Global Steel Industry: Future Outlook

Nae Hee Han/Director, Economic affairs

Presentation to Mining on Top: Stockholm, 26-27, November 2013

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Current State of the Steel Industry

Slower growth of demand

Overcapacity
Low profitability

Strengthening environmental regulations

Steel Capacity Outgrows Demand Growth

During 2000~2012, global crude steel capacity 1,013 Mt to reach
2,063 Mt, whereas crude steel production 683 MT to 1,532 Mt
Chinese capacity 771Mt to 921 Mt, production 602 Mt to 731 Mt
After the global economic crisis, capacity expansion momentum slows,
but the emerging economies continue to seek expansion
Steed Demand vs Capacity (2000=100)
Apparent steel use, crude steel equivalent

Capacity, crude steel

2000=100

220
200
180
160
140
120

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

100

Return of Overcapacity
While world steel demand continues to grow, capacity utilization ratio
trends down
No easy solutions to overcapacity in sight

100%

World crude steel capacity utilisation

Jun-08
92.7%
90%

Apr-10
84.5%

Apr-11
83.4%
Sep-13
79.3%

80%

Aug-10
74.2%

70%

Dec-12
71.5%

60%

Dec-08
59.9%
Jul-13

Jan-13

Jul-12

Jan-12

Jul-11

Jan-11

Jul-10

Jan-10

Jul-09

Jan-09

Jul-08

Jan-08

50%

Raw Materials Side Adds to Adversity

Value chain profits has been shifting away from the steel industry
Volatility and uncertainty in raw materials prices since departure from
the benchmarking pricing system
value chain profit pool split evolution
100%=
Iron ore
Coking
coal

54
8
11

23

125

156

17
44

81

135

15
42
46

22
Steel
making
(HRC)

230

22

28

78

32

61
35

27
26

1995

2000

2005

10

2011

2017

Source: McKinsey & Company

Steel Industry Performances

Steel vs Raw materials prices

Index 2005=100

Steel industry stocks vs Dow Jones

Index 2005=100

Steel Demand Forecasts for 2013-14

Apparent Steel Use, finished steel (SRO October 2013)

Mt

y-o-y % growth

Mt

14.0

15

10

1 403
1 219

1 600

1 523

1 400
1 200

1 300

1 219
1 141

7.0

1 430

1 475

125.0*

7.9

1 000

3.1

3.3

2.0

800
600

0.0
400

-5

200

-6.4
-10

0
2007

2008

2009

2010

2011

2012

2013

2014

*) 2014 as % of 2007

Demand Forecasts for selected countries

Apparent Steel Use, finished steel (SRO October 2013)
Mt

2012

2013

2014

12/11

13/12

14/13

2014 as %
of 2007

World
United States
European Union (27)
Japan
China
India
Brazil
ASEAN (5)
MENA

1,430.3

1,475.1

1,523.2

2.0

3.1

3.3

125.0

96.2

96.9

99.8

7.8

0.7

3.0

92.2

140.2

134.9

137.8

-9.5

-3.8

2.1

69.1

63.9

64.0

63.0

-0.2

0.1

-1.6

77.6

660.1

699.7

720.7

2.9

6.0

3.0

172.2

71.6

74.0

78.2

2.6

3.4

5.6

151.8

25.2

26.0

27.0

0.6

3.2

3.8

122.3

54.8

57.3

60.4

12.8

4.6

5.4

149.7

63.2

64.3

69.0

2.2

1.7

7.3

127.2

Developed Economies
Emerging & Developing
Economies excl China
World excl. China

390.2

384.1

390.5

-1.7

-1.6

1.7

82.4

380.0

391.4

412.1

4.2

3.0

5.3

126.0

770.2

775.4

802.6

1.1

0.7

3.5

100.3
9

Key Trends in Post-Crisis Period Steel Demand

Multi-speed recovery continues driven by emerging economies, but
weakening growth in the emerging world

Eurozone stabilizes and finally positive growth expected in 2014

China moves into slower growth phase
Key emerging economies struggling with structural issues
Multi-Speed Recovery of Steel Demand
180
2007=100

World

China

Developed Economies

Em. & Dev. Economies excl. China

160
140
120
100

80
60
2007

2008

2009

2010

2011

2012

2013

2014
10

Regional Share in World Steel Demand

Apparent Steel Use, finished steel (SRO October 2013)
Emerging & Developing Economies

2000
2001
2002
2003
2004

Developed Economies

41.5%

16.4%

58.5%

46.1%

20.5%

53.9%

48.5%

23.3%

China

51.5%

52.2%

27.4%

47.8%

53.0%

28.3%

47.0%

2005

33.3%

58.3%

41.7%

2006

33.1%

58.4%

41.6%

2007
2008
2009

61.1%

34.3%

38.9%

63.3%

36.7%
48.3%

36.7%
73.7%

26.3%

2010

45.2%

71.3%

28.7%

2011

45.7%

71.7%

28.3%

2012

46.1%

72.7%

27.3%

2013

47.4%

74.0%

26.0%

2014

47.3%

74.4%

25.6%

11

11

China Entering a New Phase of Development

After soft landing, renewed focus on rebalancing of the economy
Less steel intensive growth to come, implying steel demand growth will
underperform GDP growth

Future focus will be on capacity closures, environmental performance

and upgrading
Growth trend of Chinas steel use

Steel intensity (ASU/GDP)

12

Economic Growth and Steel Demand

S-Curve of different countries

Thailand

China

Indonesia

India

United States

Japan

South Korea

Per Capita Steel Use

finished steel, kg, 2012

ASU per capita, ASU, crude steel equivalent per capita, kg

1 400

South Korea

488 506

1 200

1 000

305
800

279

222

Japan

220

127

600

China
40

57

400
Africa

United States
200

India

Brazil

Middle United EU (27) China

East States

Japan

World

10

20

30

GDP per capita, 2005 PPP$,

40

50

thousands USD

13

How Far Will Chinese Steel Demand Grow?

