The global steel industry in 2005 - - The opportunities The opportunities The global steel industry in 2005 and threats existing for U.S. pipe manufacturers and threats existing for U.S. pipe manufacturers 2005 NAPCA Convention 2005 NAPCA Convention The Registry Resort & Club, Naples, Florida The Registry Resort & Club, Naples, Florida Dr. James Ley Ley, Metals Analyst , Metals Analyst Dr. James
Presentation overview Presentation overview • Overview of the global steel industry • The China factor • How has this contributed to steel prices in the USA? • Price forecasts for steel products through 2005 • Outlook for US steel pipe manufacturers • Conclusions NAPCA 2005 NAPCA 2005
Steel production rapidly accelerates in 2004... Steel production rapidly accelerates in 2004... 30 Chinese steel production now three times the 25 levels in the USA EU (15) (m tonnes) Japan (m tonnes) 20 China (m tonnes) USA (m tonnes) 15 10 5 US steel production increased by just under 8% year-on-year in 2004 Jan-95 Nov-95 Sep-96 Jul-97 May-98 Mar-99 Jan-00 Nov-00 Sep-01 Jul-02 May-03 Mar-04 Jan-05 Source: IISI, MBR NAPCA 2005 NAPCA 2005
…as has consumption, noticeably in China... as has consumption, noticeably in China... … 350 Chinese steel consumption grew at 300 25% in 2003, and 24% in 2004 EU (15) (m tonnes) China (m tonnes) 250 US steel consumption Japan (m tonnes) picked up impressively in USA (m tonnes) 2004, rising by 16% year-on- 200 year 150 100 50 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Source; JISF, AISI, IISI, MBR NAPCA 2005 NAPCA 2005
…on current growth China could account for on current growth China could account for … 40% of global steel demand by 2010 ... 40% of global steel demand by 2010 ... China could account for 40% of global steel demand 450 China accounts for 25% of 400 Forecast global steel demand, more than the rest of Asia combined 350 Chinese demand 300 surpassed both the EU Million tonnes and US 250 200 Chinese demand overtook Japan and represented 10% of the global market 150 100 50 2005f 2006f 2007f 2008f 2009f 2010f 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Source: custom statistics, MBR estimates NAPCA 2005 NAPCA 2005
...imports have fallen in 2004 but China still ...imports have fallen in 2004 but China still remains a major importer of flat rolled products remains a major importer of flat rolled products (LHS) Chinese steel production (m tonnes) (RHS) Flat imports ('000 tonnes) 30 3500 (RHS) Long products imports ('000 tonnes) 3000 25 2500 20 2000 15 1500 10 1000 5 500 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 03 03 03 03 03 03 03 03 03 03 03 03 04 04 04 04 04 04 04 04 04 04 04 04 Source: custom statistics, MBR NAPCA 2005 NAPCA 2005
The China factor The China factor • Insufficient domestic steel capacity to satisfy demand although production is increasing • Imports have been diverted from other markets to China, tightening steel supply in 2003/4 in Europe, USA, SE Asia • Emerging over capacity is appearing in the long products market • Commodity grade flat products - China is expected to be a net exporter in 2005 • Special grade flat steels - China remains a net importer NAPCA 2005 NAPCA 2005
CIS countries are best positioned to supply CIS countries are best positioned to supply Chinese demand Chinese demand 1993 2003 50 2004 Surplus Millions of tonnes of finished steel 0 Deficit of finished steel -50 CIS NAFTA Central & South Western Asia & EU 15 Other Europe S & E Asia Pacific America Africa NAPCA 2005 NAPCA 2005
Chinese demand has driven up global HR Chinese demand has driven up global HR prices... prices... 800 Prices accelerated 700 600 US-Midwest ($/ton) Japan domestic ($/ton) 500 Germany domestic ($/ton) 400 300 200 100 0 Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr 00 00 00 00 01 01 01 01 02 02 02 02 03 03 03 03 04 04 04 04 05 05 Source: MBR NAPCA 2005 NAPCA 2005
…and plate prices and plate prices … 1000 900 US Midwest ($/ton) 800 German domestic ($/ton) 700 Japanese domestic ($/ton) 600 500 400 Plate prices 300 appeared to accelerate later than 200 with HR coil 100 0 Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr 00 00 00 00 01 01 01 01 02 02 02 02 03 03 03 03 04 04 04 04 05 05 Source: MBR NAPCA 2005 NAPCA 2005
