TITLE 16 MAY 2012 KATOWICE CONFERENCE 2012 : A CHALLENING YEAR JUERGEN NUSSER MANAGING DIRECTOR.

TITLE16 MAY 2012 KATOWICE

CONFERENCECONFERENCE

2012 : A CHALLENING YEAR2012 : A CHALLENING YEAR

JUERGEN NUSSERJUERGEN NUSSERMANAGING DIRECTORMANAGING DIRECTOR

EUROPEAN ECONOMIC CONGRESS 16 MAY 2012 KATOWICE© JUERGEN NUSSER, MD EUROMETAL 2012 : A CHALLENGING YEAR SLIDE 2

16 MAY 2012 KATOWICE

EUROMETAL presentations may include forward-looking information and statements about the steel sector (production, distribution, consuming industries and their stake-holders). Forward-looking statements are not historical facts but have to include financial or other projections & estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, products and services, and statements regarding future performance.

For EUROMETAL, expectations reflected in such information and statements are reasonable. Any third parties are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of EUROMETAL, that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.

Consequently EUROMETAL • denies all responsibility regarding the said informations and statements• undertakes no obligation to publicly update forward-looking statements, whether as a result of

new information, future events, or otherwise.

ABOUT EUROMETAL PRESENTATIONS

DISCLAIMER



AGENDA

EUROPEAN ECONOMIC CONGRESS

ABOUT EUROMETAL

EUROPEAN ECONOMICS

STEEL PARAMETERS

PRICING POWER SHIFTS

OUTLOOK 2012


ABOUT EUROMETAL

ASSOCIATION OF EUROPEAN DISTRIBUTORS

OF STEEL, TUBES AND METALS

EUROPEAN STEEL TRADING STUDY GROUP

EUROPEAN ASSOCIATION OF FLAT STEEL SERVICE CENTERS

FEDERATION OF EUROPEAN NATIONAL ASSOCIATIONS OF

STEEL, TUBE AND METAL DISTRIBUTION

COVERING ALL ASPECTS & TYPESOF STEEL INTERMEDIATIONIN THE EUROPEAN UNION AND BEYOND

3.500 GROUPS & COMPANIESMORE THAN 100.000 EMPLOYEES

MORE THAN 80 MLN TONNES OF SALES

24 OCTOBER 2011: IMPLEMENTATION OF THE NEW EUROMETAL




16 MAY 2012 KATOWICE

EUROZONEGDP

SEASONALLY ADJUSTED

UNEMPLOYMENTMARCH 2012

SEASONALLY ADJUSTED

. . . WITH THE EUROZONE MOVING TOWARDS RECESSION. . . WITH UNEMPLOYMENT IN EUROPE REACHING A RECORD LEVEL. . . WITH INCREASING RELOCATION AND TECHNOLOGY TRANSFER. . . WITH THE EUROZONE FINANCIAL STATUS DETERIORATING. . . WITH LATEST ELECTION RESULTS CREATING NEW UNCERTAINTIES. . . AND WITH A GLOBAL ECONOMY GOING CRAZY?

2012: A CHALLENING YEAR . . .

MARKET CAPITALISATION96.000.000.000 USD ??


SINCE Q4/2008 WE WE HAVE SEEN RECOVERY - BUT . . .

EUROPEAN ECONOMICS


IN 2012 FINANCIAL PARAMETERS RULE THE ECONOMIC WORLD

EUROPEAN ECONOMICS


27 FEBRUARY 2012: PUBLICATION OF THE EEAG REPORT 2012

NOT REALLY AN ENCOURAGING OUTLOOK FOR 2012

EUROPEAN ECONOMICS


A MACROECONOMIC RECESSIONA MACROECONOMIC RECESSIONINTENSIFIES STRUCTURAL CHANGE OF INDUSTRIAL PRODUCTIONINTENSIFIES STRUCTURAL CHANGE OF INDUSTRIAL PRODUCTIONHARDLY EVER AGAIN REACHING THE FORMER LEVELHARDLY EVER AGAIN REACHING THE FORMER LEVEL

ECONOMIC CYCLEECONOMIC CYCLE

STRUCTURAL CHANGESTRUCTURAL CHANGE

IN MATURE AND SATURATED ECONOMIESIN MATURE AND SATURATED ECONOMIESTHE SHORT TERM UPSWINGS AND DOWNSWINGS OF THE MACROECONOMIC CYCLETHE SHORT TERM UPSWINGS AND DOWNSWINGS OF THE MACROECONOMIC CYCLESLOW DOWN OR SPEED UP CONTINUOUS AND LONG TERM STRUCTURAL CHANGESLOW DOWN OR SPEED UP CONTINUOUS AND LONG TERM STRUCTURAL CHANGE

EUROPEAN ECONOMICS

DIFFERENCE BETWEEN ECONOMIC CYLES AND STRUCTURAL CHANGE


1.400

1.200

1.000

800

600

400

200

0

TO REACH 1.294 MTO IN 2010 (14% Y-O-Y)

1.2% pa

7,1% pa

14% pa

IN MLN TO

1990 20001995 20051981 1985 2010

STEEL PARAMETERS

GROWTH OF GLOBAL STEEL DEMAND CONTINUES . . .


