cancun, mexico steel’s technological
TRANSCRIPT
Alacero 58Latin American Steel Conference
Cancun, Mexico
Steel’s Technological
Leap-Frog FROG: Jump On or Croak
November 7, 2017
Peter F. Marcus
Jump on!
2
STEEL’S in TIME WARP!
Persistence of old equipment
3
First Continuous Hot Strip Mill
4
Part I
THE HOT-ROLLED BAND
EXPORT PRICE
ROLLERCOASTER
Subtitle: Forewarned is
Forearmed
Today’s Alacero
Presentation
Part II
STEEL’s
CHALLENGING NEW
“INDUSTRIAL STRUCTURE”
Subtitle: The “Age of
Management”
Today’s Alacero
Presentation
Part III
OPPORTNITIES FOR LATIN
AMERICAN
STEEL
Subtitle: Time to re-take the
baton from the Chinese?
Today’s Alacero
Presentation
PART I: HRB PRICE
ROLLERCOASTER
8
Next six weeks:
HRB down $35/tonne
to $525/tonne.
HRB Export Price
Rollercoaster
Early 2018:
Spike to $700-750/tonne.
VOLCANO!
HRB Export Price
Rollercoaster
Volcanoes and Death Spirals
11
Summer of 2018
The party’s over!
HRB down to $525/tonne.
“Death spiral” risk
HRB Export Price
Rollercoaster
CHINESE STEEL MILLS’
ACHILLE’S HEEL
13
$200
$250
$300
$350
$400
$450
$500
$550
$600
$650
$700
Ap
r-1
1M
ay-
11
Jun-
11
Jul-1
1A
ug-
11
Se
p-1
1O
ct-1
1N
ov-
11
De
c-1
1Ja
n-1
2F
eb
-12
Ma
r-1
2A
pr-
12
Ma
y-1
2Ju
n-1
2Ju
l-12
Au
g-1
2S
ep-
12
Oct
-12
No
v-1
2D
ec-
12
Jan-
13
Fe
b-1
3M
ar-
13
Ap
r-1
3M
ay-
13
Jun-
13Ju
l-13
Au
g-1
3S
ep-
13
Oct
-13
No
v-1
3D
ec-
13
Jan-
14
Fe
b-1
4M
ar-
14
Ap
r-1
4M
ay-
14
Jun-
14
Jul-1
4A
ug-
14
Se
p-1
4O
ct-1
4N
ov-
14
De
c-1
4Ja
n-15
Fe
b-1
5M
ar-
15
Apr
-15
Ma
y-1
5Ju
n-1
5Ju
l-15
Au
g-1
5S
ep-
15
Oct
-15
No
v-1
5D
ec-
15
Jan-
16
Fe
b-1
6M
ar-
16
Ap
r-1
6M
ay-
16
Jun-
16
Jul-1
6A
ug-
16
Se
p-1
6O
ct-1
6N
ov-
16
De
c-1
6Ja
n-1
7F
eb
-17
Ma
r-1
7A
pr-
17
Ma
y-1
7
US
D p
er
me
tric
to
nn
e
Domestic ex-works price (average)
Ex-works price for exported boron-containing HRB is equal to Chinese FOB export price less $20 per tonne freight expense to port of export, and less payment of
8% VAT (after 9% VAT credit)
Source: WSD's WCC for Flat Rolled Sheet and SteelBenchmarker
Chinese Ex-Works HRB Export Price versus Domestic Ex-Works Price
14
Challenging New Steel
”Industrial Structure”
STEEL INDUSTRY “DRIVING FORCES” Rating
Chinese policymakers driving the steel industry bus 8
Shifting global steel trade – Chinese exporting armada defeated 10
Major advances steel’s technological revolution 4
Extreme price volatility 3
THE FUTURE: Liquid steel futures curves outside of China 9
No change in global steel production by 2025 1
Extreme M&A activity 9
Massive Chinese steel scrap recovery 4
Tightening of third-party steel slab market 7
Steel’s new “Age of Protectionism” 9
Global steel production is crashing into the ECO-Capacity wall 9
AVERAGE 6.8
#1Chinese policymakers
driving the industry bus.
Rating = 8
NEW Steel Industry
“Industrial Structure”
Chinese iron ladies
no more?
