the age p r o f i of presentation by: karlis m. kirsis managing partner world steel dynamics inc. t...
TRANSCRIPT
The Age
PROF I
OF
Presentation by:
Karlis M. Kirsis
Managing Partner
World Steel Dynamics Inc.
www.worldsteeldynamics.com
TS
WORLD STEEL DYNAMICS
Volcanic Activity: The Steel Market
WORLD STEEL DYNAMICS
Death Spirals and Volcanoes(HRB -- $ per tonne, Tier I mills, FOB the port)
$300June ’94
VolcanoMay’95
$475
“The Sna ke”
--
$270May ’98
Dea th Valley $ 185
Dec. 1998
$333April 2000
$305Oct. ‘95
$345April ‘97 $325
Jan. ‘98$355
Sept. ‘94
---- The “V” ----
$275May ‘96
$290Dec. ‘96
$225Feb. ‘96
MassiveEruptio n
$625 Sept. 2004
$480May 2005
Rock Bottom$ 175
Dec. 2 00 1
$350Feb. 2003
Death Sp iral Threat
$250, June 2003
MiniVolcano
MiniVolcano
$600Dec. 2004
$475Oct. 2005
$390July 2005
$300June ’94
VolcanoMay’95
$475
“The Sna ke”
--
$270May ’98
Dea th Valley $ 185
Dec. 1998
$333April 2000
$305Oct. ‘95
$345April ‘97 $325
Jan. ‘98$355
Sept. ‘94
---- The “V” ----
$275May ‘96
$290Dec. ‘96
$225Feb. ‘96
MassiveEruptio n
$625 Sept. 2004
$480May 2005
Rock Bottom$ 175
Dec. 2 00 1
$350Feb. 2003
Death Sp iral Threat
$250, June 2003
MiniVolcano
MiniVolcano
$600Dec. 2004
$475Oct. 2005
$390July 2005
$420Jan
2006
$450Mar. 2006
WORLD STEEL DYNAMICS
HRB Pricing Troika: USA, China and World HRB Prices: Chinese Home Market, USA Spot and World Export(dollars per tonne)
150
250
350
450
550
650
750
850Ja
n-97
Apr
-97
Jul-9
7
Oct
-97
Jan-
98
Apr
-98
Jul-9
8
Oct
-98
Jan-
99
Apr
-99
Jul-9
9
Oct
-99
Jan-
00
Apr
-00
Jul-0
0
Oct
-00
Jan-
01
Apr
-01
Jul-0
1
Oct
-01
Jan-
02
Apr
-02
Jul-0
2
Oct
-02
Jan-
03
Apr
-03
Jul-0
3
Oct
-03
Jan-
04
Apr
-04
Jul-0
4
Oct
-04
Jan-
05
Apr
-05
Jul-0
5
Oct
-05
Jan-
06
$ p
er m
etri
c to
nn
e
USAHRB Spot Price
ChinaDomestic Price
World SpotExport Price
WORLD STEEL DYNAMICS
Dollars-per-Euro drives World HRB Price
100
200
300
400
500
600
700Ja
n-00
Mar
-00
May
-00
Jul-
00S
ep-0
0N
ov-0
0Ja
n-01
Mar
-01
May
-01
Jul-
01S
ep-0
1N
ov-0
1Ja
n-02
Mar
-02
May
-02
Jul-
02S
ep-0
2N
ov-0
2Ja
n-03
Mar
-03
May
-03
Jul-
03S
ep-0
3N
ov-0
3Ja
n-04
Mar
-04
May
-04
Jul-
04S
ep-0
4N
ov-0
4Ja
n-05
Mar
-05
May
-05
Jul-
05S
ep-0
5N
ov-0
5Ja
n-06
Mar
-06
$ p
er M
T, F
OB
th
e P
ort
0.80
0.90
1.00
1.10
1.20
1.30
1.40
Do
llar
s p
er E
uro
Dollars per EuroExchange rate(right scale)
World Export Price(left scale)
Age of Steelmakers’Metallics
WORLD STEEL DYNAMICS
50
100
150
200
250
300
350
400
450
500Ja
n-9
7M
ar-9
7M
ay-9
7Ju
l-97
Sep
-97
No
v-97
Jan
-98
Mar
-98
May
