Experiences with Structural Adjustment of the Australian Steel industry Presentation by Dr Bob Every Managing Director and CEO of OneSteel Limited

Transcription

1 Experiences with Structural Adjustment of the Australian Steel industry Presentation by Dr Bob Every Managing Director and CEO of OneSteel Limited September 9, 2004

2 Contents Global Industry Landscape Australian Industry Landscape Current Trends and Structural Impacts The Future of Steel Slide 2

3 Global Steel Industry Landscape

4 Global Steel Industry Landscape Period from 1970 to 2000 Global Over-capacity 800 million tonnes demand 950 million tonnes capacity Fragmented Industry 95 players produce more than 2 million tonnes p.a Top player only produces 3-4% of world production Since 2000 Some consolidation is occurring China has grown dramatically 25-30% of world demand Mega or niche to succeed Slide 4

5 Steel in the Global Context $US/capita ($1995) World Steel Consumption and GDP Per Capita, Collapse of USSR led to steel consumption collapse in Eastern Europe Post war expansion to 1970 led to predictions of seemingless endless growth 1954 Asian crisis 1961 Phase 1 China takes off! 1994 Phase Phase First and second oil prices and subsequent recessions led to massive light-weighting of steel-containing products kg steel/capita Source: Macquarie Research Slide 5

6 Steel in the Global Context Index, 1990 = Industrial Production Growth in the 1990s Western Europe Eastern Europe China Japan Other Asia North America Source: Ecowin Slide 6

7 Steel in the Global Context World Steel Consumption by Region '000t crude steel China Japan Other Asia Western Europe Eastern Europe Form er Soviet Union Middle East Africa Oceania Latin America Canada USA Source: IISI Slide 7

8 International Steel Production and Prices Slide 8

9 International Steel Forecast Demand Slide 9

10 Steel in the Global Context Early signs of a complementary change on the production side Consolidation is occurring - Corus from merger of British Steel and Hoogovens - Arcelor from merger of Usinor, Arbed and Aceralia - JFE Steel from NKK and Kawasaki - U.S. Steel acquired assets of National Steel - Nucor has made four acquisitions over two years Slide 10

11 Steel in the Global Context So what does this all mean? We may be entering a new period of growth in international steel the first time in three decades It has the potential to change the balance in the industry from over to under supply Slide 11

12 Australian Steel Industry Landscape

13 Australian Steel Industry Landscape 1970s One Steel producer BHP (Blast furnace based) 1980s Emergence of Smorgon Steel (Electric Arc furnace) 1990s BHP closes Newcastle steel works (1.5 million tonne facility) 2000s, BHP exits steel BHP spins off OneSteel Limited (long products) BHP Billiton spins off BlueScope Steel (flat products) Slide 13

14 Australian Steel Industry Landscape Long Product Flat Product Smorgon Steel 900,000 tonnes OneSteel 1.7 million tonnes BlueScope Steel 5 million tonnes Mainly Domestic Export Slide 14

15 Current Trends and Structural Impacts

16 $460 $440 $420 $400 $380 $360 $340 $320 $300 $280 $260 $240 $220 $200 $180 $160 $140 $120 $100 $80 Scrap Prices Asian HM1 Scrap Price Jan 1994 to Jul 2004 Slide 16 $/t Jul-95 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 $US/t $A/t Source : Tex Report

17 Trends in International Long Product Steel Prices Source : CRU Long Products International Prices Jan 1994 to Jul (US$) US$/Tonne (c&f into China) ex Non-CIS Jul-04 Jan-04 Jul-03 Jan-03 Jul-02 Jan-02 Jul-01 Jan-01 Jul-00 Jan-00 Jul-99 Jan-99 Jul-98 Jan-98 Jul-97 Jan-97 Jul-96 Jan-96 Jul-95 Jan-95 Jul-94 Jan-94 BEAMS MER.BAR REBARS LC WIRE ROD Slide 17

18 Imports into Australia mth moving totals Australian Steel Imports - kt 1400 Other Blue Scope Steel Range OneSteel Range 0 Jan-00 May-00 Sep-00 Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 Source: Australian Bureau of Statistics and OST data Slide 18

19 Import versus International Prices Import versus International Prices - $AUD From January 1999 to June Australian Dollar Appreciation Impact 1.7 Index Jan- 99 May- 99 Sep- 99 Jan- 00 May- 00 Sep- 00 Jan- 01 May- 01 Sep- 01 Jan- 02 May- 02 Sep- 02 Jan- 03 May- 03 Sep- 03 Jan- 04 May- 04 Basket of Goods (Rebar, Mebar, Structural) Import Price International Price Source: Australian Bureau of Statistics and OST data Slide 19

20 Australian Steel Price Index Prices for Steel Construction Materials from INDEX ( =100) CPI Structural steel Decking & cladding Steel in Res Construc QUARTERS FROM MARCH 1990 TO JUNE 2004 Rebar & mesh Steel decking and cladding Structural steel Reinforcing steel bar, fabric and mesh Weighted Average of 8 Capital Cities CPI Source: Australian Bureau of Statistics Steel products used in Res construction Slide 20

21 International Freight Rates Source: Clarkson Research Studies Slide 21

22 Performance of Australian Steel Companies Share Price Performance of Australian Steel Companies versus All Ordinaries (Indexed at 100 on 21 July 2002) Australian Steel Companies Index* Index Value All Ordinaries Index Jul-02 Aug-02 Sep-02 Oct-02 Nov-02 Dec-02 Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03 Jan-04 Feb-04 Mar-04 Apr-04 May-04 Jun-04 Jul-04 * Index of the share prices of BlueScope Steel, OneSteel, Sims and Smorgon Steel (not weighted by market capitalisation) Slide 22

23 The Future for Steel Steel Consumption is rising, driven by China Less government ownership Consolidation is occurring, at least regionally Slide 23

24 Conclusion Australian steel industry undergone massive restructuring An exciting decade ahead - supply and demand changing - potential for strong sustainable steel prices Australian steel companies are creating value OneSteel has undergone a process of reinvention I believe we really are seeing the reinvention of steel Slide 24