I had an opportunity to participate on procurement panel discussing steel procurement challenges and issues for Pipe and Tube manufacturers @ 11th Pipe and Tube Conference organized by American Metal Market (AMM). My presentation provides general idea about global excess steel capacity and what do we see in near term future.

1. 1
PROCUREMENT
PANEL
11th AMM Pipe and Tube Conference
14 - 15 March 2018
Houston
Dhaval Trivedi

2. Poll Results and President Trump…. 2
AMM – 11th Annual Pipe and Tube Conference
Data Resource: AMM Poll (http://www.amm.com/Poll/2753/PollResults/How-long-will-the-United-States-Section-232-protections-last.html)

3. How are things changing in terms of customer needs vis-à-vis sour service and connections in particular?
What factors are being considered by tube and pipe mills in creating a flexible procurement strategy to cope with
unknown raw material prices?
To what extent is 232 driving prices? How can exposure to unknown be limited?
How do these fluctuations get absorbed into the business model? Do producers or consumers take the hit?
Discussion Points… 3
AMM – 11th Annual Pipe and Tube Conference

4. Domestic Steel Production increased to 81.6 million metric tons from 78.5 million metric tons in 2016 – 3.4% increase.
Overall Capacity Utilization in 2017 averaged 73.9%, up from the 2016 average of 70.5%.
U.S. Imports of Steel mill Products was 34.5 million metric tons in 2017 compared to 30 million metric tons in 2016 –
15% increase.
Import Penetration averaged 26.8% in 2017, up from 25.5% in 2016
Top Three Import Sources: Canada (16.5%), Brazil (13.5%) and South Korea (9.9%)
DOC – Steel Industry Executive Summary: Feb 2018 4
Data in Million Metric Tons, Data Resource: https://enforcement.trade.gov/steel/license/documents/execsumm.pdf
AMM – 11th Annual Pipe and Tube Conference

5. China had 49% of the Global Steel Production share @ 823
million metric tons.
Top Steel Producing Countries – 2014 5
While the #2 nation – Japan – was only 7% of global
steel production with United States at #4 with only 5%
of global steel production.
Data Source: World Steel Association
https://www.worldsteel.org/media-centre/press-releases/2018/World-crude-steel-output-increases-by-5.3--in-
2017.html
AMM – 11th Annual Pipe and Tube Conference

6. China’s steel capacity exploded between 2000 and 2014. From 128.5 million metric tons to 822 million metric tons.
“The extent of excess capacity in China’s steel and cement industries — the largest sources of industrial emissions —
and the need for a structural turnaround in these industries are now widely recognized throughout the Chinese
government and the industries themselves.”
“The expected decline in steel and cement in 2015 and beyond will reduce the demand for coking coal and thermal
coal in industry, respectively.”
“As domestic demand moderated in 2014, China’s steel producers responded by rapidly expanding their exports, but
this export expansion clearly has its limits: it has depressed global steel prices and has raised trade tensions in Europe
and the U.S., with producers in those countries accusing China of dumping cheap steel and pressing their governments
for protectionist responses”
“A declining proportion of steel, for example, is being produced from blast furnaces (which use coking coal), which are
increasingly being substituted for methods that use recycled scrap steel (which do not use coal).”
Chinese Steel Overcapacity & Paris Agreement - 2015 6
Data Source: Grantham Research Institute
http://www.lse.ac.uk/GranthamInstitute/wp-content/uploads/2015/06/China_new_normal_web1.pdf
AMM – 11th Annual Pipe and Tube Conference

7. Global Trade Measures on Hot Rolled Steel - 2016 7
August 3, 2016
AD/CVD on 7
Countries
USA
Nov 21, 2016
Anti-Subsidy
Investigation
launched against
HRC from China
Brazil
Oct 7, 2016
Duties on Chinese
HRC
European
Union
March 23, 2016
Safeguard Duties
India
Nov 10, 2016
Anti-Dumping
Investigation
launched
Australia
Data Resource: AMM Research & Metal Bulletin Research
Apr 20, 2016
Anti-Dumping
Investigation
was withdrawn
Turkey
Mexico
Extended Import
Duties
AMM – 11th Annual Pipe and Tube Conference

8. Why is the issue so important?
As the second biggest industry in the world after oil and gas, steel production remains an indispensable link in the whole
industry system, providing basic materials to downstream manufacturers and creating enough employment to stabilize
the economy.
What is China doing?
China is in the middle of a painful downsizing in its steel sector. Since supply-side structural reform was proposed at the
end of 2015, capacity cutting has been in full swing.
What does this mean for the global steel sector?
The contraction in China's steel sector will be a relief to countries suffering from the steel glut.
What is next?
The cuts will continue.
China plans to reduce steel capacity by 100 million to 150 million tons during 2016 to 2020.
China Daily Talks About Chinese Over Capacity Cuts - 2017 8
Source: China Daily, last updated 2017-07-08
http://www.chinadaily.com.cn/business/2017-07/08/content_30041248.html
AMM – 11th Annual Pipe and Tube Conference

