Transcript Document

SE UPE Co. Research & Consulting
World Steel Market and
Ukrainian metallurgy in 2010
Vlasyuk V.S.
SE UPE Co. Research & Consulting, Ukraine
30th September 2010
I. World steel market development
1. Record world crude steel production
1 600
annual
8 months
1 400
1 200
1 346
1 329
1 000
800
873
1 390*
1 227
935
925
758
600
400
200
0
2007
2008
2009
2010
Source: WSA, *UPE Co. estimation
World steel production in 2010 will beat record pre-crisis level 2007 by 50 Mt and will be
around 1390 Mt. It has resulted in the increase of demand and prices for raw materials:
for iron ore by +111%, for coking coal by +64% to the level 2009 year
I. World steel market development
2. Current global macroeconomic situation
GDP growth in China, USA and Eurozone
150%
100%
*6m 2008=100%
123%
107%
100%
100%
100% 95% 96%
92% 98%
50%
0%
China
6m 08
USA
6m 09
6m 10
Eurozone
Source: National Statistics Agencies, IMF
In 1H 2010, USA and Eurozone has not reached the pre-crisis level (6 m 2008) yet, whereas
Chinese economy is rising despite the global economic turmoil. This year USA economy may reach
pre-crisis level, while Euro area economy - not earlier than in 2011-2012
I. World steel market development
3. Recovery of crude steel production by regions
140
140
123
1H 2008 = 100
120
115
120
102
102
100
100
92
80
80
66
60
59
USA
EU
Japan
40
20
48
China
60
India
40
Brazil
20
Russia
71
80
94
91
93
88
80
82
80
106
100
91
119
84
86
2H
1H
61
0
0
1H
2H
2007
1H
2H
2008
1H
2H
2009
1H
2H
2010
1H
2H
2007
1H
2H
2008
1H
2009
2H
2010
Source: WSA, UPE Co.
Growth rate of steel production in the regions is different. Developed economies are still under pre-crisis
level, but China and India have demonstrated strong performance throughout 2008-2010
I. World steel market development
4. Crude steel production in China and the other world
World (w/o China)
1,600
China
Mt
1,400
1,200
1,000
488
499
858
830
2007
2008
566
625
800
600
400
200
661
765
0
2009
2010*
Source: WSA, *UPE Co. estimation
Record steel production in 2010 is primarily provided owing to China. Namely additional demand
for raw materials from China caused global raw material prices increase. Such an impact of
China has affected majority steel producers all around the world
I. World steel market development
5. Raw price increase
Itabira fines, 64.2% Fe
$/t fob Brazil (to Asian market)
$/t fob Australia, Peak Downs
140
129
$/т
120
350
Iron ore
112
105
Coking Coal
$/т
300
300
100
250
225
76
80
200
209
200
55
60
42
55
36
40
150
125
46
129 129
115
98
100
58
21
20
50
0
0
2004 2005 2006 2007 2008 2009 2010 2010 2010 2010
(1Q) (2Q) (3Q) (4Q)
2004 2005 2006 2007 2008 2009 2010 2010 2010 2010
(1Q) (2Q) (3Q) (4Q)
Source: UPE Co.
Enhancing demand for raw materials have resulted in
the iron ore price raise by 111% and the coking coal price raise by 64% y-to-y in 2010
I. World steel market development
7. Excessive steel capacities
World capacity input and steel production,
mln. tonnes
2000
90%
1865
1785
1800
1620
1600
1695
1360
1195
1346
1247
1000
1069
85%
1147
83%
81%
78%
80%
1270
1200
84% 84%
85%
475 Mt
1460
1400
800
Capacity utilization, %
1390
1329
75%
1218
75%
970
70%
600
capacity
400
steel production
utilization, %
65%
68%
200
0
60%
2003 2004 2005 2006 2007 2008 2009 2010
2003 2004 2005 2006 2007 2008 2009 2010
est.
est.
Source: WSA, OECD, UPE Co.
Intensive input of new steel capacities has continued despite crisis in 2008-2009
and currently about 475 million tons of capacities stay idle due to lack of markets
I. World steel market development
8. Post-crisis changes in the world steel market
Before crisis
1600
1400
1200
Demand
1000
After crisis
mln. tonnes
450
625
850
765
before crisis
(2007)
after crisis
(2010)
China
800
600
High
at all regions
400
World, others
200
Low or scanty
except China
0
Profitability
16%
14%
12%
10%
high: +9% ÷ +19%
8%
6%
14%
1%
4%
2%
low: -12% ÷ +15%
0%
Capacities
Deficit and
high utilization
85-90%
100%
95%
90%
85%
80%
75%
70%
65%
60%
55%
50%
before crisis
(2007)
after crisis
(2009)
Utilization, %
85,0%
Excess and
68,2%
before crisis
(2007)
low utilization
68-74%
after crisis
(2009)
Post-crisis situation on the global steel market fundamentally differs from pre-crisis one. The main distinction lies in keeping of
high production cost on the back of excessive and underused capacities. That situation will intensify competence and “erase”
technologically outdated productions, especially depleted of their own raw materials base. Obsolete enterprises with raw
materials base will be forced out into the segments of pig iron and semis.
