Global & National Economic Outlook April 2011 This document should not be copied, reproduced or forwarded without the consent of OneSteel. The document contains information collated by OneSteel from various public sources regarding the current economic and steel industry environment and outlook and does not necessarily reflect OneSteel's opinions in relation to those matters. Recipients of this document should form their own views in relation to these matters and OneSteel makes no representation or warranty and accepts no responsibility, in relation to the accuracy, currency or completeness of any of the information contained in this document. Neither OneSteel, any of its related body corporate, their respective directors, employees, advisers or agents accept any responsibility or any liability for any loss or damage suffered or incurred by a recipient relating in any way to this document.
Global Environment Global Environment The document contains information collated by OneSteel from various public sources regarding the current economic and steel industry environment and outlook and does not necessarily reflect OneSteel's opinions in relation to those matters. Recipients of this document should form their own views in relation to these matters and OneSteel makes no representation or warranty and accepts no responsibility, in relation to the accuracy, currency or completeness of any of the information contained in this document. Neither OneSteel, any of its related body corporate, their respective directors, employees, advisers or agents accept any responsibility or any liability for any loss or damage suffered or incurred by a recipient relating in any way to this document. Global & National Economic Outlook – April 2011
Global Environment – Slowdown not as deep as expected Slide 3 Source: IMF World GDP - IMF Forecast GDP much 6 higher than initially expected (@ start of 5 GFC) 4 3 2 % 1 0 -1 -2 2007 2008 2009 2010 2011 2012 2013 2014 2015 July 2009 Forecast October 2009 Forecast April 2010 Forecast October 2010 Forecast Latest IMF Forecast (Jan-11 Update) - World GDP forecast for CY11 is 4.4% (0.2% increase from October 2010 Forecast). Global & National Economic Outlook – April 2011
Global Environment – Asia leading the global economic recovery. Slide 4 Average Projected Real GDP Growth during 2010-11 (%) Asia is advancing with resilience in domestic demand -> benefiting commodities exporters. USA moderate whilst Europe gradual and uneven recovery. Global & National Economic Outlook – April 2011
Global Environment – Two-speed recovery continues Slide 5 Year-on-Year % Change CY09A CY10A CY11F CY12F World (0.6) 5.0 4.4 4.5 USA (2.6) 2.8 3.0 2.7 Euro Area (4.1) 1.8 1.5 1.7 Japan (6.3) 4.3 1.6 1.8 United Kingdom (4.9) 1.7 2.0 2.3 Canada (2.5) 2.9 2.3 2.7 Central & Eastern Europe (3.6) 4.2 3.6 4.0 CIS (6.5) 4.2 4.7 4.6 China 9.2 10.3 9.6 9.5 Source: IMF India 5.7 9.7 8.4 8.0 ASEAN-5 1.7 6.7 5.5 5.7 Latin America & Caribbean (1.8) 5.9 4.3 4.1 Middle East & North Africa 1.8 3.9 4.6 4.7 Advanced economies – growth remains subdued, unemployment still high. Emerging economies – activity remains buoyant, inflation pressures, some signs of overheating Global & National Economic Outlook – April 2011
Global Environment – Recovery in context Slide 6 index index 106 106 105 105 Financial crises driven downturns 104 104 All other 103 103 102 102 Real GDP 101 101 100 100 99 99 98 98 Source: IMF, ABS, Westpac Economics. 97 97 0 2 4 6 8 10 12 Years Financial crisis driven recessions – long slow recoveries Global & National Economic Outlook – April 2011
Global Environment – General Government Balance Slide 7 Government debt is reaching historical highs in many countries. Global & National Economic Outlook – April 2011
Emerging Economies Becoming Dominant Source of Growth Contribution to Global GDP Growth 100% US Developed (ex. US) Developing/Emerging 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: International Monetary Fund; US Department of Agriculture Global & National Economic Outlook – April 2011
