World Gold Council: Gold Recycling Accounts for a Third of Total Supply
A new report by the World Gold Council examines the evolving industry that contributes a third of global gold supply.
“The Ups and Downs of Gold Recycling: Understanding Market Drivers and Industry Challenges,” written and published today by the World Gold Council and The Boston Consulting Group (BCG), analyzes the economic drivers of the global gold recycling market and highlights important future industry trends including; a shift in concentration of gold recycling from west to east, increased difficulty in obtaining gold from electronic products as less is used in modern devices, and potential consolidation within the recycling industry across the entire value chain.
The report shows that between 1995 and 2014, recycled gold accounted for, on average, about a third of total supply. This average belies the dynamic, responsive nature of recycling. An analysis of recycling data from 1982 to 2012 reveals that price fluctuations accounted for around 75 percent of the changes in recycling volumes and that economic shocks can boost recycling by up to 20 percent.
The report examines the challenges and opportunities facing the gold recycling industry, which has two main components; high-value recycled gold and industrial recycled gold. The growing volume in waste electrical and electronic equipment (WEEE) offers opportunities for industrial materials recycling, although obtaining gold from this material will become ever harder as smaller amounts of gold are used in them.
Furthermore, as Asia’s stock of gold keeps growing the ‘center of gravity’ for gold recycling will likely shift east. India’s and China’s gold jewelry consumption rose from 28 percent of the global total in 2004 to 60 percent in 2014 and as a consequence local competition for gold recycling business could heat up in Asia.
Intensified competition and overcapacity in the near and mid-terms represent the main challenges for both the high-value and industrial gold recycling segments. In addition, falls in precious metal prices have squeezed margins along the recycling value chain, spurring consolidation.
Alistair Hewitt, Head of Market Intelligence at the World Gold Council said: “The decline in recycling in 2014 was widespread across both developing and industrial countries, although more severe in the latter. Looking forward, we expect recycling to remain low in 2015, and possibly decrease further given that a large portion of near-market supply has been flushed out in recent years. Reduced volumes of distress selling may further suppress recycling volumes and many recycling collectors are struggling to source stock. That said, recycling is the most dynamic element of supply and helps balance the gold market; any price increase in 2015 may elicit an increase in gold recycling volumes.”
Matthias Tauber, Partner and Managing Director, The Boston Consulting Group, said: “Industry players in the gold recycling market face a complex blend of challenges and opportunities. Chief among the challenges is overcapacity, particularly in waste electrical and electronic equipment recycling which has nearly doubled over the past 10 years. To succeed, companies must rethink their competitive strategies and operating models – including leveraging economies of scale through M&A and strengthening their operational excellence and reputation among customers.”
In 2014 gold recycling fell to a seven-year low and is expected to remain low in 2015. This is partly a result of gold prices being lower than they were several years ago, leading to less ‘distress selling’ as a result of greater economic stability, and the depletion of near-market gold recycling materials.
Global iron ore production to recover by 5.1% in 2021
Global iron ore production fell by 3% to 2.2bnt in 2020. Global production is expected to grow at a compound annual growth rate (CAGR) of 3.7% to 2,663.4Mt between 2021 to 2025. The key contributors to this grow will be Brazil (6.2%), South Africa (4.1%), Australia (3.2%) and India (2.9%). Key upcoming projects expected to commence operations include South Flank in Australia (2021), Zulti in South Africa (H2 2021), Serrote Da Laje in Brazil (H2 2021) and Gudai-Darri (2022), according to GlobalData, a leading data and analytics company.
Vinneth Bajaj, Associate Project Manager at GlobalData, comments: “Declines from Brazil and India were major contributors to the reduced output in 2020. Combined production from these two countries fell from a collective 638.2Mt in 2019 to an estimated 591.1Mt in 2020. The reduced output from the iron ore giant, Vale, was the key factor behind Brazil’s reduced output, while delays in the auctioning of mines in Odisha affected India’s output in 2020.
“Miners in Australia were relatively unaffected by COVID-19 due to effective measures adopted by the Australian Government, while a speedy recovery in China led to a significant 10.4% increase in the country’s iron ore output.”
Looking ahead, the global iron ore production is expected to increase by 111.3Mt to 2,302.5Mt in 2021. Rio Tinto is expected to produce up to 340Mt of iron ore, while BHP has released production guidance of 245–255Mt, supported by the start of the Samarco project in December, which is expected to produce between 1–2Mt.The company has retained its guidance for Australian mines at 276–286Mt on a 100% basis, due to scheduled maintenance work at its ore handling plant and tie-in activity at the Area C mine and South-Flank mine.
Bajaj added: “The remaining companies are expected to produce more than 600Mt of iron ore, including FMG, whose production is expected to range between 175–180Mt supported by its Eliwana mine that commenced operations in late December 2020, and Anglo American, which is expecting to produce between 64–67Mt. Vale is expected to resume 40Mt of its production capacity, taking its overall production capacity to 350Mt in 2021, with production guidance of 315-335Mt.”