fbferbasa´s ch & chrome & ferrosilicon day · kazakhstan 387 4.0 3 3.8 12.8 turkey 220 2.3...

May 2011

F b ´ Ch & Ferbasa´s Chrome & Ferrosilicon Day

Heinz H. Pariser

Heinz H. Pariser Alloy Metals & Steel Market Research

1

Market ResearchXanten / Germany

OutlineOutline

1 Chromium as Alloying Element (6 - 12)1. Chromium as Alloying Element (6 - 12)

2. The Changing Cr Ore Enviroment (13 - 17)

3. FeCr Supply (18 - 31)

4 FeCr Production Cost & Price Trends (32 43)4. FeCr Production Cost & Price Trends (32 - 43)

5. Stainless Steel (38 - 55)

6. FeSi Selected Market Indicators (56 - 69)

7 Conclusion (70 75)7. Conclusion (70 - 75)

2

Chrome Ore Reserves & Resources 2010Chrome Ore Reserves & Resources 2010

RankChromite Ore Reserve Chromite Ore OutputRankin Mill t in % in Mill t in %

South Africa 7,340 76.0 1 14.8 *) 49.5

Chromite Ore Reserve Chromite Ore Output

Zimbabwe 930 9.6 2 0.6 1.9

Kazakhstan 387 4.0 3 3.8 12.8

Turkey 220 2.3 4 2.4 8.1

Finland 120 1.2 5 0.6 1.9

India 67 0 7 6 3 2 10 7India 67 0.7 6 3.2 10.7

Brazil 17 0.2 7 0.7 2.4Others 576 6.0 8 3.7 12.5

Total 9,657 100.0 29.9 100.0*) incl. UG2 & Independent Mines

S D t t f Mi l R S th Af i H i H P i

3

Source: Departm ent of Mineral Resources, South Africa, Heinz H. Pariser

Ferbasa Financial ResultsFerbasa Financial Results80.0250.0

60.0

70.0

200.0

2005 - 2010 :Cum. Sales: US$ 2,094 MillCum. Net Income US$ 344 MillReturn on Sales 16.4%

50.0150.0

Net Incoml $

2008 - 2010:Return on Sales 21.0%

30.0

40.0

100 0

me / Loss al

es in

Mil

10 0

20.0100.0 in M

ill $Sa

0.0

10.050.0

4

-10.00.02006 200920082007 2010

Ferbasa´s Position in the Global FeCr IndustryFerbasa s Position in the Global FeCr Industry60.0

0)

50.0

008

-201

0

40.0

vera

ge 2

0

Average 39.3%

30.0

s, in

% (

Av

Average 24.2% excl. ENRC

10 0

20.0

n on

Sal

es

0.0

10.0

Retu

rn

5

0.0ENRC Xstrata

(incl. Vanadium)

Merafe Ferbasa IMFA African Rainbow

Facor IFM

Chromium & Stainless SteelChromium as Alloying ElementChromium & Stainless SteelChromium as Alloying Element

6

Overview First Use for ChromiteOverview First Use for Chromite

Metallurgical f iMetallurgical Chromite

(Lump, Chips, Fines & Concentrates)

Chemical Chromite ( Concentrates)

Refractory Chromite (Lump, Fines & Concentrates)

Foundry Sand Chromite

( Concentrates)

Smelting Roasting Upgrade / Blend / Fire Upgrade

Ch /

Sodiumdichromate Refractory Bricks & Mortars Molds for Casting

Cr2O3 / Cr MetalCh i A id

Stainless Steels Super Alloys

Charge /High C FeCr

Low CFeCr

FeSiCr Chromic AcidChromic SulphateChromates

Stainless SteelsAlloy SteelsCast SteelsCast I ron

Super AlloysMetal FinishesLeather TanningPigmentsOther Uses

7

Source: USGS, Heinz H. Pariser

Other Uses

Chromium First Use 2010(in Chromium Content)

25

4.5

5.0

5.5

ill t20

25

te, i

n %

2.5

3.0

3.5

4.0

in M

nles

s Ste

el

15owth

Rat

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

CrM

n St

ain

HSLA

Tool & HSS Engineering Steels10

nnua

l Gr

Ferritic Stainless Steel

Special AlloysFoundries &

Castings

g g

5

erag

e A

n

Average Growth Rate: 4.8

Ferritic Stainless SteelCarbon & Low Alloy Austenitic Stainless Steel

00 20 40 60 80

Ave

8

Chromium First Use in %

Chromium Alloying Element in SteelChromium - Alloying Element in Steel

Increasing Hardness,Passiv Layer Formation Increasing Hardness,Carbide Forming

Tool & HSS

Passiv Layer Formation„Stainlessness“

Stainless Steels

CrTool & HSS,

Creep Resistant Steels,Wear Resistant Steels

Stainless Steels(min 10.5% Cr)

CrCase

S l R i t

Heat ResistingSteels

Case Hardening,

Q&TIncrease Hardness Scale ResistanceIncrease Hardness

Penetrability

0 5 - 2% Increase Hardability

9

0.5 - 2% Increase Hardability4 – 30% Increase Corrosion Resisting

Chrome in Selected Stainless Steel GradesChrome in Selected Stainless Steel Grades

% Cr Typical Grades ApplicationsFerritic

X 5 CrTi 12 4 ( 409“- 12% Cr)

% Cr Typical Grades Applications

Automotive exhaust systemX 5 CrTi 12 4 („409 12% Cr)

10.5%-

exhaust system

MartensiticX 20 Cr 13 („420“- 13% Cr)

Cutlery, needlevalves, nozzles

-30.0% Austenitic / CrMn

X 5 CrNi 18 9 („304“- 18% Cr) „General Purpose“Architecture, food processing, X 12 CrMnNiN 18 9 5 ( 202“- 18% Cr)

Ø Cr: 17.0%

food processing, deep drawing

X 12 CrMnNiN 18 9 5 („202 18% Cr)

DuplexX 2 CrNiMoN 22 5 3 („2205“- 22% Cr)Process industry,

D li ti l t( )