9. Top Steel Producing Countries – 2014 through 2017 9
Data Source: World Steel Association
https://www.worldsteel.org/media-centre/press-releases/2018/World-crude-steel-output-increases-by-5.3--in-2017.html
2014, 1669.9
2015, 1615.4
2016, 1628.5
2017, 1691.2
2014, 822.8 2015, 803.8 2016, 808.4 2017, 831.7
2014, 73.40%
2015, 69.70% 2016, 69.30%
2017, 72.49%
50.00%
55.00%
60.00%
65.00%
70.00%
75.00%
0
200
400
600
800
1000
1200
1400
1600
1800
2014 2015 2016 2017
Global China Japan
India United States Russia
South Korea Germany Brazil
Turkey Ukraine Global Capacity Utilization
AMM – 11th Annual Pipe and Tube Conference

10. Section 232 – National Security …??? 10
AMM – 11th Annual Pipe and Tube Conference

11. Section 232 – DOC Report to President Trump Feb 11, 2018 11
Data Source: DOC
https://www.commerce.gov/sites/commerce.gov/files/the_effect_of_imports_of_steel_on_the_national_security_-_with_redactions_-_20180111.pdf
AMM – 11th Annual Pipe and Tube Conference

12. Section 232 – What Do We Know So Far? 12
Data Source: The White House
https://www.whitehouse.gov/presidential-actions/presidential-proclamation-adjusting-imports-steel-united-states/
President Trump signed Proclamation on March 8, 2018
25% ad valorem tariff on steel articles.
“………In my judgement, this tariff is necessary and appropriate in light of the many factors I have considered, including ……., the failure of
countries to agree on measures to reduce global excess capacity, ………, and special circumstances that exist with respect to Canada
and Mexico…”
“This relief will help our domestic steel industry to revive idled facilities, open closed mills, preserve necessary skills by hiring new steel
workers, and maintain or increase production,….”
“(3) The Secretary, ……is hereby authorized to provide relief from the additional duties set forth in clause 2 of this proclamation for any
steel article determined not to be produced in the United States in a sufficient and reasonably available amount or of a satisfactory
quality and is also authorized to provide such relief based upon specific national security considerations. ”
“(4) Within 10 days after the date of this proclamation, the Secretary shall issue procedures for the requests for exclusion described in
clause 3 of this proclamation. ”
Effective from March 23, 2018 12:01 am EST.
AMM – 11th Annual Pipe and Tube Conference

13. Section 232 – What Do We Know So Far? 13
Data Source: AMM Prices
AMM – 11th Annual Pipe and Tube Conference

14. Interesting Factual Numbers…. 14
Data Source: Mill Utilization from AISI Reports, US Midwest Domestic Price from CRU, US Mill Financials reported in DOC Steel Industry Executive Summary
Report Feb 2018.
AMM – 11th Annual Pipe and Tube Conference

15. What’s The Goal? 15
Domestic Capacity : 113.3 Million Metric Tons
Total U.S. Demands : 107.3 Million Metric Tons
Import From Canada & Mexico : 8.6 Million Metric Tons
Domestic Steel Capacity Utilization : 80%
Target Domestic Steel Production : 90.6 Million Metric Tons
Available Tons for Import (Non-NAFTA) : 8.1 Million Metric Tons
While Canada, Mexico and Australia are exempt for now, the total target share of import
will be reduced to 50%. This would mean re-alignments and re-allocation of the steel
products that are being imported.
Facts
Goal
Meaning
Based on 2017 reports:
To be profitable by achieving targeted utilization rate:
What does this mean for Importers?
AMM – 11th Annual Pipe and Tube Conference

16. What Should We Expect? 16
Domestic price through the roof
Tight supply
Longer lead times
Stable demand for the 1H 2018 mainly driven by
seasonal and structural markets
Short Term Long Term
Faltering demand with higher prices
Clarity and more exclusions to Sec 232 tariff
Domestic price correction
Return of certain steel imports
AMM – 11th Annual Pipe and Tube Conference

17. What is Borusan Doing? 17
Strategic Relationship
We partnered with the “like-minded” steel suppliers, those who share the same values and have
equal commitments for our customers and our industry.
AMM – 11th Annual Pipe and Tube Conference
Commitments
Downturn was tough but we made commitments to our supplier partners in those days when no
body wanted steel – not for short term wins but looking at long term collaborative support.
In it, Together
We win together, we lose together. We have worked (and will continue to work) closely and
transparently to achieve our goal.
Redefine Efficiency
With open door policy and technical knowledge sharing, we find more efficient practises and
solutions to achieve quality products.

18. 18
THANK YOU
QUESTIONS