Presentation to SMR/Metal Bulletin Summit by John Rowe Secretary-General International Stainless Steel Forum ISSF Stock statistics Hasenclever 9/2/2014 03 September 2014 Istanbul 1
ISSF Antitrust Policy The International Stainless Steel Forum binds itself to adhere to the strictest interpretation of the Anti-Trust Laws and Regulations. This presentation includes my own interpretation of the current market situation. You are free to draw your own conclusions about the condition of the market and you are encouraged to study the Annual Reports published by producing companies and Analyst Reports. 2
A Review of the Market Iposedthequestionataconferenceatthe beginning of this year of whether we were beginning to see the first green shoots of recovery, after what has been a very difficult period for the Stainless Steel Industry since the nickel price reversal in May 2007 and particularly the financial crisis of 2008. 3
The first green shoots??? The answer I gave at that time was a cautious yes and that message has since become stronger, but it is important to consider the reasons Economic indicators have been improving and the stainless steel market generally grows at a faster pace than GDP growth There has been some price recovery, but it has so far been muted and has primarily been driven by raw materials By far the most important factor has been the cost reduction programmes which were introduced by the leading industry players These have been extraordinarily successful and are continuing. 4
The first green shoots??? Re-structuring is underway, but the full extent of its value will only begin to be realised in this financial year and the following two years. Overcapacity still exists in the industry; and Financial constraints and a lingering uncertainty still inhibit re-stocking, although demand is clearly strengthening. 5
Ifo* World Economic Climate August 2014 *Institute for Economic Research 6
OECD Industrial Production Index [2010=000] 110 105 100 95 90 2014 01 2013 01 2012 01 2011 01 2010 01 2009 01 2008 01 2007 01 2006 01 2005 01 2004 01 2003 01 2002 01 2001 01 2000 01 7
Selected Global Indices Oxford Economic Forecasting June 2014 [2005=100] 150 140 130 120 110 100 90 2014Q1 2013Q1 2012Q1 2011Q1 2010Q1 2009Q1 2008Q1 2007Q1 2006Q1 2005Q1 Manufacturing Capital goods Consumer durables Construction 8
EU 28 July 2014 Eurostat Economic Sentiment Indicator 120 110 100 90 80 70 60 2014 01 2013 01 2012 01 2011 01 2010 01 2009 01 2008 01 2007 01 2006 01 2005 01 2004 01 2003 01 2002 01 2001 01 2000 01 9
Ifo Asia Economic Climate August 2014 10
OECD Asia Industrial Production Index [2010=100] 120 110 100 90 80 70 60 50 40 2014 01 2013 01 2012 01 2011 01 2010 01 2009 01 2008 01 2007 01 2006 01 2005 01 2004 01 2003 01 2002 01 2001 01 2000 01 Japan S. Korea India 11
China PMI Manufacturing vs. OECD CLI y-o-y Change 70 28 65 24 60 20 55 16 50 12 45 8 40 4 35 0 2014 01 2013 01 2012 01 2011 01 2010 01 2009 01 2008 01 2007 01 2006 01 2005 01 China PMI OECD CLI China y-o-y change 12
GDP Oxford Economic Forecasting June 2014 [y o y change in %] 15 10.4 10 9.2 9.3 6.3 7.7 7.7 7.1 6.9 5 2.7 2.0 4.1 2.9 2.2 2.0 1.7 3.2 2.6 2.7 2.7 2.6 2.8 3.0 2.5 2.6 2.3 2.2 1.9 1.6 1.8 0-0.3 0.1-2.3-2.9-2.3-5 -4.5 2015 2014 2013 2012 2011 2010 2009 China Asia w/o China NAFTA EU 27 World 13
Stainless Steel Melt Shop Production [mill t] 50 45 43.4 40 35 30 25 20 15 10 5 28.7 28.1 26.2 24.6 24.5 5.3 22.8 7.2 20.7 2.4 3.2 1.8 6.9 19.2 1.1 0.7 10.1 8.9 9.5 9.6 7.9 9.3 7.7 8.4 2.3 2.7 2.8 2.9 3.0 2.7 2.6 2.3 8.2 8.6 9.0 9.4 8.8 10.0 8.7 8.3 24.9 8.8 7.5 1.9 6.4 38.1 33.6 35.4 31.1 19.0 14.1 16.1 11.3 9.0 8.8 8.7 8.8 2.6 2.5 2.4 2.5 7.9 7.9 7.8 7.5 40.6 0 2015e 2014e 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 EuroAfrica Americas Asia w/o China China CEE 14