Desalination plants,Flue-gas Cleaning

10

First Use by Grades – HC FeCr 2010y(in Chromium Content)

20

25

n %

HSLA

Tool & HSS15

20

th R

ate,

in

CrMn Stainless Steel

Carbon & Low Alloy

Engineering SteelsFoundries &

Castings5

10

ual G

row

t


Special Alloys5

0

age

Ann

u

Austenitic Stainless Steel Ferritic Stainless Steel

-10

-5

0 20 40 60 80

Ave

ra

11

0 20 40 60 80


First Use by Grades – MC & LC FeCr 2010y(in Chromium Content)

HSLAAustenitic St St

Ferritic St St9

10

in %

CrMn St St

Tool &HSS6

7

8

wth

Rat

e,

HSS

4

5

6

nual

Gro

w


SpecialAlloys

Carbon & Low Alloy

Engineering Steels Foundries & Castings1

2

3

erag

e A

nn

g

0

1

0 20 40 60 80

Ave

12


Chromium & Stainless SteelThe Changing Cr Ore

Chromium & Stainless SteelEnvironment

13

Chrome Ore ProductionChrome Ore Production

2001 2008 2009 2010 G.R.01 10

Change10/092001 2008 2009 2010 01-10 10/09

Brazil 444 787 446 730 5.5 63.7

in %in ´000 t

EU 27 575 614 247 570 -3.3 130.8Other Europe 568 3,098 2,422 3,424 27.4 41.4Other Asia 2,178 4,037 3,815 4,045 6.3 6.0Middle East 217 1,435 1,272 1,847 30.3 45.2South Africa 7,824 13,634 11,073 14,791 6.8 33.6Other Africa 800 654 416 766 -3.0 84.0Australia 12 225 231 201 21 2 13 1Australia 12 225 231 201 21.2 -13.1

Subtotal 12,618 24,484 19,922 26,374 8.2 32.4

China 185 220 280 280 4.9 0.0India 1,678 3,900 2,414 3,200 5.2 32.6

Subtotal 1,862 4,120 2,694 3,480 5.2 29.2

Total 14 480 28 604 22 616 29 854 7 8 32 0

14

Total 14,480 28,604 22,616 29,854 7.8 32.0

Chrome Ore ProductionChrome Ore Production

Other Europe Middle EastAlbania364 kt,

11%Russia630 kt,

18%

Iran388 kt,

21% UAE

T k

21% UAE16 kt, 1%

Oman910 kt, 49%

Turkey 2,430 kt,

71%

Pakistan534 kt, 29%

15

Chrome Ore Demand Structure 2010Chrome Ore Demand Structure 2010

28

30

25

30

a. 20

22

24

26

28

n M

ill t

China

Australia15

20

0 in

% p

.a

14

16

18

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

in

Other Europe

AmericaOther 5

10

00 -

2010

Average Growth Rate: 6.5%

2 2 2 2 2 2 2 2 2 2 2

America Africa

EU

Asia

-5

00 20 40 60 80

Rat

e 20

0 g

Japan

-15

-10

Gro

wth

16

-20Share of Cr Ore Demand in %

Overview First Use for ChromiteOverview First Use for Chromite

Metallurgical Chromite

(Lump, Chips, Fines & Concentrates) 21.3 Mill t

Chemical Chromite ( Concentrates)

0.4 Mill t

Refractory Chromite (Lump, Fines & Concentrates)

0.1 Mill t

Foundry Sand Chromite

( Concentrates)0.6 Mill t

Smelting Roasting Upgrade / Blend / Fire Upgrade

Sodiumdichromate Refractory Bricks & Mortars Molds for Casting

FerrochromeCh /HC/MC/LCCharge/HC/MC/LC

9.5 Mill t / 5.5 Mill t Cr-units

Stainless Steel (Cr input) ll S l O h

67.3% 9.1%23.6%

Internal & External Stainless Scrap

12.8 Mill t,2.3 Mill t Cr-units

Stainless Steel (Cr input)Cr-units 3.7 Mill t Alloy Steel

Aust.Cr-units1.7 Mill t

Ferr.Cr-units1.2 Mill t

CrMnCr-units0.8 Mill t

Tool & High Speed Steel

Low Alloy Steel

Others

Nickel Alloys Foundries Welding Elec.

17Source: USGS, Heinz H. Pariser

Chromium & Stainless SteelFeCr SupplyChromium & Stainless SteelFeCr Supply

18

Ferrochrome Production Technologies (I)Ferrochrome Production Technologies (I)SAF

(Outokumpu & Conventional Process)DC Furnace

Beneficiation

Fines

(Ou o u pu & Co e o a ocess)

Lumpy Ore Fines

BeneficiationBeneficiation

Pelletising

Beneficiation

Pre heating

Sintering

OffgasReductants Reductants

Pre-heating

SAF

Offgas

Offgas

Fluxes

Power DC FurnaceOffgas Power

Fluxes

SAF

FeCr

g

Slag

DC Furnaceg

FeCr Slag

19Source: IFML Company Information

FeCr Ingots

Slag FeCr Ingots

Slag

Ferrochrome Production Technologies (II)Ferrochrome Production Technologies (II)

R M t i l C O R d t t

Xstrata / Merafe – Premus Process

Drying

Raw Materials: Cr2O3, Reductants,Binder Clay

Rotary Kiln

Hot sintered pellets

CoalDrying (Pre-Reduction)

Reductants, Fluxes

Coal,Off Gas

MillingElectric FurnaceSlag Power

H2O

FeCr IngotsPelletizing

FeCr GranulesRoasting

FeCr Granules

20Source: Heinz H. Pariser

Hot sintered pellets

Charge / HC FeCr ProductionCharge / HC FeCr Production2009 2010 2011 f Change

11/10 2012 f Change12/1111/10 12/11

in % in ´000 t in %

Brazil 113 172 190 10 5 190 0 0

in ´000 t

Brazil 113 172 190 10.5 190 0.0EU 27 158 339 399 17.7 425 6.5Russia, Turkey, Albania 224 343 373 8.7 421 12.9India 670 966 1 050 8 7 1 100 4 8India 670 966 1,050 8.7 1,100 4.8Kazakhstan 985 1,150 1,212 5.4 1,250 3.1South Africa 2,128 3,591 3,714 3.4 3,862 4.0Zimbabwe 100 150 180 20 0 180 0 0Zimbabwe 100 150 180 20.0 180 0.0Iran 9 15 17 13.3 28 64.7

