Dr. VICTORIANO MUÑOZ Chairman & CEO, ACERINOX Chairman, ISSF Dr. VICTORIANO MUÑOZ Dr. VICTORIANO MUÑOZ Chairman Chairman & CEO, & CEO, ACERINOX ACERINOX Chairman Chairman , ISSF , ISSF DEVELOPMENT IN THE GLOBAL STAINLESS STEEL INDUSTRY DEVELOPMENT IN THE DEVELOPMENT IN THE GLOBAL GLOBAL STAINLESS STEEL STAINLESS STEEL INDUSTRY INDUSTRY INFACON X 2 nd February, 2004 INFACON X INFACON X 2 2 nd nd February February , 2004 , 2004
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DEVELOPMENT IN THE DEVELOPMENT IN THE GLOBAL GLOBAL
STAINLESS STEEL STAINLESS STEEL INDUSTRYINDUSTRY
INFACON X
2nd February, 2004
INFACON X INFACON X
22ndnd FebruaryFebruary, 2004, 2004
10101010thththth INTERNATIONAL FERROALLOYS CONGRESSINTERNATIONAL FERROALLOYS CONGRESSINTERNATIONAL FERROALLOYS CONGRESSINTERNATIONAL FERROALLOYS CONGRESSCape Town, 2Cape Town, 2Cape Town, 2Cape Town, 2----4 February 20044 February 20044 February 20044 February 2004
Ladies and gentlemen,
It is a privilege for me to have the opportunity to address this distinguished audience of ferroalloys producers, South African Associations, International Corporations and friends, in this plenary meeting of your INFACON-X Congress.
I recall now, not without some nostalgia, the first time that I participated in the first INFACON Congress in April 1974. I enjoyed it very much, not only for my ferrosilicon background, but also because it was the first time I visited this fascinating Country, that impressed me deeply from the very beginning. I took that opportunity to visit the already state-of-the-art ferroalloys facilities of South Africa and Zimbabwe and to establish the first ferrochrome contracts for our Gibraltar Camp melting shop, at that time in the final stage of construction.
The subject I have been asked to present to you by Dr. Barcza, “Development in the Global Stainless Steel Industry”, is dearest to me since its content actually involves my whole professional career of almost 43 years fully dedicated to the worldwide stainless steel business.
Before all, I would like to make the statement that I am very optimistic about the future of what is our “changing global stainless steel industry”.
Let me now offer you some parameters that support this optimistic view.
A CHANGING GLOBAL A CHANGING GLOBAL A CHANGING GLOBAL A CHANGING GLOBAL A CHANGING GLOBAL A CHANGING GLOBAL A CHANGING GLOBAL A CHANGING GLOBAL
EVOLUTION OF GDP. YEARS 1998 EVOLUTION OF GDP. YEARS 1998 EVOLUTION OF GDP. YEARS 1998 EVOLUTION OF GDP. YEARS 1998 EVOLUTION OF GDP. YEARS 1998 EVOLUTION OF GDP. YEARS 1998 EVOLUTION OF GDP. YEARS 1998 EVOLUTION OF GDP. YEARS 1998 –––––––– 2003e 2003e 2003e 2003e 2003e 2003e 2003e 2003e