industry ? What does this mean for the US steel industry ? What does this mean for the US steel NAPCA 2005 NAPCA 2005
Key drivers for US steel prices in early 2004 Key drivers for US steel prices in early 2004 • Rising raw material costs, on the back of China • Improving US economy… • …leading to a rising demand for steel products • Imports re-directed from the USA to Asia • Increasing consolidation and production discipline, giving fewer steel mills greater power in pricing NAPCA 2005 NAPCA 2005
Mini mills have increased their share of US steel Mini mills have increased their share of US steel production in 2004 (‘000 tons) production in 2004 (‘000 tons) 6,000 5,500 EAF steel production 5,000 4,500 4,000 BOF steel production 3,500 3,000 Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan 00 00 00 00 01 01 01 01 02 02 02 02 03 03 03 03 04 04 04 04 05 Source: AISI, MBR NAPCA 2005 NAPCA 2005
Steel prices from mini mills have risen with increasing Steel prices from mini mills have risen with increasing raw material costs - - US scrap prices soared in Q1 2004 US scrap prices soared in Q1 2004 raw material costs (LHS) Total scrap exports ('000 tons) China surpassed South Korea as the No 1 export 300 1200 market for US scrap (RHS) US West Coast scrap export price ($/ton) (LHS) Exports to China ('000 tons) 1000 250 (LHS) Exports to South Korea ('000 tons) 200 800 150 600 100 400 50 200 0 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov 02 02 02 02 02 02 03 03 03 03 03 03 04 04 04 04 04 04 Source: custom statistics, MBR NAPCA 2005 NAPCA 2005
Mini mills look to alternative metallics metallics as scrap as scrap Mini mills look to alternative supply and imports fail to keep pace supply and imports fail to keep pace 80 Home scrap Purchased scrap Imports Exports Consumption 70 60 50 40 30 20 10 0 2000 2001 2002 2003 2004 Source: USGS, MBR NAPCA 2005 NAPCA 2005
Demand for pig iron increases in 2004, compared Demand for pig iron increases in 2004, compared with import prices... with import prices... 1200 400 (LHS) Pig iron imports ('000 ton) 350 (RHS) Gulf spot Pig Iron ($/ton) 1000 300 800 250 600 200 150 400 100 200 50 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 03 03 03 03 03 03 03 03 03 03 03 03 04 04 04 04 04 04 04 04 04 04 04 04 Source: custom statistics, MBR NAPCA 2005 NAPCA 2005
…as well as HBI out of Venezuela as well as HBI out of Venezuela … 400 400 (LHS) HBI imports ('000 tons) 350 350 (RHS) HBI import prices ($/tons) 300 300 250 250 200 200 150 150 100 100 50 50 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 03 03 03 03 03 03 03 03 03 03 03 03 04 04 04 04 04 04 04 04 04 04 04 04 Source: custom statistics, MBR NAPCA 2005 NAPCA 2005
BOF mills have also incurred rising coke import BOF mills have also incurred rising coke import prices prices 350 450 (LHS) US imports of Chinese coke ('000 tons) 400 300 (RHS) Chinese coke export prices ($/ton) 350 250 300 200 250 200 150 150 100 100 50 50 0 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 03 03 03 03 03 03 03 03 04 04 04 04 04 04 04 04 04 04 04 04 Source: custom statistics, MBR NAPCA 2005 NAPCA 2005
End- -use demand has picked up in the USA in use demand has picked up in the USA in End 2004 2004 120 0.16 0.14 (LHS) US IP (1997 = 100) 118 0.12 US construction spending index 116 0.1 114 0.08 112 0.06 0.04 110 0.02 108 0 106 -0.02 104 -0.04 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan 02 02 02 02 02 02 03 03 03 03 03 03 04 04 04 04 04 04 05 Source: US Census Bureau, MBR NAPCA 2005 NAPCA 2005
Falling imports lend support for Q1 04 prices Falling imports lend support for Q1 04 prices (tons) (tons) 1600 1400 US imports of both flat and long steel remained low through H2 of 2003, and Q1 2004, tightening 1200 supply of steel in the domestic market 1000 800 600 400 Flat steel imports 200 Long product imports Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 03 03 03 03 03 03 03 03 03 03 03 03 04 04 04 04 04 04 04 04 04 04 04 04 Source: custom statistics, MBR NAPCA 2005 NAPCA 2005
The current situation The current situation NAPCA 2005 NAPCA 2005
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