Global economic outlook and steel demand trendsEldar Askerov, 23-24 April 2012

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Key facts – worldsteel today

146 Members: 65 Regular (production > 1.8 Mt)

31 Associate (production < 1.8 Mt)

50 Affiliated (Regional and National Associations and Steel Research Institutes)

17 of the world’s 20 largest companies are members

Membership HQs are located in over 50 countries

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Contents

Long term steel market trends Global demand for steel in 1950-2010

Post-crisis steel demand recovery EU, US Emerging markets

Conclusions

4

5

Long term steel market trends

6

Steel is a cornerstone and key driver for the

world’s economy.

7

0

400

800

1200

1600

1950 1960 1970 1980 1990 2000 2010

Global growth in steel production is linked to humandevelopment

Years Mt1970 5951975 6441980 7171985 7191990 7701995 7522000 8492005 1,144 2010 1,414

2011 1,527Source: worldsteel

World crude steel production, 1950-2011

Steel a key driver of the world’s economy

World crude steel production has increased from 851 megatonnes (Mt) in 2001 to 1,527 Mt in 2011. (28.3 Mt in 1900).

The industry directly employs 2 million people worldwide, with a further 2 million contractors and 4 million in supporting industries.

Considering steel’s position as the key product supplier to industries such as automotive, construction, transport, power and machine goods then using a multiplier of 25:1 the steel industry is at the source of employment for more than 50 million people.

World average steel use per capita has steadily increased from 150 kg in 2001 to 220 kg in 2010.

India, Brazil, Korea and Turkey have all entered the top 10 steel producers list in the last 40 years.

8

Regional steel demand breakdown in 1950-2010 Regional structure of steel demand has been changing continuously

along with: Regional economic growth trends Evolution of global manufacturing base through creation and relocation of industries

Source: worldsteel, SSY9

Apparent crude steel use in 1950-2010

0

200

400

600

800

1000

1200

1400

1950

1954

1958

1962

1966

1970

1974

1978

1982

1986

1990

1994

1998

2002

2006

2010

China

Asia and Oceania excl China

former USSRNorth America

EU 15

Africa and Middle East

South America

Other Europe

Mt

10

58.4% 41.6%

28.7%

41.7% 58.3%

71.3%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Developed Economies Emerging & Developing Economies

Regional share in world steel demand

Source: worldsteel, SRO

05

101520253035404550

Chi

na

Vie

tnam

Indo

nesi

a

Mor

occo

Indi

a

Sou

th K

orea

Alg

eria

Sin

gapo

re

Thai

land

Spa

in

Can

ada

Arg

entin

a

Iran

Rus

sia

Saud

i Ara

bia

Phi

lippi

nes

Mal

aysi

a

Japa

n

Pol

and

Italy

Sou

th A

frica

Ukr

aine

Egy

pt

Turk

ey

Bra

zil

EU

15

Ger

man

y

Uni

ted

Sta

tes

Uni

ted

Kin

gdom

20072010

%

15

20

25

30

35

40

45

50

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

China

Indonesia

Thailand

India

Vietnam

%

Forecast

11

Investments: steel demand driver in developing world

Source: Global Insight

Urbanisation and development of manufacturing base boost steel demand

Fixed investments, % to GDP

Fixed investments in 1980-2015, % to GDP

Developing world: strong fundamentals for growthStrong upward population trend with high share of working age populationStrong needs for infrastructure and industries development

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Source: Global Insight, worldsteel*real 2005 PPP$

Population, million Urbanisation, %

GDP per capita, PPP$*

Steel use per

capita, kg

2011 2020 2011 2020 2011 2020 2010

Brazil 197 210 9,961 14,015 133

Mexico 115 126 76 77 13,224 16,911 140

Turkey 74 81 12,390 16,675 320

Indonesia 242 263 53 61 4,094 6,106 37

Thailand 70 72 34 39 7,648 10,884 202

Vietnam 89 96 30 35 2,981 4,803 141

India 1,241 1,387 30 34 3,195 5,895 52

China 1,347 1,388 51 61 7,503 14,306 427

13

Post-crisis steel demand recovery

14

Global steel demand growth in 2001-2011

Source: worldsteel

Steel demand landscape has been changed by global economic crisis Two-speed world: emerging & developing economies vs developed