SourceSourceSourceSourceSourceSourceSourceSource : : : : : : : : International Monetary FundInternational Monetary FundInternational Monetary FundInternational Monetary FundInternational Monetary FundInternational Monetary FundInternational Monetary FundInternational Monetary Fund –––––––– IMF & IMF & IMF & IMF & IMF & IMF & IMF & IMF & Fortis Bank estimates Fortis Bank estimates Fortis Bank estimates Fortis Bank estimates Fortis Bank estimates Fortis Bank estimates Fortis Bank estimates Fortis Bank estimates
COMPARISON BETWEEN STAINLESS STEEL COMPARISON BETWEEN STAINLESS STEEL COMPARISON BETWEEN STAINLESS STEEL COMPARISON BETWEEN STAINLESS STEEL PRODUCTION (PRODUCTION (PRODUCTION (PRODUCTION (WesternWesternWesternWestern CountriesCountriesCountriesCountries) AND INDUSTRIAL ) AND INDUSTRIAL ) AND INDUSTRIAL ) AND INDUSTRIAL OECD PRODUCTIONOECD PRODUCTIONOECD PRODUCTIONOECD PRODUCTION
STAINLESS STEEL PRODUCTION STAINLESS STEEL PRODUCTION WESTERN COUNTRIESWESTERN COUNTRIES
INDUSTRIAL OECD PRODUCTIONINDUSTRIAL OECD PRODUCTION
SOURCE: J.P. Morgan Economic Research and World Bureau of Metal Statistic
Doubling every Doubling every Doubling every Doubling every Doubling every Doubling every Doubling every Doubling every ten ten ten ten ten ten ten ten years on years on years on years on years on years on years on years on averageaverageaverageaverageaverageaverageaverageaverage
Year 2002Year 2002Year 2002Year 2002 Year 1993Year 1993Year 1993Year 1993
CHANGES IN STAINLESS STEEL DEMANDCHANGES IN STAINLESS STEEL DEMANDCHANGES IN STAINLESS STEEL DEMANDCHANGES IN STAINLESS STEEL DEMANDCHANGES IN STAINLESS STEEL DEMANDCHANGES IN STAINLESS STEEL DEMANDCHANGES IN STAINLESS STEEL DEMANDCHANGES IN STAINLESS STEEL DEMAND
APPARENT APPARENT APPARENT APPARENT APPARENT APPARENT APPARENT APPARENT WORLD WORLD WORLD WORLD WORLD WORLD WORLD WORLD CONSUMPTION COLD CONSUMPTION COLD CONSUMPTION COLD CONSUMPTION COLD CONSUMPTION COLD CONSUMPTION COLD CONSUMPTION COLD CONSUMPTION COLD
ASIA CLAIMS HALF OF ASIA CLAIMS HALF OF ASIA CLAIMS HALF OF ASIA CLAIMS HALF OF ASIA CLAIMS HALF OF ASIA CLAIMS HALF OF ASIA CLAIMS HALF OF ASIA CLAIMS HALF OF WORLD WORLD WORLD WORLD WORLD WORLD WORLD WORLD CONSUMPTION, CHINA ONE QUARTERCONSUMPTION, CHINA ONE QUARTERCONSUMPTION, CHINA ONE QUARTERCONSUMPTION, CHINA ONE QUARTERCONSUMPTION, CHINA ONE QUARTERCONSUMPTION, CHINA ONE QUARTERCONSUMPTION, CHINA ONE QUARTERCONSUMPTION, CHINA ONE QUARTER
Others Others Others Others USA W.USA W.USA W.USA W.Europe Other Europe Other Europe Other Europe Other Asia China Asia China Asia China Asia China JapanJapanJapanJapan
NEW TECHNOLOGIES NEW TECHNOLOGIES NEW TECHNOLOGIES NEW TECHNOLOGIES NEW TECHNOLOGIES NEW TECHNOLOGIES NEW TECHNOLOGIES NEW TECHNOLOGIES
CONTRIBUTION TO THE STAINLESS CONTRIBUTION TO THE STAINLESS CONTRIBUTION TO THE STAINLESS CONTRIBUTION TO THE STAINLESS CONTRIBUTION TO THE STAINLESS CONTRIBUTION TO THE STAINLESS CONTRIBUTION TO THE STAINLESS CONTRIBUTION TO THE STAINLESS
STEEL DEVELOPMENTSTEEL DEVELOPMENTSTEEL DEVELOPMENTSTEEL DEVELOPMENTSTEEL DEVELOPMENTSTEEL DEVELOPMENTSTEEL DEVELOPMENTSTEEL DEVELOPMENT
