Transcript CRU April 2009 - African Eagle

Meeting the World’s Metals Needs
Bill Scotting – Executive Vice President, Head of Strategy
FINEX ’10 Conference
London, 27th October 2010
Disclaimer
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made or to be made by ArcelorMittal, including ArcelorMittal’s Annual Report on Form 20-F for the
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events, or otherwise.
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Contents
• Historical context
• Promising medium term outlook
• Meeting the challenges of demand
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Four phases of global steel since 1900
Global crude steel production (kt)
Industrialisation
of US and parts of
Europe
1600000
Post war
rebuild
Saturation
of demand
in
developed
world
5.8% CAGR
(1950-1973)
0.4% CAGR
(1973-1998)
Industrialisation
of China and
developing
world
1200000
3.0% CAGR
(1900-1945)
800000
6.3% CAGR
(1998-2007)
400000
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Source: Worldsteel; ArcelorMittal Corporate Strategy
2000
1990
1980
1970
1960
1950
1940
1930
1920
1910
1900
0
3
Recent “pre-crisis” growth phase was not just a
China phenomenon
Apparent crude steel consumption, million tonnes
CAGR
8.1%
53
CAGR
4.8%
975
1330
412
10.3%
847
Developing
world
Developed
world
China
4.9%
279
242
2.9%
-2.2%
490
437
467
23.3%
138
2000
259
13.4%
2003
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Sources: Worldsteel Steel Statistical Yearbook 2008; ArcelorMittal Corporate Strategy
•Developing world
added about half as
much additional
demand as China
•Relatively sluggish
growth in developed
world (despite credit
bubble)
428
2007
4
Increasing and more volatile pricing
1990-2009 Raw materials price index (1990 real values*****)
Indexed at 1990 =100
400
HCC: Benchmark FOB Australia*
350
LV-PCI: Benchmark FOB Australia**
300
250
Thermal coal: Benchmark FOB
Australia***
Iron ore: Benchmark FOB, Vale sinter
feed****
200
150
100
50
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
YTD
*1990-2003 McCloskey, 2004-2009 CITI Investment Research, 2010 SBB
**1990-2003 McCloskey, 2004-2009 CITI Investment Research, 2010 UBS
***1990-2001 minerals.nsw.gov, 2002-2009 CITI Investment Research, 2010 UBS
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****1990-1999 WSD, 2000-2010 SBB
*****Use USA CPI as deflator
Source: CITI group, McCloskey, NSW gov, WSD, SBB, www.inflationdata.com, UBS, ArcelorMittal Corporate strategy team analysis
5
Price-cost squeeze risks for steel industry
Iron ore spot price and steel price in China
250
900
200
800
700
150
600
100
500
50
0
Dec 04
400
300
Dec 05
Dec 06
Dec 07
Dec 08
Dec 09
Indian Iron Ore 63% Fe dry - China import CFR (USD/t) - LHS
HRC - China domestic Shanghai (USD/t) - RHS
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Source: SBB
6
Industrial production has rebounded strongly…
Global industrial production (y-on-y)
25%
OECD
China
20%
15%
10%
5%
0%
-5%
2006
2007
2008
2009
2010
-10%
-15%
-20%
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Source: Global Insight, WSA and ArcelorMittal estimates
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…As has apparent steel consumption
Apparent crude steel consumption, Jan 2008 = 100
200
180
160
China
Latin America
India
Developed Asia
EU15
USA + Canada
140
120
100
80
60
40
20
0
2008M1
2008M7
2009M1
2009M7
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Source: Worldsteel, Trade database
2010M1
8
The world steel market has shifted
Steel market structure (%, bn tonnes*)
100%=
0.71
0.77
0.84
1.23
25%
Developed
World**
50%
Developing
world
44%
41%
China
6%
9%
16%
1980
1990
2000
50%
55%
27%
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* Apparent consumption of crude steel
** US, Canada, EU-15, Japan, S Korea, Taiwan, Australia, NZ
Sources: WSA and ArcelorMittal estimates
29%
48%
2009
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Contents
• Historical context
• Promising medium term outlook
• Meeting the challenges of demand
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Developing markets and China account for ~85% global
population and an increasing share of world GDP
Average Population (billion)
Average GDP (PPP, $ trillion)
7.2
6.5
82
1.38
5.7
13
1.3
1.2
China
56
4.2
Developing
world
4.8
3.6
Developed
world 0.95
1990-99
5
3
14
19
26
0.96
1
2000-09
2010-19
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Source: Global Insight
43
1990-99
30
32
39
2000-09
2010-19
11
Rising urbanization in developing countries
Increase 2009-19
(millions)
Urban population (million)
2,877
+500
712
+165
2,344
1,911
547
China
358
+275
745
+54
1145
Developing
world
923
Developed
world
630
1990-1999
691
2000-2009
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Source: Global Insight
1420
2010-2019
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Steel is changing our world
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Chinese steel consumption is following same
pattern as developed world followed earlier
Crude steel production, kg/capita
1200
S. Korea
1000
Japan
800
600
Germany
400
China
200
France
US
India
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Sources: Worldsteel; www.populstat.info; ArcelorMittal Corporate Strategy team analysis
2001
1991
1981
1971
1961
1951
1941
1931
1921
1911
1901
0
14
Outside China there is also significant, broadbased growth in steel consumption
Steel consumption per capita 2009 (kg)
Developing world ex-China:
• Over 4 billion people
Developed world:
• Large populations in
MENA, CIS, Brazil, parts
of SE Asia
• Ca. 1bn people
• Many of these countries
are well on
industrialisation and
urbanization growth path
