steel price tracker - jrj.com.cnpg.jrj.com.cn/acc/res/cn_res/indus/2014/8/5/10bf7efa-3...5 august...

Deutsche Bank Markets Research

Europe

Steel

Periodical

Steel Price Tracker

Date

5 August 2014

US HRC prices continue to rise; Europe remains weak

US prices strengthen and push the spread over Europe to USD200/t

________________________________________________________________________________________________________________

Deutsche Bank AG/London

Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 148/04/2014.

Bastian Synagowitz

Research Analyst

(+41) 44 227-3377

[email protected]

HRC Prices

400

450

500

550

600

650

700

750

800

850

900

950

1,000

1,050

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Jul 13

Sep 13

Nov 13

Jan 14

Mar 14

May 14

Jul 14

Northern Europe USA China exports to Europe

USD/t

Plate Prices

500

550

600

650

700

750

800

850

900

950

1,000

1,050

1,100

1,150

1,200

1,250

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Jul 13

Sep 13

Nov 13

Jan 14

Mar 14

May 14

Jul 14

Northern Europe Southern Europe USA

USD/tUSD/tUSD/tUSD/t

Raw Material Prices

150

200

250

300

350

400

450

500

550

40

60

80

100

120

140

160

180

200

220

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Jul 13

Sep 13

Nov 13

Jan 14

Mar 14

May 14

Jul 14

Iron ore Fines 62% Fe, CFR Tianjin, China Shredded scrap, US (RHS)

USD/t USD/t

Upcoming events Date

Rautaruukki: Q2 14 results 07 Aug 2014

Salzgitter: H1 2014 13 Aug 2014

Short-term volatility in steel equities continues to be driven by macro woes/ commodity price movements. US prices have started to rise again and are now being quoted at a significant premium to most other markets. In Europe, prices have been falling (both North and Southern Europe) but have still not fully passed on the drop in variable costs (iron ore, coal and scrap). Hence, the key question is whether European prices can be defended. We retain our below-consensus earnings estimates on most stocks. Our top pick is ArcelorMittal (Buy, target price E16), as we believe the company is financially de-risked and should have strong earnings leverage to an economic recovery.

HRC: Northern European prices down USD6 (E2 in Euro terms) Northern European prices were down USD6 last week to USD555 (down E2 in Euro terms to E414). Southern European prices were up E1 to E406 (USD545). Prices have been stable in the past three months. While the latest attempt to increase prices has not been successful, it will be important for mills to stabilise steel prices now that iron ore prices have started to rise again and the weaker summer period is nearing.

Chinese exports to Europe: HRC prices up E4; spreads narrowing Chinese HRC prices were up E4 to E385 (USD516) last week. The spread between Chinese and Southern European prices narrowed to USD29 (USD32 last week). Prices have increased E12 in the past three months.

US HRC: prices up another USD8 US HRC prices increased USD8 to USD748 last week. The price gap relative to Europe has widened to USD193/t and the price differential relative to China stands at c.USD232/t. Some players have tried to increase prices and although progressing market consolidation and trade intervention in some steel grades might offer support, we believe the current US price premium to other markets is not sustainable as it incentivises trade arbitrage.

Plate: Southern European up E1 Southern European prices increased E1 to E475 (USD637) last week; prices remained flat over the past month. Northern European prices were flat at E519 (USD696). US prices decreased USD1 to USD937 last week.

Rebar: Southern European prices up E2 Southern European prices were up E2 at E436 (USD585) last week; prices have decreased E17 in the past three months. Northern European prices remained flat at E443 (USD594).

Iron ore: fines 62% Fe prices are stable Prices for fines 62% Fe were stable at USD95 last week. Chinese steel output increased 0.37% WoW to 1.808mt/day in the second 10 days of July.

Scrap: European prices up USD8 European prices were up USD8 to USD368 last week. US prices were flat at USD373. If current prices were to remain stable until end-Q3, the QoQ price increase for European scrap in Q3 would be USD6.

