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1
Challenges and JFE Steel
12th Annual Platts Steel Markets Asia Conference
November 18, 2016
K. Mike FujisawaPrincipal, Corporate Planning
Excess Capacity
2
3
Global Steel Production
0
200
400
600
800
1000
1200
1400
1600
1800
1950
1954
1958
1962
1966
1970
1974
1978
1982
1986
1990
1994
1998
2002
2006
2010
2014
World
China
former USSR
Other developing
Developed
Golden era Stagnation China driven boom
Mt China post
peak?
Source: worldsteel
0
200
400
600
800
1,000
1,200
1,400
1,600
2007 08 09 10 11 12 13 14 15 16 17
Million tons
1,534 1,544 1,499 1,501 1,510
Others
NAFTA
EU28
Other
Asia
ASEAN5
India
China
4
Global Steel Use
Source: worldsteel
5
Global Excess Capacity
Source: OECD
6
Chinese Government PolicyIn February 2016, China’s State Council announced its plans:� Reduce steel production capacity by 100 to 150 million tons
from 2016 to 2020
� No licensing for new steel projects
� Enforcing tougher regulations on environment, energy use, quality, safety, and technology for closure of outdated plants
� Dismantling the eliminated iron-making and steel-making capacities
� Guiding steel companies to take voluntary actions to reduce capacities by consolidation and transfer of production
� Steel producers to provide workers with training for new jobs and compensation for early retirement.
� Set up a special fund for structural adjustment of industrial companies
� Since the first oil crisis in 1973, slower economic growth led to lower steel demand.
� The steel industries in the US, the EU and Japan implemented restructuring measures to improve the utilization ratio by reducing crude steel-making capacity.
US EU Japan
0
40
80
120
160
1982年 1988年
(M tons)
Crude Steel Capacity
Crude Steel Production
Excess capacity
20%
0
50
100
150
200
250
1980年 1987年
(M tons)
24%
0
50
100
150
200
1977年 1990年
(M tons)
19%
7
Restructurings in the US, the EU and Japan
Sources: Japan Iron and Steel Federation, World Steel Dynamics & American Iron & Steel Institute
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
1974 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91
欧州欧州欧州欧州
米国米国米国米国
日本日本日本日本
日本日本日本日本 日本日本日本日本
※円高に伴う
構造調整
主要
鉄鋼
メー
カー
売上
高主
要鉄
鋼メ
ーカ
ー売
上高
主要
鉄鋼
メー
カー
売上
高主
要鉄
鋼メ
ーカ
ー売
上高
利益
率利
益率
利益
率利
益率
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
1974 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91
欧州欧州欧州欧州
米国米国米国米国
日本日本日本日本
主要
鉄鋼
メー
カー
売上
高主
要鉄
鋼メ
ーカ
ー売
上高
主要
鉄鋼
メー
カー
売上
高主
要鉄
鋼メ
ーカ
ー売
上高
利益
率利
益率
利益
率利
益率
米国米国米国米国
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
1974 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91
欧州欧州欧州欧州
8
Pro
fit /
Sal
es
of th
e m
ajor
ste
el c
ompa
nies
Japan
Japan
EU
EU
US
US
JapanJapanStructural adjustments caused by a higher yen
Restructurings and Financial Results
Sources: Japan Iron and Steel Federation, World Steel Dynamics & American Iron & Steel Institute
Japanese Economy
9
Economy
Source: Consensus forecast
�Public investment associated with the Tokyo 2020 Olympics and replacement of outdated infrastructure is expected to support demand.
� Expected recovery of global economy is forecast to lead to more export and capital investment.
10
(fiscal year) 2013 2014 2015 2016(F) 2017(F)
GDPGDPGDPGDP 2.02.02.02.0 ▲ 0.9▲ 0.9▲ 0.9▲ 0.9 0.80.80.80.8 0.70.70.70.7 0.90.90.90.9
Personal Consumption 2.3 -2.9 -0.2 0.6 0.8
Residential Investment 8.8 -11.7 2.4 5.4 -0.7
Capital Investment 3.0 0.1 2.1 0.5 1.5
Public Investment 10.3 -2.6 -2.7 2.8 3.9
Exports 4.4 7.9 0.4 -0.5 2.0
Imports 6.7 3.4 0.0 0.1 2.4
Real GDP growth rate (%) Real GDP growth rate (%) Real GDP growth rate (%) Real GDP growth rate (%)
Corporate Earnings
UnemploymentCorporate Earnings 100 Million Yen %
-5,000
0
5,000
10,000
15,000
20,000
25,000
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
All industries Steel
3
3.5
4
4.5
5
5.5
11
20
25
30
35
40
45
50
55
60
65
70
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
� Manufacturing accounts for about 60% of steel consumption.� The auto sector makes up about 30% of total steel consumption.� Construction is modestly increasing because of public works projects
and preparation for the Tokyo 2020 Olympics.
