Nickel: State of the marketNovember 2017

2

HSEC Management

• Key toolkit – SAFENICKEL

• Rolled out globally

• Focussed on:

• Fatal hazard protocols

• Life saving behaviours

• Catastrophic risk management

• Target ZERO HARM

• Zero fatalities 2016 and 2017 year to date.

• Total recordable injury frequency rate down -30% in the last 4 years to < 5.

3

Glencore Nickel Operations

Source: Glencore4

• We estimate a 170Kt nickel supply shortage for 2017, as very strong demand offsets supply gains.

• Market tightness is evident in high and rising premiums and substantial stock draws from peak levels.

• Significant structural supply deficits, before the contribution of battery demand becomes material.

Nickel market balance (Kt Ni)

-200

-100

0

100

200

300

400

500

600

2011 2012 2013 2014 2015 2016 2017F 2018F

Balance Cumulative Balance

Significant structural deficits

Global nickel inventory (Kt Ni) – Sizable decreases

5

470380

112

46

136

62

182

157

0

200

400

600

800

1000

Peak Current

LME

SHFE

China other (excl. SRB)

Other (excl. SRB)

Source: Glencore, LME, SHFE

- 25Kt

- 74Kt

- 66Kt

- 90Kt

• Global nickel inventory down from a peak of 900kmt to 650kmt today.

Source: Glencore

Primary nickel demand in stainless (Kt Ni)

6

World crude stainless output by grade (Mt)

0

400

800

1'200

1'600

2015 2016 2017F 2018F

Other World China Indonesia

0

10

20

30

40

50

2015 2016 2017F 2018F

300-series 200-series & duplex 400 series

Gains in 300-series stainless drive nickel demand growth

• We see very strong growth in global nickel demand in stainless:

• Chinese stainless steel Growth driven firmly by 300-series output (+7%).

• Ramp up of Indonesian stainless capacity 2Mtpa 300-series capacity operational. Additional 1Mtpa to be

commissioned H1 2018.

• Ex-China/Indonesia 2017 stainless growth at 4%.

• We estimate 2017 primary Ni demand in stainless will increase by almost 9% to more than 1.5Mt.

We forecast continued growth for 2018 and beyond.

Strong nickel demand across all regions and industries

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• Positive developments in non-stainless further support solid demand growth:

• Oil & Gas We’ve seen a steady return of demand, reflected in strongly improved offtake from special steel

and nickel based alloy producers.

• Automotive A solid upswing in the European automotive market provides additional support to special steel.

• Batteries Strong growth in Korea, Taiwan and China with nickel consumption tracking +25% YoY.

• We estimate 2017 global primary nickel demand increased by more than 9% to over 2.2Mt.

0

500

1'000

1'500

2'000

2'500

2015 2016 2017F 2018F

Stainless Special Steel Ni based alloys Plating Others Battery

Source: Glencore

Global primary nickel demand by industry (Kt Ni)

8

Global non-NPI supply (Kt Ni)

• We estimate non-NPI supply will decrease by 2% this year, reflecting price-induced closures,

production issues and general supply disruptions.

• We nevertheless forecast global supply to grow by 5% in 2017 to 2.06Mt.

• Increased ore availability enabled Chinese NPI production to rise to 390-400Kt Ni this year (361Kt Ni in

2016).

• 2017 Indonesian NPI production increased as PT SMI phase III commissioned and all phases ramped

up. 2017 production forecast at 178Kt Ni.

Source: Glencore

Widespread underperformance in non-NPI supply/NPI supply up

Nickel pig iron supply (Kt Ni)

0

200

400

600

800

2015 2016 2017F 2018F

Chinese NPI Indonesian NPI

1000

1200

1400

1600

2015 2016 2017F 2018F

Nickel market balance

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Nickel market balance (Kt Ni)

1'700

1'800

1'900

2'000

2'100

2'200

2'300

2015 2016 2017F 2018F

Supply Demand

2015 2016 2017 2018

Global Supply (Kt) 1,985 1,964 2,059 2,153

-2.5% -1.1% 4.8% 4.6%

Sulphide 804 785 752 700Laterite 1,181 1,179 1,307 1,453

Hydro-metallurgical 306 273 263 261Pyro-metallurgical 874 906 1,043 1,192

China NPI 403 361 395 480Indonesia NPI 29 91 178 228Other FeNi/Matte 442 453 471 484

Global Demand (Kt) 1,896 2,036 2,226 2,293

-0.2% 7.4% 9.3% 3.0%

China 1,013 1,125 1,210 1,226Indonesia 0 2 53 191Europe 334 336 353 329US 120 114 137 121Japan 133 141 146 152Korea 79 86 82 68Taiwan 69 70 74 56India 50 68 77 65Other 99 94 93 85

Global Balance / Surplus (Kt) 89 -72 -167 -140

Source: Glencore

Source: Glencore

Primary nickel demand in batteries (Kt Ni)

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World rechargeable battery production (GWh)

And all this with very limited primary nickel demand in batteries

• Short-term growth potential driven by substitution within the Li-ion battery segment to NMC/NCA

cathodes, and within the NMC cathode segment towards higher Ni-content chemistries.

• Long-term growth potential reflecting the projected growth trajectory of EVs and ESS. Even the

lower end of the range of forecast EV penetration generates considerable Ni unit demand from 2025

onwards.

• We conservatively estimate more than 10M EVs will be sold a year in 2025 and that will generate

net additional primary nickel requirements of over 400Kt Ni in 2025 only.

0

20

40

60

80

100

120

140

160

2010 … 2015 2016 2017F 2018F

Li-Ion Ni-MH Ni-Cd

81100

130

250

500

0

100

200

300

400

500

2016 2017F 2018F 2020F 2025F

Ni-Cd Ni-MH (portable)

Ni-MH HEV Li-ion (portable)

Li-ion (EV) Li-ion (e-buses)

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• The nickel market’s fundamentals are the best we’ve seen since 2006/2007, as evidenced by stock

draws, demand rates across all geographies and physical premia, which are at 10-year highs.

• Despite additional NPI production and lower forecast demand growth rates, sizeable structural deficits

will exist into the future.

• Global stocks are drawing down very quickly despite headline LME inventory suggesting otherwise.

• Battery demand will very likely be a transformational demand event, which will turbo charge primary

nickel demand in the next decade.

Where will all the primary nickel needed come from?

In conclusion – An exciting market outlook

5'000

15'000

25'000

35'000

45'000

55'000

Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

LME Nickel price (US$/t)

Source: Glencore, LME

Questions?

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