Kim Marti's presentation on Global Steel Market Situation at SteelOrbis Spring '12 Conference & 66th IREPAS Meeting

1. GLOBAL MARKET SITUATION
66 TH IREPAS MEETING
London
April 2012
Kim Martí
Celsa International Commercial Director
CELSA GROUP

2. Table of Contents
• Macroeconomic situation
• Steel and long products consumption
• Rebars market.
• International price situation.
• Summary & Outlook
2

3. • Macroeconomic situation
• Steel and long products consumption
• Rebars market.
• International price situation.
• Summary & Outlook
3

4. Macroeconomic situation
Global economic activity shows signs of strengthening in the
coming month despite it is still suffering the negative effects
of the eurozone crisis. Financial markets have improved on
signs of stabilization of global economy
%
World GDP
5,2
3 3,8 3,3 3,9
-0,7
2008 2009 2010 2011 2012(f) 2013(f)
Source: IMF, World Economic Outlook, Update January 2012, Worldsteel monthly monitor March 2012
4

5. Macroeconomic situation. Advanced economies
In advanced economies, leading indicators suggest economic
activity in US and Japan is gaining traction. Economic sentiment
showed clear signs of stabilization in EU and business confidence
indicators turned up in Germany.
5
4
% GDP
3,0
3
2,2
2 1,9
2 1,8 1,8 1,7 1,6
1,6 1,5 1,6
1,2
0,8 0,9
1 0,6
0,3
0
-0,5
-1
-0,9
-2
USA UE DE UK JAP ALL ADV
2011 1,8 1,6 3,0 0,9 -0,9 1,6
2012 1,8 -0,5 0,3 0,6 1,7 1,2
2013 2,2 0,8 1,5 2 1,6 1,9
2011 2012 2013
Source: IMF, World Economic Outlook, Update January 2012, Worldsteel monthly monitor March 2012
5

6. Macroeconomic situation. E & D economies
Leading indicators suggest strengthening of economic activity in
Russia and upturn and India. For Brazil and China, they point to
growth below long-term trend for the first half 2012. Industrial
production shows improving momentum in most of emerging world.
10
9,2
8,8 % GDP
9 8,3
8,2
8
7
6,2
5,9
6 5,4
5
4,1 4,1
4 3,5 3,5 3,6
3,3 3,5 3,2 3,1 3,2
3 2,3
2
1
0
BRAZIL RUSSIA CHINA TURKEY MENA E&D
2011 4,1 4,1 9,2 8,3 3,1 6,2
2012 3,5 3,3 8,2 2,3 3,2 5,4
2013 3,5 3,5 8,8 3,2 3,6 5,9
2011 2012 2013
Source: IMF, World Economic Outlook, Update January 2012, Worldsteel monthly monitor March 2012
6

7. Macroeconomic situation
Global economic growth in 2012 will be lower but we see already
signs of improvement in sentiment, specially in US, and also a
positive change in momentum almost everywhere. Financial
markets have improved although risks persist in Europe.
9
8
7,3
% GDP
7
6,2
5,9
6 5,4
5,2
5
3,8 3,9
4
3,2 3,3
3
1,9
2 1,6
1,2
1
0
2010 2011 2012 2013
ADV ECONOMIES 3,2 1,6 1,2 1,9
E&D ECONOMIES 7,3 6,2 5,4 5,9
TOTAL WORLD 5,2 3,8 3,3 3,9
ADV ECONOMIES E&D ECONOMIES TOTAL WORLD
Source: IMF, World Economic Outlook, Update January 2012, Worldsteel monthly monitor March 2012
7

8. Construction sector evolution
Construction industry remains as main tractor for long products. In
2011 construction remained depressed in EU, showed some pickup
in NAFTA , significant performance in South America and strong
momentum in emerging Asia
Index 100=2005

9. • Macroeconomic situation
• Steel and long products consumption
• Rebars market.
• International price situation.
• Summary & Outlook
9

10. Steel consumption situation
World finished steel consumption is sustaining a consistent uptrend
since 2009 and is forecasted to continue into 2012.
1.600
1472
1398
1.400
1220 1312
1.200
1149
646
1.000 621
587
Millions tonnes
660 487
800
600 127 134 145
111
113
400
447 551
598
200 643
681
0
2008
2009
2010
2011 f
2012f
China BRI World excl. Bric
Source: worldsteel
10

