important markets, are mainly of wool suitable for producing hand-made carpets. Wool’s significance in world textile fibre production is greater than the relatively small percentage of total output (less than 3%, compared with about 5% in 1990) that it accounts for would suggest. This is due to its potential, as a perceived high quality material, to achieve premium prices, and as a source, therefore, of high added value for textile and garment manufacturers and sellers. However, this potential has not been fully realized in recent years owing, largely, to the consequences of the imbalance in supply and demand outlined above. Although global wool production has now fallen—and continues to fall—in line with demand, this had not, by the early 2000s, led to a significant strengthening of prices, and profitability levels for wool producers, generally, remained poor. Owing to the varying grades and degrees of processing for traded wool, the most reliable source of pricing information for the commodity is the Eastern Market Indicator (EMI) index established by the Australian Wool Exchange (AWEX) at the beginning of the 1998/ 99 selling season in July 1998. The EMI is an average price per kg (clean) of various grades of wool offered at sales in the cities of Sydney, Melbourne and Newcastle. The slight difference in the weightings given to the various grades of wool meant that the EMI was comparable with, though not identical to, its predecessor index (also known as the EMI, though compiled by a different organization), and prices for previous sales could be calculated in terms of the new EMI. All prices prior to 1998 are given in terms of the AWEX EMI. Although an index, the EMI is most often quoted in terms of the Australian dollar, and frequently also in terms of the US dollar and euro (prices in US currency given here are converted from Australian currency). Depressed market conditions in the mid-1990s led to the EMI falling below 500 Australian cents per kg in early 1993, its lowest level of the decade. A strong increase occurred thereafter, and continued throughout 1994 and into 1995, reaching a peak of 930 Australian cents per kg (equivalent to 690 US cents per kg) in early 1995, as production declined sharply. However, the decline in production was arrested thereafter, aided by the release of stocks held centrally (see above), and the EMI eased rapidly, falling as low as 591 cents per kg (438 US cents per kg) before the end of that year, a level witnessed again in mid-1996. A further recovery in early 1997 led to the EMI reaching 815 cents per kg (606 US cents per kg) in mid-year, before again declining, reaching a five-year low of 488 cents per kg (307 US cents per kg) in October 1998. Prices recovered steadily thereafter, as the effects of the oversupply legacy of the reserve price scheme began to disappear. In addition, demand from China and Europe for wool was higher than expected, and the weakness of the Australian dollar relative to other major currencies made Australian wool more attractive to importers. By the beginning of 2000 the price had risen to 710 cents per kg (413 US cents per kg). The EMI rose sharply throughout 2000, buoyed in particular by the finer grades, and reached 854 cents per kg (442 US cents per kg) in April 2001, its highest level since 1995, before settling in the mid-700s, ending the year at 755 cents per kg. The final elimination of the reserve price stockpile in 2001 and predicted reduced shearings in the 2001/02 season, exacerbated by a three-week break in trading, countered
COMMODITY SURVEYS 347
Export Price Index for Wool (base: 1980=100)
the renewed strength of the Australian dollar and caused an extremely sharp rise in the EMI in the first trading week of 2002, closing the week at 83 5 cents per kg (equivalent to 431 US cents), a weekly increase of 80 cents. By the end of January the index had surpassed 900 cents per kg, and the price reached 985 cents per kg (505 US cents per kg) in February. Prices eased slightly thereafter, falling below 900 cents per kg in the last week of May. That level was again surpassed in June, as the new trading season approached, and after the first two-week session of trading, the market closed on 12 July with the EMI standing at 905 cents per kg (equating to 511 US cents per kg). Reduced world economic growth and weaker demand had been expected to cause the price of wool, and those of competing fibres, such as cotton and synthetics, to fall during 2001–02. Confidence that the market would grow, and prices recover, had stemmed largely from the marked increase that has occurred in global trade in wool products (yarn, fabric, garments) and its profitability. This has been attributed to the removal of trade barriers, to the transfer of wool textile manufacture to countries where the cost of labour is lower, and to firmer consumer demand in developing countries. These conditions, combined with lower forecast shearings, and market confidence, contributed to the increase. It is hoped that ongoing changes to the structure of world trade in wool (and other textiles) will lead to a more stable commercial environment for the commodity, and to better returns for its producers. From 1974–94 world trade in textiles, including wool, was governed by the Arrangement Regarding International Trade in Textiles-the so-called Multifibre Arrangement (MFA). The MFA was superseded on 1 January 1995 by the WTO Agreement on Textiles and Clothing. From 2005 world trade in textiles is to be fully integrated into the global trade system, and import quotas, which have characterized world trade in textiles since the 1960s, will be abolished, possibly creating new opportunities for wool in developing countries which have hitherto restricted access to, for example, European textile products fashioned from the commodity.
Zinc
The 23rd most abundant element in the earth’s crust, zinc (Zn) is generally found in ores that also contain lead, silver and copper, and it is usually mined as a co-product of those metals. The principal zinc-bearing mineral is sphalerite (zinc blende, or lead sulphide), which may contain as much as 67% zinc. Other important zinc-bearing minerals are hemimorphite (hydrated zinc silicate in orthorhombic crystalline form), willemite (zinc silicate in hexagonal crystalline form) and smithsonite (calamine, or zinc carbonate in hexagonal crystalline form). Following extraction, zinc-bearing ores are crushed and refined through concentration in order to separate the zinc from any other metals the ore may contain. Zinc metal is produced by subjecting the concentrate to either electrolysis or smelting. Recycling, in particular the recycling of galvanized steel and electric arc furnace (EAF) dusts, is an increasingly important source of zinc metal. Zinc is known to have been used to manufacture brass (zinc-copper alloy) more than 2, 000 years ago. Today, about 50% of zinc produced world-wide is used for the galvanization of iron and steel. (Galvanization refers here to the process of coating iron and steel with molten zinc in order to increase their resistance to corrosion.) Zinc is widely employed in the motor vehicle manufacturing industry as a corrosion retardant. The construction industry is another major consumer. Construction materials, such as nails, are frequently galvanized through hot dipping, while thermal spraying with zinc and zinc-aluminium coatings is used to protect large steel edifices, such as bridges, from corrosion. Zinc’s second most important contemporary use is for the manufacture of bronze and brass, followed by its use in alloys for die-cast manufactures. Other uses for the metal include as semimanufactures, often in rolled form for use in roofing; for oxides; and as a component of various chemical compounds. An important traditional use of zinc oxide is as an accelerator in the curing of rubber. In the future, zinc-air electrical power storage batteries, designed to retain their charge for up to four times as long as conventional batteries of similar size, are expected to become a common feature of electric transport vehicles. In 2001 the world reserve base of zinc (the totality of identified resources, including those whose extraction would be uneconomic under the prevailing conditions) was estimated at 440m. metric tons by the US Geological Survey (USGS). Of the total, the People’s Republic of China accounted for 21.1% and Australia and the USA for 18.2% each. In the same year, the USGS estimated that world reserves of zinc (that part of the reserve base that could be economically extracted at the time of report) amounted to 190m. tons. According to the International Lead and Zinc Study Group (ILZSG), production of zinc metal world-
COMMODITY SURVEYS 349
Production of Zinc Ore and Concentrates (zinc content, ’000 metric tons)
*Estimated production. Source: US Geological Survey.