5 August 2014

Steel Price Tracker


Steel price summary Figure 1: Steel price summary

Prices for the week July 28- August 04

Bloomberg ticker

Price per tonne

Absolute change

(USD)

Per cent change

(USD)

Absolute change (E) Per cent change (E)

Index USD EUR 1w 1m 3m ytd YoY 1w 1m 3m ytd YoY 1w 1m 3m ytd YoY 1w 1m 3m ytd YoY

Hot-rolled coil (HRC)

N. Europe TSIPNEHR 555 414 -6 -14 -39 -53 -16 -1 -2 -7 -9 -3 -2 -3 -13 -33 -17 0 -1 -3 -7 -4

S. Europe TSIPSEHR 545 406 -1 -12 -19 -40 -19 0 -2 -3 -7 -3 1 -2 0 -24 -19 0 0 0 -6 -4

Turkey TSIPTKHR 593 442 7 1 8 -3 -10 1 0 1 -1 -2 7 8 21 4 -13 2 2 5 1 -3

US TSIPUSHR 748 558 8 17 -19 -6 33 1 2 -2 -1 5 9 22 6 4 18 2 4 1 1 3

Chinese exports to Europe TSIPCEHR 516 385 2 3 -2 -21 -199 0 1 0 -4 -2 4 9 12 -10 -11 1 2 3 -3 -3

Cold-reduced coil (CRC)

N. Europe TSIPNECR 669 499 -3 -8 -47 -64 -32 0 -1 -7 -9 -5 0 3 -16 -40 -30 0 1 -3 -7 -6

S. Europe TSIPSECR 631 471 -9 -23 -35 -64 -48 -1 -4 -5 -9 -7 -4 -8 -8 -40 -41 -1 -2 -2 -8 -8

Turkey TSIPTKCR 680 507 0 0 -2 -20 -23 0 0 0 -3 -3 2 9 16 -7 -23 0 2 3 -1 -4

US TSIPUSCR 886 661 11 15 -11 17 61 1 2 -1 2 7 11 23 15 23 39 2 4 2 4 6

Chinese exports to Europe & NA TSIPCECR 575 429 0 0 -23 -53 -25 0 0 -4 -8 -4 2 8 -1 -33 -24 0 2 0 -7 -5

Hot-dipped galvanized coil (HDG)

N. Europe TSIPNEGV 733 547 -4 -19 -47 -53 28 -1 -3 -6 -7 4 0 -4 -14 -31 15 0 -1 -2 -5 3

S. Europe TSIPSEGV 693 517 -8 -32 -42 -59 34 -1 -4 -6 -8 5 -3 -14 -12 -36 20 -1 -3 -2 -7 4

US TSIPUSGV 949 708 30 30 -1 19 83 3 3 0 2 10 26 34 24 24 54 4 5 4 4 8

Plate

N. Europe TSIPNEPL 696 519 -3 -12 -35 -10 28 0 -2 -5 -1 4 0 0 -7 0 15 0 0 -1 0 3

S. Europe TSIPSEPL 637 475 -2 -11 -30 -39 6 0 -2 -4 -6 1 1 0 -5 -22 -1 0 0 -1 -4 0

US TSIPUSPL 937 699 -1 6 20 73 128 0 1 2 8 16 3 16 39 64 89 0 2 6 10 15

Rebar

N. Europe

ope

TSIPNERB 594 443 -3 -20 -38 -61 -17 -1 -3 -6 -9 -3 0 -7 -12 -38 -18 0 -2 -3 -8 -4

S. Europe TSIPSERB 585 436 0 -15 -44 -63 -29 0 -3 -7 -10 -5 2 -4 -17 -40 -27 0 -1 -4 -8 -6

US NA 696 519 0 0 0 -11 -11 0 0 0 -2 -2 3 9 18 0 -14 1 2 4 0 -3

Iron ore as of 04 August 2014

Fines 62% Fe TSIPIO62 95 71 0 -1 -8 -37 -36 0 -1 -7 -28 -28 0 0 -4 -26 -28 0 0 -5 -27 -28

Fines 58% Fe TSIPIO58 81 60 0 0 -11 -41 -41 0 0 -12 -34 -34 0 1 -6 -29 -31 0 2 -9 -33 -34

Prices as of 31 July 2014

Scrap

US TSIPUSFS 373 278 0 6 -23 -52 15 0 2 -6 -12 4 0 8 -8 -35 8 0 3 -3 -11 3

Europe MBSFRSHR

368 274 8 14 12 -11 4 2 4 3 -3 1 6 13 15 -3 -1 2 5 6 -1 0 Source: The Steel Index, Bloomberg Finance LP

