An outlook for the EU Steel Market and Industry 14 December 2011 MCB Suppliers Day 2011
MCB Suppliers Day 2011  –  Outlook for the EU Steel Market and Industry  – Contents  Contents <ul><li>A long term perspect...
Global consumption of finished steel (mln tonnes) Source: WSA, SteelConsult analysis MCB Suppliers Day 2011  –  Outlook fo...
Source: WSA, SteelConsult analysis, Hatch Beddows Steel output by country/region (mln tonnes) MCB Suppliers Day 2011  –  O...
Source: SBB, SteelConsult MCB Suppliers Day 2011  –  Outlook for the EU Steel Market and Industry  – A Long Term Perspecti...
Source: SteelConsult analysis Notes: *Incl. net energy credit Operational production cost/t slab, EU mill, US$/t MCB Suppl...
MCB Suppliers Day 2011  –  Outlook for the EU Steel Market and Industry  – A Long Term Perspective  Three groups of steel ...
The steel industry has done fairly well in 2010 and 2011. The mining industry has seen profitability explode. It is the au...
MCB Suppliers Day 2011  –  Outlook for the EU Steel Market and Industry  – Contents  Contents <ul><li>A long term perspect...
Source: WSA, SteelConsult MCB Suppliers Day 2011  –  Outlook for the EU Steel Market and Industry  – Short Term Outlook  T...
MCB Suppliers Day 2011  –  Outlook for the EU Steel Market and Industry  – Short Term Outlook  Meanwhile, plenty of other ...
MCB Suppliers Day 2011  –  Outlook for the EU Steel Market and Industry  – Short Term Outlook  Slow growth notwithstanding...
MCB Suppliers Day 2011  –  Outlook for the EU Steel Market and Industry  – Short Term Outlook  Steel output has weakened i...
Source: IMF, Eurostat, SteelConsult G3 BRIC countries Global GDP growth (%) MCB Suppliers Day 2011  –  Outlook for the EU ...
Source: Eurostat MCB Suppliers Day 2011  –  Outlook for the EU Steel Market and Industry  – Short Term Outlook  The EU-27 ...
Source: ACEA MCB Suppliers Day 2011  –  Outlook for the EU Steel Market and Industry  – Short Term Outlook  New registrati...
Source: Markit, Ifo Institute, Eurostat MCB Suppliers Day 2011  –  Outlook for the EU Steel Market and Industry  – Short T...
MCB Suppliers Day 2011  –  Outlook for the EU Steel Market and Industry  – Short Term Outlook  Steel consumption in the EU...
MCB Suppliers Day 2011  –  Outlook for the EU Steel Market and Industry  – Short Term Outlook  Steel consumption in the EU...
MCB Suppliers Day 2011  –  Outlook for the EU Steel Market and Industry  – Short Term Outlook  Market supply is reduced by...
MCB Suppliers Day 2011  –  Outlook for the EU Steel Market and Industry  – Short Term Outlook  ...Whilst EU mills are also...
MCB Suppliers Day 2011  –  Outlook for the EU Steel Market and Industry  – Short Term Outlook  While the overall outlook r...
MCB Suppliers Day 2011  –  Outlook for the EU Steel Market and Industry  – Contents  Contents <ul><li>A long term perspect...
Global consumption of finished steel (mln tonnes) Source: WSA, SteelConsult analysis MCB Suppliers Day 2011  –  Outlook fo...
Finished steel consumption/capita (kg), 2008 GDP(PPP)/capita (US$), 2009 Germany USA Brazil India Japan Source: WSA, CIA, ...
Source: WSA, SteelConsult Note: All data for 2008, except China 2010 and India 2009 MCB Suppliers Day 2011  –  Outlook for...
Consumption of finished steel per capita (kg/head) Source: WSA, SteelConsult analysis MCB Suppliers Day 2011  –  Outlook f...
Source: Wikipedia, Goldman Sachs, SteelConsult Share of global GDP (PPP) at various points in time  MCB Suppliers Day 2011...
MCB Suppliers Day 2011  –  Outlook for the EU Steel Market and Industry Thank you for your attention! <ul><li>SteelConsult...
MCB Suppliers Day 2011  –  Outlook for the EU Steel Market and Industry  About SteelConsult International <ul><li>We know ...
