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Outlook for the steel market

Outlook for the steel market. Sherpa group meeting, Bruxelles, 13 March 2014. Agenda. Current situation: global demand is slowly recovering Prospects for global steel demand until 2025 Structure of EU steel exports EU steelmaking excess capacity

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Outlook for the steel market

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  1. Outlook for the steelmarket Sherpa group meeting, Bruxelles, 13 March 2014

  2. Agenda • Current situation: global demandisslowlyrecovering • Prospects for global steeldemanduntil 2025 • Structure of EU steel exports • EU steelmakingexcesscapacity • Financial health of the Europeansteelindustry

  3. Apparent consumption of steel by region(Index 2007Q2=100, data from CRU)

  4. Production shares by region, % of world(before and after the crisis)

  5. Steelmakingcapacityshares by region(% of world capacity)

  6. Regionalsteeltradedevelopments(Thousands of tonnes)

  7. Sectorsdrivingsteeldemandgrowth (in tonnage) during the nexttenyears • 3 sectors expected to represent 90% of global steel demand growth up to 2025 • Construction (68%), driven by residential, infrastructure projects in emerging economies • Mechanical engineering (13%) • Energy transportation(9%), pipelines, OCTG and other tubes.

  8. Global steel demand by sector in 2011 and 2025 mmt and % of total steel demand CAGR 3.7% 2349 mmt 1414 mmt Source: Metal Bulletin Research

  9. Construction sector value added : growingshare of emergingeconomies • Shares in world construction value added in 2025: • NAFTA (18.3%), EU (10.8%), Japan (6.2% ), China (24%) • China’s construction VA: CAGR 5.9% in a catching-up process • 175 airports in China in 2010 compared to 5,194 in the US • Urban residential floor space in 2011 was 31 m² per capita in China compared to 82 in the US. • The urbanisation rate is expected to reach 51.5% in 2015 (target of 12thChinese Five-Year Plan): 10 million new urban residents/year • India’s construction VA: CAGR 8.1% faster than China but from a much lower base. • By 2025, India could have two cities of more than 25 million inhabitants (New Delhi and Mumbai) • Strong infrastructure building alsoexpected in South East Asia, Africa and the Middle East.

  10. Global steel demand for energy-related construction in 2011 and 2025 mmt and % of total steel demand CAGR 0% 31 mmt 31 mmt Source: Metal Bulletin Research

  11. Global steel demand in the transportation sector in 2011 and 2025 mmt and % of total steel demand CAGR 2.7% 398 mmt 274 mmt Source: Metal Bulletin Research

  12. The steelindustryisa major supplier to the energy industry Consumption of steel by energy industries (Mt) 178 MT that is 12 % of total finished steel production Source : Worldsteel, Eurofer, Laplace Conseil analysis & estimates

  13. Reducingquantity of steel per auto willlimitgrowth in steeldemanded by auto sector

  14. Strong growth of auto production expected to continue in China

  15. Regionaldemand for automotivesteels, % share

  16. Global excesscapacity situation

  17. EU has been a net steel exporter since 2009

  18. EU steel exports have shifted towards African markets from 2007 to 2012.

  19. The structure of exports -capturing the growth opportunity in emerging markets- • The share of pipes and tubes (a major export item), has declined from 14.8% (2007) to 13.1% (2012) while bars became the largest export item in 2012. • Exports of long products have been increasing steadily supported by robust construction activity in North Africa. • Exports of high value-added products (e.g. galvanized sheets) have been increasing along with the growth of the auto sector in emerging markets. • EU can take advantage of its good access to growing steel markets in Africa and Middle East.

  20. Demand growing strongly in Europe’s neighbouring regions

  21. EU iron and steel exports (external trade) matrix in 2012 (thousands of tonnes) Source: Eurostat.

  22. Frequent cycles of excesscapacity in the EU

  23. Most flat steels are produced in BF/BOFs Most long steels are produced in EAFs

  24. EBITDA on sales (EU and the rest of the world) in % Sources: Facset, OECD calculations

  25. EBITDA on sales (EU steelindustry) and global capacity utilisation ratio in % Sources: Facset, OECD calculations

  26. EBITDA on sales distribution for EU steelmakersin % Sources: Facset, OECD calculations

  27. EBIT on sales (EU and the rest of the world) in % Sources: Facset, OECD calculations

  28. Debt on Ebitda (%) – Europeansteelmakers Sources: Facset, OECD calculations

  29. Interest on assets (%) – Europeansteelmakers Sources: Facset, OECD calculations

  30. Price to book ratio – Europeansteelmakers Sources: Facset, OECD calculations

  31. Investment on assets – Europeansteelmakers (%) Sources: Facset, OECD calculations

  32. R&D on assets – Europeansteelmakers (%) Sources: Facset, OECD calculations

  33. Thankyou for your attention

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