11. Long products market
World long products consumption is showing a stronger pace of
growth and is gaining share in total steel consumption.
700
600
701
648 500
573 581
Millions tonnes
400
300
200
100
0
2008
2009
2010
2011 f
Source: Estimation
11

12. Long products by area
Asian markets are supporting a consistent long-term in longs.
Markets in South America and Mena countries are also
contributing to this growth.
800
700
31
600 30
36
Million tons
42 106
27
99
500
80 131 80
400
300
330
330 400 439 475
200
100 25
24
88
71 20
0 23
54 21
2007 57
2008 68
2009
2010
2011
Other World East& Se Asia Cis Eu-25 North America
Source: Estimation
12

13. Long products by areas – 2011VS 2010
In 2011 long products recovered in Europe and North America
from very low levels. Asia and other areas kept growing at good
pace for a total growth of 9%
20%
18%
16%
14%
12%
10%
8%
12%
6%
4%
10%
9%
2% 4% 6%
2,0%
0%
North America
CIS
Europe
Other World
E & SE Asia
Total World
13

14. Long products per product
Reinforcing bars are the big winners in long product mix evolution
and sections are the clear losers.
800
700
600
500
285
264
Millions tonnes
400 194 220 234 244 Rebars
Wire Rod
300 Sections
139 148 153 Merchant Bars
200 155 168 188
53 57 51
100 39 44 47
132 141
0 154 143
2006
172 181
2007
2008
2009
2010
2011
Source: Estimation
14

15. Long products by product – 2011 vs 2010
Reinforcing bars performed well thanks to construction activity in
emerging markets. Improvement in industrial activity fueled wire
rod remarkable growing pace.
14%
12%
10%
8%
6%
11%
4% 10%
7%
9%
2% 5%
0%
Sections
Merchant bars
Wire Rod
Rebars
Long Products
15

16. Long products by product. Sections – 2011 vs 2010
Offshore activity helped sections market recovery in North
America. CIS recovered but from a low level and Asia also helped
on the total 7% growth
SECTIONS
30%
25%
20%
15%
28%
10%
5%
6%
10%
0%
CIS 7%
North 1%
-3%
Europe
-5% America Other World
E & SE Asia
Total World
16

17. Long products by product. Merchant bars – 2011 vs 2010
Improvement of industrial production in different areas lifted total
consumption of merchant bars up to 5%. Market drop in Europe
prevented global stronger growth.
MERCHANT BARS
14%
12%
10%
8%
13%
6%
4% 9%
2%
3% 5%
5%
0%
North
-2% CIS &
America Other World
Turkey Europe
E & SE Asia
-3% Total World
-4%
17

18. Long products by product. Rebars – 2011 vs 2010
Good construction activity in emerging and developing countries
powered a remarkable 10% growth in reinforcing bars world
consumption. North America was still suffering of very poor
business conditions in construction sector
REBARS
15%
10%
14%
5% 12%
10%
8%
3%
0% -4%
North
CIS &
America Europe
Turkey Other World
E & SE Asia
Total World
-5%
18

19. Long products by product. Wire rod – 2011 vs 2010
Industrial production showed improvement almost everywhere. As
a result, wire rod market growth showed stronger pace amongst all
long products, up to 11%
WIRE ROD
14%
12%
10%
8%
6%
13%
4% 11%
5% 6%
2%
5%
0% 1%
North
America CIS &
Turkey Europe
Other World
E & SE Asia
Total World
19

20. Long products . Sections vs Rebars
Reinforcing bars keep gaining share against sections in
construction. In total, world market share of sections has been
pushed well below 20%.
350
300
250
200
234
Million to ns
150 244 258 285
100
50
51
0 39
21,7% 44
2008
16,1 % 48
2009 17,2 %
2010
16,8%
2011
Rebars Sections
Sections vs Rebars
Source: Estimation
20

21. • Macroeconomic situation
• Steel and long products consumption
• Rebars market.
• International price situation.
• Summary & Outlook
21

