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Global Steel Industry: Future Outlook Nae Hee Han/Director, Economic affairs Presentation to Mining on Top: Stockholm, 26-27, November 2013

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Steel Future Forecast

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  • Global Steel Industry: Future Outlook

    Nae Hee Han/Director, Economic affairs

    Presentation to Mining on Top: Stockholm, 26-27, November 2013

  • Disclaimer text

    This document is protected by copyright. Distribution to third parties or reproduction

    in any format is not permitted without written permission from worldsteel. worldsteel

    operates under the strictest antitrust guidelines. Visit worldsteel.org\About us for

    detailed antitrust guidelines.

    2

  • Current State of the Steel Industry

    Slower growth of demand

    Overcapacity

    Low profitability

    Strengthening environmental regulations

    3

  • 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

    Steel Capacity Outgrows Demand Growth

    During 2000~2012, global crude steel capacity 1,013 Mt to reach 2,063 Mt, whereas crude steel production 683 MT to 1,532 Mt

    Chinese capacity 771Mt to 921 Mt, production 602 Mt to 731 Mt After the global economic crisis, capacity expansion momentum slows,

    but the emerging economies continue to seek expansion

    Steed Demand vs Capacity (2000=100)

    4

  • Return of Overcapacity

    While world steel demand continues to grow, capacity utilization ratio trends down

    No easy solutions to overcapacity in sight

    Jun-08 92.7%

    Dec-08 59.9%

    Apr-10 84.5%

    Aug-10 74.2%

    Apr-11 83.4%

    Dec-12 71.5%

    Sep-13 79.3%

    50%

    60%

    70%

    80%

    90%

    100%

    Jan-0

    8

    Jul-08

    Jan-0

    9

    Jul-09

    Jan-1

    0

    Jul-10

    Jan-1

    1

    Jul-11

    Jan-1

    2

    Jul-12

    Jan-1

    3

    Jul-13

    World crude steel capacity utilisation

    5

  • 6

    value chain profit pool split evolution

    Value chain profits has been shifting away from the steel industry

    Volatility and uncertainty in raw materials prices since departure from the benchmarking pricing system

    Raw Materials Side Adds to Adversity

    81

    78

    61

    35

    26

    27

    11

    7

    22

    22

    28

    32

    8

    23 54 125 156 230 135

    1995 2000 2005 10 2011 2017

    100%=

    Iron ore

    Steel

    making

    (HRC)

    Coking

    coal

    15

    17

    44

    46

    42

    Source: McKinsey & Company

    6

  • 7

    Steel Industry Performances

    Steel industry stocks vs Dow Jones

    Index 2005=100

    Steel vs Raw materials prices

    Index 2005=100

    7

  • 1 2191 219

    1 141

    1 3001 403 1 430

    1 475 1 523

    7.0

    0.0

    -6.4

    14.0

    7.9

    2.0

    3.1 3.3

    0

    200

    400

    600

    800

    1 000

    1 200

    1 400

    1 600

    -10

    -5

    0

    5

    10

    15

    2007 2008 2009 2010 2011 2012 2013 2014

    Mt%

    Mt y-o-y % growth

    125.0*

    Steel Demand Forecasts for 2013-14 Apparent Steel Use, finished steel (SRO October 2013)

    *) 2014 as % of 2007

    8

  • Demand Forecasts for selected countries Apparent Steel Use, finished steel (SRO October 2013)