Global steel demand, ASU finished steel

5.50.18.9

-5.08.9-0.61.8

-6.1 -5.7

-32.9

24.4

3.7 10.45.6

12.09.3

14.612.512.9

8.912.6

17.8

-40

-30

-20

-10

0

10

20

30

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

%

01002003004005006007008009001,0001,1001,2001,3001,400

MtWorld, mmtDeveloped Economies, y-o-y % growthEmerging&Developing Economies, y-o-y % growth

Regional summary at a glance

Source: worldsteel, SRO

15

Apparent steel use finished steel, Index (2007=100)

40

50

60

70

80

90

100

110

120

130

140

2007 2008 2009 2010 2011

World

CIS

Africa

EU-27

NAFTA

Middle East

Other Europe

Central&South America

Asia&Oceania

16

IMF GDP Forecast Revisions for Advanced Economies

2.62.5

1.4

1.2

1.9

2.62.6

2.0

1.9

2.42.52.5

Oct-10 Jan-11 Apr-11 Jun-11 Sep-11 Jan-12 Apr-12

2012 2013

Global economic outlook

6.0

6.56.4

5.7

5.4

6.1

6.66.5 6.5

5.9

Apr-11 Jul-11 Oct-11 Jan-12 Apr-12

2012 2013

IMF GDP Forecast Revisions for Emerging and Developing Economies

Source: IMF

In 2012 the world economy is projected to expand by3.5% (IMF) Downside risks for the forecast:

Sovereign debt crisis in euro zone Subdued growth as a result of austerity measures Significant slowdown in growth in emerging economies China’s hard landing

World GDP, y-o-y, % Industrial production, y-o-y, %

Source: Global Insight

17

-20

-15

-10

-5

0

5

10

15

1Q06

3Q06

1Q07

3Q07

1Q08

3Q08

1Q09

3Q09

1Q10

3Q10

1Q11

3Q11

1Q12

3Q12

1Q13

3Q13

1Q14

3Q14

World

Advanced Economies

Emerging Markets

%

Forecast

-8

-6

-4

-2

0

2

4

6

8

10

1Q06

3Q06

1Q07

3Q07

1Q08

3Q08

1Q09

3Q09

1Q10

3Q10

1Q11

3Q11

1Q12

3Q12

1Q13

3Q13

1Q14

3Q14

World

Advanced Economies

Emerging Markets

%

Forecast

EU steel market: thorny way to recovery Two-speed euro zone: North and South Europe Germany: positive economic outlook, strong growth in construction,

automotive Spain, Italy: the second wave of crisis EU: Strong rebound in automotive sector

EU 15: steel using sectors growth, %

Source: worldsteel, Oxford Economics

EU countries: steel demand, Mt

18

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

AutomotiveMetal GoodsElectrical engineeringMechanical engineeringTransportation (less automotive)

0

5

10

15

20

25

30

35

40

45

50

2003 2004 2005 2006 2007 2008 2009 2010

GermanyItalyFranceSpainUK

mmt

Is the US economy coming back on growth path?

US: steel using sectors growth, %

Latest data gives some hope that the US is recovering steadily US construction: housing starts seems to rise but still has a long

way to go Strong rebound in automotive industry

0

200

400

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1200

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1600

Jan-0

0Ju

l-00

Jan-0

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l-01

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l-11

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0

0.5

1

1.5

2

2.5

New 1 Family Houses Sold: sa: Annual Rate Private Housing Units Started: saar: Total

% %

US: Housing units started and houses sold, %

Source: CEIC, Oxford economics

19

-30

-20

-10

0

10

20

30

40

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Fabricated metal productsMechanical machineryElectrical and optical equipmentMotor vehicles

-10

-5

0

5

10

15

20

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Indonesia Thailand Vietnam Malaisia ASEAN