22. Rebars market per area
World reinforcing bars market growth is supported mainly from
emerging and developing economies. Reinforcing bars
consumption is consistently moving from advanced to developing
countries.
300
258 285
250 234 244
61
57 57
200 63
Millions tonnes
150
129 151 180
100 161
50
10
20
17
12 11 18
0 8 13 20
10 13
9
Cis Other World East&Se Asia Europe N America
Source: Estimation 22

23. Rebars consumption vs production per area
Reinforcing bar producers in almost all main markets are adjusting
their production to demand in their regional markets.
Consumption vs. Production (Million tons)
149 149
140,0
Millions tonnes
120,0
100,0
80,0
60,0
40,0
20,0 5 13
5 10
9 9
0,0 14
11
USA
EU-15 4 13
4
SOUTH KOREA 6
CHINA
CIS & EE
BRAZIL
TURKEY
Production Consumption
Source: Estimation
23

24. Rebar consumption per capita
Consumption per capita has always potential to grow in
developing countries. Countries in CIS&EE and also in South
America show good prospects for future growth
Consumption per capita (kg)
120
111
100 98
91 99
80
69
78
60 73
62
40
29 33
40
21 19 27
17 23 23
20 27 27
20
0 14 14 18 19
USA
EU-15
China
CIS & EE
Brazil
Turkey
2008 2009 2010 2011
Source: Estimation
24

25. • Macroeconomic situation
• Steel and long products consumption
• Rebars market.
• International price situation.
• Summary & Outlook
25

26. Reinforcing bars, wire rod and billet FOB price
Long term price lines for the three products show an accelerating
uptrend on higher lows, well above long term moving average.
900
800
700
USD (fob)
600
500
400
300
200
100 01 02 03 04 05 06 07 08 09 010 011 03/12
Rebars 195 230 295 450 385 490 630 870 480 600 650 680
Mesh 195 245 290 500 385 500 600 870 490 610 660 690
Billets 165 195 260 380 330 430 580 820 430 560 600 620
26

27. Reinforcing bars CFR price and spread
After the market drop in 2009 prices are recovering nicely due to
increasing demand, but strength in raw materials is keeping
margins very tight for rebar producers.
1000
900
800
700
Usd /T
600
500
400
300
200
100
0
01 02 03 04 05 06 07 08 09 10 11 03/12
Rebar 210 250 315 455 415 520 660 900 500 620 650 680
Scrap 85 115 155 255 210 265 340 450 300 375 410 435
Spread 125 135 160 200 205 255 320 450 200 245 240 245
Rebar Scrap Spread
Source: IREPAS
27

28. Reinforcing bars spread
Spread is lagging behind price increases. Rebar producers will
probably take actions to improve the margins they need.
1000 70%
870
900
60% 60%
800
54% 680
700 51% 49% 49% 660 50% 650 50%
48% 620
Usd /T
600 44%
520 500 40% 40% 40%
500 455 37% 36%
415
30%
400 315
300 250 20%
210
200
10%
100
0 0%
01 02 03 04 05 06 07 08 09 10 11 03/12
Rebar % Spread
Source: IREPAS
28

29. • Macroeconomic situation
• Steel and long products consumption
• Rebars market.
• International price situation.
• Summary & Outlook
29

30. Summary & Outlook
 After the slowdown caused by European sovereign debt storm
in Q311, global economy shows signs of improvement for
coming months. Major advanced economies signal stronger
activity and, although some emerging economies may grow
slower than previous forecast, all indicators suggest
performance of world economy will improve.
 Long product consumption kept growing supported by markets
in Asia, Mena and South America. Reinforcing bars grew
stronger than long products average, clearly taking share from
sections. Renewed momentum in industrial production helped
wire rod to be the best performer. Signs point to market
continuing in the same trend.
 Long term price trend for long products and Reinforcing bars in
particular is up. Marketing policies are strictly pursuing margin
and profit. Mills located in slowest areas are monitoring regional
markets, in order to maintain levels of production in accordance
with demand.
 As consequence of general improving demand, raw materials
cost and margin pressures, price levels will continue to move up
although volatility and short term change in price direction will
be present in the trade. 30

31. Thank you for your attention
31