wide in 2001 totalled 9.2m. tons, compared with 8.9m. tons in 2000. ILZSG reported world consumption of zinc at 8.8m. tons in 2001, compared with 8.9m. tons in 2000. In 2001, according to the USGS, the People’s Republic of China was the world’s leading producer of mined zinc. In that year Chinese output amounted to an estimated 1.7m, metric tons, equivalent to 19% of total estimated production world-wide of 8.9m. tons. China’s reserves of zinc were assessed at 34m. tons in 2001. In 2000 China was the world’s leading producer of primary and secondary smelter zinc, with output estimated at 1.9m. tons in that year. Zinc is mined in Hengyang (Hunan province), among other locations. The Lanping deposit, in Yunnan province, is thought to be one of the most important unexploited zinc resources in the world, from which output could eventually reach up to 270,000 tons of zinc metal annually. Located in western China, where foreign investment in mining activities is permitted, the Lanping deposit was being developed in 2002 through a joint venture between BHP Billiton (Australia/United Kingdom) and Chinese Lanping Nonferrous Metal Co. China has extensive zinc smelting facilities, including those located in Gansu, Baiyin, Guangdong, Shaoquan, Zhuzhou, Liaoning and Laibin. Smelting capacity was forecast to increase during 2000–05, especially in north-western China, through the construction of new facilities with annual capacities of greater than 50,000 tons, and through the upgrading of existing facilities. As a consequence of the increase in refining capacity, Chinese imports of zinc concentrate were also expected to grow. Chinese exports of zinc metal and alloys (unwrought) were reported to have totalled 593,336 tons in 2000, while those of zinc oxide and peroxide amounted to 135,022 tons. In the same year, China overtook the USA as the world’s leading consumer of zinc. According to the USGS, Australia ranked as the world’s second largest producer of mined zinc in 2001, with estimated output of 1.7m. metric tons, equivalent to 16.8% of all zinc mined world-wide. Australia’s reserves of zinc were assessed at 32m. tons in 2001. In 2000
350 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Production of Zinc Metal (including secondary, ’000 metric tons)
*Estimated production. Source: US Geological Survey.
Australia was the world’s fourth largest producer of smelter zinc, with output of both primary and secondary metal amounting to an estimated 500,000 tons. Zinc mining in Australia began with the discovery of deposits at Broken Hill in New South Wales and Mount Isa in Queensland in the late 19th and early 20th centuries. Mines in both locations are still in production, but output has been greatly supplemented by resources discovered in Western Australia, the Northern Territory and Tasmania. In addition, there is a small deposit of high-grade zinc silicate ore in South Australia. After Canada, Australia is the world’s second largest exporter of zinc. The major destinations for Australian exports of zinc metal are Taiwan, Indonesia and Malaysia, while the most important markets for Australian zinc ores and concentrates are Japan, the Republic of Korea and, to a lesser extent, Belgium, Germany and the United Kingdom. Australia’s largest facility for the production of primary refined zinc is located at Risdon in South Australia. Primary metal is also produced at Port Pirie in South Australia and Cockle Creek in New South Wales, while production of secondary metal takes place at Port Kembla in New South Wales. Elsewhere in the Far East and Australasia, the Democratic People’s Republic of Korea (DPRK) is a significant producer of both mined and refined zinc. In 2000 mined output amounted to an estimated 190,000 metric tons, while smelter production of primary refined metal was estimated at 200,000 tons. Indian mine production of zinc totalled an estimated 144,000 tons in 2000. There are important deposits of zinc in the state of Rajasthan, and zinc smelting facilities are located in Rajasthan, Kerala and Andhra Pradesh. In 2000 India’s smelter production of primary and secondary refined zinc amounted to an estimated 201, 000 tons, sufficient to meet almost 70% of domestic requirements. Imports from Australia, the People’s Republic of China and the Republic of Korea met the country’s deficit for consumption in 2000. Japanese mine output of zinc reportedly totalled 63,547 in 2000. Japanese zinc deposits include those in Gifu and Hokkaido prefectures. There are refining
COMMODITY SURVEYS 351
facilities at numerous locations, including the prefectures of Gifu, Hokkaido, Akita, Aomori and Yamaguchi. Domestic zinc production meets less than 10% of Japan’s requirements for smelting and refining, and the country is consequently one of the world’s largest importers of zinc concentrates. In 2000 imports of zinc concentrates totalled 1.06m. tons (531,030 tons zinc content). Japan imported zinc concentrates from a wide range of suppliers in 2000, including Australia (more than 40% of the total), Peru, the USA, Canada, Chile, Mexico, Russia and Bolivia. The value of imported zinc concentrates in 2000 was US $292. 33m. In 2000 Japan ranked as the world’s third largest producer of refined zinc, with smelter output of primary and secondary metal reaching a reported 700,510 tons—about 94% of capacity—compared with 683,616 tons in 1999. Exports of zinc reportedly declined in 2000, owing to sluggish economic growth in major markets such as Malaysia, the Philippines, Taiwan and Thailand. In 1999 zinc metal (including alloys, unwrought) was the most important category of Japanese zinc exports, with total shipments amounting to 79, 379 tons. Taiwan (29,734 tons), the Philippines (19,017 tons) and Bangladesh (10,514 tons) were the major destinations for Japanese exports of zinc metal in that year. In 1999 zinc metal (including alloys, unwrought) represented the principal category of Japanese zinc imports. Shipments to Japan totalled 62,891 tons in 1999, compared with 121,378 tons in 1998. In 1999 the People’s Republic of China (34,537 tons) was the major supplier, followed by Peru (12,118) and Canada (6,114). Japanese demand for zinc slab was reported to have totalled 614,120 tons in 2000. More than 50% of the total was used for sheet galvanizing. Two Japanese companies, Dowa Mining and Sumitomo Corporation, have made substantial investments in Mexico’s Rey de Plata copper-lead-zinc-silver mining operation, while Mitsubishi Corporation has invested in Peru’s Antamina copper and zinc mining unit. Thailand is a significant producer of refined zinc, with output of smelted primary metal estimated at 77,525 tons in 2000. In 2001, according to the USGS, Canada, the USA and Mexico accounted for 24.3% of estimated mined output of zinc world-wide. Canada was the leading North American producer, and the fourth largest producer globally, with estimated output of 950,000 metric tons. Canada’s reserve base of zinc was estimated at 31m. tons in 2001, while the country’s reserves of zinc were assessed at 11m. tons. Canada’s most important zinc mining operations are located in the provinces of New Brunswick, Ontario, Manitoba and British Columbia, and in the Northwest and Yukon Territories. There are concentrating and smelting facilities in New Brunswick, Ontario, Manitoba and British Columbia. In 2000 Canada was the world’s second largest producer of smelter zinc, with estimated output of primary refined metal of 787,527 tons. In 2000 zinc metal (unalloyed, unwrought, containing by weight 99.99% or more of zinc) was the largest single category of Canadian zinc exports, totalling 376,722 tons. (Metal in this form was also by far the most valuable zinc export category.) The most important market in 2000, by a very substantial distance, was the USA (350,299 tons), followed by Taiwan (6,287), Malaysia (4,864), the Chinese Special Administrative Region (SAR) of Hong Kong (4,174) and Singapore (3,386). Zinc ores and concentrates constituted the second largest category of Canadian zinc exports in 2000, totalling 303,733 tons (in terms of zinc content). The most important markets for ores and concentrates in that year were Belgium (75,089 tons), Sweden (46,629), Finland (45,797), Japan (34,892) and Spain (31,398). Metal (unalloyed, unwrought, containing by weight less
352 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