Subtotal 4,388 6,726 7,134 6.1 7,456 4.5

China 1,510 2,005 2,310 15.2 2,650 14.7

Total 5 898 8 731 9 444 8 2 10 106 7 0

21

Total 5,898 8,731 9,444 8.2 10,106 7.0Charge Cr 2,391 4,078 4,262 4.5 4,434 4.0HC FeCr 3,508 4,652 5,182 11.4 5,672 9.5

2010 Charge & HC FeCr Producer Rankingg g22.71,200

%-share of total Cr units produced

18.1

800

1,000

r con

tent

77%14.5

12.1600

800

n '0

00 t

Cr

23%

9.2

400

duct

ion,

in

3.73.1 2.6 2.2 2.0 1.8 1.8

1.2 1.0 1.2 0.8

0

200Prod

0

Chi

na 1

)

ENRC

-Mer

afe

Indi

a 1)

man

cor

Hern

ic

A M

etal

s

okum

pu

IFM

L

ssm

ang

mba

bwe

Ferb

asa

Mec

hel

Varg

ön

Eti K

rom

yabi

nsk

22

C

Xstra

ta-

Sam

ASA

Out

o A Zim F E

Che

ly

591_065_Ranking 2010

1) Domestic Production; i.e. overseas activities not included

Producers of Charge / HC FeCrProducers of Charge / HC FeCrProduction Breakdown by Type2009 2010

in ´000 t Cr Units

Total Output(Cr Units)3,397 kt

Total Output(Cr Units)4,922 kt

ENRC 739.7 901.1Chelyabinsk 26.4 40.1Mechel 57.5 57.4Eti Krom 23.6 57.4ig

h G

rade

25 22High Grade

HC FeCrVargön 4.4 11.2India 416.8 600.9China 327.1 511.7Zi b b 60 7 91 0

HG

rade

4037Low Grade

HC FeCr

Zimbabwe 60.7 91.0Albania 4.0 13.8Iran 5.9 9.8Xstrata / Merafe 488.4 718.7

Low

G

Samancor 213.6 456.9Hernic 108.9 185.6Outokumpu 65.4 130.2IFML 61 2 110 5 C

r

35 41Charge Cr

IFML 61.2 110.5Assmang 62.8 100.0Ferbasa 59.5 90.3ASA Metals 90.7 152.9

Cha

rge

232009 2010

Tata & Others 36.7 69.7Vargön 14.6 37.4Feral 2.1 7.0

High Carbon overtaking Charge Chrome g g g(Production)

6,000

5 000

5,500

,

HC FeCrG.R.: 11.1%

4,500

5,000

Wei

ght

3,500

4,000

Mat

eria

l

Charge CrG.R.: 3.3%

2 500

3,000

in ´0

00 t

2,000

2,500

24

1,5002000 2002 2004 2006 2008 2010 2012 f

Regional Production Breakdown 2010Regional Production Breakdown 201030

20

in % China

Russia

Charge Cr

HC FeCr

10

0 -2

010,

i

Brazil

India Average Growth Rate: 6.2% p.a.Turkey

0

ate

2000

Brazil

Finland

South AfricaKazakhstan

20

-10

Gro

wth

Ra

Zimbabwe

Sweden

-30

-20G

Others

25

0 10 20 30 40 50 60 70 80 90

Share of Production, in % Others incl. Romania, Albania, Iran

Charge / HC FeCr Production –gIntegrated vs. Converters

25 0

30.0

9,00010,000

%

ChinaG.R.: 24.4%Converters with own

Cr Ore Base

20.0

25.0

6 0007,0008,000

% share of

Other ConvertersG.R.: -2.5%

G.R.: 10.6%

15.0

4 0005,0006,000

f Chinese n ́

000

t

10.0

2 0003,0004,000 C

onvertei

Integrated Producers

0.0

5.0

01,0002,000 ersIntegrated Producers

G.R.: 4.4%

26

02000 2002 2004 2006 2008 2010

Charge / HC FeCr ConsumptionCharge / HC FeCr Consumption

2009 2010 2011 f Change 2012 f Change2009 2010 2011 f 11/10 2012 f 12/11

in % in ´000 t in %NAFTA 229 481 507 5.4 531 4.7

in ´000 t

Brazil 99 152 198 30.7 210 5.9EU 1,234 1,687 1,907 13.0 2,083 9.2Japan 459 722 730 1.1 759 4.0S. Korea/Taiwan/India 1,124 1,442 1,638 13.6 1,658 1.2Others 522 573 524 -8.4 529 0.9

Subtotal 3,666 5,056 5,505 8.9 5,769 4.8

China 3,660 3,811 4,281 12.4 4,767 11.4

Total 7,326 8,867 9,786 10.4 10,537 7.7Total 7,326 8,867 9,786 10.4 10,537 7.7

Charge Cr 3,353 3,997 4,333 8.4 4,618 6.6

HC FeCr 3,972 4,870 5,453 12.0 5,919 8.5

27

High Carbon overtaking Charge Chrome g g g(Demand)

6,500

5 500

6,000

6,500

4 500

5,000

5,500HC FeCr

G.R. 00-10: 10.3%

4,000

4,500

in ́0

00 t

3,000

3,500

i

Charge Cr

2,000

2,500Charge Cr

G.R. 00-10: 4.6%

28

1,5002000 2002 2004 2006 2008 2010 2012 f

Regional Demand BreakdownRegional Demand Breakdown

HC F h D d Ch Ch D d

45

HC Ferrochrome Demand 2010

45

Charge Chrome Demand2010

China30

35

40

0 in

% p

.a.

