11/29/041
UNITED NATIONSUNITED NATIONSEconomic Commission for EuropeEconomic Commission for Europe
UNECE Ad Hoc Group of Experts onCoal in Sustainable DevelopmentSeventh Session - Geneva 7-8 December 2004
The turnaround in the Global SteelIndustry: 2004/2005 in perspectiveBy: dr. Domenico Maiello
11/29/042
STEEL PRODUCTION WILL BE CLIMBINGSTEEL PRODUCTION WILL BE CLIMBINGTOWARD THE ONE BILLION MT IN 2005TOWARD THE ONE BILLION MT IN 2005
> CHINA’S GROWING ECONOMY LIFTING STEEL DEMAND ANDPRICES WORLD WIDE CAUSES SHORTAGES OF STEEL MAKINGINGREDIENTS BOOSTING PRICES, SEA FREIGHTS AND LOGISTIC.
> MINES, RAIL SYSTEMS AND PORTS, UNABLE TO COPE WITHSURGING UNPLANNED DEMAND WORKING ON EXPANSION PLANS.
BOOM OF LATE 2003, EXPANDED IN 2004 AND WILL KEEP ITSWAY UP IN 2005 AND MORE YEARS TO COME .URGENT NEED FOR
GLOBAL WISDOM AND REGULATORY ARMONIC CONVERGENCE
11/29/043
STEEL AT THE CROSSROAD?STEEL AT THE CROSSROAD? Steel prices were heading towards the bottom of
the cycle in the year 2000. Next year they will likely hit the top due to strong demand & weak US$. Today, prices are at high levels heading even
higher into 2005 (and possibly also in 2006). Low prices of 2000 added unprecedented speed to
Regional consolidation trends in steel making, rawmaterial mining and shipping.
Late 2003 China’s booming demand, broke the Supply-Demand balance, and, overlapping the US $weakness and political tensions, added speed tothe on going Globalization Trend, lifting steeldemand and boosting prices for raw materials suchas met coke, coking coal, iron ores, metals, scrap,shipping and logistic.
Today the question is: Is China going for a hard or soft landing?…and when?…social peace is secure?Next,Globalization Trend for steel will move one step
forward: MITTAL STEEL the first move toward it ?.
11/29/044
STEEL PRICES 2001>2005STEEL PRICES 2001>2005
291 233 144 116 100INDEX586/635469/508262/282183/198148/163SLAB $-T. cfr
East Asia
537/597430/478230/239160/170135/145SLAB $-T. fobBlack Sea
461/517369/414267/276183/213170/200BILLET $-T.cfrEast Asia
406/452325/362237/247165/180145/165BILLET $-T.-fobBlack Sea
443/483355/387249/260175/195155/180BILLET $-T.fob-Turkey
595/665476/532300/322252/264215/225HRC $-T.cfrFar East
700/755560/604281/296315/331225/238HRC -$T.cfrMidWest-USA
477/507382/406299/323267/274256/261HRC - Euro-T. exWork - Europe
2005Trend
2004200320022001STEELPRODUCT
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BOOMING SEA-FREIGHTBOOMING SEA-FREIGHTMARKET PREVAILED IN 2004MARKET PREVAILED IN 2004
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SCRAP DEMAND RISING FAST SCRAP DEMAND RISING FAST The world’s merchant scrap requirements could reach 388m
tonnes in 2010,compared with estimated 277m tonnes in 2003. This is an increase of over 100m tonnes in six or seven years
equal to 40% increased requirement. Demand for merchant scrap by the end of the decade will thus
exceed availability, most likely, and it is doubtful whetherthere will be sufficient buildings to demolish and enough end-of life cars and other consumer goods to meet this forecastrequirement.
>>> The additional 100m tonnes is equivalent to an extra 16mtonnes/year on average. In the last six years, in contrast, theaverage increase in merchant scrap availability has been “only”about 10m tonnes/year.
Forecast for global crude steel production for 2010 is 1.3bntonnes, compared with 963m tonnes last year. Chinarepresents around half the increase. For the rest of the world,on average a 3% a year growth rate is generally excpected.