than 99.99% of zinc) represented the third largest category of zinc exports, totalling 225, 866 tons in 2000. The principal markets in that year were the USA (187,166 tons), the Chinese SAR of Hong Kong (9,064), Taiwan (7,877) and Indonesia (4,799). In terms of value, these three categories accounted for 88.6% of all Canadian zinc exports in 2000. Ores and concentrates were the most important category of Canadian imports of zinc in 2000, totalling 207,676 tons (zinc content). The second largest category of imported zinc was that of zinc metal contained in silver ores and concentrates, totalling 20,889 tons. Canadian imports of zinc oxide and zinc peroxide totalled 7,521 tons in 2000. In 2001, according to the USGS, the USA was the fifth largest producer of mined zinc world-wide, with estimated output of 830,000 metric tons. In that year the USA’s reserve base was estimated at 80m. tons, while the country’s reserves were assessed at 25m. tons. US zinc deposits are distributed across a wide range of geographical locations. In 2000 the most productive mines were located in the states of Alaska (where deposits in the Red Dog area are considered to be the most abundant in the world), New York, Tennessee, Montana and Missouri. In 2000 the USA was the world’s seventh largest producer of smelter zinc, with output of primary and of secondary metal amounting, respectively, to 228,000 tons and 143, 000 tons. Since mining began at the Red Dog deposit in 1989, US mined output of zinc has been far greater than smelter capacity—nearly all of Red Dog’s extracted output is smelted in Canada. In 2000 US exports of surplus zinc ores and concentrates totalled 523,000 tons (zinc content). The principal destinations for exports of ores and concentrates in that year were Belgium (202,000 tons), Japan (108,000 tons), the Republic of Korea (73,900 tons) and Canada (49,900 tons). US exports of zinc metal totalled 2,770 tons of slab zinc and 3,530 tons of rolled zinc in 2000. In the same year the US imported 52,800 tons of zinc ores and concentrates, 915,000 tons of slab zinc and 9,380 tons of rolled zinc. US production of zinc metal for consumption is sufficient to meet only about 25% of domestic demand. The 75% deficit is met mainly by imports from Canada. In 2000, for the first time, the USA was overtaken by China as a consumer of zinc. US consumption of zinc metal in that year totalled 1.33m. tons—about 15% of the total consumed world-wide. Galvanization was the principal end-use (almost 60%) of US imports of zinc in 2000, followed by zinc-based alloys and the manufacture of brass and bronze. With mined output estimated at 1.1m. metric tons, Peru was the principal Latin American producer of zinc in 2001, and the third largest producer world-wide. In that year the country’s reserve base of zinc was estimated at 13m. tons, while its reserves were assessed at 8m. tons. Peru’s most important zinc deposits are located in the departments of Lima, Junín and Cerro de Pasco, and there are refinery facilities at La Oroya and Cajamarquilla (Lima). Smelter production of primary zinc metal totalled 199,813 tons in 2000. In that year zinc was Peru’s third most important metal export, after gold and copper. Peru’s zinc exports totalled 792,000 tons in 2000, an increase of 18.4% compared with 1999. The value of zinc exports in 2000 was US $496m., compared with $462m. in 1999. In 2001 Mexican output of mined zinc was estimated at 390,000 metric tons by the USGS. The country thus ranked as the second largest Latin American producer, and as the sixth largest in the world. In 2001 Mexico’s reserve base of lead was estimated at 8m. tons, while the country’s reserves were assessed at 6m. tons. Chihuahua and Zacatecas are the
COMMODITY SURVEYS 353
principal zinc-producing states. The country’s two most productive mines were located in the states of Chihuahua and San Luis Potosí in 1999. Mexico’s largest identified deposit of zinc is at Francisco I.Madero, where annual mined output was forecast to reach 96,000 tons of zinc concentrate in 2001. In 2000 Mexican production of smelter zinc was estimated at 230,000 tons of primary metal. Among Mexico’s most important smelting and refining facilities is the Torreón metallurgical complex, operated by Industrias Peñoles SA de CV. Annual capacity there has recently been raised to 220,000 tons, owing to growth in domestic demand for zinc alloys for use in the construction and motor vehicle manufacturing industries. In 1998 Mexican exports of zinc were principally in the form of ores and concentrates. The major market for these exports, which totalled 336,269 tons, were Belgium-Luxembourg (120,632 tons), followed by Russia (65,490 tons), Japan (55, 510) and the USA (39,097 tons). Zinc metal (including alloys, unwrought) constituted the second largest zinc export category in 1998, with shipments amounting to 69,672 tons. Taking 50,784 tons, the USA was the principal market, followed by Venezuela (7,037 tons), Guatemala (4,697 tons) and Colombia (1,886 tons). Exports of zinc metal semimanufactures, almost all of which were destined for the USA, totalled 31,582 tons in 1998. Mexican imports of zinc metal (including alloys, unwrought) totalled 24,829 tons in 1998. Kazakhstan was the principal supplier, shipping 12,027 tons, followed by Russia (6,487 tons) and Argentina (3,074 tons). Elsewhere in Latin America, mined output of zinc in 2000 amounted to an estimated 150, 000 metric tons in Bolivia. Mined output of zinc in Brazil totalled an estimated 96,500 tons in 2000, and the country’s reserves of zinc were estimated at 5.6m. tons in 1999. Brazil’s most important zinc deposits and refining facilities are located in the state of Minas Gerais. In 2000 Brazilian smelter production of primary and secondary refined zinc metal totalled an estimated 201,000 tons. In 1998, when domestic production of primary refined metal totalled 187,010 tons, Brazil imported some 216,000 tons of zinc concentrates and 21,500 tons of refined metal. Peru was the source of 95% of imported concentrates and of 13.5% of imported refined metal. Other suppliers of zinc metal to Brazil in 1998 were Argentina and the USA. Zinc is also mined on a relatively small scale in Honduras, where production was estimated at 41,000 tons in 2000, Argentina, where output totalled an estimated 35, 000 tons in 2000, and in Chile, whose production amounted to an estimated 33,000 tons in that year. Smelter production of refined primary and secondary metal in Argentina totalled an estimated 43,000 tons in 2000. In Western Europe, Ireland, Spain and Sweden are all important producers of mined zinc, with estimated output in 2000 in those countries totalling, respectively, 262,900 metric tons (reported), 200,000 tons and 176,200 tons. The Irish zinc mining industry is based on orebodies located at Lisheen (Co. Tipperary), Navan (Co. Meath) and Galmoy (Co. Kilkenny). Should mining operations at Lisheen reach full capacity, Ireland will become the world’s seventh largest producer of zinc, accounting for about 8% of global output. As domestic demand and consumption is low, Ireland is a major exporter of zinc, its exports of concentrate, at 214,000 tons, accounting for 42% of European Union (EU) zinc exports in 1999. Spanish zinc mining operations are based at Torrelavega (Santander), Aznalcóllar, Rubiales (Lugo) and Los Frailes (Seville—this site was closed for over a year from April 1998 after an incident in which tailings from the mine reached a river used for irrigation and
354 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
affected farmland and a national park). In 2000 Spanish production of refined zinc (both primary and secondary metal) totalled an estimated 391,000 tons, making Spain the sixth largest producer in the world. Spain is generally a net exporter of zinc to its partners in the European Union. In Sweden zinc is mined at Ammeberg, Garpenberg, Laisvall, Langdal and Renstrom. Belgium (251,700 tons), Finland (223,000 tons), France (348,000 tons), Germany (325,000 tons), Italy (168,000 tons) and the Netherlands (215,000 tons) were all major producers of refined zinc (both primary and secondary metal) in 2000, with estimated production as indicated above. Among the former Soviet republics, Kazakhstan is the principal producer of zinc, with mined output reportedly totalling 325,000 metric tons in 2000. There are zinc-mining operations in the regions of Zhezkazgan, Oskemen, Karagayly, Leninogorsk, Tekeli and Taldyqorghan, Semey, Zhayrang, Zyryanovsk and East Kazakhstan. In 1998 data cited by the USGS indicated that Kazakhstan’s zinc reserves totalled 34.7m. tons of generally low-grade ore. By 1998, according to the USGS, Kazakhstan’s production of zinc had declined by some 51% from the highest level (494,000 tons per year) achieved in the 1980s. Nevertheless, Kazakhstan remained self-sufficient in zinc, producing a sizeable surplus for export. In 2000 smelter production of refined zinc (both primary and secondary metal) totalled an estimated 260,000 tons. Russia’s output of mined zinc was reported to have totalled 136,000 tons in 2000. There are zinc deposits (associated with lead) in South Siberia, the Maritime Region, Chita Oblast, Severo-Ossetiya and Kemerovo Oblast; and (associated with copper) in the southern and central Urals. By 1999, according to data from Ministry of Natural Resources cited by the USGS, output of mined zinc had declined by 50% compared with the level of production in 1990. Zinc refining facilities include high-capacity plants at Chelyabinsk and at Vladikavkaz in North Caucasus. In 2000 Russian production of refined zinc (both primary and secondary metal) was estimated at 230,000 tons. Owing to a decline in domestic consumption since the disintegration of the Soviet Union, Russian production of zinc, like that of other non-ferrous and precious metals and of many other mineral resources, is highly export-oriented. In Central and South-Eastern Europe, Poland is the most important producer of zinc, with mined output totalling an estimated 155,000 metric tons in 2000. Zinc is mined in the Bukowno region, and at Trzebinia, where there is also a concentrator. In 1999, however, only one-tenth of Poland’s known deposits of zinc/ lead were being exploited. Smelter production of refined zinc (both primary and secondary metal) amounted to an estimated 175,000 tons in 2000. Polish exports of zinc totalled 102,000 tons in 1999, compared with 81,000 tons in 1998. Elsewhere the region, zinc is mined on a smaller scale in Romania, where output totalled an estimated 27,455 tons in 2000, and Bulgaria, where the corresponding figure was 11,000 tons. In 2000 Romanian output of refined zinc (both primary and secondary metal) was estimated at 25,000 tons, while that of Bulgaria was estimated at 85,000 tons. Morocco is the major African producer of mined zinc, with output estimated to have totalled 130,000 metric tons in 2000. Guemassa is an important location for Moroccan zinc mining and refining. Algerian output of mined zinc reportedly totalled 38,303 tons in 2000, while production of refined zinc (both primary and secondary metal) was estimated at 34, 000 tons. Tunisian mined output of zinc was reported to have totalled 41,247 tons in 2000.
