yasushi aoki, nippon steel - japan's steel growth and the role of mozambique coal

© 2013 NIPPON STEEL & SUMITOMO METAL CORPORATION All Rights Reserved.

Nippon Steel & Sumitomo Metal Corporation

Yasushi Aoki

July 15th 2013

General Manager, Raw Materials Development

Japan’s Steel Growth

and the Role of Mozambican Coal

1


Current Situation of Japanese Steel Industry

Strategic Responses Taken by NSSMC

Why Mozambican Coal ?

Our Approach to Mozambican Coal

Expectation for Mozambican Coal

2

Contents


Current Situation of

Japanese Steel Industry

3

4

2009 2010 2011 2012 2013 (f)

World Total 1.14 1.29 1.37 1.43 1.47

China : + 4.8% Developed countries : +2.6% Developing countries : +5.6%

China : + 3.1% Developed countries : +2.5% Developing countries : +2.6%

(Unit: Billion ton)

(Unit: Billion ton)

0.42

c.f . China - Steel Consumption Growth Rate and Value of Elastic ity of GDP2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013(f) 2020(f)

Steel Consumption Growth Rate 1.4% 27.1% 21.1% 25.7% 14.7% 26.0% 8.7% 11.9% 2.9% 26.1% 5.1% 5.8% 1.9% 3.5% 1.3%GDP Growth Rate 8.4% 8.3% 9.1% 10.0% 10.1% 10.4% 11.6% 13.0% 9.8% 9.2% 10.4% 9.2% 8.0% 7.8% 7.3%Value of Elasticity of GDP 0.2x 3.3x 2.3x 2.6x 1.5x 2.5x 0.7x 0.9x 0.3x 2.8x 0.5x 0.6x 0.5x 0.5x N/A

World Steel Demand


24% 26%24%

29%32% 31%

28%26%

28%30% 30%

38% 38%

34%

43% 43% 40%46% 50%

51% 50%

48%50% 52% 53%

59%58%

55%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

20

40

60

80

100

120

140

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Direct Export

Indirect Export

Net Domestic Demand

5

Domestic Steel Demand & Export Ratio in Japan

Overseas

Demand

Domestic

Demand

million ton

Export Ratio

(Direct + Indirect)

Export Ratio

(Direct only)


-40

-20

0

20

40

60

80

2002 '03 '04 '05 '06 '07 '08 '09 '10 11 '12 e

Steel Export Steel Import Net Export Quantitymillion ｔon

-40

-20

0

20

40

60

80

2002 '03 '04 '05 '06 '07 '08 '09 '10 11 '12 e

Steel Export Steel Import Net Export Quantitymillion ｔon

Korea China

6

(Importer → Exporter )

Steel Trade in Korea & China


0.5

1.0

1.5

2.0

2.5

4 7 10 2010.01

4 7 10 2011.01

4 7 10 2012.01

4 7 10 2013.01

4

Apr-Jun 2009 Bench Mark Price IO CFR US$ 60/MT HCC FOB US$129/MT

Apr-Jun 2011 Bench Mark Price IO CFR US$171/MT HCC FOB US$330/MT

Apr-Jun 2013 Bench Mark Price IO CFR US$137/MT HCC FOB US$172/MT

Japan

( Prices of Hot Rolled Sheets in local currency as of Apr. 2009 = 1.0 ）

Bao Steel Prevailing List Price

( Source :The Japan Iron and Steel Federation )

2009 4

Hot Rolled Sheets Prices by Region

7


© 2013 by Prof. Werner Antweiler, University of British Columbia, Vancouver BC, Canada.

Strong Japanese Yen vs US$

(Jan 2006 = 100)

Won

Euro

RMB

Yen

8


Strategic Responses

Taken by NSSMC

9


Global Strategy

Technological Superiority

World-leading Cost Competitiveness

Building an organization with world-leading competitive strength by 2015

NSSMC Group will pursue world-leading technologies and manufacturing capabilities, and contribute to society by providing excellent products and services.

10

Creating the Best Steelmaker with World-leading Capabilities


Up

stre

am

pro

cess

Kimitsu ･ Shift to two-blast-furnace operation (No. 3 blast furnace to cease operation) End of FY2015

･ Streamlining of No.1 steelmaking plant - No. 5 continuous caster to cease operation - Shift to one-basic-oxygen-furnace operation

(One basic-oxygen-furnace to cease operation)

1H of FY2014 1Q of FY2016

Wakayama ･ Postponement of operation of the new No. 2 blast furnace (Two-blast-furnace operation with No. l and No. 5 blast furnaces to continue)

Kimitsu Wakayama

Two-BF operation No.1 BF(3,700m³) No.5 BF(2,700m³)

Postponement of operation of the new No.2 BF

・No.3 BF to cease operation

No.3 BF : 4,822m³ <May, 2001~>

・No.5 continuous caster to cease operation

・Shift to one-basic-oxygen- furnace operation

Blast Furnace (BF) 14 13 (End of FY15)

Basic Oxygen Furnace 32 31 (1Q of FY16)