Scrap prices volatility will become steeper and unpredictableas obsolete scrap demand continues to rise since the recoveryrate from the global scrap reservoir is already high.
11/29/047
STEEL SCRAP PRICES 2001>2005STEEL SCRAP PRICES 2001>2005
276 221 153 103 100INDEX
461/517369/414267/276183/213170/200$ T. cfrEast Asia
287/320230/256165/180130/140105/115$ T. fob -Rotterdam
238/267191/214130/141101/10681/86Euro T.ExWork-Europe
2005trend
2004200320022001Shreddedscrap
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HIGH PRICES OF SECOND-HAND SHIPSHIGH PRICES OF SECOND-HAND SHIPSDID NOT HELP SCRAP AVAILABILITYDID NOT HELP SCRAP AVAILABILITY
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MET COKE PRICES HIT THEMET COKE PRICES HIT THERECORD TOP IN 2004RECORD TOP IN 2004>Mid-2004, due to acute shortage and due to the $250-T.
cost of the Export Permits in China, fob cokeprices climbed above the unprecedented level of $500T. fob load port.
>At the end of 2004, China’s Export Prices appear tohave ”stabilized” in the range $240/280 T. fob withpersisting risk of sudden volatility directlyrelated to the random flow or freeze of ExportPermits by Chinese Government.
>Mid 2005 demand for coke is due to decelerate afterthe reactivation of captive coke plants in variousTraditional Steel Producing Regions.
>Therefore added stress will translate to metcoal demand during 2005 and future years.
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MET COKE PRICES 2001>2005 MET COKE PRICES 2001>2005
496 422 219 113 100INDEX
330/370 220/450144/16575/8565/76
Ash 10.5%-12.5%$ T. fob -port CHINA
2005 Trend
2004 2003 2002 2001CHINESEMET COKEFOREXPORT
Above prices include the burden for China’s Export Permits
11/29/0411
IRON ORE PRICES ARE SET TO RISEIRON ORE PRICES ARE SET TO RISESHARPLY FOR NEXT YEARSHARPLY FOR NEXT YEAR
Massive World demand for iron ore will increaseby almost a quarter between now and 2009. Globalconsumption due to increase from 1.3bn mt, thisyear, to 1.6bn mt in 2009.
Expansion plans have been put in place by the“Big Three” iron ore producers (CVRD, RIO TINTOand BHPB) as well as by smaller iron ore minersin Australia, Brazil, Africa, Sweden, NorthAmerica and India, but these plans will dolittle to ease the supply tightness in the shortterm. Export restrictions risks ? India ?
Therefore, consensus is that prices will risesharply in 2005 by over 20%, on top of the 18.62%rise of 2004. China’s massive investments abroad
11/29/0412
IRON ORE PRICES 2001>2005IRON ORE PRICES 2001>2005
155,43124,34 96.02 96.01 100,00INDEX
77.35 61.88 52.00 47.36 50.10CVRD- Tubarao--Blast furnace pellet(for Europe)
45.56 36.45 31.04 28.62 28.92CVRD-Tubarao-Standard sinter feed(for Europe)
44.99 35.99 30.34 27.83 28.52BHP-Mt.Newman-High grades fines(for Japan)
57.42 45.94 25.82 35.56 37.43HAMERSLEY LumpW.Australian port(for Japan)
2005estimate
2004 2003 2002 2001$-cent fobload port(dmtu)
dmtu = dry metric ton unit (of FE content)
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IRON ORE SEA FREIGHTS 2003 AND 2004 IRON ORE SEA FREIGHTS 2003 AND 2004
11/29/0414
COKING COAL PRICES ARE SET TOCOKING COAL PRICES ARE SET TORISE SHARPLY FOR 2005RISE SHARPLY FOR 2005 Major Coking Coal Buyers (JSM, ESM, BSM) for more than a
decade elected to keep a squeeze on export prices (in US$)and indeed succeeded thanks to the volatility of certaincurrencies versus the U.S.$.and mining factors.