-98
Jul-
98S
ep-9
8N
ov-
98Ja
n-9
9M
ar-9
9M
ay-9
9Ju
l-99
Sep
-99
No
v-99
Jan
-00
Mar
-00
May
-00
Jul-
00S
ep-0
0N
ov-
00Ja
n-0
1M
ar-0
1M
ay-0
1Ju
l-01
Sep
-01
No
v-01
Jan
-02
Mar
-02
May
-02
Jul-
02S
ep-0
2N
ov-
02Ja
n-0
3M
ar-0
3M
ay-0
3Ju
l-03
Sep
-03
No
v-03
Jan
-04
Mar
-04
May
-04
Jul-
04S
ep-0
4N
ov-
04Ja
n-0
5M
ar-0
5M
ay-0
5Ju
l-05
Sep
-05
No
v-05
Jan
-06
Mar
-06
$ p
er
me
tric
to
nn
e
USA Autobundles
Far East No. 1,Heavy Melt
USA No. 1Heavy Melt
WORLD STEEL DYNAMICS
Spread: USA Autobundle lessUSA #1 Heavy Melting
0
50
100
150
200Ja
n-00
Mar
-00
May
-00
Jul-
00
Sep
-00
Nov
-00
Jan-
01
Mar
-01
May
-01
Jul-
01
Sep
-01
Nov
-01
Jan-
02
Mar
-02
May
-02
Jul-
02
Sep
-02
Nov
-02
Jan-
03
Mar
-03
May
-03
Jul-
03
Sep
-03
Nov
-03
Jan-
04
Mar
-04
May
-04
Jul-
04
Sep
-04
Nov
-04
Jan-
05
Mar
-05
May
-05
Jul-
05
Sep
-05
Nov
-05
Jan-
06
Mar
-06
Do
llar
s p
er G
ross
To
n,
Del
iver
ed
WORLD STEEL DYNAMICS
Return of the Steel Phoenix “Profitability”
-$40
-$20
$0
$20
$40
$60
$80
$100
$120
$140Q
1 00
Q2
00
Q3
00
Q4
00
Q1
01
Q2
01
Q3
01
Q4
01
Q1
02
Q2
02
Q3
02
Q4
02
Q1
03
Q2
03
Q3
03
Q4
03
Q1
04
Q2
04
Q3
04
Q4
04
Q1
05
Q2
05
Q3
05
Q4
05
Q1
06f
Q2
06f
Q3
06f
Q4
06f
Do
llar
s p
er N
et T
on
Sh
ipp
ed
USMajor Mills
USMini Mills
USProcessors
Forecast
China Dominates Steel Growth
WORLD STEEL DYNAMICS
Sep-04Oct-04Nov-04Dec-04Jan-05Feb-05Mar-05Apr-05
May-05Jun-05Jul-05
Aug-05Sep-05Oct-05Nov-05Dec-05Jan-06Feb-06Mar-06Apr-06
China Crude Steel Production
100
150
200
250
300
350
400
Jan-
00M
ar-0
0M
ay-0
0Ju
l-00
Sep
-00
Nov
-00
Jan-
01M
ar-0
1M
ay-0
1Ju
l-01
Sep
-01
Nov
-01
Jan-
02M
ar-0
2M
ay-0
2Ju
l-02
Sep
-02
Nov
-02
Jan-
03M
ar-0
3M
ay-0
3Ju
l-03
Sep
-03
Nov
-03
Jan-
04M
ar-0
4M
ay-0
4Ju
l-04
Sep
-04
Nov
-04
Jan-
05M
ar-0
5M
ay-0
5Ju
l-05
Sep
-05
Nov
-05
Jan-
06M
ar-0
6
Mill
ion
To
nn
es
An
nu
aliz
ed
All but China Crude Steel Production
660
700
740
780
820
Jan-
00M
ar-0
0M
ay-0
0
Jul-
00
Sep
-00
Nov
-00
Jan-
01M
ar-0
1M
ay-0
1
Jul-
01S
ep-0
1
Nov
-01
Jan-
02
Mar
-02
May
-02
Jul-
02
Sep
-02
Nov
-02
Jan-
03M
ar-0
3M
ay-0
3
Jul-
03
Sep
-03
Nov
-03
Jan-
04
Mar
-04
May
-04
Jul-
04S
ep-0
4
Nov
-04
Jan-
05M
ar-0
5M
ay-0
5
Jul-
05
Sep
-05
Nov
-05
Jan-
06M
ar-0
6
Mill
ion
To
nn
es
SA
AR
WORLD STEEL DYNAMICS
Chinese Fixed Asset Investment Bubble
0%
10%
20%
30%
40%
50%
China Japan South Korea USA
FAI as Share of GDP
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
China Japan South Korea USA
FAI Steel Intensity
0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