1.400

1.200

1.000

800

600

400

200

01990 20001995 20051981 1985 2010

. . . IN WHICH EUROPEAN STEEL DEMAND HAS ALMOST NO PART

BUT STRUGGLES TO COME BACK TO HISTORIC AVERAGES

IN MLN TO

240

200

160

120

80

40

01981 1985 1990 20001995 2010

153

125

189

207197

2005

173179

169167169

STEEL PARAMETERS


DOWNWARD TREND OF GLOBAL CRUDE STEEL PRODUCTION

STEEL PARAMETERS

40

60

80

100

120

140

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

MLN TONS

?

GROWTH TREND BEFORE 2008 RECESSION

RECOVERY TREND AFTER RECESSION

DOWNWARD TREND SINCE MAY 2011

CRISIS TREND INTO 2008 RECESSION

CRU WORLD STEEL CONFERENCE LONDON FEBRUARY 2012

A CONSEQUENCE OF A NEGATIVE TREND OF GLOBAL STEEL CONSUMPTION


-1

0

1

2

3

4

5

6

7

8

9

10

APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV

CHANGE IN % Y-O-Y

2010 2011

9 9

8

7

8

9

7

8

9

7 7

5 5

4

3

4

5

2

1

-0,2

COULD THIS BE A DEJA VUE EXPERIENCE ?

INDUSTRIAL PRODUCTION IN EU-27 HAS TURNED TO ZERO

STEEL PARAMETERS


WINNERS, SURVIVORS AND LOSERS IN THE PAST FIVE YEARS

- 10 %

+ 6 %+ 10 %

+ 5 %

+ 14 %

+ 28 %+ 23 %

CHINA, LATIN AMERICA AND THE MIDDLE EAST ARE THE UNCONTESTED WINNERS

THE MATURE ECONOMIES EU AND NAFTA ARE THE CLEAR LOSERS

- 20 %

2011 APPARENT STEEL USE, FINISHED PRODUCTSAS COMPARED TO HIGH CYCLE 2007, IN %

AFRICA MID EASTEU-27 CHINAASIA-PCF LATIN.AMCISNAFTA OTHER EU WORLD

+ 63 %

+ 21 %

STEEL PARAMETERS


THE EUROPEAN UNION IS NO MORE A WINNING MARKET

- 44 %

- 17 %

+ 3 %

+ 21 %

- 7 %

STAGGERING LOSSES IN MAIN EU MARKETS SPAIN, UK, ITALY AND FRANCE

CHARACTERISE THE EUROPEAN PICTURE

ONLY POLISH STEEL CONSUMPTION IS EXPECTED TO COMPLETELY RECOVER FROM LAST YEARS CRISIS

- 26 %- 23 % - 20 %

2011 APPARENT STEEL USE, FINISHED PRODUCTSAS COMPARED TO HIGH CYCLE 2007, IN %

FRANCE GERMANYUK POLANDITALYSPAIN EU - 27 WORLD

STEEL PARAMETERS


WILL STEELMAKING AND STEEL DISTRIBUTION BECOME A « CONVERTER » BUSINESS? WILL STEELMAKING AND STEEL DISTRIBUTION BECOME A « CONVERTER » BUSINESS?

RAW MATERIALS PRODUCERS

STEELPRODUCERS

STEELDISTRIBUTION

STEELEND USERS

STEEL PRICE HEDGING & RESALE

IRON ORE SURCHARGEIRON ORE SPOT

PRICING

SCRAPSURCHARGE

VOLATILESCRAP PRICING

ALLOY SURCHARGE

VOLATILE METALEXCHANGE PRICING

SHORT TERMPRICE CONTRACTS

MARKET PRICING IS LOSING IMPORTANCEMARKET PRICING IS LOSING IMPORTANCE

TO SURCHARGE-MODELS, PRICE INDEXING AND HEDGINGTO SURCHARGE-MODELS, PRICE INDEXING AND HEDGING

THE PROBABLE ANSWER TO THIS:THE PROBABLE ANSWER TO THIS:


POWER SHIFT TO RAW MATERIALS KILLS MARKET PRICING


RAW MATERIAL’S PRODUCERS SHARE IN VALUE CHAIN ALLOCATION IS OVER 70 %RAW MATERIAL’S PRODUCERS SHARE IN VALUE CHAIN ALLOCATION IS OVER 70 %

OVER THE LAST STEEL CYCLE, VALUE ALLOCATION IN THE STEELVALUE CHAIN DID SHIFT DRAMATICALLY TOWARDS RAW MATERIAL PRODUCERS

PRICING POWER TURNING UPSTREAM

2004

STEEL

COAL

IRON ORE

2009

STEEL

COAL

IRON ORE

9 %

41% 9 %

31% 82%

28%

POWER SHIFT FROM STEEL TO RAW MATERIALS PRODUCERS



THERE ARE 40 - 50 MLN TONS OF OVERCAPACITY IN EUROPETHERE ARE 40 - 50 MLN TONS OF OVERCAPACITY IN EUROPE

WITH REAL STEEL CONSUMPTION IN MATURE MARKETS DECLINING EXCESS CAPACITY OF STEEL PRODUCTION COULD ASK FOR PRICE CONCESSIONS

PRICING POWER TURNING DOWNSTREAM?

