steel industry overview régulo salinas cancún, méxico october 2007
TRANSCRIPT
Steel Industry Overview
Régulo Salinas
Cancún, México
October 2007
2
Global Steel Industry Resumed its Growth After Decades of Stagnation and Low Profitability
World Crude Steel Production
Sources: IISI, World Steel in Figures 2007; Geographic Information Systems
Production Volume(Million tons)
0
200
400
600
800
1000
1200
1400
50 55 60 65 70 75 80 85 90 95 00 05 06
1,244
60
80
100
120
140
160
180
200
50 55 60 65 70 75 80 85 90 95 00 05 06
Production per Capita(Kg / Capita)
191
-2
0
2
4
6
8
10
12
50 55 60 65 70 75 80 85 90 95 00 05
Compound Annual Growth Rate(Average % for 5 year periods)
06*
* 2006/2005
3
China has Been the Main Driver Behind Growth, Changing the Industry Structure
11%
10%
9%
34%
13%
4%
3%
16%
North America
CIS
Japan
Other
China
EU 25
Central &South
America
India
1,244 Million Tonnes
19%
22%
16%5%
11%3%
23%
1%India
NorthAmerica
USSR
WesternEurope
China
Other
Japan
Central & South
America
World Crude Steel Production
644 Million Tonnes
Source: IISI, World Steel in Figures 1976, 2007
1975 2006
4
The Other Driver Behind Growth & Profitability has been Industry Consolidation
53
71 73
2004 2005
24 28
68
2004 20052006 2006
Source: Bloomberg, Completed Deals
Number of Steel Industry M & A’s Amount (US$ Billions)
5
Global Steel Price Cycle Shows Two Eras
* Constant dollars (July 2007)** 2006 cost plus iron-ore price increase (9.5% abril 07)
Supply DrivenPrivatizationCost Based
Demand DrivenConsolidationPrice Based
Source: CRU / WSD
0
100
200
300
400
500
600
700
800
900
HRC US* HRC Europe*China HRC Estimated Costs(w/o General Expenses)
208
370 384
Asian Crisis
Russian Crisis
Steel Crisis
China + Global GDP Sep ’07 = 573 (USA)
0
100
200
300
400
500
600
700
800
900
US$ / ton
US
$ /
ton
**
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
HRC CIS*
6
Growing Regional Steel Concentration
Source: IISI
Top 5 producer’s share in 2006 production
* Million tonnes per year
Total US / Canada 110 *
64%
Total Latin America 63
74%
Total Others Asia 105
63%
Total Europe 166
59%
Total China 349
24%
Total Japan 112
77%
Total CIS 113
46%
7
Global Concentration Lagging Behind Other Metals, Suppliers and Key Customers
81%
66%
49%
40% 38%
28%
20%
Iron Ore Nickel Alumina Aluminum Copper Zinc Steel
Sources: Morgan Stanley Research, 16 Feb 2007 IISI, World Steel in Figures 2006 JD Power
Industry Concentration, Top 5 Producers(%)
72%
Automotive
Top 7
8
Impact Of Industry Consolidation will Become More Apparent in Coming Years
Scale economies and synergies
Better balanced steel inventories
Optimization of Cost / Production / Logistics
Global production / Local customer service
Optimal plant location
Optimal use of resources — capital, physical, labor
Faster response to market volatility and trends
Better balance with suppliers and customers
Increased competition among large, efficient producers
TacticalLevel
StrategicLevel
9
Mexico’s Steel Demand
0
2
4
6
8
10
12
14
16
18
20
22
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07e**
* Compound Average Growth Rate
Source: Canacero
Imports/ ASC23%
Production
Imports
Apparent Steel Consumption
** 2007: Jan-July annualized
CAGR*: ’96-’07e: 6.4%CAGR*: ’96-’07e: 6.4%
Mexico’s Apparent Steel Consumtion(MM tons)
10
Mexican Steel Imports
0.0
1.0
2.0
3.0
4.0
5.0
6.0
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07*
* 2007: Jan-July annualizedSource: Canacero
Flat Products
Long Products
Total
Steel Products Imports(Million tons)
11
Mexican Market Structure
50%
37%
13%
Steel Products Demand in Mexico 2007*(%)
Flat Products
Long Products
* Seamless pipe, structural shapes, rails, Etc. ** January – July annualized
Other **
12
Raw Steel Production in Mexico
2006 Raw Steel Production
16.3 million tonsSource: Canacero
Ahmsa
21%
Sicartsa(Mittal)
5%
Other
24%
Mittal Steel Lazaro Cardenas
24%
Ternium Hylsa
20%
Tamsa6%
13
•Automotive•Domestic appliances•Motors•Containers•Metallic furniture•Machinery &
equipment•Other
Mexican Commercial Market Structure
Steel Mills
Imports
ServiceCenters
Traders / Retailers
Construction
IndustrialConsumers
Agriculture and others
14
WSD 2006 World Cost Curve (Hot Rolled Band Operating Costs before overhead)
Source: World Steel Dynamics
Efficient, low cost operations
15
U.S. Forecasted Price Upturn to be Reflected in Mexico
US HRC Price
Actual: CRU September 07 Projections: CRU Quarterly Oct 07
GFMS September 07
US$ / ton
200
300
400
500
600
700
800
900
E03
A J O E04
A J O E05
A J O E06
A J O E07
A J O E08
A J
Forecast
CRU
GFMS
16
Positive Domestic Economic Perspectives
(%) 2007 2008
Mexico’s GDP 3.2 3.8
Manufacturing GDP 1.0 3.2
Construction 2.0 4.1
Basic metals industry 1.0 1.2
Metallic products, machinery & equipment
1.2 3.8
Inflation (Dec-Dec) 3.5 3.6
Interest Rate (28 days) 7.1 7.5
Exchange Rate (Dec, $/dollar) 11.00 11.30
Source: Harbor Intelligence, August 2007
