Tim Hard - Outlook & Review on Steel in the Asian Market


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  • Our company Trans Global Trading is a sister concern of JTC group in Bangladesh. We have lot of customers in Bangladesh who are interested to import HMS1, HMS2 Used Rail Scrap as well soft Cast Iron Scrap. : Our all customers requirement is approx. 3000/4000 Metric Ton per month per customer. It will be highly appreciated if you kindly provide me CNF Price per Metric Ton for both Used Rail Scrap as well soft Cast Iron Scrap. Discharge port is Chittagong, Bangladesh. Payment mood : LC you may contact through textrade.bran@gmail.com Viber : 8801681009480 skype : rafid.khan3 Regards Md.Shafiqul Alam Khan
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Tim Hard - Outlook & Review on Steel in the Asian Market

  1. 1. Asian Mining Indaba 29/10/12
  2. 2. All INFORMATION PRESENTED IN THIS REPORT IS AGREED TO BE CONFIDENTIAL AND CANNOT BE Disclaimer REPRODUCED WITHOUT THE EXPRESSED PERMISSION OF THE STEEL INDEXThis document does not constitute an offer or solicitation to buy or sell any investment product(s). It does not take into account thespecific investment objectives, financial situation or particular needs of any person. Investors should seek advice from a financialadviser before investing in any investment products or adopting any investment strategies. In the event that the investor chooses not toseek advice from a financial adviser, he/she should consider whether the product in question is suitable for him/her. The investmentproduct(s) discussed herein are subject to significant investment risks, including the possible loss of the principal amount invested. Pastperformance of investment products is not necessarily a guide to future performance.Unless expressly stated, we do not make any representations nor give any warranties in respect of the information contained in thispresentation. To the extent permitted by the applicable law, we hereby exclude all warranties, conditions, representations or dutieswhatsoever and howsoever arising (whether express or implied) including but not limited to any representations or warranties as to theownership of intellectual property or other rights in the presentation, or the satisfactory quality, merchantability or fitness for a particularpurpose of, any goods or services referred to at any time in this presentation, any express or statutory warranties, and any warranties orduties regarding accuracy, timeliness, completeness, performance, availability, lack of negligence or of workmanlike effort.To the fullest extent allowed by applicable law, you agree that we will not be liable to you or your business under any circumstanceswhatsoever (whether in contract, negligence or any other tort, breach of statutory duty or otherwise) for any loss of profits, income,business interruption, loss of business information or for increase in any costs, liabilities or expenses or any other loss whatsoever andhowever arising directly or indirectly out of or in connection with or relating to the information in this presentation and we shall not beliable for any loss, damages, costs, expenses or other liability which you incur or suffer as a result of your use of the information in thispresentation.We take all such steps as are reasonably necessary to provide information that is accurate and reliable, but exclude to the fullest extentpermitted by law any liability for the inaccuracy of the information in this report.The Steel Index (TSI) used all reasonable endeavours to certify the correctness of the information contained in this presentation.Without limiting the above, you acknowledge and agree that we shall not be liable for matters beyond our reasonable control includingbut not limited to information gathered during field visits, third party information presented or the acts of third parties.You understand and expressly agree that use of the information presented here is at your sole risk, that any content, material and/ordata presented or verbalised or otherwise obtained through your use of the information in this presentation is at your own discretion andrisk and that you will be solely responsible for any damage to you personally or your company or organization or business associateswhatsoever which in any way results from the use, reliance or application of such content material and/or data and/or information.
  3. 3. Methodology The key principles of TSI’s approach are: – to maximise industry participation in compiling each index and the accuracy of the data submitted – whilst minimising opportunities for manipulation and subjectivity in the compilation of each index TSI uses the same approach for compiling its iron ore, steel and scrap reference prices: – legal agreements with relevant Data Providers active in the physical market – secure confidential on-line data collection of actual transactions – prices normalised to reference product specifications – data ‘cleaned’ with outliers excluded – volume-weighted average calculated and published /3
  4. 4. The CONFIDENTIALITY Data Steel Provider AGREEMENT Index Submits price data to TSI using secure Buy/Sell Outliers Prices online system balance excluded Normalized Transaction Final Step3 Step2 Step1 Data Data Set SampleVolume-weightedaverages TSI Publishcalculated Step4 Reference Prices
  5. 5. : Ferrous Coverage Steel Iron Ore Scrap Hot rolled coil*  62% Fe Fines*  HMS 1&2 (80:20)* Cold rolled coil  58% Fe Fines*  Shredded HDG coil  63/63.5% Fe Fines* Plate  62% Fe (2% Al) Fines* Rebar StainlessRegions covered Regions covered Regions covered USA  Chinese imports*  Turkish imports* Asia  USA Northern Europe*  Indian imports Southern Europe*  Asia (coming soon) Turkey India (coming soon) • Daily Indices Basis for cleared derivatives contracts
  6. 6. Shock and Ore(Formerly An Outlook & Review on Steel in the Asian Market!)
