The document summarizes LKAB's position in the global iron ore industry and the challenges it faces. It notes that China accounts for over half of global iron ore demand and the top four producers control over 60% of the market. This has led to price pressure. It also discusses LKAB's investments of 1 billion USD per year to extend mining operations by 25 years at its Kiruna, Malmberget, Svappavara, and Narvik mines. Finally, it outlines LKAB's marketing and sales strategies to respond to rapid changes in the volatile iron ore market through measures like product portfolio management, quality control, customer relationships, and risk management.
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The Industry Landscape - How does it affect LKAB in the future
1. MINING ON TOP – STOCKHOLM
NOV 26-27, 2013
The Industry Landscape –
How does it affect LKAB in the future
Peter Schmid, Marketing & Sales Director
2. • Introduction about LKAB - Update
• The Industry Landscape
• …and How does it affect LKAB in the future
Iron Ore Producer
Steel Producers
End-Users
THE INDUSTRY VALUE CHAIN – FROM MINE TO END-USER
LKAB - MORE THAN 120 YEARS OF SERVING THE STEEL INDUSTRY
2
3. LKAB WORLDWIDE 2012
Harbours
Mines and processing plants
Sales and/or purchasing offices
LKAB Minerals and LKAB Wassara
• 4,300 employees, whereof 650 expatriates, 19% women
• 30 operations in 15 countries
• Sales 2012: SEK 26,9 billion
• EBIT 2012: SEK 10,9 billion
• 90% of EU Iron Ore production; (2012: 26.3 Mt whereof pellets 22,9 Mt)
• Owner: Swedish state
3
4. IRON ORE OPERATIONS
Narvik
Harbour
Kiruna
Under ground
mining and
processing
Malmbanan
Railway Narvik Luleå
Svappavaara
Open pit mining
and processing
Malmberget
Under ground
mining and
processing
Luleå
Harbour and
Head Office
4
Source: LKAB
6. LKAB PRODUCTION AND SALES 2012
Market (Revenues)
Products
Special 4%
Others 1%
Fines 12%
Pellets BF
62%
Middle
East &
Asia 32%
Pellets DR
21%
Blast furnace pellets (BF) for coal-based steel production
Direct reduction pellets (DR) for natural gas-based steel production
6
Source: LKAB
Europe
67%
7. GLOBAL IRON ORE PRODUCTION 2012: 1800MT
GLOBAL SEABORNE TRADE: 1170MT (140MT PELLETS)
107Mt
40Mt
30Mt
80Mt
55Mt
21Mt
280Mt
38Mt
12Mt
15Mt
140Mt
16Mt
7Mt
367Mt
57Mt
12Mt
LKAB:
Deliveries 26,3 Mt, Export 22,5 Mt (2%)* where of 18,3 Mt pellets (13%)*
*Share of global seaborne trade
7
Source: CRU, LKAB 2012
520Mt
8. IRON ORE EXPORT & IMPORT BY REGION 2012
Export
South Am: Brazil 350 Mt, Chile 13 Mt
8
Source: CRU, LKAB
Import
Asia: China 739 Mt, Japan 130 Mt,
S Korea 64 Mt & ME 34 Mt
9. IRON ORE MARKET CONTINENTAL DRIFT
2000-2012 (IMPORTS)
Year 2000
Year 2012
126 Mt
13%
68 Mt
20%
124 Mt
12%
152 Mt
44%
739 Mt
75%
124 Mt
36%
Total 344 Mt
Total 989 Mt
China
9
Source: CRU, LKAB
Japan
EU27
11. NEW IRON ORE PROSPECTS
11 Source: Raw Material Group
12. FINISHED STEEL PRODUCTS 2000 VS 2020 (MT)
167 154 186
141
98
CIS
132
585
Europe
North America
28
41
814
73
28 45
65
63
131
132
131
India
China
South America
•
•
•
CAGR 2005-2020: ≈3%
Low price level
Overcapacity
12 Source: World Steel Association (WSA); McKinsey Steel Demand Model
Demand Steel
2000
2010
2020
13. CONSUMPTION OF STEEL (KG/CAPITA)
Canada
Mexico
United States
NAFTA
France
Germany
Belgium-Luxembourg
Italy
European Union (27)
Russia
416,4
158,1
284,5
263,0
Middle East
Africa
Central & South America
208,5
479,6
422,5
459,5
310,0
292,2
233,9
China
India
Japan
South Korea
Taiwan
Asia
459,8
57,0
506,7
1156,6
784,4
238,8
34,8
98,6
Australia and New Zealand
World: 215 kg/capita
13
Source: World Steel
261,6
14. CHINA IS THE LOCOMOTIVE
World Crude Steel Production
World Iron Ore Consumption
Price - Spot Price - Platts index
Micro & Macro Economics in
China Impacts the Iron Ore Market
-15% to +23 m-o-m
•
•
•
•
•
GDP
Interest rate
PMI
Inventory levels
Currency
Global market imbalances are driven by China
14 Source: CRU, LKAB
15. THE INDUSTRY LANDSCAPE IN SUMMARY
Iron Ore Producers
• China demand (≈57%)
• The “Big 4” (+60%)
• Capacity additions
• Price pressure
Steel Producers
End-Users
• China (≈48%)
• CAGR
o 2000-2005 ≈12%
o 2005-2020 ≈3%
• Capacity utilization 75%
• Low profitability
Demand and Supply:
Segments:
•
Construction
•
Machinery & Equipment
•
Transportation
Regions:
• Europe
• Americas
• MENA
• China
• CIS
Global Macro economics – Supply and Demand
15
Source: LKAB
16. LKAB CHALLENGES – TODAY AND FUTURE
Market Landscape
Competiveness
Urban
development
LKAB
Challenges
Attract people
+1000 people
16
Source: LKAB
Environmental
permits
17. INVESTMENTS: 1 BILLION USD PER YEAR
Final products
(Mt/year)
Further organic
growth potential
Further capacity
planned
Malmberget new main level M 1250
Present capacity
Kiruna new main level KUJ 1365
INVESTMENTS EXTENDING MINING OPERATIONS BY 25 YEARS
17
Source: LKAB