China

30

35

40

0 in

% p

.a.

15

20

25

2000

-20

10

15

20

25

2000

-20

10

India

Others

Other Asia

J

Other Europe

0

5

10

owth

Rat

e 2

Average Growth Rate: 9.8%S.Africa

Others

Other Asia EU

J

NAFTA

0

5

10

owth

Rat

e 2

Av. Growth Rate: 4.3%

Japan

NAFTA

EU

-10

-5 0 20 40 60 80Gro

Share of FeCr Demand in %

Japan

-10

-5 0 20 40 60 80Gro

Share of FeCr Demand in %

29

Charge / HC FeCr Supply & Demand BalanceCharge / HC FeCr Supply & Demand Balance2007 2008 2009 2010 2011 2012

Stainless Steel Production 28 529 26 436 25 989 32 468 35 008 37 265

´000 t

Stainless Steel Production 28,529 26,436 25,989 32,468 35,008 37,265

Real Cr Demand 7,402 7,049 6,769 8,623 9,347 9,990

Production - Cr Production 7,665 7,434 5,898 8,732 9,444 10,106 - Capacity 9,238 8,963 9,573 10,199 10,614 11,297

i i i (i %) - Ut ilisat ion (in %) 83.0 82.9 61.6 85.6 89.0 89.5

Supply 7,523 6,843 7,052 8,579 9,312 10,053

Supply & Demand Balance 121 -206 283 -43 -35 63

Charge Cr Prices in $ / lb 0.91 1.76 0.85 1.24 1.38 1.61

30

Charge Cr Prices in $ / lb 0.91 1.76 0.85 1.24 1.38 1.61

Charge / HC FeCr Supply & Demand BalanceCharge / HC FeCr Supply & Demand Balance

3 000 Actual Forecast

2 500

3,000 Actual Forecast

2 000

2,500Real

Demand

1 500

2,000

in ́0

00 t

1 000

1,500

Supply

500

1,000

31

500

2009 2010 20112008 2012

Chromium & Stainless SteelFeCr Production Cost

Chromium & Stainless Steel& Price Trends

32

Charge / HC FeCr Costs ex Works - 2010Charge / HC FeCr Costs ex Works 2010

140.0

120.0

b C

r

China

80.0

100.0

S$ c

t per

lb

Average: US$ ct 76.9 per lb

China

60.0

80.0

Wor

ks, i

n US

South Africa a

20 0

40.0

Cos

ts E

x W South Africa

Ferbasa

0.0

20.0

0 0 0 0 20 0 30 0 40 0 0 0 60 0 0 0 80 0 90 0 00 0

Kazakhstan

33

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0Share of Total Production, in %

(Selected Companies)593/032/D1

South Africa – Major Cost DriversSouth Africa Major Cost Drivers

E h R t Eff tE k P T iff I30.0

Exchange Rate Effect

2010 AverageCash Cost:


30.0

Eskom Power Tariff Increases


Dez 2010:10.0

20.0

tion,

%

Cash Cost:US$ c 68.6 per lb


73.4

79.3

10.0

20.0

tion,

%


Feb 2010: 7.67 ZAR / US$

Dez 2010:6.83 ZAR / US$

0.0

sh C

ost V

aria

t

60.8

65.1

68.6

10 0

0.0

sh C

ost V

aria

t

ø 2009

ø 2010 April 2011:6.72 ZAR / US$

April 2011Increase

-20.0

-10.0

Cas

-20.0

-10.0

Cas

ø 2008

-30.0-30.0-20.0-10.00.010.020.030.0

Exchange Rate Variation, %

Ap-PreciationDe-Preciation Ap-PreciationDe-Preciation-30.0

-60.0 -40.0 -20.0 0.0 20.0 40.0 60.0 80.0Change in Power Tariff, %

34

g

Captive Power – Key to successfulp yFeCr Production?

0.12

0.14

Wh

Based on average Jan-Mar 2011exchange rates

0.10

US$

per k

W

2012/13

0.08

pric

e in

U

2011/12

0.04

0.06

e po

wer

p

2010/11

2009/10

0.02Ave

rage

IndiaCaptive China

South Africa

2009/10

IndiaPurchased

Kazakh‐stan

Scandi‐navia

Turkey

0.00Power (Eskom)Powerstan navia

35Sources: Annual and company reports, NordPool Electricity Spot Prices, Eskom, Heinz H. Pariser

Power SupplyPower Supply1. According to S. Africa´s electricity provider Eskom, sufficient

electricity will be available from 2013 onwardselectricity will be available from 2013 onwards.

2. Industry sources believe that electricity demand will shortly thereaftery y yexceed capacity again

3 Other power stations in Botswana are providing additional electricity3. Other power stations in Botswana are providing additional electricity.

With exception of the recently announced LION II expansion, no otherFeCr capacity expansions in South Africa will take place in largescale within the next 3 years. The LION II expansion as well as liftedcapacity restrictions after 2013 are expected to add 360 ktpy new and

600 kt idl d F C itsome 600 ktpy idled FeCr capacity.

36

Charge Cr Long term Price DevelopmentCharge Cr Long-term Price DevelopmentII III IV

2.50Realistic Price

Phase :G.R. :

I-4.1%

II III IV IV-1.5% -12.9% 12.7% 2.1%

2.00Deflated Prices 2010 US$

Realistic Price Forecast

(in 2010 US$)

1.50

/ lb

1.00

in U

S$ /

0.50

Nominal Prices FeCr

Production Cost

37

0.001970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Production Cost

DB_Cr_Prices

Chromium & Stainless SteelStainless SteelChromium & Stainless SteelStainless Steel

38

Stainless Steel in the Global Steel EnvironmentStainless Steel in the Global Steel EnvironmentStainless Steel Production

