Meeting the World’s Metals Needs Bill Scotting – Executive Vice President, Head of Strategy
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Meeting the World’s Metals Needs Bill Scotting – Executive Vice President, Head of Strategy FINEX ’10 Conference London, 27 th October 2010
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Meeting the World’s Metals Needs Bill Scotting – Executive Vice President, Head of Strategy. FINEX ’10 Conference London, 27 th October 2010. Disclaimer. Forward-Looking Statements - PowerPoint PPT Presentation
Transcript of Meeting the World’s Metals Needs Bill Scotting – Executive Vice President, Head of Strategy
Meeting the World’s Metals NeedsBill Scotting – Executive Vice President, Head of Strategy
FINEX ’10 ConferenceLondon, 27th October 2010
FINEX '10 Conference 2
Disclaimer
Forward-Looking Statements
This document may contain forward-looking information and statements about ArcelorMittal and its subsidiaries. These statements include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, products and services, and statements regarding future performance. Forward-looking statements may be identified by the words “believe,” “expect,” “anticipate,” “target” or similar expressions. Although ArcelorMittal’s management believes that the expectations reflected in such forward-looking statements are reasonable, investors and holders of ArcelorMittal’s securities are cautioned that forward-looking information and statements are subject to numerous risks and uncertainties, many of which are difficult to predict and generally beyond the control of ArcelorMittal, that could cause actual results and developments to differ materially and adversely from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include those discussed or identified in the filings with the Luxembourg Stock Market Authority for the Financial Markets (Commission de Surveillance du Secteur Financier) and the United States Securities and Exchange Commission (the “SEC”) made or to be made by ArcelorMittal, including ArcelorMittal’s Annual Report on Form 20-F for the year ended December 31, 2009 filed with the SEC. ArcelorMittal undertakes no obligation to publicly update its forward-looking statements, whether as a result of new information, future 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 1900Global crude steel production (kt)
Industrialisation of US and parts of Europe
Post war rebuild
3.0% CAGR (1900-1945)
Saturation of demand in developed world
Industrialisation of China and developing world
5.8% CAGR (1950-1973)
0.4% CAGR (1973-1998)
6.3% CAGR (1998-2007)
Source: Worldsteel; ArcelorMittal Corporate Strategy
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Recent “pre-crisis” growth phase was not just a China phenomenonApparent crude steel consumption, million tonnes
China
Developed world
CAGR4.8%
2000 2003
138
467
242
428
490
41253
847
1330
259
437
975
Developing world
2007
CAGR8.1%
2794.9%
-2.2%
23.3%
10.3%
2.9%
13.4%
•Developing world added about half as much additional demand as China
•Relatively sluggish growth in developed world (despite credit bubble)
Sources: Worldsteel Steel Statistical Yearbook 2008; ArcelorMittal Corporate Strategy
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1990-2009 Raw materials price index (1990 real values*****) Indexed at 1990 =100
0
50
100
150
200
250
300
350
400
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010YTD
HCC: Benchmark FOB Australia*
LV-PCI: Benchmark FOB Australia**
Thermal coal: Benchmark FOBAustralia***
Iron ore: Benchmark FOB, Vale sinterfeed****
Increasing and more volatile pricing
*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****1990-1999 WSD, 2000-2010 SBB*****Use USA CPI as deflatorSource: CITI group, McCloskey, NSW gov, WSD, SBB, www.inflationdata.com, UBS, ArcelorMittal Corporate strategy team analysis
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Iron ore spot price and steel price in China
Source: SBB
Price-cost squeeze risks for steel industry
0
50
100
150
200
250
Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09300
400
500
600
700
800
900
Indian Iron Ore 63% Fe dry - China import CFR (USD/t) - LHS
HRC - China domestic Shanghai (USD/t) - RHS
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Industrial production has rebounded strongly…
Global industrial production (y-on-y)
Source: Global Insight, WSA and ArcelorMittal estimates
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
2006 2007 2008 2009 2010
OECD China
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2008M1 2008M7 2009M1 2009M7 2010M1
China
Latin America
India
Developed Asia
EU15
USA + Canada
…As has apparent steel consumptionApparent crude steel consumption, Jan 2008 = 100
Source: Worldsteel, Trade database
FINEX '10 Conference 10* Apparent consumption of crude steel** US, Canada, EU-15, Japan, S Korea, Taiwan, Australia, NZSources: WSA and ArcelorMittal estimates
Steel market structure (%, bn tonnes*)
The world steel market has shifted
Developing world
China
DevelopedWorld**
1980 1990 20092000
0.71 0.77 1.230.84100%=
50%
44%
6%
50%
41%
9%
25%
27%
48%
55%
29%
16%
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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
Source: Global Insight
Average GDP (PPP, $ trillion)
1990-99 2000-09 2010-19
3 14
26
5
19
13
30
3932
43
56
82
Average Population (billion)
1990-99 2000-09 2010-19
1.2
3.6
0.95
1.3
4.2
1.38
4.8
10.96
5.76.5
7.2