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Gilles Calis - an outlook for eu staal market

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Gilles Calis - an outlook for eu staal market

  1. 1. An outlook for the EU Steel Market and Industry 14 December 2011 MCB Suppliers Day 2011
  2. 2. MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – Contents Contents <ul><li>A long term perspective </li></ul><ul><li>Outlook </li></ul><ul><ul><li>Short term outlook </li></ul></ul><ul><ul><li>Long term outlook </li></ul></ul>
  3. 3. Global consumption of finished steel (mln tonnes) Source: WSA, SteelConsult analysis MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – A Long Term Perspective Global steel consumption has seen unprecedented growth in the last decade, even taking into account the 2008 crisis, only seen before in the post-WWII reconstruction period 1920-1929 CAGR 5.8% 1929-1945 CAGR -0.4% 1945-1974 CAGR 6.5% 1974-1989 CAGR 1.0% 1989-2001 CAGR 1.3% 2001-2010 CAGR 6.0% Roaring twenties Great Depression & WWII Post war reconstruction Oil crises, inflation, unemployment Post-Soviet Union demand collapse China Consolida- tion Restruc -turing in N. America, E. Europe and CIS Restructuring & privatization of steel industry in W. Europe Cost reductions AD Cases, Section 201 1 st Golden Age 2 nd Golden Age 3 rd Golden Age
  4. 4. Source: WSA, SteelConsult analysis, Hatch Beddows Steel output by country/region (mln tonnes) MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – A Long Term Perspective While steel production was dominated by the Atlantic Basin for decades, leadership has now been taken over by Asia, which in 2010 produced 63% of global output, compared to only 11% in 1960 Atlantic Basin Asia ?
  5. 5. Source: SBB, SteelConsult MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – A Long Term Perspective In past decades, steel prices traditionally declined by about 2% per annum. In 2002, this trend was broken, in part due to rising costs and in part owing to higher profitability of the steel industry
  6. 6. Source: SteelConsult analysis Notes: *Incl. net energy credit Operational production cost/t slab, EU mill, US$/t MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – A Long Term Perspective Steel production costs stand at an all-time ever high. Raw materials costs have greatly increased in importance and are impacting on the financial performance of the whole supply chain
  7. 7. MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – A Long Term Perspective Three groups of steel mills can be identified: those with captive raw materials, those close to raw materials resources, and the rest Source: CRU (2001), SteelConsult International (2010) Note: Integrated mills only World Steel Slab Cost Curve Mills with their own raw materials Mills located close to raw materials
  8. 8. The steel industry has done fairly well in 2010 and 2011. The mining industry has seen profitability explode. It is the auto industry that has lost out in the supply chain Source: SteelConsult International ( www. steelearningsbarometer .com ) EBITDA (Index (US$, Q1 2000=100)) EBITDA (bln US$) Top-70 publicly listed mills (65% of global steel output) Top-9 publicly listed iron ore mining companies (45% of global iron ore output, 75% of seaborne trade) Top-12 Automotive OEMs (90% of global car output) MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – A Long Term Perspective 2,312 218 102
  9. 9. MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – Contents Contents <ul><li>A long term perspective </li></ul><ul><li>Outlook </li></ul><ul><ul><li>Short term outlook </li></ul></ul><ul><ul><li>Long term outlook </li></ul></ul>
  10. 10. Source: WSA, SteelConsult MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – Short Term Outlook The EU market is mature and declines by 0.3% per year on average over the long term...