35 005

Stainless Steel Production

Steel Production 2010

6,4901,182

1,34732,46835,005

Production2.6%

3,4273,522

4 811

5,814

1,22225,989

12,35013,347

2,607

4,811

OthersAsiaJapan

Crude Steel Production

97.4%

9,751

JapanChinaEU 27USA97.4%

1 618 2 201 2 385

5,9807,494 7,914

39

1,618 2,201 2,385

2009 20112010

Global Stainless Steel End Use 2010Global Stainless Steel End Use - 2010

23 6%Engineering

22.1%

23.6%

Metal Goods

Engineering

17.2%

. %

Building & Construction

12.9%Tubular Products

Construction

11.6%Transport(incl. Automotive)

6.8%Non-Allocated

40

5.8%Electromechanical & Electronic Products

Stainless Steel MeltingStainless Steel Melting2009 2010 2011 Change 2012 Change

11/10 12/11 11/10 12/11in % in ´000 t in %

NAFTA 1,618 2,201 2,385 8.4 2,450 2.7

in ´000 t

NAFTA 1,618 2,201 2,385 8.4 2,450 2.7Brazil 482 472 493 4.5 514 4.3European Union 5,980 7,494 7,914 5.6 8,221 3.9Other Europe 152 232 243 4.5 253 4.4Japan 2,607 3,427 3,522 2.8 3,670 4.2S. Korea/Taiwan 3,121 3,642 3,700 1.6 3,948 6.7S. Africa 588 478 611 27.9 638 4.3

Subtotal 14,548 17,946 18,868 5.1 19,694 4.4

China 9,751 12,350 13,347 8.1 14,548 9.0India 1,690 2,172 2,793 28.6 3,023 8.2

Subtotal 11,441 14,522 16,140 11.1 17,571 8.9

41

Total 25,989 32,468 35,008 7.8 37,265 6.4

Global Crude Stainless Production 1968 2015Global Crude Stainless Production 1968 - 201550.0 Post-War

Reconstruction Crisis Years Stainless Steel-Boom:Asia - Europe - USA

Stainless Steel‐Boom:China

R² = 0.9835

40.0

45.0

n M

ill t

Reconstruction Asia Europe USA China

2008 - 2010World-Financial Crises

30 0

35.0

duct

ion,

in

25.0

30.0

s Ste

el P

rod

15.0

20.0

l Sta

inle

ss Stainless Steel ProductionG.R.: + 5.1% p.a.

5.0

10.0

Glo

ba

42

0.01968 1973 1978 1983 1988 1993 1998 2003 2008 2013

Stainless Price CompetitivenessStainless Price Competitiveness

Index 1967 = 100

300

340

282 5

2009 2010 2011Jan-Feb

430 SS CR 91.6 122.6 132.8

220

260

s

Iron & Steel

282.5Non Ferrous 173.4 221.5 257.3Plastic 161.9 167.8 172.4Aluminium 184.6 194.4 209.5Iron & Steel 233.0 258.8 282.5

180

220

ndex

Poi

nts

170.1

100

140

in In Nominal Price 304

20

60 Deflated Price 304Growth Rate: -1.7 %

57.9

43

201967 1972 1977 1982 1987 1992 1997 2002 2007 2012

*) Base: Germany Source: Heinz H. Pariser

Chromium & Stainless SteelStainless Global CapacitiesChromium & Stainless SteelStainless Global Capacities

44

Stainless Steel – Global Melting CapacitiesStainless Steel Global Melting Capacities

Key Projects

84.487.7 89.0 88.9 90.0 88.8 90

100

50

55

NameplateCapacity

UtilizationRatio

• Jindal Stainless, India(2011 / 800 kty)

76.2

71.1

60

70

80

45

50

o, in

%

t in

Mill

t

CapacityG.R.: 5.9%

• Tsingshan Holding, China(2012? / 800 kty)

40

50

60

35

40

zatio

n Ra

tio

city

/ O

utpu

Global Melting

• ThyssenKrupp Stainless, USA(2013 / 900 kty)

B h St i l M l i

0

20

30

25

30 Utiliz

Cap

ac PeakCapacityG.R.: 5.3%

gG.R.: 8.4%• Bahru Stainless, Malaysia

(2015? / 1,000 kty)

0

10

202008 2010 2012 2014

• Ongoing expansion ofmills in India and China

45

Production Ranking 2010 gSelected Stainless Steel Producers

2.5

3.0Production Volume 2010Peak Production

-1.5%

-5.9%

-29.9%

-21.0%-20.4%

2.0

l t

29.9%

1.0

1.5

in M

il

-16.8%

-20.8%

.72

.65

.37

.13

.06

.05

.63

.34

.10

.92

.84

.79

.69

.68

.63

.56

.50

.36

32 31 .30

0.5

2007

)

2006

)

2006

)

2008

)

2007

)

2006

)

2006

)

2006

)

006)

2007

)

2006

)

2007

)

2007

)

16.8%

-0.7%-7.0%

-21.1%-13.1%-2.7%

-27.0%

2. 2. 2. 2. 2. 2. 1. 1. 1. 0. 0. 0. 0. 0. 0. 0. 0. 0. 0. 0.3 0.0.0

TISC

O

sco

/ ZP

SS

ssen

Krup

p ta

inle

ss

O /

LIS

CO

Ace

rinox

celo

rMitt

al

utok

umpu

Baos

han

on &

Ste

el

Tsin

gsha

n

Wuh

ang

nles

s Ste

el

JISC

O

AK

Stee

l

l Sta

inle

ss

ppon

Ste

el JFE

sshi

n St

eel

Alle

ghen

y Te

ledy

ne

pon

Yaki

n

(Nip

pon

umito

mo)

kkin

ko

pon

Met

al)

