1. Outlook for the steel market
Sherpa group meeting, Bruxelles, 13 March 2014

2. Agenda
Current situation: global demand is slowly recovering
Prospects for global steel demand until 2025
Structure of EU steel exports
EU steelmaking excess capacity
Financial health of the European steel industry

3. Apparent consumption of steel by region (Index 2007Q2=100, data from CRU)

4. Production shares by region, % of world (before and after the crisis)

5. Steelmaking capacity shares by region (% of world capacity)

6. Regional steel trade developments (Thousands of tonnes)

7. Sectors driving steel demand growth (in tonnage) during the next ten years
3 sectors expected to represent 90% of global steel demand growth up to 2025
Construction (68%), driven by residential, infrastructure projects in emerging economies
Mechanical engineering (13%)
Energy transportation(9%), pipelines, OCTG and other tubes.

8. Global steel demand by sector in 2011 and 2025
mmt and % of total steel demand
CAGR 3.7%
1414 mmt
2349 mmt
Source: Metal Bulletin Research

9. Construction sector value added : growing share of emerging economies
Shares in world construction value added in 2025:
NAFTA (18.3%), EU (10.8%), Japan (6.2% ), China (24%)
China’s construction VA: CAGR 5.9% in a catching-up process
175 airports in China in 2010 compared to 5,194 in the US
Urban residential floor space in 2011 was 31 m² per capita in China compared to 82 in the US.
The urbanisation rate is expected to reach 51.5% in 2015 (target of 12th Chinese Five-Year Plan): 10 million new urban residents/year
India’s construction VA: CAGR 8.1% faster than China but from a much lower base.
By 2025, India could have two cities of more than 25 million inhabitants (New Delhi and Mumbai)
Strong infrastructure building also expected in South East Asia, Africa and the Middle East.

10. Global steel demand for energy-related construction in 2011 and 2025
mmt and % of total steel demand
CAGR 0%
31 mmt
31 mmt
Source: Metal Bulletin Research

11. Global steel demand in the transportation sector in 2011 and 2025
mmt and % of total steel demand
Pipelines CAGR 6.1%
CAGR 2.7%
274 mmt
398 mmt
Source: Metal Bulletin Research

12. The steel industry is a major supplier to the energy industry
Consumption of steel by energy industries (Mt)
178 MT that is 12 % of total finished steel production
Source : Worldsteel, Eurofer, Laplace Conseil analysis & estimates

13. Reducing quantity of steel per auto will limit growth in steel demanded by auto sector

14. Strong growth of auto production expected to continue in China

15. Regional demand for automotive steels, % share

16. Global excess capacity situation

17. EU has been a net steel exporter since 2009

18. EU steel exports have shifted towards African markets from 2007 to 2012.

19. The structure of exports -capturing the growth opportunity in emerging markets-
The share of pipes and tubes (a major export item), has declined from 14.8% (2007) to 13.1% (2012) while bars became the largest export item in 2012.
Exports of long products have been increasing steadily supported by robust construction activity in North Africa.
Exports of high value-added products (e.g. galvanized sheets) have been increasing along with the growth of the auto sector in emerging markets.
EU can take advantage of its good access to growing steel markets in Africa and Middle East.

20. Demand growing strongly in Europe’s neighbouring regions

22. EU iron and steel exports (external trade) matrix in 2012 (thousands of tonnes)
Source: Eurostat.

23. Frequent cycles of excess capacity in the EU
57% integrated route
43% EAF

24. Most flat steels are produced in BF/BOFs Most long steels are produced in EAFs

25. EBITDA on sales (EU and the rest of the world) in %
Sources: Facset, OECD calculations

26. EBITDA on sales (EU steel industry) and global capacity utilisation ratio in %
Sources: Facset, OECD calculations

27. EBITDA on sales distribution for EU steelmakers in %
47 steelmakers based in the EU out of 633 in the sample
Sources: Facset, OECD calculations

28. EBIT on sales (EU and the rest of the world) in %
Sources: Facset, OECD calculations

29. Debt on Ebitda (%) – European steelmakers
Sources: Facset, OECD calculations

30. Interest on assets (%) – European steelmakers
Sources: Facset, OECD calculations

31. Price to book ratio – European steelmakers
Sources: Facset, OECD calculations

32. Investment on assets – European steelmakers (%)
Sources: Facset, OECD calculations

33. R&D on assets – European steelmakers (%)
Sources: Facset, OECD calculations

34. Thank you for your attention