    2012 2013 2014 12/11 13/12 14/132014 as %

    of 2007

    World 1,430.3 1,475.1 1,523.2 2.0 3.1 3.3 125.0

    United States 96.2 96.9 99.8 7.8 0.7 3.0 92.2

    European Union (27) 140.2 134.9 137.8 -9.5 -3.8 2.1 69.1

    Japan 63.9 64.0 63.0 -0.2 0.1 -1.6 77.6

    China 660.1 699.7 720.7 2.9 6.0 3.0 172.2

    India 71.6 74.0 78.2 2.6 3.4 5.6 151.8

    Brazil 25.2 26.0 27.0 0.6 3.2 3.8 122.3

    ASEAN (5) 54.8 57.3 60.4 12.8 4.6 5.4 149.7

    MENA 63.2 64.3 69.0 2.2 1.7 7.3 127.2

    Developed Economies 390.2 384.1 390.5 -1.7 -1.6 1.7 82.4

    Emerging & Developing

    Economies excl China380.0 391.4 412.1 4.2 3.0 5.3 126.0

    World excl. China 770.2 775.4 802.6 1.1 0.7 3.5 100.3

    Mt %

    9

  • Key Trends in Post-Crisis Period Steel Demand

    Multi-speed recovery continues driven by emerging economies, but weakening growth in the emerging world

    Eurozone stabilizes and finally positive growth expected in 2014

    China moves into slower growth phase

    Key emerging economies struggling with structural issues

    Multi-Speed Recovery of Steel Demand

    60

    80

    100

    120

    140

    160

    180

    2007 2008 2009 2010 2011 2012 2013 2014

    2007=100 World China Developed Economies Em. & Dev. Economies excl. China

    10

  • 11

    41.5%

    46.1%

    48.5%

    52.2%

    53.0%

    58.3%

    58.4%

    61.1%

    63.3%

    73.7%

    71.3%

    71.7%

    72.7%

    74.0%

    74.4%

    58.5%

    53.9%

    51.5%

    47.8%

    47.0%

    41.7%

    41.6%

    38.9%

    36.7%

    26.3%

    28.7%

    28.3%

    27.3%

    26.0%

    25.6%

    16.4%

    20.5%

    23.3%

    27.4%

    28.3%

    33.3%

    33.1%

    34.3%

    36.7%

    48.3%

    45.2%

    45.7%

    46.1%

    47.4%

    47.3%

    2000

    2001

    2002

    2003

    2004

    2005

    2006

    2007

    2008

    2009

    2010

    2011

    2012

    2013

    2014

    Emerging & Developing Economies Developed Economies China

    Regional Share in World Steel Demand Apparent Steel Use, finished steel (SRO October 2013)

    11

  • China Entering a New Phase of Development

    After soft landing, renewed focus on rebalancing of the economy

    Less steel intensive growth to come, implying steel demand growth will underperform GDP growth

    Future focus will be on capacity closures, environmental performance and upgrading

    Growth trend of Chinas steel use Steel intensity (ASU/GDP)

    12

  • 0200

    400

    600

    800

    1 000

    1 200

    1 400

    0 10 20 30 40 50

    GDP per capita, 2005 PPP$, thousands USD

    S-Curve of different countries

    Thailand China Indonesia India

    United States Japan South Korea

    AS

    U p

    er

    ca

    pit

    a, A

    SU

    , cru

    de s

    teel e

    quiv

    ale

    nt p

    er

    capita

    , kg

    South Korea

    Japan

    United States

    China

    Economic Growth and Steel Demand

    40 57

    127

    222

    305279

    488 506

    220

    Africa India Brazil MiddleEast

    UnitedStates

    EU (27) China Japan World

    Per Capita Steel Use finished steel, kg, 2012

    13

  • How Far Will Chinese Steel Demand Grow?

    Positive Negative

    Further room for urbanization and

    Industrialization

    Low level of development in the West

    Condensed growth, high share of

    investment in GDP

    Environmental regulations, resource

    constraints

    Manufacturing relocation out of China

    Speed and mode of development in the West

    China provincial steel use per capita (2011, kg/per, crude steel equiv )

    US (1973) Japan (1973) China (2012)

    14

  • World Developed China Other Emerging

    1992-2000 142.6 84.1 51.1 7.4

    2000-2007 480.3 74.2 297.8 108.4

    2007-2014 320.2 -85.5 314.8 90.9

    Contribution to Apparent Steel Demand Growth( Mt)

    0

    200

    400

    600

    800

    1 000

    1 200

    1 400

    1 600

    1 80019

    50

    19

    55

    19

    60

    19

    65

    19

    70

    19

    75

    19

    80

    19

    85

    19

    90

    19

    95

    20

    00

    20

    05

    20

    10

    Evolution of Steel Demand (1950-2014, crude steel equiv)

    RoW

    China

    former USSR

    US, EU, Japan

    Mt

    CAGR 1950-19755.0%

    CAGR 1975-20001.1%

    CAGR 2000-20076.6%

    CAGR 2007-20143.1%

    End of the China Effect, Next Growth Engine?

