global steel industry and in particular china: future outlook
DESCRIPTION
Mining On Top: Stockholm 2013 26-27 Nov 2013 Global steel industry and in particular China: future outlook – Dr Nae Hee Han, World Steel Association; Chief EconomistTRANSCRIPT
Global Steel Industry: Future Outlook
Nae Hee Han/Director, Economic affairs
Presentation to Mining on Top: Stockholm, 26-27, November 2013
Disclaimer text
This document is protected by copyright. Distribution to third parties or reproduction
in any format is not permitted without written permission from worldsteel. worldsteel
operates under the strictest antitrust guidelines. Visit worldsteel.org\About us for
detailed antitrust guidelines.
2
Current State of the Steel Industry
Slower growth of demand
Overcapacity
Low profitability
Strengthening environmental regulations
3
100
120
140
160
180
200
220
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2000=100
Apparent steel use, crude steel equivalent Capacity, crude steel
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)
4
Return of Overcapacity
While world steel demand continues to grow, capacity utilization ratio
trends down
No easy solutions to overcapacity in sight
Jun-08 92.7%
Dec-08 59.9%
Apr-10 84.5%
Aug-10 74.2%
Apr-11 83.4%
Dec-12 71.5%
Sep-13 79.3%
50%
60%
70%
80%
90%
100%
Jan-0
8
Jul-08
Jan-0
9
Jul-09
Jan-1
0
Jul-10
Jan-1
1
Jul-11
Jan-1
2
Jul-12
Jan-1
3
Jul-13
World crude steel capacity utilisation
5
6
value chain profit pool split evolution
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
Raw Materials Side Adds to Adversity
81
78
61
35
26
27
11
7
22
22
28
32
8
23 54 125 156 230 135
1995 2000 2005 10 2011 2017
100%=
Iron ore
Steel
making
(HRC)
Coking
coal
15
17
44
46
42
Source: McKinsey & Company
6
7
Steel Industry Performances
Steel industry stocks vs Dow Jones
Index 2005=100
Steel vs Raw materials prices
Index 2005=100
7
1 2191 219
1 141
1 3001 403 1 430
1 475 1 523
7.0
0.0
-6.4
14.0
7.9
2.0
3.1 3.3
0
200
400
600
800
1 000
1 200
1 400
1 600
-10
-5
0
5
10
15
2007 2008 2009 2010 2011 2012 2013 2014
Mt%
Mt y-o-y % growth
125.0*
Steel Demand Forecasts for 2013-14 Apparent Steel Use, finished steel (SRO October 2013)
*) 2014 as % of 2007
8
Demand Forecasts for selected countries Apparent Steel Use, finished steel (SRO October 2013)
2012 2013 2014 12/11 13/12 14/132014 as %
of 2007
World 1,430.3 1,475.1 1,523.2 2.0 3.1 3.3 125.0
United States 96.2 96.9 99.8 7.8 0.7 3.0 92.2
European Union (27) 140.2 134.9 137.8 -9.5 -3.8 2.1 69.1
Japan 63.9 64.0 63.0 -0.2 0.1 -1.6 77.6
China 660.1 699.7 720.7 2.9 6.0 3.0 172.2
India 71.6 74.0 78.2 2.6 3.4 5.6 151.8
Brazil 25.2 26.0 27.0 0.6 3.2 3.8 122.3
ASEAN (5) 54.8 57.3 60.4 12.8 4.6 5.4 149.7
MENA 63.2 64.3 69.0 2.2 1.7 7.3 127.2
Developed Economies 390.2 384.1 390.5 -1.7 -1.6 1.7 82.4
Emerging & Developing
Economies excl China380.0 391.4 412.1 4.2 3.0 5.3 126.0
World excl. China 770.2 775.4 802.6 1.1 0.7 3.5 100.3
Mt %
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
60
80
100
120
140
160
180
2007 2008 2009 2010 2011 2012 2013 2014
2007=100 World China Developed Economies Em. & Dev. Economies excl. China
10
11
41.5%
46.1%
48.5%
52.2%
53.0%
58.3%
58.4%
61.1%
63.3%
73.7%
71.3%
71.7%
72.7%
74.0%
74.4%
58.5%
53.9%
51.5%
47.8%
47.0%
41.7%
41.6%
38.9%
36.7%
26.3%
28.7%
28.3%
27.3%
26.0%
25.6%
16.4%
20.5%
23.3%
27.4%
28.3%
33.3%
33.1%
34.3%
36.7%
48.3%
45.2%
45.7%
46.1%
47.4%
47.3%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Emerging & Developing Economies Developed Economies China
Regional Share in World Steel Demand Apparent Steel Use, finished steel (SRO October 2013)
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 China’s steel use Steel intensity (ASU/GDP)
12
0
200
400
600
800
1 000
1 200
1 400
0 10 20 30 40 50
GDP per capita, 2005 PPP$, thousands USD
S-Curve of different countries
Thailand China Indonesia India
United States Japan South Korea
AS
U p
er
ca
pit
a, A
SU
, cru
de s
teel e
quiv
ale
nt p
er
capita
, kg
South Korea
Japan
United States
China
Economic Growth and Steel Demand
40 57
127
222
305279
488 506
220
Africa India Brazil MiddleEast
UnitedStates
EU (27) China Japan World
Per Capita Steel Use finished steel, kg, 2012
13
How Far Will Chinese Steel Demand Grow?