Industry valuations and risks

We use various methodologies to value the steel companies under our

coverage – from a DCF-based valuation to a normalised earnings approach and

a sum-of-the-parts (SOTP) analysis. Key industry risks: 1) global economic

growth not meeting expectations; 2) lower-than-expected steel prices, which

could result in earnings erosion; 3) raw material and other operating costs,

which might limit earnings growth; 4) the political influence of governments on

the steel trade; 5) expansion projects not progressing as expected; and 6) M&A

valuation and integration risks.

5 August 2014

Steel Price Tracker


Steel price announcements

Figure 2: Recent price changes

Product category Date of announcement

Company Country Details

Flats

11 July 2014 China Steel Corp Taiwan Taiwan's largest steel producer, China Steel Corp (CSC), is asking Japanese long-term contract buyers of its hot-rolled coil to pay an extra Yen 1,000/metric ton ($9.86/mt). The increase applies for August-October shipments.

30 June 2014 US Steel US US Steel announced a $25/st sheet price increase Monday, catching by surprise at least some buyers who expected a move after the Fourth of July holiday. The increase is effective immediately and covers all spot flat-rolled orders, open quotations and negotiations.

20 June 2014 Benxi Iron & Steel (Bengang)

China Benxi Iron & Steel (Bengang) announced that it is trimming its pickled coil price by Yuan 110/metric ton ($18/mt) and trimming its premium for SPHC grade HRC to Yuan 30/mt. Consequently, Bengang’s ex-works price for Q235 5.5mm HRC in July will stay at Yuan 3,640/mt ($592/mt), for DC01 1.0mm CRC at Yuan 3,980/mt ($647/mt), and for DC51D+Z 1.0mm HDG at Yuan 4,580/mt ($744/mt). All prices exclude 17% VAT.

19 June 2014 Hebei Iron and Steel (Hegang)

China Hebei Iron and Steel (Hegang) has decided to cut its ex-works prices for hot-rolled coil, pickled coil and plate by Yuan 100/metric ton ($16/mt). The new policy will cut Hegang’s ex-works prices for Q235 5.5mm HRC and Q235 14-20mm plate to Yuan 3,500/mt ($567/mt) and Yuan 3,550/mt, respectively, while that for SPCC 1.0mm CRC will stay at Yuan 4,400/mt. All prices include 17% VAT.

Longs

01 August 2014 Nucor USA Nucor will raise base pricing for all carbon and alloy special bar quality products and cold-heading quality coiled bar products by $40/st, effective with September 1 shipments.

01 August 2014 Shagang China Shagang Group cut its rebar ex-works prices by Yuan 30/metric ton ($5/mt) for the August 1-10 period. The latest cut took Shagang’s prices for 16-25mm diameter HRB400 rebar to Yuan 3,170/mt ($513/mt) with 17% VAT.

31 July 2014 Icdas Turkey Icdas increased its prices for rebar and wire rod by TRY 5/metric ton. The company announced its sales price for 12-32mm diameter rebar at TRY 1,450/mt ($676) ex-works. Its price for 10mm dia rebar rose to TRY 1,460/mt ex-works ($681), while 8mm dia rebar was at TRY 1,470/mt ex-works ($685).

28 July 2014 Steel Dynamics Inc. USA Steel Dynamics Inc. announced a $10/st price increase effective immediately. However, all confirmed orders from last Friday will be price-protected if shipped before August 23.

28 July 2014 Gerdau Long Steel North America

Gerdau Long Steel announced a $10/st price increase effective immediately. However, all confirmed orders from last Friday will be price-protected if shipped before August 25.

Stainless

01 August 2014 Posco Specialty Steel (Posco SS)

South Korea Posco has cut domestic prices of austenitic coil by Won 100,000/metric ton ($97/mt) for August. The new base price for grade 304 hot rolled coil will be around Won 3.6m/mt ($3,483/mt), while 304 cold rolled coil will be Won 3.87m/mt ($3,745/mt).