China Japan South Korea USA
Household Spending Steel Intensity
WORLD STEEL DYNAMICS
Global Steelmaking Metallics Requirements
Global Steelmaking Metallics Requirements
0
100
200
300
400
500
600
700
800
900
1,000
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
MIL
LIO
N T
ON
NE
S Pig Iron
SSS+HMSNew Scrap
Home Scrap
Obsolete Scrap
Forecast
China Region Metallics Requirement
WORLD STEEL DYNAMICS
China Region Metallics Requirement
0
100
200
300
400
500
600
700
80019
75
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
MIL
LIO
N T
ON
NE
S
Note: Includes North Korea and Vietnam.
Pig Iron
Home Scrap
Obsolete Scrap
New Scrap
SSS/HMS
Forecast
WORLD STEEL DYNAMICS
Global Metallics Requirements excluding China
Global Metallics Requirements Excluding China
0
200
400
600
800
1,000
1,200
1,40019
75
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
MIL
LIO
N T
ON
NE
S
Pig Iron
Home Scrap
SSS Needs
HMS Needs
New Scrap
Obsolete Scrap
Forecast
WORLD STEEL DYNAMICS
2006Outlook
WORLD STEEL DYNAMICS
Big Picture Global economic news appears favorable. Economic activity continues to expand notwithstanding oil prices in the mid-high $60s.
In China, the economy has shifted to an even faster growth rate in the past six months.
In the USA, the economy is strong, with signs that non-residential construction may rise 10% or more this year.
In Germany, business confidence is up sharply.
In Japan, confidence is also up and capital spending by manufacturers is rising.
WORLD STEEL DYNAMICS
The Odds for Non-Chinese Mills
Steel shortage – 50% odds.
High operating rate – 45% odds.
Sizable oversupply outside of China – 5% odds.
WORLD STEEL DYNAMICS
The Odds for Chinese Mills
Steel shortage – 5% odds.
High operating rate – 35% odds.
Reduced operating rate in China – 60% odds.
WORLD STEEL DYNAMICS
The USA mills are benefiting from a favorable supply/demand balance reflecting lagging steel production, relatively low imports of both steel products and semi-finished steel and good underlying demand.
Based on the recent annualized steel production rate and the imports of semis, the USA mills at present have a shipment capability of only about 104 million net tons versus the shipment forecast requirement of 109+ million tons.
This shortfall of steel deliveries is why hot-rolled band in the USA spot market is priced at the high level of about $615 per metric tonne, FOB the steel mill.
USA – Sole Strong Region
WORLD STEEL DYNAMICS
USA Crude Steel Production Difficulties?
