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SBB Dubai 3 September 2007 Roger Manser SBB Global Editor

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China’s Steel Industry: A New World Reality. SBB Dubai 3 September 2007 Roger Manser SBB Global Editor. Structure of Presentation. How is China changing? How is China changing the world steel industry? Some conclusions. (1) How is China changing?.

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Presentation Transcript
slide1
China’s Steel Industry:

A New World Reality

SBB Dubai 3 September 2007

Roger Manser SBB Global Editor

slide2
Structure of Presentation
  • How is China changing?
  • How is China changing the world steel industry?
  • Some conclusions
slide3
(1) How is China changing?
  • Becoming a manufacturing powerhouse
  • Looking for self-sufficiency
  • Investing in urbanisation/ new infrastructure
  • Consequences in China for steel:
  • Strong growth in production and consumption
  • A growing excess of production over consumption
  • Slow consolidation/continuing fragmentation
slide5
Looking to be self-sufficient

Three Gorges Dam 3m+ tonnes

slide7
2000-2008f

19 %/ yr

in Million tonnes

1980-1999

7.1 % p.a.

1949-1979

13.3 % p.a.

Strong Growth in Production

Crude Steel Output 1949 – 2008f

slide8
Strong Domestic Consumption

Million tonnes

2000-2008f:

16%/ yr

slide9
Fragmentation Continues

Typical Production Chge

Output 20052006 %

Top 10 Mills 5-23m131.1145.9 +11.3

Top 11-20 Mills 3-5m56.163.9 +14.0

Other Reporting* 1-3m103.9125.3 +20.6

Non Reporting* <1m64.783.6 +29.2

* Around 75 companies report to CISA

Source: CISA, SBB

but some m a at the top end
But Some M+A at the Top-End

Shougang 11m

Tangshan 19m

Caofeidian 5m

Baosteel 23m

Anshan 15m

Bayi 4m

Benxi 7m

Handan 5m

Anben

Kunming 5m

Shagang 15m

Wuhan 14m

Source:SBB

slide11
How is China changing the world steel industry?
  • Higher raw material prices
  • New investment, mainly in flats
  • Import substitution ….. now exports
  • Financialization, and global M+A
  • Defensive moves
slide12
How China is changing the world

CHINA’S DEVELOPMENT

Investment

Commodity Price

Impact

Steel

Trade

Impact

Financial

Impact

Defensive and Other Reactions

slide13
Rising iron ore prices

$ cent/dmtu

Australian iron ore price ex-port fob (SBB)

slide15
New rolling capacities 2007-2009

Total 175m t/y

Source: SBB

import substitution now exports
Import Substitution….now exports

HDG Imports are beginning their fall, with low quality HDG being replaced

HRC Imports well on their way to being replaced

Source: CISA, SBB

slide17
Fall in Imports; Rise in Exports

Tonnes (m)

Source: CISA, SBB

some reported major plate hrc investments t y for start up 2007 08
Some reported major plate/HRC investments (t/y): for start-up: 2007/08

Caofeidian +5.5m

Anshan+5m

Benxi +4m

Handan Zongheng +6m

Beitai +4m

Handan +5.5m

Tianjin +3.8m

Rizhao +5m

Anyang +4m

Baosteel +3.7m

Maanshan +5m

Ningbo +4m

Source:SBB

slide19
Threat from Chinese Exports

SBB estimates

Producer-led pricesinc High Strength, Tinplate, HG Flats, HG Pipe, Most Stainless/ Specials

Most at threat

13%

27%

10%

Producer-influenced pricesinc Other HG Flats, Some Beams, Other Stainless etc

Moderate threat

48%

Commodity pricesinc Bars, Rods, Most Sections, Other Flats (for construction), Other Pipe

Quality: grade, dimension, market etc

slide20
Demand Prices Profits M+A Finance

2003-6: Global consolidation

2001-5: Steel suppliers earn more

  • ArcelorMittal
  • Tata Corus
  • Essar Algoma
  • SSAB Ipsco
  • NLMK Duferco
slide21
Open to Foreign M+A

Dislike of Foreign M+A

Dislike of Foreign M+A by Companies

slide22
SBB’s Conclusions for China:
  • A slow-down in production and consumption growth
  • No real restructuring through M+A
  • Supply side export controls?
  • Smaller mills may soon face squeeze
  • BUT
  • Crude production soon @ 500m t/y
  • Some decline in exports, in due course
slide23
SBB’s Conclusions for China and the World
  • Demand strongest in emerging markets
  • Three scenarios:
      • Insufficient new capacity globally
        • Growth in CN exports/AD+CVD
      • Stronger RMB, curbed GDP, licences
        • Decline in exports
      • Decline in global GDP growth (CN )
        • Prices weaken
slide24
Other Pointers for the Future
  • Higher raw material prices for some time
  • Growth outside Europe - GHGs
  • More complex global supply chains
    • More differentiation in finished qualities
  • More price volatility/shorter cycles
    • Reference prices
  • Global M+A less likely
    • But more local M+A probable
slide25
THANK YOU

Have you got a China steel map yet?

US map also available

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