World Steel Outlook 2015-2016 Adam Szewczyk / Manager, Economics and Statistics

Х Metal Expert’s Conference, April 20-21, 2015, Kiev, Ukraine

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Global Steel Industry in the post-Crisis Period

Global macro environment remains difficult

4

Global GDP growth has slowed

down

Global economic recovery

continues to disappoint despite

drop in oil prices

Structural problems in many advanced

and emerging economies

Ongoing geopolitical conflicts

Overall divergence in growth

rates among countries and

regions

Low oil price to generate overall

positive net impact on growth

Sources: IMF, Haver Analytics

5

100

120

140

160

180

200

220

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2000=100 Apparent steel use, crude steel equivalent

Capacity, crude steel

Production slowing down with strong increase of exports in 2014

Excessive steel capacity expansion during the boom period

World capacity utilisation in 70-80% range

Overcapacity to stay

Global Capacity vs Demand (2000=100)

Source: OECD, worldsteel

100

120

140

160

180

200

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2000=100 Production, crude steel

Exports, f.&sf.

Indirect Exports, fs. equiv.

Production, Exports, Indirect Exports (2000=100)

How are other industries doing?

6

Sources: different, OICA, worldsteel, IAI, USGS

7

Sources: different, companies’ reports, Thomson Reuters

Steel industry stuck in low performance

Steel companies’ profitability converges at a low level due to

overcapacity and high raw material prices

Steel Market Prospects

9.8%

2.5%

3.3%

9.3%3.1%

2.7%

3.5%

65.8%

Share of ASU

by regions in 2016, %

European Union (28)

Other Europe

CIS

NAFTA

Central and South America

Africa

Middle East

Asia and Oceania

Source: worldsteel

NAFTA

CENTRAL and SOUTH

AMERICA

EUROPEAN UNION (28)

OTHER EUROPE

MIDDLE EAST

AFRICA

ASIA and OCEANIA

CIS

WORLD

Short Range Outlook (SRO) 2015-16: Regional Overview Apparent Steel Use, finished steel (SRO April 2015)

9

2015 2016

143 Mt

145 Mt

2015 2016

46 Mt

48 Mt

2015 2016

150 Mt

154 Mt 2015 2016

52 Mt

52 Mt

2015 2016

1 544 Mt

1 565 Mt

2015 2016

1 021 Mt

1 030 Mt

2015 2016

40 Mt

42 Mt

2015 2016

53 Mt

56 Mt

2015 2016

38 Mt

39 Mt

- 0.3%

- 7.3% - 0.9%

1.3%

3.4%

2.8% 1.4%

7.4%

4.9%

2.1% 2.8%

2.8%

4.2%

0.6% 0.9%

0.5% 1.4%

-3.4%

Source: worldsteel SRO

Steel demand shifts to low gear with China deceleration

10

474 447300 373 397 389 388 412 413 420

329 332299

348 374 391 406 415 425 442

418 447551

588641 660 735 711 707 704

6.8

0.4

-6.1

13.7

7.9

2.0

6.2

0.6 0.5 1.4

0

500

1 000

1 500

2 000

2 500

-50

-45

-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

15

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

China, Mt Developing ex China, MtDeveloped, Mt World, y-o-y % growth

-40

-30

-20

-10

0

10

20

30

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

China Developing ex China Developed

y-o-y % growth

Apparent Steel Use, finished steel (SRO April 2015)

Lack of growth engine after China

Post-crisis recovery led by the emerging economies

Source: worldsteel SRO

Developed Economies in Focus Apparent Steel Use, finished steel (SRO April 2015)

2014 2015 2016 14/13 15/14 16/152016 as

% of 2007

World 1 537.3 1 544.4 1 565.5 0.6 0.5 1.4 128.2

United States 106.9 106.5 107.2 11.7 -0.4 0.7 99.0

European Union (28) 146.8 149.9 154.1 4.5 2.1 2.8 76.9

Japan 67.5 65.9 66.6 3.5 -2.4 1.1 82.0

South Korea 55.4 56.9 58.0 7.0 2.7 2.0 105.1

Developed Economies 411.9 412.6 420.3 6.2 0.2 1.8 88.7

Mt %

11

Strong growth seen in 2014 in the developed world on the back of

strength in the US, 'but moderate growth in 2015-2016

US steel demand to stagnate in 2015 due to high base and strong

dollar, material competition in the auto sector

Spain showing signs of recovery after a long crisis

Japan and Korea continued to show moderate growth

Source: worldsteel SRO

Emerging Economies in Focus Apparent Steel Use, finished steel (SRO April 2015)