COMMODITY SURVEYS 355
Export Price Index for Zinc (base: 1980=100)
To the south, Namibian output of mined zinc was reported to have amounted to 37,800 tons in 2000. South African output of mined zinc reportedly totalled 62,703 tons in 2000, while output of primary refined metal was estimated at 115,000 tons. In 1999 South Africa’s reserve base of zinc was assessed at 15m. tons. Mining operations are mainly in the Northern Province and at Aggeneys, in Northern Cape Province. Elsewhere in the world, Iran produced an estimated 80,000 metric tons of mined zinc in 2000. Iranian zinc mining is based in the north-west of the country, where the Angouran deposit is located, and there are processing facilities at Dandi, close to the Angouran mine. In 2000 Cominco (now Teck Cominco Ltd, following a merger) was reported to be seeking to establish a joint venture with Iran Zinc Mine Development Co in order to explore the feasibility of constructing additional refining facilities to process output from Angouran. The price of zinc exhibited a downward trend, punctuated by occasional recoveries, in the 1990s and early 2000s. In July 1993, the first month in which the London Metal Exchange (LME) quoted metals prices in US dollars, the average price of zinc metal was 42 US cents per lb, approximately one-half of the price obtainable some four years earlier. The average for 1993 was 43.7 cents per lb. The LME quotation recovered over 50 cents per lb as a monthly average in November 1994, the average price for that year as a whole being 45. 3 cents per lb. Although the 50-cent level was not sustained long into 1995, the annual average price was nearly 47 cents per lb. Prices remained relatively stable in 1996, with the annual average price being only fractionally lower than in the previous year. A significant surge in the LME price occurred in mid-1997, with the average price for August of that year being 75 cents per lb, compared with 56 cents per lb in April. These gains were nullified even more sharply later in the year, however, the monthly average price for December being almost exactly 20 cents per lb and the annual price being just under 60 cents per lb. The price was less volatile in 1998 (a year in which the LME changed the grade of zinc traded by its members), but generally moved downward, averaging 46.5 US cents per lb for the year and 43 for its last month. A recovery began in 1999 (annual average price: 48.8 cents per lb), and was sustained throughout most of 2000, reaching a three-year high in excess of 55 cents per lb in August. However, a sustained period of price decline began thereafter, amid a deterioration in global economic conditions. The annual average LME quotation for 2000 was 51.2 cents per lb. The yearly average for 2001 was fractionally over 40 cents per lb as the decline continued, the monthly average quotation reaching its lowest level for over two decades in December, at 34 cents per lb. Price movements stabilized somewhat in 2002, the monthly price for July being 36 cents per lb.
356
PART THREE Major Commodity Organizations
Major Commodity Organizations
African Groundnut Council: Trade Fair Complex, Badagry Expressway Km 15, FOB 3025, Lagos, Nigeria; tel. (1) 880982; fax (1) 887811; f. 1964 to advise producing countries on marketing policies. Mems: six African countries. Chair. MUSTAFA BELLO; Exec. Sec. Elhadj MOUR MAMADOU SAMB (Senegal). Publ. Groundnut Review. African Oil Palm Development Association—AFOPDA: 15 BP 341, Abidjan 15, Côte d’Ivoire; tel. 25–15–18; f. 1985; seeks to increase production of, and investment in, palm oil. Mems: Benin, Cameroon, Democratic Republic of the Congo, Côte d’Ivoire, Ghana, Guinea, Nigeria, Togo. Exec. Sec. BAUDELAIRE SOUROU. African Petroleum Producers’ Association—APPA: POB 1097, Brazzaville, Republic of the Congo; tel. 83–64–38; fax 83–67–99; f. 1987 by African petroleumproducing countries to reinforce co-operation among regional producers and to stabilize prices; council of ministers responsible for the hydrocarbons sector meets twice a year. Mems: Algeria, Angola, Benin, Cameroon, Democratic Republic of the Congo, Republic of the Congo, Côte d’Ivoire, Egypt, Equatorial Guinea, Gabon, Nigeria. Publ. APPA Bulletin (2 a year). American Soybean Association: 12125 Woodcrest Executive Drive, St Louis, MO 63141–5009, USA; tel. (314) 576–1770; fax (314) 576–2786; internet www.amsoy.org; represents soybean producers in the world’s largest producer country. Chair. BART RUTH; CEO STEVE CENSKY. Asian and Pacific Coconut Community—APCC: POB 1343, 3rd Floor, Lina Bldg, Jalan H.R.Rasuna Said Kav. B7, Kuningan, Jakarta 10002, Indonesia; tel. (21) 5221712; fax (21) 5221714; e-mail
[email protected]; internet www.apcc.org.sg; f. 1969 to promote and co-ordinate all activities of the coconut industry, to achieve higher production and better processing, marketing and research. Mems: Fiji, India, Indonesia, Kiribati, Malaysia, Federated States of Micronesia, Papua New Guinea, Philippines, Samoa, Solomon Islands, Sri Lanka, Thailand, Vanuatu, Viet Nam; assoc. mem.: Palau. Exec. Dir Dr P.RETHINAM. Publs Cocomunity (2 a month), CORD (2 a year), Statistical Yearbook, Cocoinfo International (2 a year). Association of Natural Rubber Producing Countries—ANRPC: Bangunan Getah Asli, 148 Jalan Ampang, 7th Floor, 50450 Kuala Lumpur, Malaysia; tel. (3) 2611900; fax (3) 2613014; f. 1970 to co-ordinate the production and marketing of natural rubber, to promote technical co-operation amongst members and to bring about fair and stable prices
MAJOR COMMODITY ORGANIZATIONS 359
for natural rubber; holds seminars, meetings and training courses on technical and statistical subjects. A joint regional marketing system has been agreed in principle. Mems: India, Indonesia, Malaysia, Papua New Guinea, Singapore, Sri Lanka, Thailand. Sec.-Gen. GNOH CHONG HOCK. Publs ANRPC Statistical Bulletin (quarterly), ANRPC Newsletter. Centre Internacional del Mejoramiento de Maíz y Trigo—CIMMYT (International Maize and Wheat Improvement Centre): Apdo. Postal 6–641, 06600 Mexico, DF, Mexico; tel. (55) 5804–2004; fax (55) 5804–7558; e-mail
[email protected]; internet www.cimmyt.org; conducts research on wheat and maize with the aim of improving conditions for farmers in developing countries. Dir-Gen. MASA IWANAGA. Cocoa Producers’ Alliance: POB 1718, Western House, 8–10 Broad St, Lagos, Nigeria; tel. (1) 2635506; fax (1) 2635684; f. 1962 to exchange technical and scientific information, to discuss problems of mutual concern to producers, to ensure adequate supplies at remunerative prices and to promote consumption. Mems: Brazil, Cameroon, Côte d’Ivoire, Dominican Republic, Ecuador, Gabon, Ghana, Malaysia, Nigeria, São Tomé and Príncipe, Togo, Trinidad and Tobago. Sec.-Gen. DJEUMO SILAS KAMGA. Common Fund for Commodities: Postbus 74656, 1070 BR, Amsterdam, Netherlands; tel. (20) 575–4949; fax (20) 676–0231; e-mail
[email protected] ; internet www.common-fund.org; f. 1989 as the result of an UNCTAD negotiation conference; finances commodity development measures including research, marketing, productivity improvements and vertical diversification, with the aim of increasing the long-term competitiveness of particular commodities; paid-in capital US $165m. Mems: 104 countries and the EC, OAU and COMESA. Man. Dir (also Chief Exec. and Chair.) ROLF BOEHNKE. European Aluminium Association—EAA: 12 ave de Broqueville, 1150 Brussels, Belgium; tel. (2) 775–63–63; fax (2) 779–05–31; e-mail
[email protected]; internet www.eaa,net; f. 1981 to encourage studies, research and technical co-operation, to make representations to international bodies and to assist national asscns in dealing with national authorities. Mems: individual producers of primary aluminium, 17 national groups for wrought producers, the Organization of European Aluminium Smelters, representing producers of recycled aluminium, and the European Aluminium Foil Association, representing foil rollers and converters. Chair. R.BELDA; Sec.-Gen. P.DE SCHRYNMAKERS. Publs Annual Report, EAA Quarterly Report. European Association for the Trade in Jute and Related Products: Adriaan Goekooplaan 5, POB 29822, 2502 LV, The Hague, Netherlands; tel. (70) 330–4659; fax (70) 351–2777; e-mail
[email protected]; f. 1970 to maintain contacts between national asscns, permit the exchange of information and represent the interests of the trade; carries out scientific research. Mems: enterprises in eight European countries. Sec.-Gen. H.J.J.KRUIPER. European Committee of Sugar Manufacturers: 182 ave de Tervueren, 1150 Brussels, Belgium; tel. (2) 762–07–60; fax (2) 771–00–26; e-mail
[email protected]; internet www.ib.be.cefs; f. 1954 to collect statistics and information, conduct research and promote co-operation between national organizations. Mems: national asscns in 15 European countries. Pres. RENATO PICCO; Dir-Gen. J.L. BARJOL.