Taish

an

Stai

nles

s

(2 (2 (2(2(2(2(2(2(2 (2(2(2(246

Pos

Thys St

YUSC

O

Arc Ou B Iro W

Stai

n

Jinda N

ip Nis A

Nip

p

NSS

C

Stee

l/S Nik

(Nip

p

Stainless Steel –Stainless Steel –Supply & DemandSupply & Demand

47

Total Selected CountriesTotal Selected Countries

12 0

2009 2010 201511.0

12.0

teel

Source: Heinz H. PariserDemandForecast

2009 2010 2015

Supply 24,767 31,286 42,966

in ´000 t

9.0

10.0

Stai

nles

s St

Demand

Demand 27,084 31,020 43,034

Stock Change -2,317 266 -697.0

8.0

ll t C

rude

S

Supply

5.0

6.0in M

il

4.0

5.0

2000 2005 2010 2015

48

ChinaChina

6 0

5.0

6.0

teel

Source: Heinz H. Pariser DemandForecast

2009 2010 2015

4.0

Stai

nles

s St 2009 2010 2015

Supply 9,751 12,350 20,093

in ´000 t

2 0

3.0

ll t C

rude

S

Supply

Demand 9,104 11,269 19,990

Stock Change 647 1,081 103

1.0

2.0

in M

il

0.02000 2005 2010 2015

Demand

49

IndiaIndia

1 0

2009 2010 20150.8

0.9

1.0

teel

Source: Heinz H. Pariser DemandForecast

2009 2010 2015

Supply 1,690 2,172 3,675

in ´000 t

0.6

0.7

0.8

Stai

nles

s St

SupplyDemand 2,160 2,422 3,607

Stock Change -470 -249 680.4

0.5

ll t C

rude

S pp y

0 1

0.2

0.3

in M

il

Demand

0.0

0.1

2000 2005 2010 2015

50

Stainless Steel –Stainless Steel –Key Growth DriversKey Growth Drivers

51

Stainless Key Growth Drivers StrengthStainless Key Growth Drivers - Strength

I i ti f2005 2010

Increasing ratio ofemerging markets 48.2% 59.0%

St i l ti2006 2007

2008

2010 201125.0

30.0

ptio

n,

Correlation: 0.99

Stainless consumptionexpansion driven byeconomic growth &rising standard of living 1968

20082009

5.0

10.0

15.0

20.0

Glo

bal C

onsu

mp

in M

ill t

rising standard of living 0.00.0 20.0 40.0 60.0 80.0

G

GDP (PPP adjusted) in Trill US$

140 Source: Heinz H. Pariser

Price Competitiveness 57.7

40

60

80

100

120n

Inde

x Po

ints

Index 1967 = 100

f i

52

0

20

1967 1977 1987 1997 2007

in Deflated Price 304Growth Rate: -1.7 %

*) Base: Germany

Stainless Key Growth Drivers WeaknessStainless Key Growth Drivers - Weakness

P i V l tilit d 4 0

4.5

5.0

ce €pe

r t

Average Trader Price

GERMANY

Price Volatility and exposureto speculative nickelprices

1 5

2.0

2.5

3.0

3.5

4.0

Effe

ctiv

e Pr

icG

rade

304

, '00

0 €

Service Centres Sales

1.5

2000 2005 2010

G

60.02.0€

Selected European Stainless Producers

Lack of profitability20.0

30.0

40.0

50.0

-0.5

0.0

0.5

1.0

1.5

Nickel C

ash Priin '000 US$ peof

it &

Loss

in B

ill €

0.0

10.0

-1.5

-1.0

ice,er tPr

o

Source: Heinz H. Pariser

2007 2010

No technological „Revolution“-State-of-the-art productionbased on EAF-AOD/VOD and

EAF

AOD / VOD

53

Continuous Casting Cont. Casting

Stainless Key Growth Drivers - ThreatsStainless Key Growth Drivers - Threats2005 2010

Market Saturation!51.8% 41.0%

120OECD - IP vs Material Consumption

Copper Industrial Production

Pricing, External Substitution

70

80

90

100

110

Inde

x 20

05=1

00

pp

Stainless Steel Nickel

60

70

1995 1998 2001 2004 2007 2010

I

External Scrap Ratios -China vs Global (in %)

High primary and lowsecondary raw materialusage in China 36 4

China vs. Global (in %)44.3

39.9Global Average

54

g 36.4

15.6

2005 2010China

Stainless Key Growth Drivers - OpportunitiesStainless Key Growth Drivers - Opportunities

Industry Consolidation 1 + 1 = 1.5?

NPI RKEFTechnological Advancement?Low-scrap stainless meltingin China

NPI - RKEF

AOD

in China. Cont. Casting

Backward integrationinto (primary) raw materials

60% of the largest global stainless producers are backward integrated –

55

backward integrated but only 1 European

Chromium & Stainless SteelFeSi Selected Market IndicatorsChromium & Stainless SteelFeSi Selected Market Indicators

56

Crude Steel ProductionCrude Steel Production1,400

ring

teel

1 300

1,350 G.R.: 3.8%

Engi

neer

3%HS

LA3%

Stai

nles

s S3%

l & H

SS0%

1,250

1,300

Tool 0

Stee

l

1,200

in M

ill t

rbon

& A

lloy

S91

%

1,100

1,150 Ca

1,050

1,100

57

1,0002005 2006 2007 2008 2009 2010 2011

Steel Production & FeSi MarketSteel Production & FeSi Market

2005 2009 2010 2011 G.R.in %in Mill t

Crude Steel Production 1,007 1,088 1,268 1,337 3.8

Si d i 6 8 0FeSi Production 5 6 7 8 5.0China 3 4 5 5 6.1ROW 2 2 2 2 3.0ROW 2 2 2 2 3.0

FeSi Consumption 5 6 7 8 5.0

Specific FeSi Input in % 0.53 0.55 0.56 0.57 1.2

58

FeSi ProductionFeSi Production5.5

Chi

4.5

5.0China

G.R.: 6.1%

4.0

3.0

3.5

in M

ill t

2 0

2.5RoW

G.R.: 3.0%

1.5

2.0

59

1.02005 2006 2007 2008 2009 2010 2011

FeSi ConsumptionFeSi Consumption0.588.0

0 56

0.577.5 G.R.: 5.0%

0.55

0.56

7.0

Specificn,

in M

ill t

0.546.5

c FeSi Inpunsum

ptio

n

0.52

0.536.0

ut, in %Fe

Si C

on

0.515.5

60

0.505.02005 2006 2007 2008 2009 2010 2011

China FeSi MarketChina - FeSi Market

Crude Steel Production & FeSi Production &Crude Steel Production & Specific FeSi Input