Continuous Caster 30 29 (1H of FY14)

The number of facilities

11

Cessation of Selective Operations to Optimize Fixed Costs

and Realize Highly-productive Low-cost Operation


Number of Cars Produced （Actual・Estimates）Million Cars

（Sources: Public Information, NSSMC Data）

Mexico

TENIGAL 49%

New CGL Line [0.4 mil ton] Operation （2013）

China

BNA 50%

[Cold Roll 2.2 mil tons / CAPL 0.95 mil tons / CG

1.25 mil tons]

2007 2008 2009 2010 2011

888 930 1,379

1,826 1,842

2007 2008 2009 2010 2011

210 217 156

234 268

Europe ArcelorMittal/

Cross License of Technology

2,285 2,178

1,706 1,983

2,113

2007 2008 2009 2010 2011

129 139 100

164 148

2007 2008 2009 2010 2011

225 233 264 356 394

52%

[Cold Roll 1 mil ton]

Thailand SUS

India

JV with Tata 49%

New Cold Roll Line[0.6 mil ton]Operation（2013）

Under Construction

In Operation

USA

I/N Tek

I/N Kote 50%

40%

[Cold Roll 1.7 mil st / CAPL 1.2 mil st]

[CG 0.5 mil st / EG 0.45 mil st]

2007 2008 2009 2010 2011

1,336 1,078

722 983 1,079 North America

Brazil

UNIGAL

＃2CGL[0.55 mil ton]Expansion（2011）

30%

[CG 0.48 mil ton]

2007 2008 2009 2010 2011

370 394 378

419 433 South America

＜Nippon Steel & Sumitomo Metal＞

Domestic and Abroad CGL/CAPL

Production Capacity in Total: around 15 mil tons

＜Domestic: 8.5 mil tons/Abroad: 6.8 mil tons＞

*Equity Basis: around 3 mil tons

[CG 0.36 mil tons] Operation（2013）

Nippon Steel & Sumikin

Galvanizing (Thailand) Co., Ltd.

100%

Thailand

Nippon Steel & Sumitomo Metal

12

Global Supply Network of Steel Sheets for Cars


U.A.E

AGIS

NIGERIA

MRM

Vietnam CSVC

NPV

PEBSB

Malaysia N-EGALV

YKGI 50.1%

10%

30%

51%

12%

South Africa

Safal Steel 7%

20%

（HGI ）

（CRC）

（HGI/ PPGI)

（ERW Pipe , Steel Pipe for

Fences)

（HGI/ PPGIC, Other Products for Construction)

（EG)

（HGI/ PPGI）

（CRC）

（Steel Pipe Pile, Sheet Pile)

（Steel Sheet for Fabrication ）

South East Asia / U.S.A

NS Bluescope

Coated Products 50%

USA Western Tube & Conduit

95%

To Capture the Demand Expected to Grow in Developing Countries

Supply of CRC 0.5-0.6mtpa

Supply of CRC 0.28 mtpa

Supply of HRC 0.15 mtpa

Supply of CRC 0.15 mtpa

Supply of CRC : 0.08mtpa Supply of CRC : 0.15mtpa

10%

Nippon Steel & Sumitomo Metal

13

Global Supply Network of Steel Products for Construction

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http://ja.wikipedia.org/wiki/%E3%83%95%E3%82%A1%E3%82%A4%E3%83%AB:Flag_of_Brunei.svg

© 2013 NIPPON STEEL & SUMITOMO METAL CORPORATION All Rights Reserved. 14

• High-end OCTG/Line Pipe

• X120 High Strength large-diameter tube

• High quality slabs for marine structures

As a supply and development hub of leading

and high-end products, we seek for synergy

effect in technology.

We will respond to growing steel demand in energy industry by combining existing technologies of NSC and SMI.

As VSB・USIMINAS・NPC main hubs, we supply

energy industries in growing areas.

• OCTG/Line Pipe

• High quality slabs

Domestic Production Overseas Production

（Products）（Products）

Investment Ratio：VSB/39%, USIMINAS/28%, NPC/33%）

Global Deployment : Energy & Resources


80

90

100

110

120

130

140

150

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q

PCI Ratio

Semi-soft Ratio

Reducing Agent Ratio

Coke Ratio

15

Technological & Operational Challenge for Usage of Coal

Strategy & Measures in Raw Materials

(Q1 JFY2010 = 100)

JFY2010 JFY2011 JFY2012


MUSA

NIBRASCO

CBMM

70%*

31.4%

2.5%

Elkview 2.5%

Revuboe 33.3%

Hail Creek

Moranbah North

Warkworth

Integra

Bulga

Foxleigh

8.0%

6.25%

9.5%

6.0%

12.5%

10.0%

Robe River 14.0%

Beasley River 37.6%

* USIMINAS

（planned）

Brazil

Canada

Mozambique Australia

Self Sufficiency of Iron Ore Self Sufficiency of Coal

(Total Volume：68MT)

Ratio：approx. 25%

(Total Volume：32MT)

Ratio：approx. 20% Total Procurement Volume

(FY2010)

Mines with long-term contracts or investments

Iron ore

Coal

% Investment %

Other alloy

（under exploration）

16

Investment in Raw Materials Assets

*

*

*Joint investment with Nippon Steel Trading


Why Mozambican Coal ?