China
Developing world
Developedworld
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Rising urbanization in developing countries
Source: Global Insight
1990-1999 2000-2009 2010-2019
712
1420
630 691745
2,877
Urban population (million)
358
547
9231145
1,911
2,344
+500
+165
+275
+54
Increase 2009-19(millions)
Developedworld
Developingworld
China
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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
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71
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81
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91
20
01
Crude steel production, kg/capita
India
China
FranceUS
Germany
Japan
S. Korea
Sources: Worldsteel; www.populstat.info; ArcelorMittal Corporate Strategy team analysis
FINEX '10 Conference 16* US, Canada, EU-15, Japan, Korea, TaiwanSources: WSA, www.populstat.info; ArcelorMittal Corporate Strategy team estimates and analysis
Outside China there is also significant, broad-based growth in steel consumption
Steel consumption per capita 2009 (kg)
74
398290
48
India Other developing
world
China DevelopedWorld*
Developing world ex-China:
• Over 4 billion people
• Large populations in MENA, CIS, Brazil, parts of SE Asia
• Many of these countries are well on industrialisation and urbanization growth path
• Over 400m tonnes steel consumption
• 6% CAGR 1997-2007
Developed world:
• Ca. 1bn people
• Low population growth
• Post-industrial service based economies
• Declining steel consumption
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Steel consumption is forecast to continue to grow strongly beyond 2014 in the developing world
5.8%
CAGR4.5%
Apparent crude steel consumption, Indexed
China
Developed world*
Developing world
4.8%
0.2%
CAGR ’08-’19
Sources: Worldsteel; base steel demand scenario, CCM/Corporate Strategy demand model (Feb 2010) *EU15, US, Canada, Japan, South Korea, Taiwan, Australia and New Zealand
100
150
130
CAGR3.1%
CAGR3.8%
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Leading to significant demand growth for raw materials and requiring a supply response
Raw material consumption forecast, Indexed
Sources: ArcelorMittal Corporate Strategy team analysis
Metallurgical coal
2009 2019
Iron ore
2009 2019
100
159
100
165
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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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Source: CITI group, Macquarie Research, Credit Suisse, FIL Investments, Standard Chartered, Goldman Sachs, ArcelorMittal Corporate Strategy team analysis
New Iron ore supply projections 2010-14 (from 2010 reports), mt
Significant project pipeline
367 380
453 456495
571606
1 2 3 4 AMCorporateStrategy
5 6
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New low cost Iron Ore supply to China*
China Iron Ore demand
growth
600 500 375
570
440
330
30 -70 -195
160 60 -65
270 170 45
*Includes Chinese domestic projectsSource: ArcelorMittal Corporate Strategy team analysis
Broad range of outcomes for scenarios
Scenarios for displacement of Chinese high cost supply by 2014 relative to 2008
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Declining average ore quality in China
China Domestic iron ore requirement at 63% Fe quality (LHS)
China ROM iron ore production (LHS)
Iron ore Quality in China (RHS)
China’s iron ore requirement & domestic supply (Mt) and apparent quality (%Fe)
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Changing Mineralogy
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0 25 50 75 100Hydration (goethite content %)
He
ma
tite
av
g c
rys
tal s
ize
(µ
m)
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Larger Blast Furnaces changing quality needs
* 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 CRI: coke reactivity indexSource: China Metal Association, China Metallurgy Newspaper
BF volume, m3 1000 2000 3000 4000 5000
Coke ash content, %
< 13 < 13 < 12.5 < 12 < 12
M40, % > 78 > 82 > 84 > 85 > 86
CSR, % > 58 > 60 > 62 > 65 > 66
CRI, % < 28 < 26 < 25 < 25 < 25
Coke quality requirement by BF volume size
Lower, better
Higher, Stronger
Higher, Stronger
Lower, better
Index implication
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Coal absorbing Chinese rail capacity
38%40%
43%45%
47% 48% 48% 49% 49%
53%55%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Q1-3
Share of railway cargo used for transporting coal, China, %
Source: China Railway Bureau 2009 Year Book, Railway Mid/long-term Planning by NDRC, SX coal, ArcelorMittal Corporate Strategy team analysis
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Australian coal infrastructure debottlenecking
Source: ABARE, ArcelorMittal Corporate Strategy team analysis
Queensland coal infrastructure projection (m tonnes)
NSW coal infrastructure projection (m tonnes)
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People and skills to meet the needs
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Steep cost curve leads to high price volatility at the margin2009 cash cost curve for iron ore* - CIF into China($/tonne)
* Chinese iron ore production is re-evaluated to 63% Fe contentSource: SBB, Mysteel, WSD, ArcelorMittal Corporate Strategy team analysis
• 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
Domestic Capacity
Imports
Cumulative capacity
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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