Steel Consumption
Source: The Japan Iron and Steel Federation
%Million tons
Manufacturing
Automobile
12
31 31 31 31 32 32 32 32 31 31 31 31 29 29 29 29 29 29 29 29 30 30 30 30 29 29 29 29 30 30 30 30
28 28 28 28 27 27 27 27
20 20 20 20 20 20 20 20 20 20 20 20 2121212123 23 23 23 23 23 23 23 22 22 22 22 22 22 22 22 22 22 22 22
39 39 39 39
42 42 42 42
40 40 40 40 42 42 42 42
44 44 44 44
47 47 47 47 48 48 48 48
50 50 50 50 51 51 51 51
43 43 43 43
37 37 37 37
41 41 41 41 41 41 41 41
43 43 43 43 41 41 41 41 42 42 42 42
41 41 41 41 40 40 40 40 40 40 40 40
0
10
20
30
40
50
60
70
80
90
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
manufacturingconstruction
-100
100
300
500
700
900
1,100
1,300
1,500
1,700
1,900
93 93 93 93 95 95 95 95 97 97 97 97 99 99 99 99 01010101 03030303 05050505 07070707 09090909 11111111 13131313 15151515
Autos
Source: The Japan Iron and Steel Federation13
10,000 units
Overseas Production
Domestic Production
Export
Domestic Sales
� The ultra-high yen after the financial crisis led to decreased exports, expanded overseas production and lowered domestic production.
� Even after adjustment of the ultra high yen, production centers are not returning to Japan.
10
12
14
16
18
20
22
24
26
28
88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
0
50
100
150
200
88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Trillion yen ($10 billion)
Source: Research Institute of Construction and Economy
Construction
10,000 units
Forecast to increase moderately in 2016 due to low interest rates
Forecast to increase due to Olympic and replacement demand
14
Construction Investment (Public Investment)
Housing Starts
Summary
Japan• Demand generated by the government’s infrastructure
improvement plans and the Tokyo 2020 Olympics
• After 2020, effects of decreasing population are likely, but public investment and capital investment are expected to continue as outdated infrastructures and facilities are replaced
Asia• Overcapacity particularly in East Asia exerting pressure on steel
prices
• Growing steel demand for automobiles, infrastructure projects, and increasing need for quality steel (energy saving and environmental protection)
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JFE Steel
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SlabSlabSlabSlab
PipePipePipePipe
Bar andBar andBar andBar and
ShapesShapesShapesShapes SheetSheetSheetSheet
20.2Mt80%
2.0Mt8%
0.9Mt4%
2.2Mt9%
FY2015 JFE Steel’s shipment of 25.4Mt
(stand-alone)
JFE Steel� Crude Steel Production 29.8 million tons (FY2015)
JFE Steel 27.4 million tonsEAF subsidiaries 2.4 million tons
� JFE Steel’s main products are flat products, accounting for about 80% of the total.
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JFE Steel’s Strategies
� Improving our manufacturing capabilities
� Maintaining and improving our cost competitiveness and world-class technology
� Strengthening international businesses, and promoting the JFE brand
� Passing on technical skills to further develop our human resources
� Strengthening the Group structure … for sustainable growth of JFE Steel
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Greece・・・・Corinth Pipeworks
U.S.A.・・・・California Steel・・・・AK Steel・・・・Benoit
South Korea・・・・Dongkuk Steel・・・・Hyundai HYSCO・・・・Dongbu Steel
South Korea・・・・Dongkuk Steel・・・・Hyundai HYSCO・・・・Dongbu Steel
JFE SteelJFE Steel
Thailand・・・・JFE Steel Galvanizing Thailand・・・・Thai Cold Rolled Steel Sheet ・・・・Thai Coated Steel Sheet・・・・Sahaviriya SteeI Industries・・・・Thai Tinplate
Indonesia・・・・JFE Steel Galvanizing Indonesia・・・・Sermani Steel
Malaysia・・・・Perstima・・・・Mycron
Germany・・・・ThyssenKrupp・・・・Georgsmarienhuette
China・・・・Guangzhou JFE Sheet ・・・・Fujian Sino-Japan Metal・・・・Hainan Haiwoo Tinplate・・・・Bohai NKK Drill Pipe・・・・Pancheng Yihong Pipe・・・・Jiaxing JFE Precision Steel Pipe
Taiwan ・・・・Ton-yi
India・・・・JSW Steel
Pakistan・・・・International Steel
Japan NKK Tubes
JFE Steel’s Global Alliances
Colombia・・・・ Hojalata Y Laminados
Vietnam ・・・・Sun Steel, J-Spiral Steel Pipe・・・・Formosa Ha Tinh Steel
UAE・・・・Al Gharbia Pipe
Mexico・・・・Nucor JFE
19
India :::: JSW SteelSteelSteelSteel
� To capture growing demand for high-end steel in India
� To respond to the automakers’ strategies favoring local procurement
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• Based upon the Strategic Collaboration Agreement with JSW Steel, JFE Steel has 15% equity ownership in JSW Steel.
• JFE has provided technical assistance for JSW in the area of automotive steel sheet and non oriented electrical steel(NOES).
• Based upon the Strategic Collaboration Agreement with JSW Steel, JFE Steel has 15% equity ownership in JSW Steel.
• JFE has provided technical assistance for JSW in the area of automotive steel sheet and non oriented electrical steel (NOES).