  7. 7. Source LME/TSI/SBB 700 900 1100 1300 1500 1700 1900 2100 500 US$/MT 01-Jul-93 01-Jan-94 volatile… 01-Jul-94 01-Jan-95 01-Jul-95 01-Jan-96 01-Jul-96 01-Jan-97 01-Jul-97 Aluminium 01-Jan-98 01-Jul-98 Zinc 01-Jan-99 01-Jul-99 01-Jan-00 01-Jul-00 01-Jan-01 01-Jul-01 Copper (RHS) 01-Jan-02 01-Jul-02 01-Jan-03 01-Jul-03 Back in time…’pre-China’, commodity prices were still 0 500 1000 1500 2000 3000 3500 2500 US$/MT
  8. 8. …yet, whilst other commodities were gyrating, iron ore markets were a sleepy backwater.US$/dry tonne 62% Fe Fines FOW W. Australia 200 180 160 140 120 100 80 60 40 20 0 Jan 01 Jan 93 Jan 94 Jan 95 Jan 96 Jan 97 Jan 98 Jan 99 Jan 00 Jan 02 Jan 03 Jul 93 Jul 94 Jul 95 Jul 96 Jul 97 Jul 98 Jul 99 Jul 00 Jul 01 Jul 02 Jul 03Source: SBB
  9. 9. However, over the same period, the Chinese steel industryquietly taking No.1 position for crude steel output was…Million tonnescrude (MMT) 105 100 95 90 85 80 1993 1994 1995 1996 China Japan USASource SBB/TSI
  10. 10. …but a hint of growth to come. World steel productionmore than doubled, with China’s share ballooning. MMT 0 10 20 30 40 50 800 700 600 500 Chinese Output 400 % of world output 300 200 100 0 1993 2011Source SBB/TSI
  11. 11. Which saw a somewhat predictable (though almost universally un-forecasted) effect on prices.US$/dry tonne 62% Fe Fines FOB W. Australia (2 Year averages) 160 140 120 100 80 60 40 20 0Source TSI/SBB
  12. 12. The price gradient is somewhat less shocking when matched against additions to Chinese output. US$/t MMT 160 800 140 700 120 600 100 500 80 400 60 300 40 200 20 100 0 0 62% Fe Fines FOB W. Australia Chinese crude productionSource TSI/SBB
  13. 13. 150 250 350 450 550 50Source LME/TSI/SBB 01-Aug-93 01-Apr-94 01-Dec-94 01-Aug-95 01-Apr-96 01-Dec-96 01-Aug-97 01-Apr-98 01-Dec-98 Copper 01-Aug-99 01-Apr-00 01-Dec-00 01-Aug-01 01-Apr-02 Aluminium 01-Dec-02 01-Aug-03 01-Apr-04 Zinc 01-Dec-04 01-Aug-05 01-Apr-06 01-Dec-06 01-Aug-07 Iron Ore Iron ore soars past doctor copper. 01-Apr-08 01-Dec-08 01-Aug-09 01-Apr-10 01-Dec-10 Metals vs Iron Ore Index 1993-2012. (100 = Aug ’93) 01-Aug-11 01-Apr-12
  14. 14. Iron ore prices today have become significantly more ‘fluid’, with a mix of pricing periods. Indicative Monthly Contract Prices, 1 Month Lag (US$/dry metric tonne) FOB Australia 62% Fe 2% Al FOB Brazil 66% Fe 2% Al TSI 62% Fe 3.5% Al, CFR Tianjin (spot)200190180170160150140130120110100 90 80 01-Apr-11 01-Jun-11 01-Aug-11 01-Oct-11 01-Dec-11 01-Feb-12 01-Apr-12 01-Jun-12 01-Aug-12 01-Oct-12Source: TSI
  15. 15. Steelmakers in China see iron ore prices changing increasingly quickly. 10 8 6 4 2 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Source: TSI
  16. 16. The magnitude of changes has been immense in iron ore markets… though at least price change ‘shock’ has reduced. US$/dry tonne Price Change 180 120% 160 100% 140 120 80% 100 60% 80 60 40% 40 20% 20 0% 0 May-01 Jan-02 Sep-02 May-03 Jan-04 Sep-04 May-05 Sep-06 May-07 Jan-08 Sep-08 May-09 Jan-10 Sep-10 May-11 Jan-12 Sep-12 Jan-06 -20 -20%Source TSI/SBB
  17. 17. Iron ore takes a September dip. US$/dry tonne 62% Fe Fines -CFR Tianjin Port) 120 115 110 105 100 95 90 85Source: TSI
  18. 18. The knock-on effects of which surprise, given the structure of the cost curve.Source: Macquarie Research
  19. 19. The driver for recent price falls was a splutterin Chinese demand – for finished steels, notthe inputs. At such a big % of worldproduction, this had huge effects around theworld as exports ramped up and input costswere pressured.> Rebar (Turkey/MENA/ASEAN)> Scrap – Europe, USA, Turkey, Asia> HRC - World> ASEAN Imports up in 2012