1,200
1,400
1,600
1,800
2,000
2,200
2,400Ja
n-00
Feb
-00
Mar
-00
Apr
-00
May
-00
Jun-
00Ju
l-00
Aug
-00
Sep
-00
Oct
-00
Nov
-00
Dec
-00
Jan-
01F
eb-0
1M
ar-0
1A
pr-0
1M
ay-0
1Ju
n-01
Jul-0
1A
ug-0
1S
ep-0
1O
ct-0
1N
ov-0
1D
ec-0
1Ja
n-02
Feb
-02
Mar
-02
Apr
-02
May
-02
Jun-
02Ju
l-02
Aug
-02
Sep
-02
Oct
-02
Nov
-02
Dec
-02
Jan-
03F
eb-0
3M
ar-0
3A
pr-0
3M
ay-0
3Ju
n-03
Jul-0
3A
ug-0
3S
ep-0
3O
ct-0
3N
ov-0
3D
ec-0
3Ja
n-04
Feb
-04
Mar
-04
Apr
-04
May
-04
Jun-
04Ju
l-04
Aug
-04
Sep
-04
Oct
-04
Nov
-04
Dec
-04
Jan-
05F
eb-0
5M
ar-0
5A
pr-0
5M
ay-0
5Ju
n-05
Jul-0
5A
ug-0
5S
ep-0
5O
ct-0
5N
ov-0
5D
ec-0
5Ja
n-06
Feb
-06
Mar
-06
Th
ou
san
d N
et T
on
s P
er W
eek
WORLD STEEL DYNAMICS
USA Steel Consumption/Shipment Outlook(million short tons)
1995 2000 2001 2002 2003 2004 2005E 2006F
Shipments 97.5 109.1 98.9 100.0 106.0 111.4 104.1 109.4
Plus: Imports 24.4 38.0 30.1 32.7 23.1 35.8 32.7 34.0
Less: Imported semis converted to finished 5.0 8.6 6.4 8.8 4.8 7.4 6.7 6.9products by AISI-reporting companies
Less: Exports 7.1 6.5 6.1 6.0 8.2 7.9 8.6 7.0
Subtotal: Apparent steel demand 109.8 131.9 116.4 117.8 116.1 131.9 121.5 129.5
Less: Est. user/buyer inventory build -2.0 -2.0 -4.4 0.0 0.5 5.0 -5.5 0.0
Equals: Actual steel consumption 111.8 133.9 120.8 117.8 115.6 126.9 127.0 129.5Year-to-Year % change 2.0% 3.1% -9.8% -2.5% -1.9% 9.8% 0.1% 2.0%
Index of activity in 15 steel consuming industries (1975 = 100) 99 116 105 98 94 100 101 102Year-to-Year % change 4.3% 5.8% -9.9% -6.7% -3.3% 5.8% 1.0% 1.0%
Steel consumption per point of activity index (million tons) 1.134 1.152 1.154 1.206 1.223 1.269 1.257 1.270
WORLD STEEL DYNAMICS
HRB and Other Items: Price Forecast
04 peak 1Q 05 2Q 05 3Q 05 4Q 05 Shakeout Good Times Shortage
Hot-Rolled Band:
USA, FOB the mill $830 $655 $555 $530 $595 $400 $610 $680
EU, FOB the mill 720 660 527 490 465 350 540 600
China, FOB the mill 505 522 463 400 350 270 350 400
World export, Tier I FOB port of export 625 575 473 435 425 330 470 600
World export, Tier IV FOB port of export 575 500 413 350 350 290 420 550
Steel slab, FOB the port of export 540 500 415 320 330 260 380 480
Rebar – world export price FOB theport of export 530 424 400 365 400 310 420 490
Scrap: ($ per gross ton)
No. 1 Heavy Melt, USA, delivered 285 215 188 207 210 130 225 270USA Autobundles, delivered 465 323 231 315 285 155 315 370No. 1 HM to Far East ($ per tonne) 312 280 240 275 230 150 270 300
2005 2006
WORLD STEEL DYNAMICS
The profit performance of the steel’s sheet-producing group, will probably be better than that for the long-products group.
One reason is that the steel sheet segment of the industry has grown far more concentrated in recent years.
Age of Profits
Improved Steel Cycle
Portion of the Steel CycleFor World Spot Export Pricing
Past 25 years Next 10 years
Shake-out 21% 5%Bad times 25 25Average times 25 30Good times 12 30Boom times 17 10
WORLD STEEL DYNAMICS
WORLD STEEL DYNAMICS
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