DolviDolviDolviDolvi WorksWorksWorksWorks5 million tons5 million tons5 million tons5 million tons
Salem WorksSalem WorksSalem WorksSalem Works1 million tons1 million tons1 million tons1 million tons
VijayanagarVijayanagarVijayanagarVijayanagar WorksWorksWorksWorks12 million tons12 million tons12 million tons12 million tons
Head Office in Head Office in Head Office in Head Office in MumbaiMumbaiMumbaiMumbai
Pickling and Tandem Cold Rolling Line
2,300,000 t/y
Continuous Annealing Lines 950,000 t/y x 2
Continuous Galvanizing Line (GI/GA)
400,000 t/y
Annealing and Coating Line for NOES
200,000 t/y
JFE Steel : 50%Guangzhou Steel Sheet : 50%
Tandem Cold Rolling Mill 1.8Mt
Continuous Annealing Line 1.0Mt
Continuous Galvanizing Lines (2 lines) 0.8Mt
• No. 1 CGL started operation in 2006.
• PL-TCM started operation in May, 2011.
• CAL started operation in July, 2011.
• No. 2 CGL started operation in March, 2012.
• GJSS started as a JV with Guangzhou Iron and Steel, and became a JV with Guangzhou Steel Sheet, a Bao Steel subsidiary in 2012.
• GJSS is serving the auto and electrical appliance sectors in Southern China.
China :::: Guangzhou JFE Steel Sheet
� To capture growing demand for high-end automotive steel sheets in China
� To respond to automakers’ strategies favoring local procurement
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●●●●::::Automakers Automakers Automakers Automakers
� JFE Steel Galvanizing (Thailand), Thailand’s first CGL for Automobiles
� To capture growing demand for high-end automotive steel in Thailand
� To respond to automakers’ strategies favoring local procurement
� Overview
• Ownership: JFE Steel 100%
• Product: Hot-dip galvanized steel sheet(mainly for autos)
• Capacity: 400,000 tons/year
• Start-up: April 2013
Hemaraj Eastern Seaboard Industrial EstateHemaraj Eastern Seaboard Industrial EstateHemaraj Eastern Seaboard Industrial EstateHemaraj Eastern Seaboard Industrial Estate
HondaHondaHondaHonda
ToyotaToyotaToyotaToyota①①①①
IsuzuIsuzuIsuzuIsuzu①①①①
MitsubishiMitsubishiMitsubishiMitsubishi
ToyotaToyotaToyotaToyota③③③③
NissanNissanNissanNissan
SuzukiSuzukiSuzukiSuzuki
FordFordFordFord
ToyotaToyotaToyotaToyota②②②②
IsuzuIsuzuIsuzuIsuzu②②②②
Ford,MazdaFord,MazdaFord,MazdaFord,MazdaGMGMGMGM
BangkokBangkokBangkokBangkok
All of the automakers in Thailand are All of the automakers in Thailand are All of the automakers in Thailand are All of the automakers in Thailand are
located within the Hemaraj district.located within the Hemaraj district.located within the Hemaraj district.located within the Hemaraj district.
Map Ta PhutMap Ta PhutMap Ta PhutMap Ta Phut
JFE Steel Galvanizing (Thailand) JFE Steel Galvanizing (Thailand) JFE Steel Galvanizing (Thailand) JFE Steel Galvanizing (Thailand)
22
� Overview
• Ownership: JFE Steel 100%
• Product: Hot-dip galvanized steel sheet (mainly for autos)
• Capacity: 400,000 tons/year
• Start-up : January 2016
� JFE Steel Galvanizing Indonesia, Indonesia’s first CGL for automobiles
� To stay ahead of automakers’ ongoing expansion in Indonesia
� To capture growing demand in Indonesia
JFE Steel Galvanizing Indonesia
23
� JFE Steel joined Formosa Ha Tinh Steel, Vietnam’s first integrated steelworks , in 2015
� To capture growing demand in Vietnam and the ASEAN
� Overview • Ownership:
Formosa Plastic Group 70% China Steel Corporation 25%JFE Steel 5%
• Products: Hot Rolled Coils, Bars, Wire Rod
• Crude Steel Capacity: 7 million tons/year
Vietnam
24
� JFE Steel established Al Gharbia Pipe in UAE with SENAAT, a holding company owned by the Emirate of Abu Dhabi, and Marubeni-Itochu Steel, a Japanese trading house, in 2015
� To capture the demand for high-quality steel pipes for pipelines to transport oil and gas in the UAE and other GCC countries
MENA
� Overview• Ownership:
SENAAT 51%JFE Steel 27%Marubeni-Itochu Steel 22%
• Products: Large-diameter Welded Steel Pipes
• Capacity: 240,000 tons/year
• Start-up: October 2018
25
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IndonesiaJSGICGL
(2016)
IndiaJSW
CRM, CAL, CGL(2013)
Automotive Market
ChinaGJSS
CRM, CAL, CGL(2006)
ThailandJSGTCGL
(2013)
MexicoNucor JFE
CGL(2019)
� Grow with growing markets by producing locally high value added products
Thank you!
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