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The Industry Landscape - How does it affect LKAB in the future
The document summarizes LKAB's position in the global iron ore industry and the challenges it faces. It notes that China accounts for over half of global iron ore demand and the top four producers control over 60% of the market. This has led to price pressure. It also discusses LKAB's investments of 1 billion USD per year to extend mining operations by 25 years at its Kiruna, Malmberget, Svappavara, and Narvik mines. Finally, it outlines LKAB's marketing and sales strategies to respond to rapid changes in the volatile iron ore market through measures like product portfolio management, quality control, customer relationships, and risk management.
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The Industry Landscape - How does it affect LKAB in the future
- 1. MINING ON TOP– STOCKHOLM NOV 26-27, 2013 The Industry Landscape – How does it affect LKAB in the future Peter Schmid, Marketing & Sales Director
- 2. • Introduction aboutLKAB - Update • The Industry Landscape • …and How does it affect LKAB in the future Iron Ore Producer Steel Producers End-Users THE INDUSTRY VALUE CHAIN – FROM MINE TO END-USER LKAB - MORE THAN 120 YEARS OF SERVING THE STEEL INDUSTRY 2
- 3. LKAB WORLDWIDE 2012 Harbours Minesand processing plants Sales and/or purchasing offices LKAB Minerals and LKAB Wassara • 4,300 employees, whereof 650 expatriates, 19% women • 30 operations in 15 countries • Sales 2012: SEK 26,9 billion • EBIT 2012: SEK 10,9 billion • 90% of EU Iron Ore production; (2012: 26.3 Mt whereof pellets 22,9 Mt) • Owner: Swedish state 3
- 4. IRON ORE OPERATIONS Narvik Harbour Kiruna Underground mining and processing Malmbanan Railway Narvik Luleå Svappavaara Open pit mining and processing Malmberget Under ground mining and processing Luleå Harbour and Head Office 4 Source: LKAB
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- 6. LKAB PRODUCTION ANDSALES 2012 Market (Revenues) Products Special 4% Others 1% Fines 12% Pellets BF 62% Middle East & Asia 32% Pellets DR 21% Blast furnace pellets (BF) for coal-based steel production Direct reduction pellets (DR) for natural gas-based steel production 6 Source: LKAB Europe 67%
- 7. GLOBAL IRON OREPRODUCTION 2012: 1800MT GLOBAL SEABORNE TRADE: 1170MT (140MT PELLETS) 107Mt 40Mt 30Mt 80Mt 55Mt 21Mt 280Mt 38Mt 12Mt 15Mt 140Mt 16Mt 7Mt 367Mt 57Mt 12Mt LKAB: Deliveries 26,3 Mt, Export 22,5 Mt (2%)* where of 18,3 Mt pellets (13%)* *Share of global seaborne trade 7 Source: CRU, LKAB 2012 520Mt
- 8. IRON ORE EXPORT& IMPORT BY REGION 2012 Export South Am: Brazil 350 Mt, Chile 13 Mt 8 Source: CRU, LKAB Import Asia: China 739 Mt, Japan 130 Mt, S Korea 64 Mt & ME 34 Mt
- 9. IRON ORE MARKETCONTINENTAL DRIFT 2000-2012 (IMPORTS) Year 2000 Year 2012 126 Mt 13% 68 Mt 20% 124 Mt 12% 152 Mt 44% 739 Mt 75% 124 Mt 36% Total 344 Mt Total 989 Mt China 9 Source: CRU, LKAB Japan EU27
- 10. GLOBAL IRON ORECONSUMPTION BY PRODUCTS 2012 – 2017F + 20% 2012: appr. 1800 Mt 2017F: appr. 2200 Mt + 23% + 23% + 51% 2012 10 Source: CRU, LKAB 2017F
- 11. NEW IRON OREPROSPECTS 11 Source: Raw Material Group
- 12. FINISHED STEEL PRODUCTS2000 VS 2020 (MT) 167 154 186 141 98 CIS 132 585 Europe North America 28 41 814 73 28 45 65 63 131 132 131 India China South America • • • CAGR 2005-2020: ≈3% Low price level Overcapacity 12 Source: World Steel Association (WSA); McKinsey Steel Demand Model Demand Steel 2000 2010 2020
- 13. CONSUMPTION OF STEEL(KG/CAPITA) Canada Mexico United States NAFTA France Germany Belgium-Luxembourg Italy European Union (27) Russia 416,4 158,1 284,5 263,0 Middle East Africa Central & South America 208,5 479,6 422,5 459,5 310,0 292,2 233,9 China India Japan South Korea Taiwan Asia 459,8 57,0 506,7 1156,6 784,4 238,8 34,8 98,6 Australia and New Zealand World: 215 kg/capita 13 Source: World Steel 261,6
- 14. CHINA IS THELOCOMOTIVE World Crude Steel Production World Iron Ore Consumption Price - Spot Price - Platts index Micro & Macro Economics in China Impacts the Iron Ore Market -15% to +23 m-o-m • • • • • GDP Interest rate PMI Inventory levels Currency Global market imbalances are driven by China 14 Source: CRU, LKAB
- 15. THE INDUSTRY LANDSCAPEIN SUMMARY Iron Ore Producers • China demand (≈57%) • The “Big 4” (+60%) • Capacity additions • Price pressure Steel Producers End-Users • China (≈48%) • CAGR o 2000-2005 ≈12% o 2005-2020 ≈3% • Capacity utilization 75% • Low profitability Demand and Supply: Segments: • Construction • Machinery & Equipment • Transportation Regions: • Europe • Americas • MENA • China • CIS Global Macro economics – Supply and Demand 15 Source: LKAB
- 16. LKAB CHALLENGES –TODAY AND FUTURE Market Landscape Competiveness Urban development LKAB Challenges Attract people +1000 people 16 Source: LKAB Environmental permits
- 17. INVESTMENTS: 1 BILLIONUSD PER YEAR Final products (Mt/year) Further organic growth potential Further capacity planned Malmberget new main level M 1250 Present capacity Kiruna new main level KUJ 1365 INVESTMENTS EXTENDING MINING OPERATIONS BY 25 YEARS 17 Source: LKAB
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- 19. OUR MARKETING &SALES RESPONSE Product portfolio strategy Product quality & stability in the supply chain Customer portfolie strategy Performance In Ironmaking Risk Management REACTIVITY TO RAPID MARKET CHANGES 19 Source: LKAB
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