1

Global Stainless Markets –

Where Are they Heading

For?

Dr. Gerhard C. Pariser

Heinz H. Pariser Alloy Metals & Steel Market Research

Xanten / Germany

10th China Nickel Conference

Shanghai 15-16 March 2013

Stainless Steel – A Longterm Success Story

2

0

100

200

300

400

500

600

700

800

900

1975 1980 1985 1990 1995 2000 2005 2010

Ind

ex

19

75

= 1

00

Stainless Steel

Aluminium

Copper

Crude Steel

OECD IP

Plastics

© Heinz H. Pariser

5.3%

3.4%

5.4%

2.1%

2.4%

1.9%

Growth Rates

1975 - 2012

Sources: USGS, International Aluminium Institute, ICSG, Plastics Europe, Worldsteel, OECD, Heinz H. Pariser

3

Outline

1. Stainless Steel – Profitless Prosperity

2. Market Concentration …

3. … and it„s Impact on Raw Materials

4. Stainless Vision 2030

5. Conclusions

4

Chromium & Stainless Steel Stainless Steel:

Profitless Prosperity

Return on Sales 2008-2012 (Selected Companies)

5

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

TISC

O

ATI

, Fla

t

Jin

da

l

PO

SC

O

NA

S

Ap

era

m

NSSC

*

Sa

nd

vik

Yie

h U

nit

ed

*

Nip

po

n Y

ak

in

Nis

shin

Ste

el

Ba

ost

ee

l

ZP

SS*

Ac

eri

no

x G

rou

p

Ac

eri

no

x C

olu

mb

us

AK

Ste

el

Thy

sse

nK

rup

p

Ou

tok

um

pu

Nip

po

n M

eta

l*

Re

turn

on

Sa

les

20

08

-2

01

2, i

n %

Weighted Average 1.5%

Asia

USA

EU

* Year 2011

© Heinz H. Pariser

“Stainless Cluster” Return on Sales

6

-10.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

2006 2007 2008 2009 2010 2011 2012

An

nu

al R

etu

rn o

n S

ale

s, i

n %

RSH-Stahl: 3.4%

Nickel & FeNi (incl. Norilsk): 28.4%

FeCr (incl. ENRC): 27.5%

© Heinz H. Pariser

Global Stainless Melting Production

7

2010 2011 2012 Change 2013e Change

12/11 13/12

in % in %

USA 2,201 2,074 1,964 -5.3 2,300 17.1

Brazil 433 399 391 -1.9 405 3.5

European Union 7,497 7,559 7,455 -1.4 7,300 -2.1

Other Europe 240 264 229 -13.5 226 -1.0

Japan 3,427 3,256 3,132 -3.8 3,175 1.4

S. Korea 2,048 2,157 2,167 0.5 2,220 2.4

Taiwan 1,523 1,203 1,106 -8.1 1,118 1.1

S. Africa 478 444 505 13.6 586 16.1

Subtotal 17,847 17,355 16,948 -2.3 17,328 2.2

China 12,350 14,460 16,372 13.2 18,450 12.7

India 2,170 2,265 2,469 9.0 2,616 6.0

Subtotal 14,520 16,725 18,841 12.6 21,066 11.8

Total 32,367 34,081 35,788 5.0 38,394 7.3

© Heinz H. Pariser, Alloy Metals & Steel Market Research

in ´000 t

A Look at Global Demand

8

Quarterly Apparent Consumption

vs Real Demand

China

Europe (EU27)

9

Chromium & Stainless Steel Market Concentration

10

Structural Supply Changes

6.0

19.0

8.3

48.1

0

5

10

15

20

25

30

35

40

45

50

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Ma

rke

t Sh

are

(C

rud

e M

eltin

g)

in %

USA

EU

Japan

China

© Heinz H. Pariser

Stainless Steel Market Concentration

11

EU, Japan, USA South Korea, Taiwan India, China

HHI = Herfindahl Hirschman Index; illustrates the level of concentration in an industry

0

500

1,000

1,500

2,000

2,500

3,000

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

HH

I In

de

x

© Heinz H. Pariser

StSt Production

StSt Consumption

me

diu

mh

igh

low

0

5

10

15

20

25

30

35

40

45

0

2

4

6

8

10

12

14

1970 1980 1990 2000 2010

Ch

ina

Sh

are

of

Glo

ba

l D

em

an

d,

in %

Ch

ina

Sta

inle

ss S

tee

l U

sag

e,

in M

ill t

© Heinz H. Pariser

China: The Industry Growth Driver…

12

Stainless Steel Demand Growth Long-term Ranking

(1970-2012)