0.70700Crude Steel Production

6,000

FeSi Production &FeSi Exports

0.67

0.68

0.69

550

600

650

Specifion, i

n M

ill t Crude Steel Production

G.R.: 10.3%

4,000

5,000

0 64

0.65

0.66

450

500

550 ic FeSi Inpu

eel P

rodu

cti

2 000

3,000

4,000

in ́0

00 t FeSi Production

G.R.: 6.7%

FeSi Exports

0.62

0.63

0.64

350

400

ut, in %

Cru

de S

te

1,000

2,000 G.R.: -7.3%

0.613002005 2006 2007 2008 2009 2010 2011

02005 2006 2007 2008 2009 2010 2011

61

Japan FeSi MarketJapan - FeSi Market

Crude Steel Production & FeSi Imports

0.70125Crude Steel

Crude Steel Production & Specific FeSi Input

FeSi Imports

600

0.60

110

115

120

Specificion,

in M

ill t Crude Steel

ProductionG.R.: -1.8%

500

550

0.40

0.50

95

100

105

c FeSi Inputeel P

rodu

cti

400

450

in ́0

00 t

G.R.: -0.5%

0.3085

90

95 t, in %

Cru

de S

te

300

350

400

0.20802005 2006 2007 2008 2009 2010 2011

3002005 2006 2007 2008 2009 2010 2011

62

South Korea FeSi MarketSouth Korea – FeSi Market


0.7065


290

FeSi Imports

0.6060 Specifon, i

n M

ill t Crude Steel

ProductionG.R.: 3.8% 250

270 G.R.: 7.6%

0.40

0.50

50

55

fic FeSi Inpuel P

rodu

ctio

210

230

in ́0

00 t

0.3045ut, in %

Cru

de S

tee

170

190

0.20402005 2006 2007 2008 2009 2010 2011

1502005 2006 2007 2008 2009 2010 2011

63

Taiwan FeSi MarketTaiwan – FeSi Market


0.7022Crude Steel


FeSi Imports

95

0.6020

21 Specifiion,

in M

ill t Crude Steel

ProductionG.R.: 0.2%

85

90

0.40

0.50

18

19

ic FeSi Inpu

eel P

rodu

cti

75

80

in ́0

00 t

0.3016

17

t, in %

Cru

de S

te

65

70G.R.: 0.3%

0.20152005 2006 2007 2008 2009 2010 2011

602005 2006 2007 2008 2009 2010 2011

64

Russia FeSi MarketRussia – FeSi MarketCrude Steel Production &

Specific FeSi Input FeSi Imports & Exports

0 50

0.60

0.70

70

75

80

Specifiction,

in M

ill t Crude Steel


300

350

400

450

ExportsG R 4 7%

0 30

0.40

0.50

60

65

70

c FeSi Input, in %

de S

teel

Pro

duct

100

150

200

250

in ́0

00 t G.R.: 4.7%

ImportsG R : 24 8%

0.20

0.30

55

60

2005 2006 2007 2008 2009 2010 2011

%

Cru

d

0

50

2005 2006 2007 2008 2009 2010 2011

G.R.: -24.8%

FeSi Production & Demand

500

600

700


200

300

400

in ́0

00 t Production

G.R.: 4.7%

65

0

100

2005 2006 2007 2008 2009 2010 2011

ConsumptionG.R.: -8.9%

Ukraine FeSi MarketUkraine – FeSi MarketCrude Steel Production &


0.20

0.25

0.30

39414345

Specifiion,

in M

ill t Crude Steel


80

100

120

ExportsG.R.: -1.1%

0.10

0.15

2931333537

c FeSi Input, in %

de S

teel

Pro

duct

i

40

60

in ́0

00 t

ImportsG R 14 4%

0.00

0.05

252729

2005 2006 2007 2008 2009 2010 2011

%

Cru

d

0

20

2005 2006 2007 2008 2009 2010 2011

G.R.: -14.4%


120

140

160


40

60

80

100

in ́0

00 t


660

20

40

2005 2006 2007 2008 2009 2010 2011

ConsumptionG.R.: -5.5%

United States FeSi MarketUnited States – FeSi Market

2005 2009 2010 2011 G.R.in %

Crude Steel Production 94,897 58,142 80,594 87,851 -4.1

in ´000 t

Crude Steel Production 94,897 58,142 80,594 87,851 4.1

FeSi Production 125 140 170 175 4.4

FeSi Exports 8 9 15 25 23.3

FeSi Imports 197 7 150 160 -15 8FeSi Imports 197 7 150 160 15.8

FeSi App. Consumption 314 138 305 310 -4.7

Specific FeSi Input in % 0.33 0.24 0.38 0.35 -0.6

67

United States FeSi MarketUnited States – FeSi MarketCrude Steel Production &


0.40

0.50

0.60

9095

100105

Specifiion,

in M

ill t Crude Steel

ProductionG.R.: -4.1% 200

250Imports

G.R.: -15.8%

0.20

0.30

6570758085

ic FeSi Input, in %e St

eel P

rodu

cti

50

100

150

in ́0

00 t

Exports

0.00

0.10

556065

2005 2006 2007 2008 2009 2010 2011

%

Cru

d

0

50

2005 2006 2007 2008 2009 2010 2011

ExportsG.R.: 23.3%


350

400Consumption

G.R.: -4.7%


200

250

300

in ́0

00 t


68100

150

2005 2006 2007 2008 2009 2010 2011

Historic Price Development FeSi (75% Si)Historic Price Development FeSi (75% Si)

3,000

2,500

,

t

Q1

2,000

,

in U

S$ p

er

1,500

2,000

%) P

rices

, i

+ 25

%

A P i 1 358 US$ t

1,000

1,500

FeSi

e (7

5%

-25%

Average Price: 1,358 US$ per t

500

1,000

69

5001998 2000 2002 2004 2006 2008 2010

Chromium & Stainless SteelConclusionsChromium & Stainless SteelConclusions

70

Conclusion (1)Conclusion (1)1. Cr is an important alloying element in steel making; Cr contents between

0 5 2% i h d bilit f t l hil C t t b t 4% d 0.5 – 2% increase hardability of steel while Cr contents between 4% and 30% increase corrosion resistant. A minimum of 10.5% Cr is required for providing stainless steels its corrosion resistant characteristics and as s ch Cr is irreplaceable such Cr is irreplaceable.