  11. 11. MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – Short Term Outlook Meanwhile, plenty of other regions see their steel markets grow at rates above 5% per year Finished steel consumption growth, CAGR 2000-2010 Source: WSA, SteelConsult
  12. 12. MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – Short Term Outlook Slow growth notwithstanding, the EU is still a major steel market in tonnage terms, larger than the USA + Japan, and larger than the fast growing “BRI” markets (Brazil, Russia and India) combined Source: WSA, SteelConsult Finished steel consumption, 2010, m tonnes
  13. 13. MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – Short Term Outlook Steel output has weakened in the EU since H1 2011, but also in the BRIC countries, and global production has fallen back to the pre-2008 crisis level Crude steel output, index (May 2008 = 100) Source: WSA, SteelConsult 2008 2009 2010 2011
  14. 14. Source: IMF, Eurostat, SteelConsult G3 BRIC countries Global GDP growth (%) MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – Short Term Outlook The ‘decoupling’ of emerging markets persists: while the mature markets are struggling, the emerging markets are surging ahead. Prospects for the EU are weakest among the major regions
  15. 15. Source: Eurostat MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – Short Term Outlook The EU-27 manufacturing sectors were doing relatively well until August, but have turned down sharply in September. The construction sector remains lacklustre. No data is available yet for October and November, but the economic situation has deteriorated significantly in the last two months 2007 2008 2009 2010 2011
  16. 16. Source: ACEA MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – Short Term Outlook New registrations of cars are also declining sharply 2007 2008 2009 2010 2011
  17. 17. Source: Markit, Ifo Institute, Eurostat MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – Short Term Outlook The PMI and Ifo business climate series have proven to be highly reliable early indicators of economic developments in the past. The PMI, Ifo and new industrial orders have all turned down sharply in recent months 2007 2008 2009 2010 2011 PMI>50 = expansion PMI<50 = contraction PMI balance point = 50
  18. 18. MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – Short Term Outlook Steel consumption in the EU expected to see 5% positive growth for the year 2011 as a whole, mainly owing to flat products, but real impact to come in 2012 Source: WSA, SteelConsult Apparent steel consumption EU (mln tonnes) Apparent EU steel consumption growth (% YoY)
  19. 19. MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – Short Term Outlook Steel consumption in the EU expected to be very weak in Q4 2011 and Q1 2012, gradually recovering from Q2, however, eurozone debt situation developments may hold a strong downside potential Source: Eurofer Market Report October 2011 Real steel consumption growth forecast (Eurofer), % YoY Apparent steel consumption growth forecast (Eurofer), % YoY Year 2011e: 6.1% Year 2012f : 2.0% Year 2011e: 7.5% Year 2012f : 2.0%
  20. 20. MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – Short Term Outlook Market supply is reduced by sharply falling imports in H2 2011... Source: SteelConsult analysis
  21. 21. MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – Short Term Outlook ...Whilst EU mills are also reducing output, led by ArcelorMittal. But is it enough? The challenge will be to maintain supply discipline Source: SteelConsult analysis Steel flats shipments (mln t) 2008 2009 2010 2011
  22. 22. MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – Short Term Outlook While the overall outlook remains one of uneven growth in different parts of the world, there are downside risks which could undermine economic fundamentals around the world. Points to watch include: <ul><ul><li>Europe facing 3 major threats: Excess Debt, Euro implosion and 2 nd Credit Crisis, with likely spillover into real economy around the world. </li></ul></ul><ul><ul><li>Unrest in the Middle-East and North Africa: Turmoil across the region has led to a sharp rise in oil prices, which would explode if instability would spread to even more significant oil producers like Saudi Arabia. Unrest continues, the ‘Arab spring’ may not be over yet. </li></ul></ul><ul><ul><li>Currency tensions becoming a trade conflict: Artificially weak currencies, used as a tool to encourage exports, could spillover into a broad trade dispute. China and the US are the key players to watch. </li></ul></ul><ul><ul><li>Inflation and real estate bubble in China : Driven by rising food, oil and raw materials prices, and in some regions, real estate prices, inflation is a growing threat around the world, but most notably in China. Central banks and governments must walk a tightrope in their bid to control inflation and not hurt economic growth. China, and other fast growing countries, face the challenge of balancing the aspirations of the rising classes with the dangers of bubble-creation. </li></ul></ul>