© Heinz H. Pariser

© Heinz H. Pariser

1970: 23

1980: 49

1990: 313

2000: 1,450

2010: 10,065

2012: 12,727

in ´000 t

1. China 96.7

2. Japan 87.7

3. USA 70.0

Stainless Usage, in Mill t

1. Japan 126.4

2. China 88.9

3. USA 78.1

Stainless Output, in Mill t

…Building further Capacity

13

0

20

40

60

80

100

120

140

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2001 2003 2005 2007 2009 2011 2013 2015

Ca

pa

city

Utilisa

tio

n,

in %

Cru

de

Sta

inle

ss O

utp

ut,

in

Mill

t

10th Five-Year-Plan 11th Five-Year-Plan 12th Five-Year-Plan

Source: CSSC, Antaike, 51BXG, Heinz H. Pariser

© Heinz H. Pariser

Melting Capacity

G.R.: 26.9%

Crude Output

G.R.: 26.5%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

1990 1995 2000 2005 2010

Ne

t Ex

po

rt V

olu

me

, in

Mill t

Su

pp

ly /

Usa

ge

, in

Mill t

Apparent Use

G.R.: 3.0%

Supply

G.R.: 2.2%

Net Exports

G.R.: -2.4%

~ 1.30 Mill t

~ 1.00 Mill t

~ 0.75 Mill t

© Heinz H. Pariser

14

Europe – Once Export-Oriented

RoS: +10%

RoS: +6%

RoS: -2%

15

... Eventually Cutting Capacity

1.6

6.0

9.4

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

1970 1980 1990 2000 2010 2020

Cru

de

Sta

inle

ss,

in M

ill t

Stainless Output

(EU27)

Peak Capacity

Growth Rates

1970 - 2006:

4.9%

2006 - 2012:

-3.1%

>2012:

0.2%

Global

Financial Crises

Exit Krefeld

Exit

Bochum ?

© Heinz H. Pariser

16

But Global Capacity Utilisation Remains Low

50

60

70

80

90

100

110

0.0

10.0

20.0

30.0

40.0

50.0

60.0

1990 1995 2000 2005 2010 2015

Ca

pa

city

Utilisa

tio

n,

in %

in M

ill t

Crude Melting

G.R.: 5.2%

Peak Capacity

G.R.: 5.9%

© Heinz H. Pariser

Capacity Utilisation

17

Chromium & Stainless Steel Impact on Nickel

18

Demand Driver: China

1,219

1,773

89.7%

55.0%

10.3%

45.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Ch

ina

/ R

oW

Sh

are

of

Co

nsu

mp

tio

n,

in %

Nic

ke

l C

on

sum

ptio

n,

in '0

00

t

Global Nickel Demand

G.R.: 3.0%

China

G.R.: 22.8%

RoW

G.R.: -2.4%

© Heinz H. Pariser

19

China„s Demand for Primary Nickel -

Stainless Steel Dependent

20

Nickel Ore & Concentrate Trade Flow 2012 in „000 t Nickel Content

South

Africa

USA

© Heinz H. Pariser, Alloy Metals & Steel Market Research

Lateritic Ore

Sulphide Concentrate

Australia New

Caledonia

Indonesia

Philippines

Greece

9.0

Ukraine

17.3

Japan

21.7

334.4

15.3

17.4

18.4

1.6

22.4

193.2

7.2

Finland

Canada

S. Korea 24.3

2.8

Zambia 3.4

16.4

13.9

China

25.9

.

.