TRADITIONAL TECHNOLOGIES SINCE THE SIXTIESTRADITIONAL TECHNOLOGIES SINCE THE SIXTIESTRADITIONAL TECHNOLOGIES SINCE THE SIXTIESTRADITIONAL TECHNOLOGIES SINCE THE SIXTIESTRADITIONAL TECHNOLOGIES SINCE THE SIXTIESTRADITIONAL TECHNOLOGIES SINCE THE SIXTIESTRADITIONAL TECHNOLOGIES SINCE THE SIXTIESTRADITIONAL TECHNOLOGIES SINCE THE SIXTIES
Rolling millRolling millRolling millRolling mill CoilerCoilerCoilerCoilerCasting speedCasting speedCasting speedCasting speed::::
20 20 20 20 to to to to 130 m/130 m/130 m/130 m/minminminmin
CONSOLIDATION OF STAINLESS CONSOLIDATION OF STAINLESS CONSOLIDATION OF STAINLESS CONSOLIDATION OF STAINLESS CONSOLIDATION OF STAINLESS CONSOLIDATION OF STAINLESS CONSOLIDATION OF STAINLESS CONSOLIDATION OF STAINLESS
STEEL INDUSTRYSTEEL INDUSTRYSTEEL INDUSTRYSTEEL INDUSTRYSTEEL INDUSTRYSTEEL INDUSTRYSTEEL INDUSTRYSTEEL INDUSTRY
Market share of top Market share of top Market share of top Market share of top 5 5 5 5 producersproducersproducersproducers ---- 1997199719971997 Market share of top Market share of top Market share of top Market share of top 5 5 5 5 producersproducersproducersproducers ---- 2000200020002000
Market share of top Market share of top Market share of top Market share of top 5 5 5 5 producersproducersproducersproducers –––– 2003e2003e2003e2003e SOURCE: Deutsche Bank
0%0%0%0%
20%20%20%20%
40%40%40%40%
60%60%60%60%
80%80%80%80%
100%100%100%100%
Pla
tin
um
Pla
tin
um
Pla
tin
um
Pla
tin
um
Dia
mo
nd
sD
iam
on
ds
Dia
mo
nd
sD
iam
on
ds
Iro
n r
reIr
on
rre
Iro
n r
reIr
on
rre
Nic
ke
lN
ick
el
Nic
ke
lN
ick
el
Sta
inle
ss
Sta
inle
ss
Sta
inle
ss
Sta
inle
ss
Ste
el
Ste
el
Ste
el
Ste
el
Co
op
er
Co
op
er
Co
op
er
Co
op
er
Th
erm
al
Th
erm
al
Th
erm
al
Th
erm
al
co
al
co
al
co
al
co
al
Zin
cZ
inc
Zin
cZ
inc
Alu
min
ium
Alu
min
ium
Alu
min
ium
Alu
min
ium
Go
ldG
old
Go
ldG
old
Pa
pe
rP
ap
er
Pa
pe
rP
ap
er
Ca
rbo
nC
arb
on
Ca
rbo
nC
arb
on
ste
el
ste
el
ste
el
ste
el
RAW MATERIALSRAW MATERIALSRAW MATERIALSRAW MATERIALSRAW MATERIALSRAW MATERIALSRAW MATERIALSRAW MATERIALS
16,61016,61016,61016,610
Ending Ending Ending Ending
2003200320032003
3,0003,0003,0003,000
5,0005,0005,0005,000
7,0007,0007,0007,000
9,0009,0009,0009,000
11,00011,00011,00011,000
13,00013,00013,00013,000
15,00015,00015,00015,000
17,00017,00017,00017,000
19,00019,00019,00019,000
OFFICIAL NICKEL PRICE IN L.M.E.OFFICIAL NICKEL PRICE IN L.M.E.OFFICIAL NICKEL PRICE IN L.M.E.OFFICIAL NICKEL PRICE IN L.M.E.OFFICIAL NICKEL PRICE IN L.M.E.OFFICIAL NICKEL PRICE IN L.M.E.OFFICIAL NICKEL PRICE IN L.M.E.OFFICIAL NICKEL PRICE IN L.M.E.((((((((MonthlyMonthlyMonthlyMonthlyMonthlyMonthlyMonthlyMonthly AverageAverageAverageAverageAverageAverageAverageAverage ValuesValuesValuesValuesValuesValuesValuesValues)))))))) JanJanJanJanJanJanJanJan 1980 1980 1980 1980 1980 1980 1980 1980 –––––––– DecDecDecDecDecDecDecDec 20032003200320032003200320032003
US$/US$/US$/US$/US$/US$/US$/US$/MtMtMtMtMtMtMtMt. Ni.. Ni.. Ni.. Ni.. Ni.. Ni.. Ni.. Ni.