EU 28 Cold Rolled Shipments [kt/month] 300 297 30% 19 (6.4%) 26.0% 4 7 (1.4%) (2.2%) 250 200 201 7 2 4 7 180 255 255 248 13 14 3 13 2 3 6 1 6 3 5 5 8 11 19.0% 8 15 11 15.4% 16.8% 216 207 207 245 22.0% 13 1 5 8 12 14 191 14 (5.7%) 6 (2.5%) 21.3% 8 (3.3%) 11 (4.3%) 14 (5.7%) 199 253 (78.7%) +127.6% +60.5% 24 (8.2%) 23 (7.8%) 220 (74.0%) 25% 20% 15% 150 10.5% 2009 2010 2011 2012 2013 2013 1-6 2014 1-6 Eurofer participants Taiwan China, People's Republic of Korea, Republic of India Japan Others Import share (excl. S Africa) 10% 15
Stainless Steel Melt Shop Production by Grade [%] 100 80 23.0 22.1 22.0 23.0 24.5 22.8 28.1 27.8 27.9 29.9 26.9 25.0 25.4 25.4 25.5 25.6 25.0 60 5.5 5.7 6.5 9.4 10.9 10.4 12.5 13.2 13.6 13.4 17.4 20.8 20.2 20.7 20.4 20.9 18.6 40 70.6 71.3 70.6 65.5 62.3 64.7 56.9 56.5 57.4 55.2 54.3 52.9 53.0 52.5 52.8 52.0 54.6 20 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2013 Q1 CrNi CrMn Cr others e 16
Stainless Steel Melt Shop Production by Grade and Region [%] 100 80 26.1 25.8 26.4 33.1 31.7 29.1 26.5 24.1 24.8 26.9 25.0 25.4 0.8 0.5 0.7 60 6.2 6.1 5.9 23.4 28.2 26.3 17.4 20.8 20.2 40 68.0 69.9 69.2 20 57.7 60.2 58.6 49.3 47.2 48.5 54.3 52.9 53.0 0 2011 2012 2013 2011 2012 2013 2011 2012 2013 2011 2012 2013 Euro/Africa Americas Asia World CrNi CrMn Cr others 17
EuroAfrica* Cold Rolled Flat Product Apparent Stainless Steel Use vs. Real Stainless Steel Use [t] 1,200,000 1,100,000 3.7% 4.3% 1,000,000 900,000 800,000 700,000 600,000 2015 Q1 2014 Q1 2013 Q1 2012 Q1 2011 Q1 2010 Q1 *EU28, S. Africa, Turkey, CIS Apparent supply Real stainless steel use 18
Americas Cold Rolled Flat Product Apparent Stainless Steel Use vs. Real Stainless Steel Use [t] 800,000 700,000 5.1% 600,000 5.0% 500,000 400,000 300,000 200,000 2015 Q1 2014 Q1 2013 Q1 2012 Q1 2011 Q1 2010 Q1 Apparent supply Real stainless steel use 19
China Cold Rolled Flat Product Apparent Stainless Steel Use vs. Real Stainless Steel Use [t] 2,600,000 2,400,000 2,200,000 8.6% 5.7% 2,000,000 1,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 2015 Q1 2014 Q1 2013 Q1 2012 Q1 2011 Q1 2010 Q1 Apparent supply Real stainless steel use 20
Asia w/o China Cold Rolled Flat Product Apparent Stainless Steel Use vs. Real Stainless Steel Use [t] 1,400,000 1,300,000 1,200,000 5.1% 5.3% 1,100,000 1,000,000 900,000 800,000 700,000 600,000 500,000 2015 Q1 2014 Q1 2013 Q1 2012 Q1 2011 Q1 2010 Q1 Apparent supply Real stainless steel use 21
Global consolidation Cold Rolled Flat Product Apparent Stainless Steel Use vs. Real Stainless Steel Use [t] 6,000,000 5,500,000 5,000,000 6.3% 5.2% 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 2015 Q1 2014 Q1 2013 Q1 2012 Q1 2011 Q1 2010 Q1 Apparent supply Real stainless steel use 22
Real Stainless Steel Use Growth Rates by Region [y-o-y change in %] 11 10.4 10 9 8.4 8 7 6 5 4 3.8 4.5 3.4 5.0 4.5 6.1 4.0 5.2 4.8 6.4 5.4 3 2 1 0-1 -0.5-0.1 2013 2014 2015 EuroAfrica Americas Asia China World 23
Stainless Steel Stocks Flat products* [000t] 1,600 100% 1,400 90% 80% 1,200 70% 1,000 60% 800 50% 600 40% 400 30% 20% 200 10% 0 0% 04 2014 01 10 07 04 2013 01 10 07 04 2012 01 10 07 04 2011 01 10 07 04 2010 01 10 07 04 2009 01 10 07 04 Hot rolled Cold rolled CR Flat Stocks as % of CR AC *Selected Countries: USA, Canada, EU 27, S. Korea, China, Japan ISSF Stock statistics Hasenclever 9/2/2014 24
Stainless Steel Growth vs. Competitors 1980 2012 CAGR % Stainless steel 5.57 Carbon Steel 2.61 Aluminum 3.52 Zinc 2.48 Copper 2.56 Lead 2.29 25
Stainless Steel Cold Rolled Order Intake (2010=100) Euro/Africa 180 160 140 120 100 80 60 40 2008 2009 2010 2011 2012 2013 2014 Americas 180 160 140 120 100 80 60 40 2008 2009 2010 2011 2012 2013 2014 Asia excluding China 140 130 120 110 100 90 80 70 60 50 40 2008 2009 2010 2011 2012 2013 2014 China World 180 160 140 120 100 80 60 40 2008 2009 2010 2011 2012 2013 2014 140 130 120 110 100 90 80 70 60 50 40 2008 2009 2010 2011 2012 2013 2014 26