Appalachian, Polish, Russian, and Canadian mines managedto resist for a number of years and finally collapsed atthe beginning of the New Millennium. The supply shrunkdrastically in 2003 exactly at the time when demand wasrising dramatically and “newly compacted miners” wereappearing on the market stage. INDIA’s buyers, who had“assumed” unlimited offer of coal, were hurt more.
In 2004, very innaturally, coking coal prices have aspread in excess of $100 mt for the same product onlydepending upon timing of contracting and destination.
Therefore in 2005 all prices will jump up to alignethemselves above the $100 mt level thus filling the
unacceptable discrimination of the 2004 negotiations.>>>New (or expanded) coal mines will be taking shape
within the coming five years hopefully alleviatingpresent shortage. Meantime prices will keep rising.
11/29/0415
COKING COAL PRICE* 2001>2005COKING COAL PRICE* 2001>2005
271/312155/290108105100INDEX
105/12070/9546,5045,5045,50RUSSIA
115/12570/9539,5039,0039,50CHINA
110/13057/9541,5041,5038,50CANADA
125/15072/15057,0052,0048,00UNITEDSTATES
115/13558/17843,5044,5040,00AUSTRALIAQueenslandHCC
2005est2004200320022001T.M.- fobloadport
*TYPICAL EXPORT VALUES: REPRESENTATIVE AVERAGE OF ALL QUALITIES*
11/29/0416
COAL SEA FREGHTS 2003 AND 2004 COAL SEA FREGHTS 2003 AND 2004
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CONCLUDINGCONCLUDINGREMARKSREMARKS
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HUGE DOSES OF WISDOM ANDHUGE DOSES OF WISDOM ANDDIPLOMACY URGENTLY NEEDEDDIPLOMACY URGENTLY NEEDED The new run toward wider Globalization will increase the risks of conflicts unless new
huge doses of high professional skill aredeployed from all involved Entities.
Monetary and Political Authorities aredemanded to implement every possible step togradually wipe volatility in currency marketsand facilitate “sane and fair internationalcompetition”.
New scope for convergent regulatory uniformity. Fair Play needed from all Actors in the Market
in their own best interest.Railroads self-control.
11/29/0419
STEEL AND RAW MATERIALSSTEEL AND RAW MATERIALSSPECIAL LESSON OF 2004SPECIAL LESSON OF 2004
Globalization will stay with us and expand. Larger dimensions of Buyer/Seller will need more
fair play pragmatism and wisdom on either side. Steel and raw materials supply have flexibility
directly related to forecasted market trends. “Metabolization” of the on going booming prices
of steel into their “final products” willproduce high inflation in coming years.
China’s booming expansion is approaching amoderate growth rate with higher volatility ?
Exports of Chinese Steel, to all markets, atcompetitive and aggressive prices will requirehigh diplomatic skill in handling it.
China’s energy deficit growing with its economicgrowth, will add on global deficit and irradiateextra burden to other Countries.
Time come for “new/revisited” energy source/s?
11/29/0420 THANKS FOR YOUR ATTENTION!
IS CHINA PULLING UP THE REST OF THE WORLD ?
11/29/0421
Acknowledgement of original data Acknowledgement of original dataand where to get more informationand where to get more information
U.N. - ECE - IREEDD <http://www.unece.org.ie> U.N. - ECE - IREED <http://www.unece.org/ie/se/docs/coal7.html> IEA Statistics: Coal Information 2004 at http://www.iea.org.com> IMO - http://www.imo.org E.U. -http://europa.eu.int/comm/dgs/energy_transport/> IISI - http://www.worldsteel.org U.N. Draught Survey Code:<http://UNECE-DRAUGHTSURVEY.ATH.CX/ > U.N. Draught Survey Codes http://www.unece.org/ie/se/coal.html#code
Steel Business Briefing at <http://www.steelbb.com> Merrill Lynch at <http://www.fs.ml.com> McCloskey Coal Report at <http://www.McCloskeyCoal.com> Japan Echo at: <[email protected]> Coal fax at <http://www.coalportal.com> Barry Rogliano-Salles at: <http://www.brs-paris.com/bulk/index.html> Platts Energy at: <http://www.platts.com>
