Session 1: Economics of the Worldwide Mercury Market & Materials Flow
Can the U.S. act alone on
mercury?
Some initial hypotheses from the analysis of
commodity flows
Edward Weiler, Economist
(202) 564-8836
weiler.edward@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
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?
2
World Supply and Demand:
Primary 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 decline
since 1987
– Kyrgystan is exception

Virgin producers also broker
secondary supply from nonmining sources.
World Virgin and By-Product Production of
Mercury
6000
5000
Metric Tonnes

4000
3000
2000
1000
0
1987
1989
1991
1995
1993
1997
1999
Year
Algeria
China
Spain
Kyrgyzstan/USSR
Other
Source: Metal Statistics 1997 & 2000 U.S. Geological Survey
Minerals Yearbook 2000
3
World Supply and Demand:
Secondary Production
WORLD SECONDARY SUPPLY OF MERCURY
(in Metric Tonnes)
Source
Chlor Alkali
~ 375
Mining By-Product
~ 300
Recycling MCDs




Annual Supply
80 - 160
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.
4
World Supply and Demand:
Demand 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)
5
U.S. and World
Demand
US and World Demand
4000
3500
3000
Metric Tonnes
2500
2000
1500
1000
500
0
1980
1982
1984
1986
1988
1990
1992
1994
1996
Year
Total U.S. Demand
Estimated World Demand
Sources: U.S. Demand; U.S. Bureau of Mines Circular 9412 and USGS Minerals Yearbook 1994 - 1997, World Demand: GOBI International
6
World Demand:
Artisanal 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
7
Domestic Supply and Demand:
Secondary and By-Product
Production
Non-virgin supply in U.S.
now exceeds total
demand
– U.S. not dependent on
world markets


"Lumpy" supply,
international
nature of trade preclude
"closed" market
According to one expert,
recent U.S. demand
significantly lower than
400 tonnes
U.S. Demand and Production
2500
Metric Tonnes

2000
1500
1000
500
0
1980
1985
1990
1995
Year
Secondary Production
US Demand
Source: U.S. Bureau of Mines Circular 9412 and USGS Minerals
Yearbook 1994 - 1997
8
U.S. Trade Patterns:
Net Imports/Exports
US Net Imports/Exports
Metric Tonnes
1,000
800
600
Imports
400
Exports
200
01
00
20
99
20
19
98
97
19
96
19
19
95
94
19
93
19
19
92
91
19
90
19
19
19
89
0
Year
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.
9
World Mercury Prices
Clear downward trend
– data limitations do not
alter this conclusion

400.00
2000
350.00
300.00
1500
250.00
200.00
1000
150.00
100.00
Metric Tonnes

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
2500
450.00
$ per flask

World Price and US Demand for Mercury
500
50.00
0
0.00
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98

Years
LME
Platt's Metal Week Europe
US Demand
Source: Platt Metals Week 1980-1998, Metallstatistik 1995
10
Mercury Pricing: U.S. and World

U.S. spot prices
track with
European prices.
Price Comparison (USA & Europe)
450
400
350
200
150
100
50
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
0
19
82
U.S. market
independent, but
clearly linked to
world markets
through pricing.
250
19
80

$ per
Flask
300
Year
NY Prices
LME
Source: Platt Metals Week 1980-1998,
American Metal Market
Platt's Metal Week Europe
Metallstatistik 1995, and
11
Primary Production:
Response to Price Changes
Comparison of Prices and World Production
Primary
production
tracks price
6000
350
5000
300
4000
250
200
3000
150
2000
Metric Tonnes
– other mercury
supplies driven
by regulation,
gold prices
400
$ per Flask

100

Virgin mines
very responsive
to price
1000
50
0
0
1987
1989
1991
1993
1995
1997
1999
Year
NY Prices
World Production
Source: American Metal Market and Metal Statistics 1997 & 2000 U.S. Geological
Survey Minerals Yearbook 2000
12
Future Supply/Demand Scenarios:
Possible 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
13
Future Supply/Demand Scenarios:
Possible 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
14
Future Supply/Demand Scenarios:
Cumulative Future Demand and
Supply
CUMULATIVE DEMAND AND SUPPLY
(in Metric Tonnes)
Cumulative
Supply
Cumulative
Demand
Cumulative
Excess Supply
High Demand/Low Secondary Supply
38,018
38,018
0
Medium Demand/Secondary Supply
32,373
25,727
6,646
Low Demand/High Secondary Supply
35,337
9,689
25,648
Scenario
15
Future Supply/Demand Scenarios:
Key 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
16
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
17
Implications for Policy:
Stockpile 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
18
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.
19