• Post-industrial
service based
economies
• Low population
growth
398
• Over 400m tonnes steel
consumption
• 6% CAGR 1997-2007
290
74
48
India
• Declining steel
consumption
Other China Developed
developin
World*
g world
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* US, Canada, EU-15, Japan, Korea, Taiwan
Sources: WSA, www.populstat.info; ArcelorMittal Corporate Strategy team estimates and analysis
15
Steel consumption is forecast to continue to grow
strongly beyond 2014 in the developing world
Apparent crude steel consumption, Indexed
CAGR
3.8%
CAGR
4.5%
CAGR
3.1%
CAGR ’08-’19
150
0.2%
130
100
Developed
world*
4.8%
Developing
world
5.8%
China
2008
2014
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*EU15, US, Canada, Japan, South Korea, Taiwan, Australia and New Zealand
Sources: Worldsteel; base steel demand scenario, CCM/Corporate Strategy demand model (Feb 2010)
2019
16
Leading to significant demand growth for raw
materials and requiring a supply response
Raw material consumption forecast, Indexed
Metallurgical coal
Iron ore
165
159
100
2009
100
2019
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Sources: ArcelorMittal Corporate Strategy team analysis
2009
2019
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Contents
• Historical context
• Promising medium term outlook
• Meeting the challenges of demand
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Challenges for the mining sector
•
•
•
•
•
Physical supply
Quality requirements
Infrastructure
People
Pricing stability
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Significant project pipeline
New Iron ore supply projections 2010-14 (from 2010 reports),
mt
571
367
380
1
2
453
456
3
4
606
495
AM
Corporate
Strategy
5
6
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Source: CITI group, Macquarie Research, Credit Suisse, FIL Investments, Standard Chartered, Goldman Sachs, ArcelorMittal Corporate Strategy team analysis
20
Broad range of outcomes for scenarios
Scenarios for displacement of Chinese high
cost supply by 2014 relative to 2008
China Iron
Ore demand
growth
570
30
-70
-195
440
160
60
-65
330
270
170
45
600
500
375
New low cost Iron Ore supply
to China*
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*Includes Chinese domestic projects
Source: ArcelorMittal Corporate Strategy team analysis
21
Declining average ore quality in China
China’s iron ore requirement & domestic supply (Mt) and
apparent quality (%Fe)
China Domestic iron ore requirement at 63% Fe quality (LHS)
China ROM iron ore production (LHS)
Iron ore Quality in China (RHS)
50%
800
45%
700
40%
36%
600
35%
33%
31%
35%
30%
500
29%
30%
23%
400
25%
19%
20%
300
15%
200
10%
100
5%
0
0%
2002
2003 2004
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Source: Mysteel, WSO, UNCTAD, AM Corp. Strategy team analysis
2005
2006
2007
2008
2009
22
Changing Mineralogy
200
Hematite avg crystal size (µm)
175
150
125
100
75
50
25
0
0
25
50
75
100
Hydration (goethite content % )
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Larger Blast Furnaces changing quality needs
Index implication
Coke quality requirement by BF volume size
BF volume, m3
1000
2000
3000
4000
5000
Coke ash content, %
< 13
< 13
< 12.5
< 12
< 12
Lower, better
M40, %
> 78
> 82
> 84
> 85
> 86
Higher, Stronger
CSR, %
> 58
> 60
> 62
> 65
> 66
Higher, Stronger
CRI, %
< 28
< 26
< 25
< 25
< 25
Lower, better
* Ash content: residual after burning, the less the better
M40: crushing strength, the higher the more strength
CSR: coke strength after reaction, the higher the more strength
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CRI: coke reactivity index
Source: China Metal Association, China Metallurgy Newspaper
24
Coal absorbing Chinese rail capacity
Share of railway cargo used for transporting coal, China, %
53%
43%
38%
45%
55%
49% 49%
48%
48%
47%
40%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Q1-3
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Source: China Railway Bureau 2009 Year Book, Railway Mid/long-term Planning by NDRC, SX coal, ArcelorMittal Corporate Strategy team analysis
25
Australian coal infrastructure debottlenecking
Queensland coal infrastructure projection
(m tonnes)
450
250
ABARE Coal Export
High Scenario
Port Capacity
400
378
323
323
200
Track Capacity
198
198
127
144127
291
300
162
275
250
227
200
150
ABARE Coal Export
High Scenario
Port Capacity
398
Track Capacity
350
NSW coal infrastructure projection (m tonnes)
136
142
177 180
204
150
123
228
111
100
165
89
85
101
138
114
100
84
139
100
50
50
0
0
2005
2007
2012
2017
2022
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Source: ABARE, ArcelorMittal Corporate Strategy team analysis
2005
2007
2012
2017
2022
26
People and skills to meet the needs
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Steep cost curve leads to high price volatility at
the margin
2009 cash cost curve for iron ore* - CIF into China
($/tonne)
Domestic Capacity
Imports
• Ability of seaborne
supply to meet China
and ex-China import
demand is key to
medium term market
dynamics
• This drives requirement
for Chinese domestic
production to fill the
supply/demand gap
Cumulative capacity
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* Chinese iron ore production is re-evaluated to 63% Fe content
Source: SBB, Mysteel, WSD, ArcelorMittal Corporate Strategy team analysis
28
Summary
•
•
•
•
Strong period of growth over past decade
Supply constraints contributed to volatile pricing
Medium term outlook fundamentally strong
Meeting demand implies challenges to be met
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Thank You/Q&A
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