  20. 20. Chinese sputter stokes exports (where feasible): largely Asian. China’s Steel Export 2011-2012 Export Destinations Destinations in Jan – Aug 2012 % Year on Year Change Americas Oceania 15% 2% Asia Non-EU Europe Middle East 2% Africa EU27 7% EU27 Africa Non-EU Europe Asia 6% 58% Americas Middle Oceania East 10% -5 0 5Source: SEASI/TSI
  21. 21. 0 100 200 300 400 500 700 800 900 100 200 400 500 600 700 800 600 300 Nov 08 Dec 08Source TSI/SBB 2000 Jan 09 Feb 09 Mar 09 Apr 09 2001 May 09 Jun 09 Jul 09 Aug 09 2002 Sep 09 Oct 09 Nov 09 Dec 09 2003 Jan 10 Feb 10 Mar 10 Apr 10 2004 May 10 Jun 10 Jul 10 Aug 10 2005 Sep 10 TSIs Iron Ore 62%Fe - Tianjin Port Oct 10 Nov 10 Dec 10 2006 Jan 11 HRC East Asia Price Feb 11 Mar 11 Apr 11 2007 May 11 Jun 11 Jul 11 Aug 11 2008 Sep 11 SBBs HRC East Asia Price Oct 11 Nov 11 Dec 11 2009 Jan 12 Feb 12 Mar 12 Apr 12 2010 May 12 Jun 12 Jul 12 Aug 12 2011 Sep 12
  22. 22. Asia’s HRC prices see a torrid 12 months 750 700 650 600 550 500 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 SBBs East Asia CFR TSIs Asean Import CFR TSIs Chinese Export FOBSource: TSI/SBB
  23. 23. Why change ferrous pricing mechanisms? Companies buying on a spot-basis alone are therefore subject to wide price movement risk. The last one year (Sept 2011 –Sept 2012) has seen ASEAN HRC import prices move in a range of US$205/t. Three broad forms of response to these market conditions have been seen:  Vertical integration  Indexing  Derivatives/ Swaps Use
  24. 24. Settlement Market Instrument Exchange Clearing House Regional Scope Mechanism OTC Cleared Swaps SGX AsiaClear TSI OTC Cleared Options OTC Cleared Swaps CME Clearport TSI OTC Cleared Options Iron Ore CFR China Indices OTC Cleared Swaps LCH.Clearnet TSI OTC Cleared Swaps ICE Platts OTC Cleared Options NOS Clearing TSI Cash-Settled Futures SMX SMX Clearing MBIOI Delivery points in Europe, Futures LME LCH.Clearnet Physical Delivery Asia, Americas and ME Steel Billet Index fob Black Sea - OTC Cleared Swaps CME Clearport Platts designed as a global reference price OTC Cleared Swaps LCH.Clearnet TSI CFR Turkey IndexFerrous Scrap OTC Cleared Swaps CME Clearport AMM US Midwest Index OTC Cleared Swaps CME (Globex) CME Clearport CRU US Midwest IndexHot Rolled Coil OTC Cleared Options OTC Cleared Swaps LCH.Clearnet TSI Northern EU Rebar Futures SHFE SHFE Physical Delivery China domestic
  25. 25. Cleared TSI Iron ore swaps and options volumes take off Million Tonnes per month 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 - Jun-09 Jun-10 Jun-11 Jun-12 Aug-09 Aug-10 Aug-11 Aug-12 Feb-10 Feb-11 Feb-12 Oct-09 Oct-10 Oct-11 Dec-09 Dec-10 Dec-11 Apr-09 Apr-10 Apr-11 Apr-12 Swaps OptionsSource: TSI/SGX/LCH/NOS/CME/ICEX
  26. 26. With volumes increasing whether the market is rising or falling (not just upside/downside trading). Million Tonnes per month 25,000,000 25 20,000,000 15 15,000,000 5 10,000,000 -5 5,000,000 -15 - -25 Aug-09 Aug-10 Aug-11 Aug-12 Jun-09 Jun-10 Jun-11 Jun-12 Feb-10 Feb-11 Oct-09 Oct-10 Oct-11 Dec-11 Feb-12 Dec-09 Dec-10 Apr-09 Apr-10 Apr-11 Apr-12 Swaps Options M-on-M % Iron Ore Price Change (RHS)Source: TSI/SGX/LCH/NOS/CME/ICEX
  27. 27. Asian steel – Demand ExpectationsSource: TSI
  28. 28. Asian steel – Price ExpectationsSource: TSI
  29. 29. Rise in optimistic sentiment echoed by a big step-up in the forward curve for iron ore. US$/dry tonne 120.00 26/10/2012 29/08/2012 115.00 110.00 105.00 100.00 95.00 90.00 85.00 80.00 Oct-12 Oct-13 Oct-14 Oct-15 Apr-13 Apr-14 Apr-15 Dec-12 Dec-13 Dec-14 Dec-15 Feb-13 Jun-13 Feb-14 Jun-14 Aug-14 Feb-15 Jun-15 Aug-15 Aug-13Source: SGX
  30. 30. Thank you for your attention! Tim Hard hard@thesteelindex.com +65 6532 2800