30 July 2014 Yieh United Steel Corp (Yusco)

Taiwan Yieh United Steel Corp (Yusco) has cut the export prices of its 300-series stainless hot rolled and cold rolled sheets and coils by $70/metric ton for September loadings. Yusco also reduced the domestic prices of its 300-series HR and CR products by TWD 2,500/mt ($83/mt) for August deliveries.

25 July 2014 Baosteel China Baosteel has cut its local domestic prices of 300-series stainless steel coil by Yuan 1,400/mt ($227/mt) for August. The review took the steelmaker’s selling prices for grade 304 3mm HRC and 2mm 2B CRC to Yuan 16,100/mt ($2,613/mt) and Yuan 17,600/mt respectively ex-works Shanghai.

24 July 2014 Aperam Luxembourg Aperam cut the monthly 316 surcharge to €2,066/metric ton ($2,785) from €2,111/mt in July.

Source: Steel Business Briefing and CRU

5 August 2014

Steel Price Tracker


Hot-rolled coil prices

Figure 3: Northern Europe Figure 4: QoQ performance

2

3

4

5

6

7

8

9

10

350

400

450

500

550

600

650

700

750

800

850

900

950

Jan 11

Mar 11

May 11

Jul 11

Sep 11

Nov 11

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Jul 13

Sep 13

Nov 13

Jan 14

Mar 14

May 14

Jul 14

HRC price (USD/t) HRC price (EUR/t) Lead time (weeks)

-20 -27

20

-42-17

8

0-22 -13

Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14

QoQ absolute performance (EUR/t)

-4% -5%

4%

-8%-4%

2%

0%-5% -3%

QoQ relative performance

Source: The Steel Index


Figure 5: Southern Europe Figure 6: QoQ performance

1

2

3

4

5

6

7

8

300

350

400

450

500

550

600

650

700

750

800

850

900

950

Jan 11

Mar 11

May 11

Jul 11

Sep 11

Nov 11

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Jul 13

Sep 13

Nov 13

Jan 14

Mar 14

May 14

Jul 14


-26 -20

20

-37-14

2

-5 -21-3

Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14


-5% -4%

4%

-8%-3%

0%

-1%-5%

-1%




Figure 7: Turkey Figure 8: QoQ performance

0

1

2

3

4

5

6

7

8

300

350

400

450

500

550

600

650

700

750

800

850

900

Jan 11

Mar 11

May 11

Jul 11

Sep 11

Nov 11

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Jul 13

Sep 13

Nov 13

Jan 14

Mar 14

May 14

Jul 14


-23-49

27

-32

1

-13 -7

3 11

Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14


-4%-10%

6%

-7%

0%

-3% -2%

1% 3%




5 August 2014

Steel Price Tracker


Figure 9: United States Figure 10: QoQ performance

2

3

4

5

6

7

8

350

450

550

650

750

850

950

1,050

Jan 11

Mar 11

May 11

Jul 11

Sep 11

Nov 11

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Jul 13

Sep 13

Nov 13

Jan 14

Mar 14

May 14

Jul 14

HRC price (USD/t) Lead time (weeks)

-16 -18 -2 -27

57 27

-16

26

-3

Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14

QoQ absolute performance (USD/t)

-2% -3% 0% -4%

9%4%

-2%

4%

0%




Figure 11: Chinese exports to Europe Figure 12: QoQ performance

0

5

10

15

20

25

250

300

350

400

450

500

550

600

650

700

750

800

850

Jan 11

Mar 11

May 11

Jul 11

Sep 11

Nov 11

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Jul 13

Sep 13

Nov 13

Jan 14

Mar 14

May 14

Jul 14


-55

-16

27

-44

-4 -140 -11

7

Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14


-11%

-4%

6%

-10%

-1%-4%

0%-3%

2%




5 August 2014

Steel Price Tracker


Plate prices


0

1

2

3

4

5

6

7

8

9

10

11

400

500

600

700

800

900

1,000

1,100

1,200

1,300

Jan 11

Mar 11

May 11

Jul 11

Sep 11

Nov 11

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Jul 13

Sep 13

Nov 13

Jan 14

Mar 14

May 14

Jul 14

Plate price (USD/t) Plate price (EUR/t) Lead time (weeks)