16
Asian Infrastructure Investment Bank
Chinese Financial Colonial Empire
17
#2Shifting steel trade flows
- - -Chinese STEEL EXPORTING
ARMADA defeated
Rating = 10
NEW Steel Industry
“Industrial Structure”
Chinese steel encountering
avalanche of trade suits
19
#3Major advances in
the steel and globaltechnological revolution
Rating = 4
NEW Steel Industry
“Industrial Structure”
Machines replace men
21
#4Extreme price volatility
for steel products and steelmakers’
raw materials
Rating = 3
NEW Steel Industry
“Industrial Structure”
#4Extreme price volatility:
Steel products and
steelmakers’ raw materials
Rating = 3
Psychological Warfare
-200
-150
-100
-50
0
50
100
150
Ja
n-7
0Ja
n-7
1Ja
n-7
2Ja
n-7
3Ja
n-7
4Ja
n-7
5Ja
n-7
6Ja
n-7
7Ja
n-7
8Ja
n-7
9Ja
n-8
0Ja
n-8
1Ja
n-8
2Ja
n-8
3Ja
n-8
4Ja
n-8
5Ja
n-8
6Ja
n-8
7Jan-8
8Ja
n-8
9Ja
n-9
0Jan-9
1Ja
n-9
2Ja
n-9
3Jan-9
4Ja
n-9
5Ja
n-9
6Ja
n-9
7Ja
n-9
8Ja
n-9
9Ja
n-0
0Ja
n-0
1Ja
n-0
2Ja
n-0
3Ja
n-0
4Ja
n-0
5Ja
n-0
6Ja
n-0
7Ja
n-0
8Ja
n-0
9Ja
n-1
0Ja
n-1
1Ja
n-1
2Ja
n-1
3Ja
n-1
4Ja
n-1
5Ja
n-1
6Ja
n-1
7
$ p
er
To
nn
e
World Export Price for Hot-Rolled Band, FOB port of export(Month-to-Month Price Change)
Source: PriceTrack and SteelBenchmarkerTM
Steel Buyer/Seller Cardiac Arrest
#5
THE FUTURE =Liquid steel futures curves
outside of China
Rating = 9
NEW Steel Industry
“Industrial Structure”
No need for a fortune teller if
there’s a futures curve
25
#6
Huge Negative!Global steel production
unchanged in 2025
Rating = 1
NEW Steel Industry
“Industrial Structure”
MILLION TONNES
2017 2025
China 839 709Advanced Countries 457 476Latin America 64 81Rest of World 329 413Total 1,689 1,679
Global Steel Stagnation
28
China’s FAI steel intensity
is declining rapidly
0.000
0.010
0.020
0.030
0.040
0.050
0.060
0.070
0.080
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
e
20
18
e
20
19
e
20
20
e
20
21
e
20
22
e
20
23
e
20
24
e
20
25
e
20
26
e
20
27
e
20
28
e
20
29
e
20
30
e
20
31
e
20
32
e
20
33
e
20
34
e
20
35
e
Steel Consumption Intensity of FAImillion tonnes per billion RMB
USA Steel Intensity
of FAI
#7
Extreme
M&A activity
Rating = 9
NEW Steel Industry
“Industrial Structure”
M&A Prowess
30
#8
Huge surge in China’s steel scrap recovery
Rating = 4
NEW Steel Industry
“Industrial Structure”
CHINESE SCRAP
GROWS ON TREES
32
Scrap battling iron ore and coking
coal for a share of BOF metallics
33
-$200
-$150
-$100
-$50
$0
$50
$100
$150
$0
$100
$200
$300
$400
$500
$600
$700
May
-10
Jul-
10
Sep
-10
Nov
-10
Jan
-11
Mar
-11
May
-11
Jul-
11
Sep
-11
Nov
-11
Jan
-12
Mar
-12
May
-12
Jul-
12
Sep
-12
Nov
-12
Jan
-13
Mar
-13
May
-13
Jul-
13
Sep
-13
Nov
-13
Jan
-14
Mar
-14
May
-14
Jul-
14
Sep
-14
Nov
-14
Jan
-15
Mar
-15
May
-15
Jul-
15
Sep
-15
Nov
-15
Jan
-16
Mar
-16
May
-16
Jul-
16
Sep
-16
Nov
-16
Jan
-17
Mar
-17
May
-17
Jul-
17
Sep
-17
Nov
-17
$ per ton
ne
$ p
er t
onn
e
Turkey scrap HM 80/20 versus
Weighted Iron Ore/Coking Coal Price Index
Spread v. Turkey Scrap (RHS) Iron Ore/Coal Index Turkey Scrap Del'd
Source: WSD Estimates, Platts, Steelbenchmarker
Integrated mills ‘scrap threat.