Positive Negative
Further room for urbanization and
Industrialization
Low level of development in the West
Condensed growth, high share of
investment in GDP
Environmental regulations, resource
constraints
Manufacturing relocation out of China
Speed and mode of development in the West
China provincial steel use per capita (2011, kg/per, crude steel equiv )
US (1973) Japan (1973) China (2012)
14
World Developed China Other Emerging
1992-2000 142.6 84.1 51.1 7.4
2000-2007 480.3 74.2 297.8 108.4
2007-2014 320.2 -85.5 314.8 90.9
Contribution to Apparent Steel Demand Growth( ∆ Mt)
0
200
400
600
800
1 000
1 200
1 400
1 600
1 80019
50
19
55
19
60
19
65
19
70
19
75
19
80
19
85
19
90
19
95
20
00
20
05
20
10
Evolution of Steel Demand (1950-2014, crude steel equiv)
RoW
China
former USSR
US, EU, Japan
Mt
CAGR 1950-19755.0%
CAGR 1975-20001.1%
CAGR 2000-20076.6%
CAGR 2007-20143.1%
End of the China Effect, Next Growth Engine?
15
Population
(million)
Urbanisation
(%)
GDP per capita,
(PPP$)
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
Developing World: Strong Fundamentals
16
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)
Environmental Challenges
Energy intensity of iron and steel
production (GJ/t of crude steel)
17
1.HH = households; CTS = commerce, trade, and service 2. Geothermal, biomass, hydro 3. CO2 expenditure for other materials not examined;
values are rounded 4. Ratio relates exclusively to the emissions
Source: BCG analysis
Innovative use of steel saves six times as much CO2 as is caused by
the production of the steel → LCA approach
Steel as Solution to Sustainable Future
Net CO2 reduction potential Emissions in the
steel production3
1.9
2.1
Mt
5 30 10 0
9.2
1.0
11.2
5.0
14.2
29.5
Mt
9 11 10 1 0
1.0
0.9
8.4
0.7
0.1
0.03
0.4
<0.1
Case study
1.3 : 1
14 : 1
1.1 : 1
Efficient fossil fuel PPs
Wind power plants
Other renewables2
Efficient transformers
Efficient e-motors
Weight reduction cars
Weight reduction trucks
Combined heat/power
Energy
industry
Traffic
HH, ind.,
CTS1
3
5
1
2
4
6
7
8
Ratio between CO2
reduction/emission4
3 : 1
~ 400 : 1
32 : 1
9 : 1
∑~ 74 Mt ∑~ 12 Mt
~ 200 : 1
6 : 1
18
19
Long Term View on Steel Demand
Mt
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 0
500
1 000
1 500
2 000
2 500
3 000
1870 1890 1910 1930 1950 1970 1990 2010 2030 2050
Long Term Evolution of World Steel Demand
*apparent steel use, crude steel equivalent
Global steel demand could reach 2.2~3.0 billion in 2050
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
world’s economy.
Thank you for your attention.
For further information contact:
Nae Hee HAN| Director, Economic Affairs/Chief Representative, Beijing Office
World Steel Association [email protected] | T: +86 (10)6464 6733| worldsteel.org
worldsteel.org