    15

  • Population

    (million)

    Urbanisation

    (%)

    GDP per capita,

    (PPP$)

    Steel Use/

    capita(Kg)

    2012 2020 2010 2020 2012 2020 2012

    Mexico 116 126 77.8 80.5 14.4 17.3 173

    Turkey 75 81 70.5 78.6 14.1 17.9 382

    Brazil 198 210 84.3 86.8 11.0 13.8 127

    Thailand 70 72 33.7 38.0 9.4 12.9 234

    China 1 354 1 388 49.2 61.0 9.0 15.3 488

    Indonesia 245 263 49.9 57.2 4.7 6.7 51

    India 1 258 1 387 30.9 34.8 3.7 5.7 57

    Vietnam 90 96 30.4 36.9 3.4 5.1 122

    Developing World: Strong Fundamentals

    16

  • Energy use reduction efforts in developed world already at theoretical limit and limited progress in Break-Through technologies. Pressure on costs

    and also negative impact on steel demand growth

    However. steel has been successful in providing solutions to the sustainability - lighter vehicles, renewable energy, etc

    Energy Intensity of steel production (N America+Japan +EU27)

    Environmental Challenges

    Energy intensity of iron and steel

    production (GJ/t of crude steel)

    17

  • 1.HH = households; CTS = commerce, trade, and service 2. Geothermal, biomass, hydro 3. CO2 expenditure for other materials not examined;

    values are rounded 4. Ratio relates exclusively to the emissions

    Source: BCG analysis

    Innovative use of steel saves six times as much CO2 as is caused by the production of the steel LCA approach

    Steel as Solution to Sustainable Future

    Net CO2 reduction potential

    Emissions in the

    steel production3

    1.9

    2.1

    Mt

    5 30 10 0

    9.2

    1.0

    11.2

    5.0

    14.2

    29.5

    Mt

    9 11 10 1 0

    1.0

    0.9

    8.4

    0.7

    0.1

    0.03

    0.4

  • 19

    Long Term View on Steel Demand

    Mt

    Years Mt

    1970 589

    1975 640

    1980 713

    1985 719

    1990 773

    1995 743

    2000 846

    2005 1 139

    2010 1 404

    2012 1 542 0

    500

    1 000

    1 500

    2 000

    2 500

    3 000

    1870 1890 1910 1930 1950 1970 1990 2010 2030 2050

    Long Term Evolution of World Steel Demand

    *apparent steel use, crude steel equivalent

    Global steel demand could reach 2.2~3.0 billion in 2050

    19

  • Conclusion

    Despite current difficulties, future scenarios for the steel industry have optimistic starting point: Urbanization and population growth will support

    industry growth for considerable time

    Surplus capacity in the industry will be difficult to reduce quickly, but can be absorbed in long term

    Steel industry will continue to provide the basis for sustainability of the modern society through innovation

    But the industry is facing formidable challenges ahead

    Changing position in value chain through expanding product mix, development of new applications becomes crucial for steel industry

    Sustainable development and, in particular, Life Cycle Assessment focus provides interesting challenges to the steel industry

    20 20

  • Steel touches every

    aspect of our lives. No

    other material has the

    same unique combination

    of strength, formability

    and versatility.

  • Steel is a cornerstone

    and key driver for the

    worlds economy.

  • Thank you for your attention.

    For further information contact:

    Nae Hee HAN| Director, Economic Affairs/Chief Representative, Beijing Office

    World Steel Association [email protected] | T: +86 (10)6464 6733| worldsteel.org

  • worldsteel.org