Stainless Steel Melt Shop Capacity Development Euro/Africa mill t Americas mill t Asia excluding China 10.2 10.3 10.3 10.3 9.7 9.3 8.1 8.1 8.1 8.1 8.1 4.9 4.9 4.9 5.4 5.6 5.8 5.8 5.8 5.8 5.8 5.8 17.2 17.4 17.4 17.4 9.5 10.3 11.1 11.5 11.6 11.5 11.7 5.9 5.9 5.9 5.9 9.5 10.3 11.1 11.5 11.6 11.5 11.3 11.3 11.5 11.5 11.5 2010 2015 2020 operating confirmed* * no new projects known * no new projects known 2010 2015 2020 operating confirmed* 2010 2015 2020 operating confirmed China World mill t 32.4 33.0 35.2 35.2 35.2 35.2 35.2 27.1 1.5 2.1 4.3 4.3 4.3 4.3 4.3 22.2 17.6 14.8 14.8 17.6 22.2 27.1 30.9 30.9 30.9 30.9 30.9 30.9 30.9 mill t 39.5 43.1 39.5 43.1 48.5 48.5 66.4 66.5 66.5 66.5 59.3 59.6 60.9 54.2 1.5 2.1 4.7 10.2 10.2 10.2 10.2 54.2 57.8 57.5 56.2 56.2 56.4 56.4 56.4 2010 2015 2020 operating confirmed 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 operating confirmed 27
Stainless Steel Cold Rolled Capacity Development Euro/Africa mill t Americas mill t Asia excluding China 5.4 5.6 5.5 5.7 5.5 5.4 5.3 5.3 5.3 5.3 5.3 3.3 3.3 3.4 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 5.9 6.3 6.5 6.9 7.4 7.5 7.5 7.5 7.5 7.5 7.5 5.9 6.3 6.5 6.9 7.4 7.5 7.5 7.5 7.5 7.5 7.5 2010 2015 2020 operating confirmed* * no new projects known * no new projects known 2010 2015 2020 operating confirmed* 2010 2015 2020 operating confirmed* * no new projects known China mill t 6.8 6.8 19.6 19.8 19.8 19.8 19.8 15.4 16.6 11.5 2.7 3.9 6.9 7.1 7.1 7.1 7.1 7.8 9.2 7.8 11.5 12.7 12.7 12.7 12.7 12.7 12.7 12.7 9.2 World mill t 24.7 23.0 21.4 21.4 23.0 24.7 36.0 36.2 36.2 36.2 36.2 31.9 33.1 27.6 2.7 3.9 6.9 7.1 7.1 7.1 7.1 27.6 29.2 29.2 29.1 29.1 29.1 29.1 29.1 2010 2015 2020 operating * no new projects known confirmed 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 operating confirmed 28
First Green Shoots of Recovery Selected Stainless Steel Producers EBIT [mill ] 1000 900 800 700 600 500 400 300 200 100 0-100 -200-300 -400-500 -600-700 -800 858 824* 777 589 * 660 526 423 232 275 212 214 164 307 192 88 112 126 48 138 48 158-57 51 15 *-63-83 -319-198 -251-258 -510-385 -441-775 2006 2007 2008 2009 2010 2011 2012 2013 2013 1HY 2014 1HY Company A Company B Company C* Company D** Source: Company Websites, *EBITDA, **Company D discontinued operations at the close of 2011 29
A look ahead The Indonesian nickel ore export ban will affect Nickel Pig Iron production until the new plants which are planned for Indonesia can be commissioned. This will tighten the supply of nickel units in 2015 and 2016 and with a knock-on effect on nickel prices.. The self-improvement programmes in place at many stainless steel producers will continue because the pressure to improve results will also continue. The restructuring process should be expected to eventually spread into China. The combination of the change in policy, a slower GDP growth rate, stricter financial controls and the weak results of existing producers in China should slow the rate of investments into new capacities. 30
A look ahead Stainless Steel continues to provide a reliable and sustainable solution for many applications in our daily lives and is irreplaceable in some of them. Demand will therefore continue to outperform that of competing materials. The state of the industry in 2014 is significantly better than it has been during the preceding five years. Many producers have taken the necessary measures to sustain this improvement and the prospects for further improvement are clear. But the hard work will need to continue. 31
Thank you for your attention! ISSF Stock statistics Hasenclever 9/2/2014 32