1H 2016 Results 12 October 2016
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Industry overview
Global steel and iron ore markets • The global steel market remained oversupplied in Steel product prices vs exports from China Iron ore price vs exports from Australia and 1H 2016: the average global steel capacity Brazil utilisation ratio was 70% (72% in 1H 2015) Steel exports from China, MT (RHS) Exports from Australia and Brazil, MT (RHS) Billet, US$/t (LHS) 1 • Global steel production fell in 2015 and is 4 HRC, US$/t (LHS) 2 Iron ore, US$/t (LHS) 650 12 170 115 expected to remain flat in 2016, while global steel 3 Slabs, US$/t (LHS) 600 150 consumption declined in 2015 and is expected to 105 550 10 130 slightly increase in 2016 by 0.2% 500 95 110 450 8 85 • Global steel prices hit multi-year lows in 1Q 2016, 400 90 350 75 although partly recovered in 2Q 2016, mainly 70 6 300 driven by monetary stimulus measures introduced 65 50 250 by the Chinese government 200 4 30 55 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 • The short-lived steel price jump in 2Q 2016 slowed down the process of steel capacity reduction worldwide. Some idled capacity was Source: Metal Expert, Bloomberg Source: Metal Bulletin, Bloomberg actually brought back online 1. Billet FOB Black Sea; 2. HRC FOB Black Sea; 3. Slabs FOB Black Sea 4. 62% Fe iron ore fines CFR China • In 1H 2016, average steel prices declined y-o-y: billets fell by 15% to US$312 per tonne, HRC by Global steel industry World steel capacity utilisation ratio 8% to US$357 per tonne and slabs by 6% to million tonnes US$308 per tonne 76% 1,670 • 1,621 1,621 The iron ore market seemed to rebalance in 1H 74% 1,544 1,499 1,501 72% 2016: the majority of the biggest players reduced 70% production (vs 2H 2015), the launch of several 68% new capacities was delayed, and demand in 66% China exceeded expectations 64% • As a result, iron ore prices partly recovered to the 62% range of US$50-60 per tonne Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 2014 2015 2016e • Despite the 14% q-o-q iron ore price rebound in 5 Crude steel production Rolled steel consumption 2Q 2016, 1H 2016 average iron ore price dropped Source: World Steel Association, Metinvest estimates Source: World Steel Association by 14% y-o-y to US$52 per tonne 5. Apparent consumption of finished steel products 4
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