360 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
Federation of Cocoa Commerce: Cannon Bridge House, 1 Cousin Lane, London EC4R 3XX, United Kingdom; tel. (20) 7379–2884; fax (20) 7379–2889; e-mail
[email protected]; internet www.calcocoa.com; f. 2002 by merger of other orgs; aims to promote, protect and regulate the trade in cocoa beans; Chief Exec. PHILLIP M. SIGLEY. Food and Agriculture Organization of the United Nations—FAO: Viale delle Terme di Caracalla, 00100 Rome, Italy; tel. (06) 57051 ; fax (06) 5705–3152; e-mail
[email protected]; internet www.fao.org; f. 1945 to co-ordinate development programmes in food and agriculture, with the aim of alleviating hunger; five regional offices; numerous publs, including global agricultural, forestry and fisheries statistics. Dir-Gen. JACQUES DIOUF (Senegal). Gold Institute: 1112 16th Street, NW, Suite 240, Washington, DC 20036, USA; tel. (202) 835–0185; fax (202) 835–0155; e-mail
[email protected]; internet www.goldinstitute.org; represents companies in all areas of the gold industry; Chair. BILL HAYES. Group of Latin American and Caribbean Sugar Exporting Countries— GEPLACEA: Paseo de la Reforma 1030, Lomas de Chapultepec, Mexico DF 11000, Mexico; tel. (55) 520–9711; fax (55) 520–5089; e-mail
[email protected] ; internet www.geplacea.ipn.mx; f. 1974 to serve as a forum for consultation on the production and sale of sugar; to contribute to the adoption of agreed positions at international meetings on sugar; to provide training and the transfer of technology; to exchange scientific and technical knowledge on agriculture and the sugar industry; to coordinate the various branches of sugar processing; and to co-ordinate policies of action, in order to achieve fair and remunerative prices. Mems: 23 Latin American and Caribbean countries (accounting for about 45% of world sugar exports and 66% of world cane sugar production). Exec. Sec. LUIS PONCE DE LEÓN. Inter-African Coffee Organization—IACO (Organisation interafricaine du café— OIAC): BP V210, Abidjan, Côte d’Ivoire; tel. 20–21–61–31; fax 20–21–62–12; email
[email protected]; internet www.oiac.org; f. 1960 to adopt a common policy on the marketing and consumption of coffee; aims to collaborate on research, in particular through the African Coffee Research Network (ACRN); seeks improvement in the quality of coffee exports. Mems: 25 coffee-producing countries in Africa. Chair. ERIC-VICTOR KAHÉ KPLOHOUROU (Côte d’Ivoire); Sec.-Gen. JOSEFA LEONEL CORREIA SACKO (Angola). International Aluminium Institute: New Zealand House, 8th floor, Haymarket, London. SW1Y 4TE, United Kingdom; tel. (20)7930–0582; fax (20) 7321–0183; internet www.world-aluminium.org; 23 mem. cos representing almost 80% of global primary aluminium production. International Cadmium Association: 12110 Sunset Hills Rd, Suite 110, Reston, VA 22090, USA; tel. (703) 709–1400; fax (703) 709–1402; f. 1976; covers all aspects of the production and use of cadmium and its compounds; includes almost all producers and users of cadmium. Chair. DAVID SINCLAIR (USA). International Chromium Development Association—ICDA: 45 rue de Lisbonne, 75008 Paris, France; tel. 1–40–76–06–89; fax 1–40–76–06–87; e-mail
[email protected] ; internet www.chromium-asoc.com; f. 1984 to encourage
MAJOR COMMODITY ORGANIZATIONS 361
growth and development in the use of chromium; 70 mem. cos from 22 countries; Publs ICDA News (quarterly), ICDA Statistical Bulletin (annual). International Cocoa Organization—ICCO: 22 Berners St, London, W1P 3DB, United Kingdom; tel. (20) 7637–3211; fax (20) 7631–0114; e-mail
[email protected] ; internet www.icco.org; f. 1973 under the first International Cocoa Agreement, 1972. The ICCO supervises the implementation of the agreements, and provides member governments with conference facilities and up-to-date information on the world cocoa economy and the operation of the agreements. The sixth International Cocoa Agreement was signed in March 2001; it will enter into force in October 2003. Mems: 19 exporting countries and 23 importing countries; and the European Union. Exec. Dir EDOUARD KOUAMÉ (Côte d’Ivoire); Council Chair. 2001–02 ADRIAN FRIJLINK (Netherlands). Publs Quarterly Bulletin of Cocoa Statistics, Annual Report, World Cocoa Directory, Cocoa Newsletter, studies on the world cocoa economy. International Coffee Organization—ICO: 22 Berners St, London, W1P 4DD, United Kingdom; tel. (20) 7580–8591; fax (20) 7580–6129; e-mail
[email protected]; internet www.ico.org; f. 1963 under the International Coffee Agreement, 1962, which was renegotiated in 1968, 1976, 1983, 1994 (extended in 1999) and 2001; aims to improve international co-operation and provide a forum for intergovernmental consultations on coffee matters; to facilitate international trade in coffee by the collection, analysis and dissemination of statistics; to act as a centre for the collection, exchange and publication of coffee information; to promote studies in the field of coffee; and to encourage an increase in coffee consumption. Mems: 45 exporting and 18 importing countries. Chair, of Council LAKSHMI VENKATACHALAM (India); Exec. Dir NÉSTOR OSORIO (Colombia). International Confederation of European Beet Growers (Confédération internationale des betteraviers européens—CIBE): 29 rue du Général Foy, 75008 Paris, France; tel. 1–44–69–41–80; fax 1–42–93–28–93; f. 1925 to act as a centre for the co-ordination and dissemination of information about beet sugar production and the industry; to represent the interests of sugar beet growers at an international level. Mems: asscns in Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Netherlands, Poland, Portugal, Romania, Slovakia, Spain, Sweden, Switzerland, United Kingdom. Pres. J.KIRSCH (Germany); Sec.-Gen. H.CHAVANES (France). International Copper Association—ICA: 260 Madison Ave, 16th Floor, New York, NY 10016, USA; tel. (212) 251–7240; fax (212) 251–7245; internet www.copperinfo.com; f. 1989 to promote and develop the use of copper. Mems: 35 cos, representing about 80% of global refined copper production. Pres. JAN.A.SMOLDERS. International Cotton Advisory Committee—ICAC: 1629 K St, NW, Suite 702, Washington, DC 20006, USA; tel. (202) 463–6660; fax (202) 463–6950; e-mail
[email protected]; internet www.icac.org; f. 1939 to observe developments in world cotton; to collect and disseminate statistics; to suggest measures for the furtherance of international collaboration in maintaining and developing a sound world cotton economy; and to provide a forum for international discussions on cotton prices. Mems: 40 countries. Exec. Dir Dr TERRY TOWNSEND (USA). Publs Cotton: This Month, Cotton: Review of the World Situation, Cotton: World Statistics, The ICAC Recorder.