-35 -27

2

-31-5

7 2 3

-3

Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14


-6% -5%

0%

-6%-1%

1% 0% 1%

-1%





2

3

4

5

6

7

8

9

10

11

12

350

450

550

650

750

850

950

1,050

1,150

Jan 11

Mar 11

May 11

Jul 11

Sep 11

Nov 11

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Jul 13

Sep 13

Nov 13

Jan 14

Mar 14

May 14

Jul 14

Plate price (USD/t) Plate price (EUR/t) Lead time (weeks)

-49-25

22

-46

9 17

-4 -17 -7

Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14


`

-9%-5%

4%

-9%

2% 3%

-1% -3% -1%





0

1

2

3

4

5

6

7

8

9

10

500

600

700

800

900

1,000

1,100

1,200

1,300

Jan 11

Mar 11

May 11

Jul 11

Sep 11

Nov 11

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Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Jul 13

Sep 13

Nov 13

Jan 14

Mar 14

May 14

Jul 14

Plate price (USD/t) Lead time (weeks)

-97-58

-27 -4

8 1365

34 19

Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14


-10%-7%

-3% 0%

1% 2%8%

4% 2%




5 August 2014

Steel Price Tracker


Rebar prices


0.0

1.0

2.0

3.0

4.0

5.0

6.0

200

300

400

500

600

700

800

900

Jan 11

Mar 11

May 11

Jul 11

Sep 11

Nov 11

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Jul 13

Sep 13

Nov 13

Jan 14

Mar 14

May 14

Jul 14

Rebar price (USD/t) Rebar price (EUR/t) Lead time (weeks)

-9 -7 -9-32

0

6

-1-21

-7

Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14


-2% -1% -2%-6%

0%

1%

0%-4% -2%





0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

300

400

500

600

700

800

900

Jan 11

Mar 11

May 11

Jul 11

Sep 11

Nov 11

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Jul 13

Sep 13

Nov 13

Jan 14

Mar 14

May 14

Jul 14

Rebar price (USD/t) Rebar price (EUR/t) Lead time (weeks)

-10 -12

0

-40

4 11

-7 -16 -15

Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14


-2% -2%

0%

-8%

1% 2%

-1% -3% -3%





0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

300

400

500

600

700

800

900

1,000

Jan 11

Mar 11

May 11

Jul 11

Sep 11

Nov 11

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Jul 13

Sep 13

Nov 13

Jan 14

Mar 14

May 14

Jul 14

Rebar price (USD/t) Lead time (weeks)

-49

4 10

-17 -14 -4 -7

0

-1

Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14


-6%

0% 1%

-2% -2% 0% -1%

0%

0%




5 August 2014

Steel Price Tracker


Iron ore prices

Figure 25: Fines 62% Fe, CFR Tianjin Port, China Figure 26: QoQ performance

40

60

80

100

120

140

160

180

200

Jan 11

Mar 11

May 11

Jul 11

Sep 11

Nov 11

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Jul 13

Sep 13

Nov 13

Jan 14

Mar 14

May 14

Jul 14

Fines 62% Fe USD/t Fines 62% Fe EUR/t

-28

11

25

-22

7 3

-15 -18-6

Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14


-20%

10%

21%

-15%

5%2%

-11%-15%

-6%




Figure 27: Fines 58% Fe, CFR Tianjin Port, China Figure 28: QoQ performance

30

50

70

90

110

130

150

170

190

Jan 11

Mar 11

May 11

Jul 11

Sep 11

Nov 11

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Jul 13

Sep 13

Nov 13

Jan 14

Mar 14

May 14

Jul 14

Fines 58% Fe USD/t Fines 58% Fe EUR/t

-26

10

26

-22

60

-14-21

-7

Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14


-20%

10%

23%

-16%

5%0%

-11%

-19%

-8%




5 August 2014

Steel Price Tracker


Scrap prices

Figure 29: Europe Figure 30: QoQ performance

100

150

200

250

300

350

400

450

500

550

Jan 11

Mar 11

May 11

Jul 11

Sep 11

Nov 11

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Jul 13

Sep 13

Nov 13

Jan 14

Mar 14

May 14

Jul 14

Shredded Scrap (EUR/t) Shredded Scrap (USD/t)