Must pay less for iron ore
34
#9
Tightening of third-party steel slab market
Rating = 7
NEW Steel Industry
“Industrial Structure”
Steel slab demand
heating up
36
#10
Steel’s new
“Age of Protectionism”
Rating = 9
NEW Steel Industry
“Industrial Structure”
Steel’s new
“Age of Protectionism”
38
Averate Score = 6.8
More than sufficient for
well-positioned and
well-managed companies
to be winners
NEW Steel Industry
“Industrial Structure”
SUBMARINE COMMANDER and
WOLFPACK
40
KEY POSITIVES
o Low costs
o Concentrated markets
o Protected markets
o Good demand growth prospect
o Solid profitability
o Capable management
LATIN AMERICAN STEEL
Opportunity Beckons
42
WCC -- Operating cost
Latin American Plants
$200
$250
$300
$350
$400
$450
$500
$550
$600
0 50 100 150 200 250 300 350 400 450 500 550 600 650
US
D p
er M
etri
c T
on
ne
Cumulative Capacity (million metric tonnes)
World Cost Curve for Hot-rolled Band
($ per metric tonne, operating cost)
October 2017
Latin American plants =
43
WCC -- Marginal Cost
Latin American Plants
$200
$250
$300
$350
$400
$450
$500
$550
$600
0 50 100 150 200 250 300 350 400 450 500 550 600 650
US
D p
er
Me
tric
To
nn
e
Cumulative Capacity (million metric tonnes)
World Cost Curve for Hot-rolled Band
($ per metric tonne, marginal cost)
October 2017
Latin American plants =
44
Latin America Crude Steel
Production
0
1
2
3
4
5
6
7
Jan-69
Aug-70
Mar-72
Oct-73
May-75
Dec-76
Jul-7
8
Feb-80
Sep-81
Apr-83
Nov-84
Jun-86
Jan-88
Aug-89
Mar-91
Oct-92
May-94
Dec-95
Jul-9
7
Feb-99
Sep-00
Apr-02
Nov-03
Jun-05
Jan-07
Aug-08
Mar-10
Oct-11
May-13
Dec-14
Jul-1
6
Latin American Crude Steel Production (million tonnes)
45
Latin America Crude Steel
Production; percent of World
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Jan-69
Aug-70
Mar-72
Oct-73
May-75
Dec-76
Jul-7
8
Feb-80
Sep-81
Apr-83
Nov-84
Jun-86
Jan-88
Aug-89
Mar-91
Oct-92
May-94
Dec-95
Jul-9
7
Feb-99
Sep-00
Apr-02
Nov-03
Jun-05
Jan-07
Aug-08
Mar-10
Oct-11
May-13
Dec-14
Jul-1
6
Latin American Crude Steel Production as percent of World
46
Latin America:
Steel Consumption
0.0
5,000.0
10,000.0
15,000.0
20,000.0
25,000.0
30,000.0
35,000.0
198
5
198
6
198
7
198
8
198
9
199
0
199
1
199
2
199
3
199
4
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
Semifinished
Long Products
Flat Products
Latin America: Steel Consumption (in thousand tonnes)
47
Latin America
Steel Imports
0.0
2,000.0
4,000.0
6,000.0
8,000.0
10,000.0
12,000.0
14,000.0
16,000.0
198
5
198
6
198
7
198
8
198
9
199
0
199
1
199
2
199
3
199
4
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
Semifinished
