Artisanal gold mining: potentially significant quantities o

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Can the U.S. act alone on mercury?
Session 1 Economics of the Worldwide Mercury
Market Materials Flow

• Some initial hypotheses from the analysis of
  commodity flows
• Edward Weiler, Economist
• [phone]
• weiler.edward_at_EPA.gov
• U.S. Environmental Protection Agency
• May 1, 2002

Prepared for Breaking the Cycle Long-term
Management of Surplus Recycled Mercury
Mercury-Bearing Waste Hynes Convention Center,
Boston, Massachusetts, May 1-3, 2002
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Key Questions to be Addressed

• What do we know about world supply and demand for
  mercury?
• What is the relationship between the U.S. and
  world markets?
• What does the future hold for supply and demand?
• What are the implications for environmental
  policy?

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World Supply and DemandPrimary Mine Production

• Three key producing nations
• Spain, Kyrgystan, Algeria(for export)
• China (for domestic demand), but mines rumored to
  be closing
• Production lumpy but declining
• 9 average annual declinesince 1987
• Kyrgystan is exception
• Virgin producers also broker secondary supply
  from non-mining sources.

Source Metal Statistics 1997 2000 U.S.
Geological Survey Minerals Yearbook 2000
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World Supply and DemandSecondary Production

• Very dependent on rate of chlor-alkali shutdowns
  large potential for year to year variability.
• Mining by-product assumed to be all production in
  countries other than Spain, Kyrgyzstan, Algeria
  and China.
• Recycling numbers for devices approximately 40-80
  tonnes per year in U.S. Similar quantity assumed
  in Europe.
• Flow from stockpiles could also be significant in
  a given year.

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World Supply and DemandDemand Trends

• World demand data very scarce
• GOBI International data points are only summary
  available
• North America, Europe dominate mercury use
• 70 of total use in 1990 and 59 in 1996
• Northeast Asia is also important locus (China,
  primarily)
• Data suggest downward demand trend
• Total demand declined 33 from 1990 to 1996
• Not clear that northeast Asia is declining
• Important continuing uses
• Artisanal gold mining potentially significant
  quantities of Hg used, released
• Lighting expanding uses (small quantities)

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U.S. and World Demand
Sources U.S. Demand U.S. Bureau of Mines
Circular 9412 and USGS Minerals Yearbook 1994 -
1997, World Demand GOBI International
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World DemandArtisanal Gold Mining

• Could represent an important contributor to world
  demand
• Representative mercury use is 1 gram hg per gram
  of gold extracted
• Estimates indicate 180 to 250 tonnes per year of
  artisanal gold production worldwide (Veiga, MMSD)
• Suggests mercury used by miners would be several
  hundred tonnes per year, but estimate is highly
  uncertain
• Demand for mercury by miners is insensitive to
  mercury price
• Hg cost is very small relative to value of
  recovered gold (approximately 0.1)
• Amazon mercury prices five times market rates
  still affordable

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Domestic Supply and DemandSecondary and
By-Product Production

• Non-virgin supply in U.S.now exceeds total
  demand
• U.S. not dependent onworld markets
• "Lumpy" supply, internationalnature of trade
  preclude "closed" market
• According to one expert, recent U.S. demand
  significantly lower than 400 tonnes

Source U.S. Bureau of Mines Circular 9412 and
USGS Minerals Yearbook 1994 - 1997
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U.S. Trade Patterns Net Imports/Exports
Source US International Trade Commission

• U.S. is often a net exporter, but patterns vary.
• Import/exports reflect market making, as well as
  balancing domestic supply/demand.

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World Mercury Prices

• Clear downward trend
• data limitations do not alter this conclusion
• Trend consistent across pricing sources
• Bottom line Mercury production and sale is
  significantly smaller and less profitable
  enterprise
• Also, falling prices do not appear to increase
  demand

Source Platt Metals Week 1980-1998,
Metallstatistik 1995
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Mercury Pricing U.S. and World

• U.S. spot prices track withEuropean prices.
• U.S. market independent, but clearly linked to
  world markets through pricing.

Source Platt Metals Week 1980-1998,
Metallstatistik 1995, and American Metal Market
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Primary Production Response to Price Changes

• Primary production tracks price
• other mercury supplies driven by regulation, gold
  prices
• Virgin mines very responsive to price

Source American Metal Market and Metal
Statistics 1997 2000 U.S. Geological Survey
Minerals Yearbook 2000
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Future Supply/Demand ScenariosPossible Demand
Scenarios

• High-Demand
• 50 percent decline in chlor-alkali world demand,
  and 50 percent decline in most mercury product
  uses over 20 years
• Metal halide lamp growth of 15 percent per year
• Medium Demand
• 70 percent decline in chlor-alkali demand over 20
  years, and 10 percent per year decline in product
  uses, consistent with recent trends
• Halide lamp demand grows at 15 percent for next
  five years
• Low Demand
• All chlor-alkali plants phased out over next 10
  years, most product uses decline by 20 percent
  per year.
• Halide lamp demand grows for five years, then
  declines

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Future Supply/Demand ScenariosPossible Supply
Scenarios

• Low Supply (consistent with high demand)
• 50 percent decline in chlor-alkali plants over 20
  years no recycling increases
• Medium Supply
• 70 percent decline in chlor-alkali plants over 20
  years
• 5 percent per year increase in recycling of
  mercury wastes
• High Supply (consistent with low demand)
• All chlor-alkali plants closed over next 10 years
  
• 10 percent per year increase in recycling of
  mercury wastes
• Virgin production assumed to close gap between
  secondary supply and demand byproduct production
  constant

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Future Supply/Demand ScenariosCumulative Future
Demand and Supply
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Future Supply/Demand ScenariosKey Insights

• Excess Hg could exist in medium, low scenarios
• Even "high demand" scenario results in 35 percent
  drop in demand from current levels.
• Mines will be first to close
• Mines highest cost source of supply
• Other sources of supply unaffected by Hg demand
• Excess supply may lead to further decline in hg
  prices
• At some point, sale of Hg becomes impossible

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Implications for Policy

• Storage/treatment option is needed
• Excess mercury may have no market
• Storage costs not insignificant
• Initial estimate 500-700 per ton (NPV over 10
  years)
• Also lost revenue from sale of mercury plus
  future treatment costs
• Extent of storage will depend on specifics of
  storage policy

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Implications for PolicyStockpile Releases

• Potential stockpile releases likely to reduce
  virgin production
• Drop in Spanish production in mid-1990s coincided
  with stockpile releases mining responsive to
  price and supply
• Impact on Hg demand likely minimal
• Could reduce emissions associated with Hg mining
• Impact on U.S. suppliers limited in low and
  medium supply scenarios, as DLA releases only
  replace virgin production

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Conclusions

• Can U.S. act alone on mercury?
• No Markets are integrated.
• What does the future mercury market look like?
• Structural decline in demand unaffected by price.
• Likely to continue to drop to point where sale of
  excess mercury is difficult.
• What are implications for policy?
• Storage/treatment/disposal important for excess
  mercury.
• Stockpile releases may offset virgin production
  or be used strategically to discourage virgin
  production.