Positive
Negative
Further room for urbanization and
Condensed growth, high share of
Industrialization
investment in GDP
Low level of development in the West Environmental regulations, resource
constraints
Manufacturing relocation out of China
Speed and mode of development in the West
China provincial steel use per capita (2011, kg/per, crude steel equiv )

China (2012) US (1973) Japan (1973)

14

End of the China Effect, Next Growth Engine?

Evolution of Steel Demand (1950-2014, crude steel equiv)
Mt
CAGR 2007-2014
3.1%

1 800
1 600

RoW

CAGR 2000-2007
6.6%

1 400
1 200

China

CAGR 1975-2000
1.1%

1 000

former USSR

CAGR 1950-1975
5.0%

800
600

US, EU, Japan

400
200
2010

2005

2000

1995

1990

1985

1980

1975

1970

1965

1960

1955

1950

Contribution to Apparent Steel Demand Growth( Mt)

World
Developed
China
Other Emerging
1992-2000

142.6

84.1

51.1

7.4

2000-2007

480.3

74.2

297.8

108.4

2007-2014

320.2

-85.5

314.8

90.9
15

Developing World: Strong Fundamentals

Population
(million)

Urbanisation
(%)

GDP per capita,

(PPP$)

Steel Use/
capita(Kg)

2012

2020

2010

2020

2012

2020

2012

Mexico

116

126

77.8

80.5

14.4

17.3

173

Turkey

75

81

70.5

78.6

14.1

17.9

382

Brazil

198

210

84.3

86.8

11.0

13.8

127

Thailand

70

72

33.7

38.0

9.4

12.9

234

China

1 354

1 388

49.2

61.0

9.0

15.3

488

Indonesia

245

263

49.9

57.2

4.7

6.7

51

India

1 258

1 387

30.9

34.8

3.7

5.7

57

Vietnam

90

96

30.4

36.9

3.4

5.1

122

16

Environmental Challenges
Energy use reduction efforts in developed world already at theoretical limit
and limited progress in Break-Through technologies. Pressure on costs
and also negative impact on steel demand growth

However. steel has been successful in providing solutions to the

sustainability - lighter vehicles, renewable energy, etc
Energy Intensity of steel production
(N America+Japan +EU27)

Energy intensity of iron and steel

production (GJ/t of crude steel)

17

Steel as Solution to Sustainable Future

Innovative use of steel saves six times as much CO2 as is caused by
the production of the steel LCA approach
Case study

Energy
industry

Traffic
HH, ind.,
CTS1

Net CO2 reduction potential

Efficient fossil fuel PPs

Wind power plants

Other renewables2

Efficient transformers

2.1

Efficient e-motors

1.9

Weight reduction cars

Weight reduction trucks

Emissions in the
steel production3

29.5

~ 400 : 1

<0.1

32 : 1

0.4

14.2
5.0

0.03

~ 200 : 1

0.1

14 : 1
3:1

0.7

1.0

0.9

1.1 : 1

1.0

9:1

9.2

Combined heat/power
5

10

1.3 : 1

8.4

11.2

Ratio between CO2

reduction/emission4

30

10

11

Mt

Mt

~ 74 Mt

~ 12 Mt

6:1

1.HH = households; CTS = commerce, trade, and service 2. Geothermal, biomass, hydro 3. CO 2 expenditure for other materials not examined;
values are rounded 4. Ratio relates exclusively to the emissions
Source: BCG analysis

18

Long Term View on Steel Demand

Global steel demand could reach 2.2~3.0 billion in 2050
Long Term Evolution of World Steel Demand

Mt

3 000
2 500
2 000
1 500
1 000
500
0
1870 1890 1910 1930 1950 1970 1990 2010 2030 2050

Years

Mt

1970

589

1975

640

1980

713

1985

719

1990

773

1995

743

2000

846

2005

1 139

2010

1 404

2012

1 542

*apparent steel use, crude steel equivalent

19

19

Conclusion
Despite current difficulties, future scenarios for the steel industry have
optimistic starting point: Urbanization and population growth will support
industry growth for considerable time

Surplus capacity in the industry will be difficult to reduce quickly, but can
be absorbed in long term

Steel industry will continue to provide the basis for sustainability of the
modern society through innovation

But the industry is facing formidable challenges ahead

Changing position in value chain through expanding product mix,
development of new applications becomes crucial for steel industry

Sustainable development and, in particular, Life Cycle Assessment

focus provides interesting challenges to the steel industry

20

20

Steel touches every

aspect of our lives. No
other material has the
same unique combination
of strength, formability
and versatility.

Steel is a cornerstone
and key driver for the
worlds economy.

Thank you for your attention.

For further information contact:

Nae Hee HAN| Director, Economic Affairs/Chief Representative, Beijing Office

World Steel Association

han@worldsteel.org | T: +86 (10)6464 6733| worldsteel.org

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