Global Environment – China now 2 nd Largest Economy Slide 9 Source: IMF GDP (current prices) & GDP (PPP) 20000 1600 AUS RHS 1400 15000 1200 USA LHS US$ billion 1000 US$ billion 10000 800 600 CHINA LHS 5000 400 Japan LHS 200 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 China China PPP USA JPN JPN PPP AUS (RHS) AUS PPP (RHS) China Purchase Price Parity is ~2X Currency Value Global & National Economic Outlook – April 2011
Global Environment – Chinese Renminbi Slide 10 Chinese Renminbi Versus Australian & US Dollar 8.5 CNY/USD CNY/AUD 8.0 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.0 Jul-04 Nov-04 Jul-05 Nov-05 Jul-06 Nov-06 Jul-07 Nov-07 Jul-08 Nov-08 Jul-09 Nov-09 Jul-10 Nov-10 Jan-04 Mar-04 May-04 Sep-04 Jan-05 Mar-05 May-05 Sep-05 Jan-06 Mar-06 May-06 Sep-06 Jan-07 Mar-07 May-07 Sep-07 Jan-08 Mar-08 May-08 Sep-08 Jan-09 Mar-09 May-09 Sep-09 Jan-10 Mar-10 May-10 Sep-10 Jan-11 Mar-11 Sources: Pacific Exchange Rate Service, Reserve Bank of Australia (Data to 04 April 2011) China announced the un-pegging of the Renminbi from the US Dollar on 20 Jun 2010. As of 04 April 2011, the Renminbi has appreciated by 3.8% against the US Dollar. Global & National Economic Outlook – April 2011
Global Environment – Fixed Assets Investment in China is ongoing Slide 11 Source: NBS Fixed asset investment (FAI) in Yuan grew by 24.9% Chinese Fixed Assets Investment 500 40% in the first 2 months in CY11. Growth in real estate 450 USD (LHS) YoY % Change (RHS) development in Yuan up 32.6% YoY for same period. 35% 400 Measures approved in January 2011 to cool China’s 30% 350 housing market: 25% 300 US$ billion Higher down payments for second homes (from 50% to 250 20% 60%) 200 More areas where home purchases are limited. 15% 150 The government is also testing new property taxes in 10% 100 Shanghai and Chongqing, southwestern China. 5% 50 The Chinese plans to construct 36m social housing units in the next 5 years and would be ensuring land supply for small to 0 0% medium size units. Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Source: NBS Chinese Monthly Investment in Real Estate People’s Bank of China raised the official interest rate for the 3 rd time since mid-October 2010 by 0.25% to 120,000 60% Monthly Investment (LHS) YoY % Growth (RHS) 6.06%. 100,000 50% Banks lent 535.6bn yuan (A$80.8bn) in new loans in February 2011 falling short of expectations of 650bn YoY % Growth 80,000 40% US$ Million yuan. It was 193 bn yuan less than in February 2010. 60,000 30% The reserve requirement ratio has been raised from 19.5% to 20% effective from 25 March 2011. This is 40,000 20% the 6 th increase since October 2010. 20,000 10% Chinese Government’s steps to cool 0 0% down a rapidly growing housing Jul-07 Nov-07 Jul-08 Nov-08 Jul-09 Nov-09 Jul-10 Nov-10 Jan-07 Mar-07 May-07 Sep-07 Jan-08 Mar-08 May-08 Sep-08 Jan-09 Mar-09 May-09 Sep-09 Jan-10 Mar-10 May-10 Sep-10 Jan-11 bubble is slowly having an impact. Global & National Economic Outlook – April 2011
Global Environment – Railways in China Slide 12 China’s National Development & Reform Commission (NDRC) has approved 5 new passenger railways projects in July 2010: Beijing – Zhangjiakou (Hebei province), Lianyungang – Yancheng (Jiangsu province), Harbin – Jiamusi (Heilongjiang province), Jilin city – Huichin (Jilin province) and Hangzhou (Zhejiang province) – Huangshan Anhui province). The combined length of these links is 1,391km with an expected cost of US$25bn. China plans to have 120,000 km of rail track by 2020, 60% of which will be electric. At the moment, there is less than 90,000 km of track. According to the Ministry of Railways, China will open 1,920 km of additional rail routes this year. By 2020 China wants to have 48,000 km of high-speed track. This will not only exceed any other country’s high-speed rail network, but it will be as much as the rest of the world put together. The fast train networks are transforming travel and opening up the economy in ways that are already boosting productivity and economic activity. Year-on-year growth in fixed asset investment in railways was 45.3% in the first 2 months of CY11. Global & National Economic Outlook – April 2011
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