2. Cr ore production reached 30 Mill t last year and the volume expanded by 7 8% annually since 2001 South Africa is the largest source of Cr ore by 7.8% annually since 2001. South Africa is the largest source of Cr ore contributing last year some 50% to the global requirement. UG2 Cr tailings from the platinum industry are meanwhile increasingly utilised and contributed last year approximately 5 – 6 Mill t to the country’s Cr and contributed last year approximately 5 – 6 Mill t to the country s Cr ore availability.

3. For the conversion of Cr ore into Ferrochrome various process routes are 3. For the conversion of Cr ore into Ferrochrome various process routes are available. The traditional submerged Arc furnace route is increasingly replaced by DC plasma furnace and advanced pre-reduction processes such as the Premus process applied by Xstrata.

71

p p pp y

Conclusion (2)Conclusion (2)4. Presently available FeCr production capacity of 10.6 Mill is utilised by

89% but major expansions in China, South Africa, India and other 89% but major expansions in China, South Africa, India and other countries will increase the capacity to approximately 12 Mill t by 2013. Bottlenecks in capacity expansions are primarily the availability of electricity (South Africa) and of Cr ore (China, India).y ( ) ( )

5. In contrast to previous years, the global market for Charge / HC FeCr is presently well balanced, providing opportunities for price increases.

6. FeCr production cost averaged last year at approximately US$ cts 75 per lb Cr, Brazils Ferbasa FeCr operation is well placed on the global cost curve. Production costs are severely influenced by prices for energy, reductants and workforce. Fluctuations of exchange rates have often an underestimated impact.

7. In the light of slow capacity expansions in recent years and lack of electricity / restrictions in various countries, bottlenecks in the availability of FeCr cannot be excluded between 2013 and 2015 possibly resulting in

72

of FeCr cannot be excluded between 2013 and 2015 possibly resulting in substantial price increases. However, once these limitations are overcome, prices will return to the prevailing growth path again.

Conclusion (3)Conclusion (3)

8 St i l t l i b f th t i t t fi t t f C I 8. Stainless steel is by far the most important first use segment for Cr. In stainless steel making Cr is irreplaceable – without Cr there is no stainless steel. Global crude stainless output expands by just over 5% annually reaching last year 32 5 Mill t and aiming at some 45 Mill t by annually, reaching last year 32.5 Mill t and aiming at some 45 Mill t by 2015. The main growth areas include China, India and most other Asian markets.

9. Despite of the high growth the global stainless steel industry suffers from overcapacities and the return on sales between 2005 and 2010 averaged 5 5% averaged 5.5%.

10.Between 60 – 80% of stainless steel production cost originate from raw materials in particular from Nickel and Chrome. Stainless markets are materials in particular from Nickel and Chrome. Stainless markets are subsequently highly volatile and exposed to significant stock changes over a business cycle.

73

Conclusion (4)Conclusion (4)11.The key growth drivers for stainless steel are the increasing demand from

emerging markets and the extraordinary price competitiveness of the material. The high dependence on Nickel and its price volatility as well as lack of technological innovations are weaknesses, while market saturation in mature economies usage and substitution triggered by

l di t i l t id d j th t exploding raw material cost are considered as major threats. Opportunities exist in further industry consolidation; changes in the raw material input and backward integration into primary raw material are important opportunities as wellimportant opportunities as well.

12.Stainless steel scrap is the main competitor for primary chrome and nickel Global stainless scrap reserves expand permanently reaching nickel. Global stainless scrap reserves expand permanently, reaching meanwhile a volume of 8.5 Mill t. Last year, Cr units contained in stainless steel scrap amounted to 1.3 Mill t, which are traded at discounts between 15 – 20% below prices for primary Cr The input of external stainless scrap 15 20% below prices for primary Cr. The input of external stainless scrap by stainless steel producers averages presently around the 40% mark, but certain markets – such as the United States – operate with high external scrap ratios ranging between 66 – 68% while China has reduced the

74

scrap ratios ranging between 66 68% while China has reduced the external stainless scrap input from some 20% in 2009 to presently 15 –16%.

Conclusion (5)Conclusion (5)

13 A b i f i f k t t f F Sili i id d U f 13.A brief review of market parameters for Ferro Silicon is provided. Usage of FeSi expanded between 2005 and 2011 (estimated) by 5% annually from 5 Mill t in 2005 to estimated 8 Mill t in 2011. The specific FeSi input increased from 0 53% in 2005 to 0 57% in 2011 increased from 0.53% in 2005 to 0.57% in 2011.

14.China accounts for over 60% of FeSi supply and output expands here by 6 1% annually All other countries contribute between 35 – 40% of the 6.1% annually. All other countries contribute between 35 – 40% of the requirement which is expanding by 3.0% p.a. Major markets for FeSi include China (4.5 Mill t), Japan and other Asian countries (0.9 Mill) USA (0 3 Mil t) and CIS countries (0 3 Mill t) (0.3 Mil t) and CIS countries (0.3 Mill t).

15.Present market prices for FeSi 75 of almost US$ 2,342 per t are approximately 72.5% above the long-term average price of approximately 72.5% above the long term average price of US$ 1,358 per t.

75

Contact Details

Heinz H. Pariser

Contact Details

Heinz H. Pariser Alloy Metals & Steel Market ResearchAlloy Metals & Steel Market ResearchScharnstr. 5146509 Xanten

Germany

Tel.: +49 2801 77 11 0Email: info@heinzpariser deEmail: [email protected]

www.heinzpariser.de

We are not the biggest, We are not the biggest, we are not the smallest,we are not the smallest,

but we are the best! but we are the best!

76

… but we are the best!… but we are the best!

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