UNUSEDCAPACITY

USEDCAPACITY

STEEL PRODUCTION

SUSTAINABLEDEMAND

STEEL CONSUMPTION

PRICING?


POWER SHIFT FROM STEEL PRODUCERS TO STEEL END USERS?


A SIGNIFICANT TREND TO A STRUCTURAL MARGIN SQUEEZE

SUCH A DEVELOPMENT WOULD OF COURSE HEAVILY AFFECT STEEL DISTRIBUTIONSUCH A DEVELOPMENT WOULD OF COURSE HEAVILY AFFECT STEEL DISTRIBUTION

STEEL PRODUCERS LEFT WITHOUT ANY PRICING POWER?



CONSIDERING THE IMPLEMENTED CAPACITIES AND SUSTAINABLE DEMANDCONSIDERING THE IMPLEMENTED CAPACITIES AND SUSTAINABLE DEMAND

ALSO FOR EUROPEAN STEEL DISTRIBUTION


PRICEPRESSURE

DISTRIBUTION CAPACITY

230 MLN TONS

SUSTAINABLEDEMAND

160 MLN TONS

110 MLN TONSDISTRIBUTION

A SIGNIFICANT TREND TO A STRUCTURAL MARGIN SQUEEZE


EUROPEAN STEEL WILL ONLY MOVE AT A SLOW PACE

210

120

155158

161 F

174 F

APPARENT DEMAND OF FINISHED STEEL PRODUCTS

220

200

180

160

140

120

100

802000 2002 2004 2006 2008 2010 2012 2014 2016

IN MLN TONNES: EU 27 + 3 + ALBANIA & FORMER YUGOSLAVIA

A DIFFICULT RECOVERY TO THE LONGTERM HISTORIC LEVELAFTER A REAL BUBBLE AND THE FOLLOWING STEEP DECLINE

?

OUTLOOK 2012


EUROPEAN STEEL WILL ONLY MOVE AT A SLOW PACE

EXAMPLE: FLAT PRODUCTSSINCE THE 2008 CRISIS, THE RELATIVE WEIGHT OF DIRECT SALES OF EUROPEAN PRODUCERS

TO END USERS HAS DECLINED TO THE BENEFIT OF THE DISTRIBUTION SEGMENT.

THIS TRANSLATES A NEED OF THE END USERS FOR IMPROVED SERVICES

DRIVEN BY A MORE STRINGENT WORKING CAPITAL REQUIREMENT.

HOWEVER, THE BUSINESS MODEL OF THE DISTRIBUTION SEGMENT

CREATES MORE VOLATILITY IN THE APPARENT DEMAND AND PRICING.

OUTLOOK 2012


DISTRIBUTION- 2 MLN TOEND USERS- 2 MLN TO

147 MLN TO??

EUROPEAN APPARENT DEMAND OF FINISHED STEEL PRODUCTS

158 MLN TO

APPARENTDEMAND 2011

APPARENTDEMAND 2012

THE MISSING RESTOCKINGTHE SOVEREIGN DEBT CRISIS AND

SLUGGISH INDUSTRIAL PRODUCTIONCOULD LEAD TO A SIGNIFICANT

DECREASE OF APPARENT DEMAND

POSSIBLE LOSSESIN DEMAND

POSSIBLE LOSSESBY DESTOCKING

HOPEFULLY THIS WILL REMAIN A WORST CASE SCENARIO!

OUTLOOK 2012

THE FORECASTED 2012 APPARENT DEMAND COULD BE ENDANGERED

AUTOMOTIVE- 1,5 MLN TO

OTHERS- 2 MLN TO

MACHINERY- 3,5 MLN TO


EUROPEAN ECONOMIC CONGRESS

DEFINITELY YES!AT LEAST PARTLY YES!MOST LIKELY YES!. . . . A CHALLENGE ALSO FOR EUROMETALTHEREFORE BETTER PREPARE FOR SOME HASARDS . . . .. . . . AND EVENTUALLY POSSIBLE COLLISIONS!

SO FINALLY - WHAT WILL WE HAVE TO FACE THIS YEAR?

TITLE16 MAY 2012 KATOWICE

CONFERENCECONFERENCE



THANK YOU FOR YOUR ATTENTIONTHANK YOU FOR YOUR ATTENTION

TITLE 16 MAY 2012 KATOWICE CONFERENCE 2012 : A CHALLENING YEAR JUERGEN NUSSER MANAGING DIRECTOR.

Documents

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