362 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
International Grains Council—IGC: 1 Canada Sq., Canary Wharf, London, E14 5AE, United Kingdom; tel. (20) 7513–1122; fax (20) 7513–0630; e-mail
[email protected] ; internet www.igc.org.uk; f. 1949 as International Wheat Council, present name adopted in 1995; responsible for the administration of the Grains Trade Convention of the International Grains Agreement, 1995; aims to further international co-operation in all aspects of trade in grains and to promote the freest possible flow of this trade, in particular, to support developing countries; seeks to contribute to the stability of the international grain market; acts as a forum for consultations between members; provides comprehensive information on the international grain market. Mems: 28 countries and the EU. Exec. Dir. G. DENIS. Publs World Grain Statistics (annually), Wheat and Coarse Grain Shipments (annually), Report for the Fiscal Year (annually), Grain Market Report (monthly), Grain Market Indicators (weekly). International Jute Study Group—IJSG: 145 Monipuriparu, Old Airport Rd, Dhaka 1215, Bangladesh; tel. (2) 9125581; fax (2) 9125248; e-mail
[email protected] ; f. 2002 as successor to International Jute Organization (f. 1984 in accordance with an agreement made by 48 producing and consuming countries in 1982, under the auspices of UNCTAD); aims to improve the jute economy and the quality of jute and jute products through research and development projects and market promotion. International Lead and Zinc Study Group—ILZSG: 2 King St, London, SW1Y 6QP, United Kingdom; tel. (20) 7484–3300; fax (20) 7930–4635; e-mail
[email protected] ; internet www.ilzsg.org; f. 1959 for intergovernmental consultation on world trade in lead and zinc; conducts studies and provides information on trends in supply and demand. Mems: 28 countries. Chair. A. IGNATOW (Canada); Sec.-Gen. DON SMALE. Publ. Lead and Zinc Statistics (monthly). International Lead Zinc Research Organization—ILZRO: POB 12036, Research Triangle Park, NC 27709–2036, USA; tel. (919) 361–4647; fax (919) 36–1957; e-mail
[email protected]; internet www.ilzro.org; f. 1958 as a non-profit research organization; mems include miners, smelters and end-users. International Manganese Institute—IMnI: 17 ave Hoche, 75000 Paris, France; tel. 1–45–63–06–34; fax 1–42–89–42–92; e-mail
[email protected]; internet www.manganese.org; f. 1975 to represent producers, traders and users of manganese, and to promote and develop the metal’s use. Sec.-Gen. ANNE TREMBLAY. International Molybdenum Association—IMOA: 2 Baron’s Gate, 33 Rothschild Rd, London, W4 5HT, United Kingdom; tel. (20) 8742–2274; fax (20) 8742–7345; e-mail
[email protected]; internet www.imoa.org.uk; f. 1989; collates statistics; promotes the use of molybdenum; monitors health and environmental issues in the molybdenum industry. Mems: 49. Pres. J.GRAELL; Sec.-Gen. MICHAEL MABY. International Nickel Study Group—INSG: Scheveningenseweg 62, 2517 KX, The Hague, Netherlands; tel. (70) 354–3326; fax (70) 358–4612; e-mail
[email protected]; internet www.insg.org; f. 1990 as an intergovernmental organization conducting research on the nickel market. Mems: 15 countries and the European Union. Publs World Nickel Statistics (monthly). International Olive Oil Council: Príncipe de Vergara 154, 28002 Madrid, Spain; tel. (91) 59033638; fax (91) 5631263; e-mail
[email protected]; internet
MAJOR COMMODITY ORGANIZATIONS 363
www.internationaloliveoil.org; f. 1959 to administer the International Agreement on Olive Oil and Table Olives, which aims to promote international co-operation in connection with problems of the world economy for olive products; works to prevent unfair competition, to encourage the production and consumption of, and international trade in, olive products, and to reduce the disadvantages caused by fluctuations of supplies on the market. Mems: of the 1986 Agreement (Fourth Agreement, amended and extended in 1993): eight mainly producing countries, one mainly importing country, and the European Commission. Dir FAUSTO LUCHETTI. Publs Information Sheet of the IOOC (fortnightly, in French and Spanish), OLIVAE (5 a year, in English, French, Italian and Spanish). International Pepper Community—IPC: 4th Floor, Lina Bldg, Jalan H.R. Rasuna Said, Kav. B7, Kuningan, Jakarta 12920, Indonesia; tel. (21) 5224902; fax (21) 5224905; email
[email protected]; internet www.ipcnet.org; f. 1972 for promoting, co-ordinating and harmonizing all activities relating to the pepper economy. Mems: six exporting countries, 30 importing countries. Exec. Dir Dr K.P.G.MENON. Publs Pepper Statistical Yearbook, International Pepper News Bulletin (quarterly), Directory of Pepper Exporters, Directory of Pepper Importers, Weekly Prices Bulletin, Pepper Market Review. International Platinum Association: Kroegerstr. 5, 60313 Frankfurt-am-Main, Germany; tel. (69) 287941; fax (69) 283601; links principal producers and fabricators of platinum. Man. Dir MARCUS NURDIN. International Rice Research Institute—IRRI: DAPO Box 7777, Metro Manila, Philippines; tel. (2) 8450563; fax (2) 8450606; e-mail
[email protected]; internet www.irri.org; f. 1960; research aimed at improving yields, incomes and environmental conditions for rice-growers; Dir-Gen. RONALD P.CANTRELL. Publ. Rice Today (2 a year). International Rubber Study Group: Heron House, 109–115 Wembley Hill Rd, Wembley, HA9 8DA, United Kingdom; tel. (20) 8903–7727; fax (20) 8903–2848; e-mail
[email protected]; internet www.rubberstudy.org; f. 1944 to provide a forum for the discussion of problems affecting synthetic and natural rubber and to provide statistical and other general information on rubber. Mems: 18 governments. Sec.-Gen. Dr A.F.S.BUDIMAN (Indonesia). Publs Rubber Statistical Bulletin (monthly), International Rubber Digest (monthly), Proceedings of International Rubber Forums (annually), World Rubber Statistics Handbook, Key Rubber Indicators, Rubber Statistics Yearbook (annually), Rubber Economics Yearbook (annually), Outlook for Elastomers (annually). International Silk Association: 34 rue de la Charité, 69002 Lyon, France; tel. 4–78– 42–10–79; fax 4–78–37–56–72; e-mail
[email protected]; f. 1949 to promote closer collaboration between all branches of the silk industry and trade, develop the consumption of silk, and foster scientific research; collects and disseminates information and statistics relating to the trade and industry; organizes biennial Congresses. Mems: employers’ and technical organizations in 40 countries. Pres. MICHELE CANEPA (Italy); Gen. Sec. R.CURRIE. Publs ISA Newsletter (monthly), congress reports, standards, trade rules, etc. International Spice Group: c/o International Trade Centre (UNCTAD/WTO), 54– 56 rue de Montbrillant, 1202 Geneva, Switzerland; tel. (22) 730–01–01; fax (22) 730–02– 54; e-mail
[email protected]; f. 1983 to provide a forum for producers and consumers of
364 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