7,1107,1107,1107,110
Beginning Beginning Beginning Beginning
2003200320032003
2% SUPPLY2% SUPPLY2% SUPPLY2% SUPPLY2% SUPPLY2% SUPPLY2% SUPPLY2% SUPPLY--------DEMAND DEFICIT DOES NOTDEMAND DEFICIT DOES NOTDEMAND DEFICIT DOES NOTDEMAND DEFICIT DOES NOTDEMAND DEFICIT DOES NOTDEMAND DEFICIT DOES NOTDEMAND DEFICIT DOES NOTDEMAND DEFICIT DOES NOTJUSTIFY SUCH EXTREME PRICE INCREASEJUSTIFY SUCH EXTREME PRICE INCREASEJUSTIFY SUCH EXTREME PRICE INCREASEJUSTIFY SUCH EXTREME PRICE INCREASEJUSTIFY SUCH EXTREME PRICE INCREASEJUSTIFY SUCH EXTREME PRICE INCREASEJUSTIFY SUCH EXTREME PRICE INCREASEJUSTIFY SUCH EXTREME PRICE INCREASE
MOLYBDENUM PRICE (MOLYBDENUM PRICE (MOLYBDENUM PRICE (MOLYBDENUM PRICE (MOLYBDENUM PRICE (MOLYBDENUM PRICE (MOLYBDENUM PRICE (MOLYBDENUM PRICE (Metal Metal Metal Metal Metal Metal Metal Metal BulletinBulletinBulletinBulletinBulletinBulletinBulletinBulletin))))))))
EVOLUTION OF THE STAINLESS EVOLUTION OF THE STAINLESS EVOLUTION OF THE STAINLESS EVOLUTION OF THE STAINLESS EVOLUTION OF THE STAINLESS EVOLUTION OF THE STAINLESS EVOLUTION OF THE STAINLESS EVOLUTION OF THE STAINLESS
USE OF STAINLESS STEEL FOR THEIR MECHANICAL USE OF STAINLESS STEEL FOR THEIR MECHANICAL USE OF STAINLESS STEEL FOR THEIR MECHANICAL USE OF STAINLESS STEEL FOR THEIR MECHANICAL USE OF STAINLESS STEEL FOR THEIR MECHANICAL USE OF STAINLESS STEEL FOR THEIR MECHANICAL USE OF STAINLESS STEEL FOR THEIR MECHANICAL USE OF STAINLESS STEEL FOR THEIR MECHANICAL
USE OF STAINLESS STEEL FOR THEIR MECHANICAL USE OF STAINLESS STEEL FOR THEIR MECHANICAL USE OF STAINLESS STEEL FOR THEIR MECHANICAL USE OF STAINLESS STEEL FOR THEIR MECHANICAL USE OF STAINLESS STEEL FOR THEIR MECHANICAL USE OF STAINLESS STEEL FOR THEIR MECHANICAL USE OF STAINLESS STEEL FOR THEIR MECHANICAL USE OF STAINLESS STEEL FOR THEIR MECHANICAL
PROPERTIES IN THE AUTOMOTIVE SECTORPROPERTIES IN THE AUTOMOTIVE SECTORPROPERTIES IN THE AUTOMOTIVE SECTORPROPERTIES IN THE AUTOMOTIVE SECTORPROPERTIES IN THE AUTOMOTIVE SECTORPROPERTIES IN THE AUTOMOTIVE SECTORPROPERTIES IN THE AUTOMOTIVE SECTORPROPERTIES IN THE AUTOMOTIVE SECTOR
COMPETITORS ON THE RISE AS WELLCOMPETITORS ON THE RISE AS WELLCOMPETITORS ON THE RISE AS WELLCOMPETITORS ON THE RISE AS WELLCOMPETITORS ON THE RISE AS WELLCOMPETITORS ON THE RISE AS WELLCOMPETITORS ON THE RISE AS WELLCOMPETITORS ON THE RISE AS WELL
12 12 12 12 12 12 12 12 monthmonthmonthmonthmonthmonthmonthmonth LME LME LME LME LME LME LME LME Aluminium Aluminium Aluminium Aluminium Aluminium Aluminium Aluminium Aluminium cash cash cash cash cash cash cash cash price price price price price price price price In MT In MT In MT In MT In MT In MT In MT In MT vs Inventoryvs Inventoryvs Inventoryvs Inventoryvs Inventoryvs Inventoryvs Inventoryvs Inventory
12 12 12 12 12 12 12 12 monthmonthmonthmonthmonthmonthmonthmonth LME LME LME LME LME LME LME LME CooperCooperCooperCooperCooperCooperCooperCooper cash cash cash cash cash cash cash cash price price price price price price price price In MT In MT In MT In MT In MT In MT In MT In MT vs Inventoryvs Inventoryvs Inventoryvs Inventoryvs Inventoryvs Inventoryvs Inventoryvs Inventory
