A recent report, “Review of Selected Global Mineral
Industries in 2011 and an Outlook to 2017”, issued by the United States
Geological Survey (USGS), provides historic production quantities from 2000 to
2010 for several minerals. The report,
which was issued in 2013, also provides estimates of future production
quantities for some of these minerals between 2013 and 2017. Click here (PDF file) to read this report.
From the historic production quantities, an average per year
production growth rate, from 2000 to 2010, can be computed. Production amounts
in a year generally do not equal consumption amounts in that year, but I
suspect, on average, over several years, the differences are relatively
small. Therefore, I am assuming that the
average per year production growth rate approximates reasonably-well the
average per year consumption growth rate for a mineral.
One reasonable method of estimating annual production and
consumption quantities is to use the historic average annual percentage
production (consumption) rate. Take the
current annual amount of the material produced and multiply it by the historic
average growth production rate to come up with the estimated production for the
following year.
However, this is not what the USGS report does in its
estimates of future production quantities.
Using only the historic average production rates does not account for
expected external events, such as new mines opening or current mines being
closed. The USGS report does take into
account such expected external events.
And therefore, the estimated production quantities that the USGS report
shows have different annual growth percentage increases from the historic
annual production percentage increases.
Assuming that the historic production annual growth rate
reasonably approximates the historic consumption annual growth rate (as
discussed above), it seems to me that this rate represents a historic demand
and, because it is an average over several years, the historic rate is likely
to be as accurate for a future consumption demand as one is able to come up
with. (Any possible external events in future consumption demands have already
been accounted for, since possible future external events are no more or less
likely than historic external events already accounted for in the historic
quantities.)
On the other hand, because the USGS has estimated future
production quantities, considering external factors (such as the ones discussed
above), the future annual production quantities that the USGS has determined
represent reasonable, as reasonable as likely to be determined, estimates of
future supply.
So, based on the USGS data, two growth percentages can be
determined, one the historic growth rate consumption percentage, which
represents a demand rate, and the other a future growth rate percentage, which
represents a supply rate. With these 2
percentages, future demand versus future supply can be estimated, and if
correct, an estimate of whether the mineral might be on the short or long-side supply
can be made.
For example, based on the USGS data in the report, iron ore
had an annual historic (from 2000 to 2010) consumption rate percentage (the
demand line) increase of 9.04% ((1,320,000,000 MT- 607,000,000 MT)/607,000,000
MT; over 13 years). And, using the USGS
estimate data on future iron ore quantities, iron ore has an annual future
production rate percentage (the supply line) increase of 3.78% ((1,750,000,000
MT – 1,520,000,000 MT)/1,520,000,000 MT; over 4 years).
Assuming these demand and supply annual production rate
percentages are reasonably correct, the significant difference in the
percentages (9.04% versus 3.78%) suggests that iron ore supply may not keep up
with iron ore demand between 2013 and 2017.
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