spices; works to increase the consumption of spices. Mems: 33 producer countries, 15 importing countries. Chair. HERNAL HAMILTON (Jamaica). International Sugar Organization: 1 Canada Sq., Canary Wharf, London, E14 5AA, United Kingdom; tel. (20) 7513–1144; fax (20) 7513–1146; e-mail exdir@ isosugar.org; internet www.isosugar.org; administers the International Sugar Agreement (1992), with the objectives of stimulating co-operation, facilitating trade and encouraging demand; aims to improve conditions in the sugar market through debate, analysis and studies; serves as a forum for discussion; holds annual seminars and workshops; sponsors projects from developing countries. Mems: 58 countries producing some 75% of total world sugar. Exec. Dir Dr P. BARON. Publs Sugar Year Book, Monthly Statistical Bulletin, Market Report and Press Summary, Quarterly Market Review, seminar proceedings. International Tea Committee Ltd: Sir John Lyon House, 5 High Timber St, London, EC4V 3NH, United Kingdom; tel. (20) 7248–4672; fax (20) 7329–6955; e-mail
[email protected]; internet www.intteacomm.co.uk; f. 1933 to administer the International Tea Agreement; now serves as a statistical and information centre; in 1979 membership was extended to include consuming countries. Producer mems: national tea boards or asscns in eight countries; consumer mems: United Kingdom Tea Assn, Tea Assn of the USA Inc., Comité européen du thé and the Tea Council of Canada; assoc. mems: Netherlands and British ministries of agriculture, Cameroon Development Corpn. Chair. M.J. BUNSTON. Publs Annual Bulletin of Statistics, Monthly Statistical Summary. International Tea Promotion Association: POB 20064, Tea Board of Kenya, Nairobi, Kenya; tel. (2) 220241; fax (2) 331650; f. 1979. Mems: eight countries. Chair. GEORGE M.KIMANI. Publ. International Tea Journal (2 a year). International Tobacco Growers’ Association—ITGA: Apdo 5, 6001–081 Castelo Branco, Portugal; tel. (72) 325901; fax (72) 325906; e-mail
[email protected]; internet www.tobaccoleaf.org; f. 1984 to provide a forum for the exchange of views and information of interest to tobacco producers. Mems: 22 countries producing over 80% of the world’s internationally traded tobacco. Pres. MARCELO QUEVEDO (Argentina); Exec. Dir ANTÓNIO ABRUNHOSA (Portugal). Publs Tobacco Courier (quarterly), Tobacco Briefing. International Tropical Timber Organization—ITTO: International Organizations Center, 5th Floor, Pacifico-Yokohama, 1–1–1, Minato-Mirai, Nishi-ku, Yokohama 220, Japan; tel. (45) 223–1110; fax (45) 223–1111; e-mail
[email protected]; internet www.itto.or.jp; f. 1985 under the International Tropical Timber Agreement (1983); a new treaty, ITTA 1994, came into force in 1997; provides a forum for consultation and cooperation between countries that produce and consume tropical timber; facilitates progress towards ‘Objective 2000’ (all trade in tropical timber to be derived from sustainably managed resources) financed by a special Bali Partnership Fund; conducts research and development, reafforestation and forest management projects. Mems: 31 producing and 25 consuming countries and the EU. Exec. Dir Dr MANOEL SOBRAL FILHO. Publs Annual Review and Assessment of the World Timber Situation, Tropical Timber Market Information Service (every 2 weeks), Tropical Forest Update (quarterly). International Tungsten Industry Association—ITIA: 2 Baron’s Gate, 33 Rothschild Rd, London, W4 5HT, United Kingdom; tel. (20) 8742–2274; fax (20) 8742– 7345; e-mail
[email protected]; internet www.itia.org.uk/; f. 1988 (fmrly
MAJOR COMMODITY ORGANIZATIONS 365
Primary Tungsten Asscn, f. 1975); promotes use of tungsten; collates statistics; prepares market reports; monitors health and environmental issues in the tungsten industry. Mems: 51. Pres. D.LANDSPERGER; Sec.-Gen. MICHAEL MABY. International Vine and Wine Office: 18 rue d’Aguesseau, 75008 Paris, France; tel. 1–44–94–80–80; fax 1–42–66–90–63; e-mail
[email protected]; internet www.oiv.int; f. 1924 to study all the scientific, technical, economic and human problems concerning the vine and its products; to spread knowledge and facilitate contacts between researchers. Mems: 45 countries. Dir-Gen. GEORGES DUTRUC-ROSSET. Publs Bulletin de l’OIV (every 2 months), Lettre de l’OIV (monthly), Lexique de la Vigne et du Vin, Recueil des méthodes internationales d’analyse des vins, Code international des Pratiques oenologiques, Codex oenologique international, numerous scientific publications. International Wool Textile Organization—IWTO: 4 rue de l’Industrie, 1000 Brussels, Belgium; tel. (2) 505–40–10; fax (2) 503–47–85; e-mail
[email protected]; internet www.iwto.org; represents the interests of members at all stages of the wool-textile process. Pres. DIETER VOLLSTEDT; Gen. Man. HENRIK KUFFNER. Publ. Wool Statistics (annual). International Zinc Association: 168 ave de Tervueren, 1150 Brussels, Belgium; tel. (2) 776–00–70; fax (2) 776–00–89; e-mail
[email protected]; internet www.iza.com; f. 1990 to represent the world zinc industry; provide a forum for senior executives to address global issues requiring industry-wide action; consider new applications for zinc and zinc products; foster understanding of zinc’s role in the environment; build a sustainable development policy. Mems: 28 zinc-producing countries. Exec. Dir EDOUARD GERVAIS. Publ. Zinc Protects (4 a year). Lead Development Association International: 42 Weymouth St, London, W1G 6NP, United Kingdom; tel. (20) 7499–8422; fax (20) 7493–1555; e-mail
[email protected] ; internet www.ldaint.org; f. 1956; provides authoritative information on the use of lead and its compounds. Financed by lead producers and users in the United Kingdom, Europe and elsewhere. Dir Dr D.N.WILSON (UK). Nickel Development Institute—NiDI: 214 King St West, Suite 510, Toronto, ON, M5H 3S6, Canada; tel. (416) 591–7999; fax (416) 591–7987; e-mail
[email protected] ; internet www.nidi.org; f. 1984 to develop international nickel markets and represent the primary nickel industry; Pres. IVOR KIRMAN; Publ. Nickel (3 a year). Organization of the Arab Petroleum Exporting Countries—OAPEC: POB 20501, Safat 13066, Kuwait; tel. 4844500; fax 4815747; e-mail
[email protected]; internet www.oapec.org; f. 1968 to encourage co-operation in the petroleum interest between Arab states and to protect their interests. Mems: Algeria, Bahrain, Egypt, Iraq, Kuwait, Libya, Qatar, Saudi Arabia, United Arab Emirates. Sec.-Gen. ABDULAZIZ A.ALTURKI (Saudi Arabia). Publs Annual Report, Energy Resources Monitor, Oil and Arab Co-operation (quarterly, Arabic), OAPEC Monthly Bulletin (Arabic and English). Organization of the Petroleum Exporting Countries—OPEC: Obere Donaustr. 93, 1020 Vienna, Austria; tel. (1) 211–12–279; fax (1) 214–98–27; e-mail
[email protected] ; internet www.opec.org; f. 1960 to link countries whose main source of export earnings is petroleum, to unify members’ petroleum policies and to protect their interests; operates
366 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
fund for international develeopment; mem countries produced 41.5% of global petroleum output in 2000, and were estimated to possess 79.3% of the world’s reserves of crude petroleum (and 44.4% of those of natural gas) in that year. Mems. Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, Venezuela. Sec.Gen. Dr ALÍ RODRÍGUEZ ARAQUE (Venezuela). Publs Annual Report, Annual Statistical Bulletin, OPEC Review (quarterly), Monthly Oil Market Report, OPEC Bulletin (monthly). Regional Association of Oil and Natural Gas Companies in Latin America and the Caribbean (Asociación Regional de Empresas de Petróleo y Gas Natural en Latinoamérica y el Caribe—ARPEL): Javier de Viana 2345, Casilla de correo 1006, 11200 Montevideo, Uruguay; tel. (2) 4106993; fax (2) 4109207; e-mail