Brazil

8.4

0.8

Guatemala

Rising Primary Nickel Supply

21

1.2

1.7

1.6

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Pri

ma

ry N

i O

utp

ut,

in

Mill

t N

i

Nickel Metal

G.R.: 1.4%

Ferronickel

G.R.: 1.4%

NOS / Chemicals

G.R. -0.2%

Nickel Pig Iron

G.R.: 71.6%

18% Market Share

in 2012

© Heinz H. Pariser

Total Production

G.R.: 3.5%

Ni Demand

G.R.: 3.0%

Nickel as the Major Cost Component (Proportion of Raw Material Cost, Nickel Input Cost of Total Cost)

22

23

Nickel Valuation Comparison

0

5

10

15

20

25

30

35

2009 2010 2011 2012 2013

Pri

ce

, in

'000 U

S$ /

t

LME Ni Cash

Ni in Scrap

(Europe)

Ni in NPI

(China. 10%)

Ni Spot

(China +VAT)

Ni in NPI

(China. 5%)

© Heinz H. Pariser

24

Stainless Mills Realising Better Prices (Nickel Input Basket – Scrap, FeNi, NPI, Ni Metal)

1.281

-4.158

-1.375

-5.0

-3.0

-1.0

1.0

3.0

5.0

7.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2009 2010 2011 2012

De

lta

Ch

ina

-EU

In

pu

t C

ost

Av

. N

ick

el

Inp

ut

Co

st,in

'0

00

US$

/ t

Europe

China

LME Cash

© Heinz H. Pariser

25

Chromium & Stainless Steel Stainless Vision 2030

Long-term „Megatrends“

26

Future Stainless

Market

2030

„Megatrends“ – Source: Roland Berger, Thoughts

Globalisation

Population

Urbanisation

Technology Knowledge

Resources

Climate

Change

• China reaching saturation at earlier stages

• Or other negatively impacting scenarios

• Return to historic levels of

expansion • Assumption CAGR of 6%

• Led by growth in China and India, coupled with a

• Revitalisation of „tradional“ markets

Stainless Demand Growth Potentials

27

Base Case: 4 - 5%

Historical: Up to 6%

„China Saturation“: < 4%

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

1970 1980 1990 2000 2010 2020 2030

Glo

ba

l Sta

inle

ss U

sag

e,

in M

ill t

Actual Forecast

1970 - 2012

Long-term Growth Rate:

5.20 %

Base Case

"Historic" Expansion

"China Saturation"

© Heinz H. Pariser

Impact on Stainless Raw Materials 2030

28

Stainless Market

Expansion

Base Case: 4 - 5%

Ferrochrome

Demand

Primary

Nickel Demand

Ext. Stainless

Scrap Input

2012 2030

9.7 Mill t

> 22 Mill t

9

G.R.: 4.6%

© Heinz H. Pariser

2012 2030

3.8 Mill t

1.6 Mill t

G.R.: 4.6%

© Heinz H. Pariser

2012 2030

7.7 Mill t

G.R.: 5.9%

> 20 Mill t

© Heinz H. Pariser

29

Chromium & Stainless Steel Conclusions

30

Stainless Rising – Pulling Nickel with It

0.0

0.5

1.0

1.5

2.0

2.5

0

5

10

15

20

25

30

35

40

45

2003 2005 2007 2009 2011 2013 2015

Ni D

em

an

d,

in M

ill t

Cru

de

Ste

el

Pro

du

ctio

n,

in M

ill t

Crude Steel

Production

G.R.: 5.2%

Nickel

Demand

G.R.: 4.2%

Actual Forecast

© Heinz H. Pariser Americas

G.R.: 0.8%

Europe

G.R.: -2.2%

China

G.R.: 19.8%

Other Asia

G.R.: -2.0%

Others

G.R.: 0.2%

Conclusions

31

• Stainless Steel is a successfull and versatile material that can look back on

a long track record of healthy historic growth of between 5 and 6%

• During the last decade, however, markets concentrated more and more

on one country: China. And China‘s industrial landscape is still in an

expansion mode. This has pushed stainless from one volume record to another,

as other markets, in particular the EU, became weaker

• However: (global) market growth does not necessarily translate into a profitable

industry! This is true for stainless steel, but has become more and more a reality

in steel making raw materials as well – including nickel recently as well

• On a global scale, medium to long-term demand for stainless steel looks

bright, albeit at somewhat reduced growth rates. While this will also increase

the need for steel making metals and ferroalloys, it does not imply that

profitability is to return fast!

32

Dr. Gerhard C. Pariser

Heinz H. Pariser

Alloy Metals & Steel Market Research

Scharnstr. 51

46509 Xanten

Germany

Tel.: +49 2801 77 11 0

Email: info@heinzpariser.de

You are always welcome

to contact us.

Contact Details