I. World steel market development
9. Steel price dynamics
1400
1220
HRC
1200
1000
rebar
1130
800
590
600
580
400
200
Jan-08
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
Apr-09
May-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
Nov-09
Dec-09
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
0
2008
2009
2010
Source: UPE Co.
Since 2Q2010 prices have been growing slowly mostly because of increasing cost price.
At the same time fundamental demand factors remain weak in developed countries.
II. Ukrainian steel sector development
12. Ukrainian crude steel production
crude steel production, mln. tonnes
45
40
35
36.9
31.3
38.7 38.6
40.9
42.8
37.1
33.1 34.1
30
33.0*
29.8
25
20
15
10
5
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
*estimation
Source: UPE Co.
Under conditions of weak market demand the volume of steel production in Ukraine has reduced
to the level of a decade ago (to 33 Mt or 23% less than record pre-crisis production in 2007)
II. Ukrainian steel sector development
13. Capacity utilization in Ukraine and world
Ukrainian capacity utilization 2007-2010
100%
98.4%
100%
95%
90%
world
90%
80%
70%
70.9% 85%
60%
80%
50%
75%
40%
75.7%
77.1%
Ukraine
78.6% 78.6%
77.2%
78.5%
71.6%
72.5%
76.5%
70%
71.3%
72.6%
32.7%
30%
65%
20%
67.7%
66.2%
60%
66.4%
64.9%
61.8%
10%
55%
3-Jan-07
21-Feb-07
11-Apr-07
30-May-07
18-Jul-07
5-Sep-07
24-Oct-07
12-Dec-07
30-Jan-08
19-Mar-08
1-May-08
24-Sep-08
12-Nov-08
7-Jan-09
25-Feb-09
15-Apr-09
3-Jun-09
22-Jul-09
9-Sep-09
28-Oct-09
16-Dec-09
10-Feb-10
31-Mar-10
19-May-10
7-Jul-10
25-Aug-10
0%
2007
2008
2009
2010
50%
Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10
Source: UPE Co., WSA, OECD
In the context of current changes in the global steel market, Ukrainian export-oriented metallurgy
is significantly behind the world level of capacity utilization
II. Ukrainian steel sector development
15. Ukrainian steel export to EU27
6.0
mln. tonnes
Structure by products in 2010
5.0
cold-rolled coil wire
other
2% rebars 1% bars
1%
2%
wire rod 4%
4.0
6%
3.0
2.0
5.0
heavy plate
9%
5.4
1.0
3.0
3.3
2009
2010
(7 months)
hot-rolled coil
11%
slab
51%
billet
13%
0.0
2007
2008
Source: State Statistics Committee of Ukraine, UPE Co.
For 7 months 2010, Ukrainian steel export to EU27 is 3.3 Mt and it assumes a recovery to precrisis level in annualized terms. As in past years, the basis of Ukrainian export EU 27 are
semi-finished products, which share is 64%
II. Ukrainian steel sector
17. Steel consumption in Ukraine
30
mln. tonnes
26.1
25
20
15
11.2
10
6.8
5
3.4
4.2
4.9
7.5
8.2
8.7
9.3
6.2
7.5
0
0
1990
-
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010*
* estimation
Source: UPE Co.
Despite the strong preconditions for the development, domestic steel market of Ukraine
remains weak. Under the influence of economic stress in 2008-2009 steel consumption in
Ukraine fell down to 6.2 Mt or 45% less than in 2007
II. Ukrainian steel sector development
19. Investments in Ukrainian steel sector
2500
2082
mln. $
Annual requirement
according to world practice
2000
1625
1500
1289
980
1000
565
500
333
304
646
406
251
193
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 1 п/р
2010
Source: UPE Co.
Investments in modernization of operating productions in Ukraine has decreased to 12$/t in
2009-2010 compared to 49 $/t in 2007. It is less than worldwide average 30-40 $/t.
II. Ukrainian steel sector development
Now after 2 years of crisis, its impact on the steel
industry of Ukraine still remains very essential
Steel market:
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