  23. 23. MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – Contents Contents <ul><li>A long term perspective </li></ul><ul><li>Outlook </li></ul><ul><ul><li>Short term outlook </li></ul></ul><ul><ul><li>Long term outlook </li></ul></ul>
  24. 24. Global consumption of finished steel (mln tonnes) Source: WSA, SteelConsult analysis MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – Long Term Outlook Where will consumption head to in the years to 2020? Is this the end of steel’s 3 rd Golden Age? 1920-1929 CAGR 5.8% 1929-1945 CAGR -0.4% 1945-1974 CAGR 6.5% 1974-1989 CAGR 1.0% 1989-2001 CAGR 1.3% ’ 01-’10 CAGR 6.0% Roaring twenties Great Depression & WWII Post war reconstruction Oil crises, inflation, unemployment Post-Soviet Union demand collapse 2011-2020 China 1 st Golden Age 2 nd Golden Age 3 rd Golden Age
  25. 25. Finished steel consumption/capita (kg), 2008 GDP(PPP)/capita (US$), 2009 Germany USA Brazil India Japan Source: WSA, CIA, SteelConsult Malaysia World average China 2010 EU-27 OECD average MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – Long Term Outlook Despite the current deep economic problems in the developed world, and though the steel market will always remain cyclical, in the long term the further development of BICS countries seems irreversible and unstoppable Thailand Philippines Vietnam Indonesia Emerging Newly industrialized Mature China 2008
  26. 26. Source: WSA, SteelConsult Note: All data for 2008, except China 2010 and India 2009 MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – Long Term Outlook Long term growth is supported by BICS and other fast developing countries, which account for a potential further consumption growth of hundreds of millions of tonnes of steel Country Population (mln people) Finished steel consumption (mln tonnes) Finished steel consumption per head (kg) Finished steel consumption (mln tonnes) at OECD average (415kg/head) Implied growth potential to reach OECD standards (mln tonnes) Brazil 182 24.0 132 75.5 51.5 India 1,180 55.3 47 489.7 434.4 China 1,330 577.3 434 (>OECD) 577.3 na Total BIC 2,692 656.6 244 1,142.5 485.9 Indonesia 222 8.8 40 92.1 83.3 Philippines 89 3.7 42 36.9 33.2 Vietnam 84 8.0 95 34.9 26.9 Thailand 63 13.5 214 26.1 12.6 Malaysia 28 8.3 296 11.6 3.3 Total SE Asia 486 42.3 87 201.7 159.4 Total BICS 3,178 698.9 220 1,344.2 645.3
  27. 27. Consumption of finished steel per capita (kg/head) Source: WSA, SteelConsult analysis MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – Long Term Outlook How far has China progressed with its economic development and when and at what level will its steel consumption peak? South Korean peak 1,211kg/head (2007) Japanese peak 751kg/head (1973) US peak 700kg/head (1968) German peak 662kg/head (1970)
  28. 28. Source: Wikipedia, Goldman Sachs, SteelConsult Share of global GDP (PPP) at various points in time MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry – Long Term Outlook China and India will increasingly dominate the world economy in the coming decades, but this is not a threat. We are just returning to the situation as prevalent for much of pre-industrial history
  29. 29. MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry Thank you for your attention! <ul><li>SteelConsult International </li></ul><ul><li>Binderij 3-S </li></ul><ul><li>1185 ZH Amstelveen </li></ul><ul><li>The Netherlands </li></ul><ul><li>Tel: +31 20 661 8900 </li></ul><ul><li>Fax: +31 20 661 8901 </li></ul><ul><li>Email : [email_address] </li></ul><ul><li>www.steelconsult.com </li></ul><ul><li>www.steelearningsbarometer.com </li></ul>
  30. 30. MCB Suppliers Day 2011 – Outlook for the EU Steel Market and Industry About SteelConsult International <ul><li>We know the steel industry </li></ul><ul><li>We know the market </li></ul><ul><li>Extensive databases </li></ul><ul><li>Strong network of senior consultants, </li></ul><ul><li>with a background in the industry </li></ul><ul><li>We offer a full-service analysis package </li></ul>Services Product Areas Why SteelConsult? <ul><li>Strategic Consulting </li></ul><ul><li>Steelmaking Raw Materials </li></ul><ul><li>Specialised in Iron & Steel </li></ul><ul><li>Market Research </li></ul><ul><li>Semis </li></ul><ul><li>Expertise & experience </li></ul><ul><li>Financial Modelling </li></ul><ul><li>Flat Products </li></ul><ul><li>Contact network </li></ul><ul><li>Cost and Feasibility Studies </li></ul><ul><li>Long Products </li></ul><ul><li>Commitment </li></ul><ul><li>Customer Satisfaction Studies </li></ul><ul><li>Processed Products </li></ul><ul><li>Languages: </li></ul>

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