[email protected]; internet www.arpel.org; f. 1965 as the Mutual Assistance of the Latin American Oil Companies; aims to initiate and implement activities for the development of the oil and natural gas industry in Latin America and the Caribbean; promotes the expansion of business opportunities and the improvement of the competitive advantages of its members; promotes guide-lines in support of competition in the sector; and supports the efficient and sustainable exploitation of hydrocarbon resources and the supply of products and services. Works in co-operation with international organizations, governments, regulatory agencies, technical institutions, universities and non-governmental organizations. Mems: state enterprises in Argentina, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Cuba, Ecuador, Jamaica, Mexico, Nicaragua, Paraguay, Peru, Suriname, Trinidad and Tobago, Uruguay, Venezuela. Exec. Sec. JOSÉ FÉLIX GARCÍA GARCÍA. Publ. Boletín Técnico. Sugar Association of the Caribbean (Inc.): c/o Caroni (1975) Ltd, Brechin Castle, Conva, Trinidad and Tobago; tel. 636–2449; fax 636–2847; f. 1942. Mems: national sugar cos of Barbados, Belize, Guyana, Jamaica and Trinidad and Tobago, and Sugar Asscn of St Kitts-Nevis-Anguilla. Chair. KARL JAMES. Sec. AZIZ MOHAMMED. Publs SAC Handbook, SAC Annual Report, Proceedings of Meetings of WI Sugar Technologists. Union of Banana-Exporting Countries—UPEB: Apdo 4273, Bank of America, piso 7, Panama 5, Panama; tel. 263–6266; fax 264–8355; e-mail
[email protected] ; f. 1974 as an intergovernmental agency to assist in the cultivation and marketing of bananas and to secure prices; collects statistics. Mems: Colombia, Costa Rica, Guatemala, Honduras, Nicaragua, Panama, Venezuela. Exec. Dir J.ENRIQUE BETANCOURT. Pubis Informe UPEB, Fax UPEB, Anuario de Estadísticas, bibliographies. Union Pétrolière Européenne Indépendante—UPEI: 10, rue de Laborde, 75008 Paris, France; tel. 1–43–87–00–01; fax 1–43–87–43–46; internet www.upei.org; represents independent petroleum companies at European level; Pres. HELLMUTH WEISSER, Sec.-Gen. BERND SCHNITTLER. West Africa Rice Development Association—WARDA: 01 BP 2551 Bouaké 01, Côte d’Ivoire; tel. 31–63–45–14; fax 31–63–47–14; e-mail
[email protected]; internet www.cgiar.org/warda; f. 1971 as a mem. of the network of agricultural research centres supported by the Consultative Group on International Agricultural Research (CGIAR, q.v.); aims to contribute to food security and poverty eradication in poor rural and urban populations, particularly in West and Central Africa, through research, partnerships, capacity strengthening and policy support on rice-based systems; promotes sustainable
MAJOR COMMODITY ORGANIZATIONS 367
agricultural development based on environmentally-sound management of natural resources; maintains research stations in Côte d’Ivoire, Nigeria and Senegal; provides training and consulting services. WARDA. Mems: 17 west African countries. Dir-Gen. Dr KANAYO F. NWANZE (Nigeria). Publs Annual Report, Current Contents at WARDA (monthly), Programme Report, Advances in Rice Research, proceedings, leaflets, brochures. West Indian Sea Island Cotton Association (Inc.): c/Lo Barbados Agricultural Development Corporation, Fairy Valley, Christ Church, Barbados. Mems: organizations in Antigua-Barbuda, Barbados, Jamaica, Montserrat and St Christopher and Nevis. Pres. E.Le ROACH; Sec. MICHAEL I.EDGHILL. World Association of Beet and Cane Growers—WABCG: c/o IFAP, 60 rue St Lazare, 75009 Paris, France; tel. 1–45–26–05–53; fax 1–48–74–72–12; e-mail
[email protected]; internet www.ifap.org/wabcg; f 1983 (formal adoption of Constitution, 1984); groups national organizations of independent sugar beet and cane growers; aims to boost the economic, technical and social development of the beet- and cane-growing sector; works to strengthen professional representation in international and national fora; serves as a forum for discussion and exchange of information. Mems: 21 beet-growing organizations, 14 cane-growing organizations, from 30 countries. Sec. MIKE GARROD. Publs World Sugar Farmer News (quarterly), World Sugar Farmer Fax Sheet, WABCG InfoFlash, study reports. World Coal Institute: Cambridge House, 180 Upper Richmond Road, London SW15 2SH, United Kingdom; tel. (20) 8246–6611; fax (20) 8246–6622; e-mail
[email protected]; internet www.wci-coal.com; represents coal producers and major consumers; Chair. DAVE MURRAY, Chief Exec. MALCOLM KEAY. World Diamond Council: 52 Vanderbilt Ave, 19th floor, New York, NY 10017, USA; e-mail
[email protected]; internet www.worlddiamondcouncil.com ; f. 2000 to develop a system to prevent the exploitation of diamonds to finance war or illicit acts; Chair. ELI IZHAKOFF. World Federation of Diamond Bourses: 62 Pelikaanstraat, 2018 Antwerp, Belgium; tel. (3) 234–07–78; fax (3) 226–40–73; e-mail
[email protected]; internet www.worldfed.com; f. 1947 to protect the interests of affiliated organizations and their individual members and to settle or arbitrate in disputes. Mems: 24 bourses in 15 countries. Pres. A.FISCHLER (Belgium); Sec.-Gen. G.GOLDSCHMIDT (Belgium). World Gold Council: 45 Pall Mall, London, SW1Y 5JG, United Kingdom; tel. (20) 7930–5171; fax (20) 7839–6561; internet www.gold.org; f. 1987 as world-wide international asscn of gold producers, to promote the demand for gold. Chair.R. M. GODSELL; Chief Exec. HARUKO FUKUDA (Japan). World Petroleum Congress—WPC: Fourth Floor, Suite 1, 1 Duchess Street, London, WIN 3DE, United Kingdom; tel. (20) 7637–4958; fax (20) 7637–4965; e-mail
[email protected]; internet www.world-petroleum.org; f. 1933 as a forum for the discussion of issues affecting the petroleum industry and the advancement of the industry. Mems: 59 countries. Pres. EIVALD RØREN (Norway). World Sugar Research Organisation—WSRO: Science and Technology Centre, University of Reading, Barley Gate, Whiteknights Rd, Reading, RG6 6BZ, United Kingdom; tel. (118) 935–7000; fax (118) 935–7301; e-mail
[email protected]; internet www.wsro.org; an alliance of sugar producers, processors, marketers and users; monitors and communicates
368 AGRICULTURAL AND MINERAL COMMODITIES YEAR BOOK
research on role of sugar and other carbohydrates in nutrition and health; organizes conferences and symposia; operates a database of information; serves as a forum for exchange of views. Mems: 73 orgs in 30 countries. Publs WSRO Research Bulletin (on-line, monthly), WSRO Newsletter, papers and conference proceedings. World Trade Organization—WTO: Centre William Rappard, rue de Lausanne 154, 1211, Geneva, Switzerland; tel. (22) 7395111; fax (22) 7314206; e-mail
[email protected]; internet www.wto.org; f. 1995, the successor to the General Agreement on Tariffs and Trade (GATT), as the legal and institutional foundation of the multilateral trading system. Mems: 144 countries and the European Union in early 2002, with some 30 additional countries in the process of negotiating membership. Dir-Gen. SUPACHAI PANICHPAKDI (Thailand). Publs Annual Report, International Trade Statistics (annual), WTO Focus (monthly).