%

ASEAN: positive perspectives for steel demand

ASEAN: Industrial production growth, %

Indonesia: steel using sectors growth, %

Thailand: steel using sectors2005=100

Source: Global Insight, Oxford Economics

Indonesia: slight slowdown in 2012 after impressive growth in 2011 Thailand: after floods recovery Region has strong fundamentals

for steel demand growth Infrastructure improvement

20

0

20

40

60

80

100

120

140

160

180

1Q20

063Q

2006

1Q20

073Q

2007

1Q20

083Q

2008

1Q20

093Q

2009

1Q20

103Q

2010

1Q20

113Q

2011

1Q20

123Q

2012

Industrial production Manufacturing Motor vehicles

-30

-20

-10

0

10

20

30

40

1Q2008 3Q2008 1Q2009 3Q2009 1Q2010 3Q2010 1Q2011 3Q2011 1Q2012 3Q2012

Manufacturing Mechanical machinery Fabricated Metal Goods Motor vehicles

%

21

India

Source: CEIC, Global Insight

0

50

100

150

200

250

300

350

400

450

Apr-05

Aug-05

Dec-05

Apr-06

Aug-06

Dec-06

Apr-07

Aug-07

Dec-07

Apr-08

Aug-08

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Apr-11

Aug-11

Dec-11

IP: Manufacturing

IP: Capital Goods

IP: Consumer Goods: Durables

India and China: Industrial production growth, %

India: Steel using sectors2004-05=100

Current deceleration due to anti inflationary policy weak external demand

Long term: economy needs modern infrastructure

0

2

4

6

8

10

12

14

16

18

20

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

China

India

%

China: deceleration of growth in 2012

Gradual slowdown because of anti inflationary policy and weaker external demand

Cooling real estate sector

Source: worldsteel

22

YTD Growth Of Auto & Machinery Sectors Production

-1.8%

47.7%

9.8%

47.5%

-5.7%

-40%

-20%

0%

20%

40%

60%

80%

100%

Jan-

08 Apr Ju

l

Oct

Jan-

09 Apr Ju

l

Oct

Jan-

10 Apr Ju

l

Oct

Jan-

11 Apr Ju

l

Oct

Jan-

12

Automobile Civil metal vessels AC electromotor

Household refrigerator Room air condioner Household washing machine

YTD Growth Of Construction Industry

33.5%38.2%

27.8%

14.2%

26.6%

35.5%

-10%

0%

10%

20%

30%

40%

50%

Jan-

08 Mar

May Ju

lS

ept

Nov

Jan-

09 Mar

May Ju

lS

ept

Nov

Jan-

10 Mar

May Ju

lS

ept

Nov

Jan-

11 Mar

May Ju

lS

ept

Nov

Jan-

12

FAI in real estate Floor space under construct ion Cement output

0

5000

10000

15000

20000

25000

Shan

ghai

Tian

jin

Beijin

g

Jian

gsu

Zhej

iang

Gua

ngdo

ng

Shan

dong

Inne

r Mon

golia

Liao

ning

Fujia

n

Jilin

Hei

long

jiang

Heb

ei

Nat

iona

l Tot

al

Hub

ei

Cho

ngqi

ng

Hen

an

Xinj

iang

Shaa

nxi

Shan

xi

Hai

nan

Hun

an

Qin

ghai

Nin

gxia

Sich

uan

Gua

ngxi

Anhu

i

Jian

gxi

Tibe

t

Yunn

an

Gan

su

Gui

zhou

PPP$

Shanghai

TianjinBeijingXinjiang

Gansu

Xizang

Qinghai

Sichuan

Nei Mongol

Yunnan

Heilongjiang

Jilin

Liaoning

Ningxia

Shaanxi

ShanxiHebei

Shandong

Henan

Hubei

GuizhouHunan

FujianTaiwan

GuangdongGuangxi

Hainan

Jiangsu

ZhejiangJiangxi

Anhui

China: multi-speed growth in provinces

Less developed

Level of development according to

GDP per capita

Developed

Source: Global Insight

China: provincial GDP per capita

23

Conclusions Regional structure of global steel demand has been changing over time

due to many different factors including competitiveness of the local manufacturing, construction activity, population trends.

Despite the deceleration of growth in the post crisis period developing economies have strong fundamentals for steel demand growth.

Global steel demand has maintained relatively stable recovery momentum so far despite uncertainties and volatilities in the global economy.

Evolution of the euro zone crisis and healthy growth of the emerging economies, especially of China, are critical to current trends.

24

25

Steel touches every aspect of our lives.

No other material has the same unique

combination of strength, formability

and versatility.

26April 30, 2012 26

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