Long Products
Flat Products
Latin America: Steel Imports (in thousand tonnes)
48
Latin America:
Steel exports
0.0
2,000.0
4,000.0
6,000.0
8,000.0
10,000.0
12,000.0
198
5
198
6
198
7
198
8
198
9
199
0
199
1
199
2
199
3
199
4
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
Semifinished
Long Products
Flat Products
Latin America: Steel Exports (in thousand tonnes)
49
EBITDA
Latin American Plants
-$100
$0
$100
$200
$300
$400
$500
$600
Q1
03
Q2
03
Q3
03
Q4
03
Q1
04
Q2
04
Q3
04
Q4
04
Q1
05
Q2
05
Q3
05
Q4
05
Q1
06
Q2
06
Q3
06
Q4
06
Q1
07
Q2
07
Q3
07
Q4
07
Q1
08
Q2
08
Q3
08
Q4
08
Q1
09
Q2
09
Q3
09
Q4
09
Q1
10
Q2
10
Q3
10
Q4
10
Q1
11
Q2
11
Q3
11
Q4
11
Q1
12
Q2
12
Q3
12
Q4
12
Q1
13
Q2
13
Q3
13
Q4
13
Q1
14
Q2
14
Q3
14
Q4
14
Q1
15
Q2
15
Q3
15
Q4
15
Q1
16
Q2
16
Q3
16
Q4
16
Q1
17
Q2
17
US
$ p
er
me
tric
to
nn
e
EBITDA per Tonne Shipped
Latin American Mills
Far Eastern Mills
Japanese MillsEuropean Mills
50
Brazil: Wide
Hot-Rolled Band Trade
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
220,000
240,000
260,000
280,000
Jan
-13
Feb-1
3M
ar-
13
Apr-
13
May-
13
Jun
-13
Jul-13
Aug-1
3S
ep-1
3O
ct-1
3N
ov-
13
Dec-
13
Jan-1
4F
eb-1
4M
ar-
14
Apr-
14
May-
14
Jun-1
4Ju
l-14
Aug-1
4S
ep-1
4O
ct-1
4N
ov-
14
Dec-
14
Jan-1
5F
eb-1
5M
ar-
15
Apr-
15
May-
15
Jun-1
5Ju
l-15
Aug-1
5S
ep-1
5O
ct-1
5N
ov-
15
Dec-
15
Jan-1
6F
eb-1
6M
ar-
16
Apr-
16
May-
16
Jun-1
6Ju
l-16
Aug-1
6S
ep-1
6O
ct-1
6N
ov-
16
Dec-
16
Jan-1
7F
eb-1
7M
ar-
17
Apr-
17
May-
17
Jun-1
7
ton
ne
s
Brazil Trade for Hot Rolled Wide Strip
Imports
Exports
Source: ISSB, WSD Estimates
51
Mexico Wide Hot Band
Trade
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
220,000
240,000
260,000
280,000
300,000
320,000
Jan-1
3F
eb
-13
Ma
r-1
3A
pr-
13
Ma
y-1
3Ju
n-1
3Ju
l-1
3A
ug-1
3S
ep-1
3O
ct-1
3N
ov-
13
De
c-1
3Ja
n-1
4F
eb
-14
Ma
r-1
4A
pr-
14
Ma
y-1
4Ju
n-1
4Ju
l-1
4A
ug-1
4S
ep-1
4O
ct-1
4N
ov-
14
De
c-1
4Ja
n-1
5F
eb
-15
Ma
r-1
5A
pr-
15
Ma
y-1
5Ju
n-1
5Ju
l-1
5A
ug-1
5S
ep-1
5O
ct-1
5N
ov-
15
De
c-1
5Ja
n-1
6F
eb
-16
Ma
r-1
6A
pr-
16
Ma
y-1
6Ju
n-1
6Ju
l-1
6A
ug-1
6S
ep-1
6O
ct-1
6N
ov-
16
De
c-1
6Ja
n-1
7F
eb
-17
Ma
r-1
7A
pr-
17
Ma
y-1
7
ton
ne
s
Mexico Trade for Hot Rolled Wide Strip
Imports
Exports
Source: ISSB, WSD Estimates
HUGE NEGATIVE
High country risk.
FORECAST
Problem to solved by globilization!
The INFO and TECHNO Revolutions
know no boundaries
LATIN AMERICAN STEEL
Opportunity Beckons
Make use of WSD.
Improve your speed, your
ideaphoria and the accuracy of
your competitive response.
Please call us: 201 503-0902
53
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