TEAM STAINLESS (ICDA TEAM STAINLESS (ICDA TEAM STAINLESS (ICDA TEAM STAINLESS (ICDA TEAM STAINLESS (ICDA TEAM STAINLESS (ICDA TEAM STAINLESS (ICDA TEAM STAINLESS (ICDA –––––––– NiDINiDINiDINiDINiDINiDINiDINiDI –––––––– IMOA IMOA IMOA IMOA IMOA IMOA IMOA IMOA –––––––– ISSF)ISSF)ISSF)ISSF)ISSF)ISSF)ISSF)ISSF)
SOUTH AFRICAN STAINLESS STEEL SOUTH AFRICAN STAINLESS STEEL SOUTH AFRICAN STAINLESS STEEL SOUTH AFRICAN STAINLESS STEEL SOUTH AFRICAN STAINLESS STEEL SOUTH AFRICAN STAINLESS STEEL SOUTH AFRICAN STAINLESS STEEL SOUTH AFRICAN STAINLESS STEEL
MARKET AND INDUSTRYMARKET AND INDUSTRYMARKET AND INDUSTRYMARKET AND INDUSTRYMARKET AND INDUSTRYMARKET AND INDUSTRYMARKET AND INDUSTRYMARKET AND INDUSTRY
80808080
90909090
100100100100
110110110110
120120120120
130130130130
140140140140
150150150150
160160160160
1996 1997 1998 1999 2000 2001 2002 2003e
SOUTH AFRICAN APPARENT STAINLESS STEEL SOUTH AFRICAN APPARENT STAINLESS STEEL SOUTH AFRICAN APPARENT STAINLESS STEEL SOUTH AFRICAN APPARENT STAINLESS STEEL SOUTH AFRICAN APPARENT STAINLESS STEEL SOUTH AFRICAN APPARENT STAINLESS STEEL SOUTH AFRICAN APPARENT STAINLESS STEEL SOUTH AFRICAN APPARENT STAINLESS STEEL CONSUMPTIONCONSUMPTIONCONSUMPTIONCONSUMPTIONCONSUMPTIONCONSUMPTIONCONSUMPTIONCONSUMPTION
MIDDELBURG FACTORY IN 2002 (MIDDELBURG FACTORY IN 2002 (MIDDELBURG FACTORY IN 2002 (MIDDELBURG FACTORY IN 2002 (MIDDELBURG FACTORY IN 2002 (MIDDELBURG FACTORY IN 2002 (MIDDELBURG FACTORY IN 2002 (MIDDELBURG FACTORY IN 2002 (South AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth AfricaSouth Africa))))))))
NEW SENDZIMIR ZNEW SENDZIMIR ZNEW SENDZIMIR ZNEW SENDZIMIR ZNEW SENDZIMIR ZNEW SENDZIMIR ZNEW SENDZIMIR ZNEW SENDZIMIR Z--------MILL 3 (ZRMILL 3 (ZRMILL 3 (ZRMILL 3 (ZRMILL 3 (ZRMILL 3 (ZRMILL 3 (ZRMILL 3 (ZR--------21BN21BN21BN21BN21BN21BN21BN21BN--------63) HOUSING FOR 63) HOUSING FOR 63) HOUSING FOR 63) HOUSING FOR 63) HOUSING FOR 63) HOUSING FOR 63) HOUSING FOR 63) HOUSING FOR
COLUMBUS STAINLESS IN PRECOLUMBUS STAINLESS IN PRECOLUMBUS STAINLESS IN PRECOLUMBUS STAINLESS IN PRECOLUMBUS STAINLESS IN PRECOLUMBUS STAINLESS IN PRECOLUMBUS STAINLESS IN PRECOLUMBUS STAINLESS IN PRE--------ASSEMBLY, NOVEMBER ASSEMBLY, NOVEMBER ASSEMBLY, NOVEMBER ASSEMBLY, NOVEMBER ASSEMBLY, NOVEMBER ASSEMBLY, NOVEMBER ASSEMBLY, NOVEMBER ASSEMBLY, NOVEMBER
I am more optimistic than ever about the future of stainless steel under only two conditions:
1.- World economy grows normally.2.- Reasonable behaviour of raw materials.
All of us, raw materials suppliers, stainless steel producers and transformers, are in the same boat and it is very important to avoid all kind of speculations like those suffered last year, especially with the LME nickel prices. How? This is a difficult question but you will agree with me that they are affecting the wonderful 6% growth rate of the stainless steel of last 53 years, that could even be higher due, on top of its life cycle and maintenance free, to its superior mechanical properties than other competitive materials.
