World Steel Industry Development and Market Prospects175bca8b... · Oil net exports as % of GDP in 2013 Source: - worldsteel calculations based on GI nominal GDP (USD) and UN Comtrade

World Steel Industry Development and Market Prospects

13th International Market and Trade Conference

Global Steel Industry in the post-Crisis Period

Global economic recovery continues to disappoint

3

The global economy grows on a single engine

• With strong fundamentals, the US remains the bright spot

• The Eurozone recovery is firming, but still lacking strength

• China decelerating, other emerging economies struggling

• Geopolitical tensions continue to undermine growth in some regions

Sources: IMF, Haver Analytics

60

80

100

120

140

160

180

2007 2008 2009 2010 2011 2012 2013 2014

2007=100

World

Developed Economies

Emerging & Developing Economies excl. China

China

Steel Demand Recovery Apparent Steel Use, finished steel

(SRO April 2015)

4

2014 as

% of 2007

World 125.9

United States 98.7

European Union (28) 73.2

Germany 91.7

Japan 83.2

China 169.9

India 146.3

Brazil 111.7

ASEAN (5) 152.1

MENA 128.5

Uneven recovery in steel demand

Post-crisis recovery led by the emerging economies

Steel demand shifts to low gear with China deceleration

5

474 447300 373 397 389 388 412

329 332

299348 374 391 406 415

418 447

551

588641 660

735 711

6.8

0.4

-6.1

13.7

7.9

2.0

6.2

0.6

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

China, Mt Developing ex China, Mt

Developed, Mt World, y-o-y % growth

Steel Demand Evolution (Apparent Steel Use, finished steel)

-40

-30

-20

-10

0

10

20

30

2007 2008 2009 2010 2011 2012 2013 2014

China Developing ex China Developed

y-o-y % growth

How are other industries doing?

6

Sources: different, OICA, worldsteel, IAI, USGS

7

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

During ‘00~’14, global crude steel capacity increased by1300 Mt to

reach 2351 Mt vs. crude steel production up by 815 MT to 1665 Mt

• Chinese capacity increased by 990 Mt to 1140 Mt, production up by

694 Mt to 823 Mt

Overcapacity to stay

Capacity Utilization Ratio Global Capacity vs Demand (2000=100)

8

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

Factors shaping future steel market development

Deleveraging in the developed economies

Deceleration of investment-led growth in China

Structural reforms in the developing and emerging economies

Geopolitical stability and transformation of MENA countries

Lower oil prices (at least in the medium term)

10

GDP Growth Forecasts, %

Source: IHS Global Insight

Fixed investments growth, %

Impact of low oil prices

11

Negative

Investment in the energy sector

will slow

Infrastructure projects in oil

revenue dependent countries

to be scaled down

Positive

Lower energy cost to boost

manufacturing and consumer

spending

Lower inflationary

pressure provides more space

for supportive monetary policy

in high inflation countries and

energy price reform -10 0 10 20 30 40

Thailand

South Korea

Poland

Spain

Japan

China

Italy

Germany

United States

France

Turkey

Indonesia

United Kingdom

Brazil

Argentina

Egypt

Malaysia

Canada

Mexico

Vietnam

Ghana

Russia

Nigeria

Venezuela

United Arab Emirates

Saudi Arabia

%

Oil net exports as % of GDP in 2013

Source:

- worldsteel calculations based on GI nominal GDP (USD) and UN Comtrade trade

(USD, HS 2709), 2013 (2011 for UAE, 2010 for Turkey), selected countries

- fiscal breakeven oil price, USD per barrel, Deutsche Bank and IMF

Iran 131

Nigeria 123

Venezuela 118

Russia 105

Saudi Arabia 104

United Arab Emirates 81

Fiscal breakeven oil price

(USD/bbl)

Deleveraging in the developed economies

Deleveraging in the developed economies is progressing only at a slow

speed, differentiated

Public sector debt has increased as a result of anti-crisis measures and

slow growth

Deflationary pressure to aggravate debt burden

12

Source: Haver Analytics

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

• ASEAN countries with reform agenda will outperform others

• MENA outlook clouded by low oil prices and geopolitical instability

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

13

Unleashing potential of emerging markets

Structural reform agenda is a prerequisite for unleashing potentials in

the developing countries

Low oil prices to facilitate reform environment

14

GDP/capita, USD Urbanization, % Population,(mln) Steel use per

capita, kg

2014 2030 2015 2030 2014 2030 2014

India 1636 9489 33 40 1267 1476 59

Indonesia 3401 12312 54 63 253 294 54

Vietnam 2012 8096 34 43 93 102 138

Thailand 5561 14391 50 64 67 68 258

Egypt 3376 9109 43 47 83 103 122

Sources: UN, Global Insight

Conclusion

15

Steel industry will face new normal of low growth and low profit

• With China deceleration, lacking a strong growth engine

• Unleashing other emerging economies’ potential requires time

Capacity build ups in newly emerging economies cause concern

Steel industry’s sustainability under great stress

• Current profitability inadequate to meet huge R&D bill to meet the challenges

of climate change

• Inter-material competition and more efficient use of steel reduces steel

market expansion potential

Focus on value creation rather than expansion

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