17


1985 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20102011

Est.

2012

Est.

Japan 69 65 60 57 66 68 68 69 67 66 67 68 55 67 66 65

South Korea 8 11 17 20 21 20 21 21 21 21 22 23 22 27 32 34

India 2 6 9 11 13 13 14 16 20 22 24 28 28 30 34 37

China 0 0 0 0 0 0 3 5 5 3 3 3 31 35 25 37

European Union 62 62 59 60 51 46 46 44 45 45 46 45 36 44 45 41

Brazil 8 10 11 11 14 12 13 13 13 13 15 16 13 14 18 13

Total Import 167 171 180 178 190 187 190 195 200 198 214 220 210 253 253 262

Australia 49 58 74 99 106 107 113 116 122 125 138 135 136 155 131 162

Canada 22 27 29 28 28 25 24 25 26 23 25 25 21 27 27 31

China 3 3 7 6 13 14 17 13 11 9 5 5 1 1 4 1

United States 55 58 47 30 18 14 15 19 19 22 27 36 31 51 65 58

Total Export 167 171 180 178 190 187 190 195 200 198 214 220 210 253 253 262

25%

62%

28%

18

Trend of Seaborne Coking Coal Trade

100%

100%


●： Existing coal field ★： New developing coal field

Australia： Bowen Basin

USA： Appalachian Mountains

Mongol: Tavan Tolgoi

China： Shanxi Province

Mozambique: Moatise Region

Russia: Elga

Canada： Rocky Mountains

19

Map of Hard Coking Coal

© 2013 NIPPON STEEL & SUMITOMO METAL CORPORATION All Rights Reserved. 20

“Premium” Hard Coking Coal (But High in Ash & TS)

Access to the Coast

♦ Great Opportunity to Establish a Firm

Presence in the Seaborne Market

Advantages of Mozambican Coal


Our Approach to

Mozambican Coal

21


Our Approach to Mozambican Coal

22

As a Final Consumer of Coal

As an Investor for a Coal Mine


Nacala Tete

Beira

Revuboè

Ownership

Talbot Group 58.9%

NSSMC Group 33.3%

POSCO Group 7.8%

Target

Start up Operation after 2016

Ramp up to 5 million tons p.a.

23

Minas de Revuboè, Limitada

Moatize

Benga


Historical Development

24

Jul. 2004 : Prospecting license granted.

2005–2006 : Initial study conducted, utilizing NEDO’s subsidies

for development

2009 : Initial feasibility study conducted, again utilizing

NEDO’s subsidies for development

Nov. 2010 : Mining concession applied for.

Apr. 2013 : Mining concession granted.


Priority of Work for This Year

25

Preparation of the Resettlement Plan and the

Grant of the DUAT (which are Preconditions

to the Grant of the Environmental License)

Negotiation of Rail and Port Allocations

Preparation for Local Employment and

Human Development

Completion of Bankable Feasibility Study


Expectation for

Mozambican Coal

26


IRR15%前提の価格： USD/MT

51

122

367

331

48

125

98

300

129

330

0

50

100

150

200

250

300

350

400

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

/1Q

20

10

/3Q

20

11

/1Q

20

11

/3Q

20

12

/1Q

20

12

/3Q

20

15

Term Spot高止まりジリ高

トラブル時は暴騰futureto date

145

170

Most of the Traditional Coking Coal

Suppliers have Now Turned to

Cost-Focused Suppliers.

Minimum price level required for sustainable

operation at existing mines or for each

expansion /greenfield project to be

economically viable, depending on the stage

of each Mines.

Upward Pressure to

Increase the Mining Cost !!

27

Coking Coal Prices

Expected to Remain

Volatile !!

Volatile Coal Prices & Upward Cost Pressure


Maintain & Improve Competitiveness,

Even in the Challenging Situation (Prices,

Costs), is the Key; Therefore,

Expect Supports from the Mozambican

Government; for Example,

Timely Expansion of Rail & Port (ex. Installment of Nacala

Route), Which Also Enable to Reduce Total Costs

Human Resource Development

Continuation of Fair & Open Policy for Investment Security

28

Expectation for Mozambican Coal


Japanese Government is Ready to Support

Mozambican Coal

Joint Statement by METI / MIREM (Oct.29, 2012)

5 Year Development Plan for Mozambican Coal Industry

◆ Human Resources Development Programs

◆ Geological Research

◆ Master Plan for Coal Development & Usage

Financial Support by JBIC on Infrastructure

Development can be expected

29

Support by Japanese Government


Muito Obrigado !

Let’s work together to build

a new & successful model !

30

yasushi aoki, nippon steel - japan's steel growth and the role of mozambique coal

Business

steel growth

steel federation

blastfurnace operation

na world steel demand

bf operation

operation shift

operation shift

mil ton operation