2014 2015 2016 14/13 15/14 16/152016 as

% of 2007

World 1 537.3 1 544.4 1 565.5 0.6 0.5 1.4 128.2

China 710.8 707.2 703.7 -3.3 -0.5 -0.5 168.2

India 75.3 80.0 85.8 2.2 6.2 7.3 166.7

Brazil 24.6 22.7 23.4 -6.8 -7.8 3.1 106.2

Mexico 22.5 23.1 24.0 11.7 2.6 3.9 140.1

Russia 43.1 40.2 39.6 -1.4 -6.7 -1.6 98.1

Turkey 30.7 31.7 32.0 -1.8 3.0 1.1 134.6

MENA 70.1 72.9 76.3 5.0 4.1 4.7 139.9

ASEAN (5) 61.4 65.3 68.5 4.2 6.4 4.9 169.6

Emerging & Developing

Economies excl. China414.7 424.5 441.5 2.3 2.4 4.0 134.1

Mt %

12

Subdued outlook in major emerging economies, e.g. Russia and Brazil

India’s outlook brightens with new reform initiatives

High growth expected in ASEAN with strong fundamentals

Source: worldsteel SRO

40

60

80

100

120

140

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

2007=100

World CIS

Russia Ukraine

Weak performance of CIS countries Apparent Steel Use, finished steel (SRO April 2015)

13

Mt %

2014 2015 2016 14/13 15/14 16/152016 as %

of 2007

World 1 537.4 1 546.1 1 567.2 0.6 0.6 1.4 128.3

CIS 56.5 52.4 52.2 -4.9 -7.3 -0.3 92.7

Russia 43.1 40.2 39.6 -1.4 -6.7 -1.6 98.1

Ukraine 4.3 3.4 3.8 -23.5 -21.0 14.0 47.7

Russia:

Structural slowdown aggravated by geopolitical tensions and weaker oil prices.

Investment activity undermined by curtailed access to capital markets, both domestic

(tight monetary policy) and international (sanctions).

Private consumption to decline, fiscal stimulus will be capped by tight budget.

Decline in steel-using sectors on the back of investment activity downturn and shrinking

real income.

Ukraine:

Weak performance of economy in 2015.

Apparent Steel Use, finished steel (SRO April 2015)

Source: worldsteel SRO

Diverging growth prospects of the developing economies

Structural reform will define growth potential

• Brazil and Russia trapped in structural problems

• Mexico has brighter prospects thanks to the strong reform agenda

• MENA outlook clouded by low oil prices and geopolitical instability

• ASEAN countries with reform agenda will outperform others

• India getting ready for a take off with renewed reform initiatives

Unleashing potential of emerging markets

14

Sources: UN, Global Insight, worldsteel

GDP/capita,

USD Urbanisation,

%

Population,

(mln)

Steel use

per capita,

kg

2014 2030 2015 2030 2014 2030 2014

India 1 636 9 489 33 40 1 267 1 476 59

Indonesia 3 401 12 312 54 63 253 294 54

Vietnam 2 012 8 096 34 43 93 102 138

Thailand 5 561 14 391 50 64 67 68 258

Egypt 3 376 9 109 43 47 83 103 122

Conclusion

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The steel industry faces new normal of low growth with

peaking of Chinese steel demand and structural changes in

the world economy

• With Chinese deceleration the world lacks a strong growth

engine

• Unleashing the potential of other emerging economies

takes time

Capacity build ups in newly emerging economies cause

concern

Focus on value creation rather than expansion

16

Thank you for your attention.

For further information contact:

Adam Szewczyk | Manager, Economics and Statistics

World Steel Association szewczyk@worldsteel.org | T: +32 (0)2 701 96 68 | worldsteel.org

worldsteel.org