Will the growth depend in a big extent of China? Yes, but not exclusively, because in all the remaining geographic areas it will continue growing too, even if certain transforming industries, intensive in man power, will move not only to China but also to Taiwan, South Korea, Malaysia, Vietnam, etc., and why not to South Africa, provided that the Rand would recover soon a reasonable parity with the US Dollar?. Such unavoidable displacements will be compensated with new applications. I also strongly believe in the recovery of the North American market, now that its economy is doing well and its stainless steel industries are becoming competitive and in consequence the market prices have been already aligned with those of other areas.
The past experience is that “when a country reaches a certain GDP level, the stainless steel consumption always takes off spectacularly” and I think this moment has already arrived for China, and you can imagine what can happen in a Country with 1.3 billion population ready to work. If GDP of China continues growing not at between 7 and 9% p.a. like last years, but even at a little lower pace, the stainless steel consumption will rise at two digits figures. If so, China will reduce rather fast its cold rolled coils imports but will continue importing hot coils and also special cold rolled grades during all this decade.
When the analysts talk about overcapacity, they often forget that the more sophisticated the new equipments are, the longer time is necessary for the start up since it takes many months until the full capacity is reached. Besides that, the recent mergers of heavy machinery makers, with the inherent early retirement of experienced engineers, has caused delays in important projects, not to mention about the possible financial dangers, specially in the tight moments of the cycle.
Even if the new investments are undertaken in a reasonable manner and timing, there will be a fierce competition in our very globalized market, and consequently the profit margins will continue narrowing more and more. The importance of the integrated process in the plants, with a minimal size of about 1 million tons, will be decisive. The location of production close to the customers and raw materials will become another important factor. Nevertheless, due to our product excellence it will not exist a big global overcapacity, except for certain short periods of time, as it happened cyclically in the past. The consolidation of the stainless steel industry will continue, as it has already been accomplished in Europe, but not enough yet in other continents and most especially in Asia, that should digest its very big and outstanding fast expansion.
I hope that these personal views about stainless steel industry will be helpful for your discussions in this Ferroalloys Congress and I am at your disposal for replying your questions.