-32

4

12

-32

6

14

-17

4 6

Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14


-8%

1%

3%

-8%

2%

4%

-5%

1% 2%


Source: Metal Bulletin



0

100

200

300

400

500

600

700

Mar 11

May 11

Jul 11

Sep 11

Nov 11

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Jul 13

Sep 13

Nov 13

Jan 14

Mar 14

May 14

Jul 14

Shredded scrap (USD/t)

-34

-1

10

-32

5

28 21

-20-8

Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14


-8%

0%

3%

-8%

2%8% 5%

-5%-2%




5 August 2014

Steel Price Tracker


Cash costs and spread

Figure 33: German HRC vs. BOF HRC cash costs Figure 34: German HRC vs. EAF HRC cash costs

-200

0

200

400

600

800

1,000

1,200

1,400

Jan-0

2

Jul-02

Jan-0

3

Jul-03

Jan-0

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Jul-04

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5

Jul-05

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6

Jul-06

Jan-0

7

Jul-07

Jan-0

8

Jul-08

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9

Jul-09

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Jan-1

1

Jul-11

Jan-1

2

Jul-12

Jan-1

3

Jul-13

Jan-1

4

Jul-14

(USD) Spread (HRC-cash cost) German HRC

BOF cash cost Average spread

-200

0

200

400

600

800

1,000

1,200

1,400

Jan-0

2

Jul-02

Jan-0

3

Jul-03

Jan-0

4

Jul-04

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5

Jul-05

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6

Jul-06

Jan-0

7

Jul-07

Jan-0

8

Jul-08

Jan-0

9

Jul-09

Jan-1

0

Jul-10

Jan-1

1

Jul-11

Jan-1

2

Jul-12

Jan-1

3

Jul-13

Jan-1

4

Jul-14

(USD) Spread (HRC-cash cost) German HRC

EAF cash cost Average spread

Source: CRU

Source: CRU

Figure 35: German HRC vs. Chinese HRC Figure 36: German HRC vs. US HRC

-200

0

200

400

600

800

1,000

1,200

1,400

Jan-0

7

Apr-

07

Jul-07

Oct-

07

Jan-0

8

Apr-

08

Jul-08

Oct-

08

Jan-0

9

Apr-

09

Jul-09

Oct-

09

Jan-1

0

Apr-

10

Jul-10

Oct-

10

Jan-1

1

Apr-

11

Jul-11

Oct-

11

Jan-1

2

Apr-

12

Jul-12

Oct-

12

Jan-1

3

Apr-

13

Jul-13

Oct-

13

Jan-1

4

Apr-

14

Jul-14

(USD) Spread (German HRC- Chinese) German HRC

Chinese HRC Average spread

-200

0

200

400

600

800

1,000

1,200

1,400

Jan-0

2

Jul-02

Jan-0

3

Jul-03

Jan-0

4

Jul-04

Jan-0

5

Jul-05

Jan-0

6

Jul-06

Jan-0

7

Jul-07

Jan-0

8

Jul-08

Jan-0

9

Jul-09

Jan-1

0

Jul-10

Jan-1

1

Jul-11

Jan-1

2

Jul-12

Jan-1

3

Jul-13

Jan-1

4

Jul-14

(USD) Spread (German HRC- US) German HRC

US HRC Average spread

Source: CRU

Source: CRU

Figure 37: US HRC vs. Chinese HRC Figure 38: German HRC vs. Rotterdam 1# HMS scrap

-50

150

350

550

750

950

1,150

1,350

Jan-0

7

Apr-

07

Jul-07

Oct-

07

Jan-0

8

Apr-

08

Jul-08

Oct-

08

Jan-0

9

Apr-

09

Jul-09

Oct-

09

Jan-1

0

Apr-

10

Jul-10

Oct-

10

Jan-1

1

Apr-

11

Jul-11

Oct-

11

Jan-1

2

Apr-

12

Jul-12

Oct-

12

Jan-1

3

Apr-

13

Jul-13

Oct-

13

Jan-1

4

Apr-

14

Jul-14

(USD)Spread (US HRC- Chinese) US HRC

Chinese HRC Average spread

0

200

400

600

800

1,000

1,200

1,400

Jan-0

2

Jul-02

Jan-0

3

Jul-03

Jan-0

4

Jul-04

Jan-0

5

Jul-05

Jan-0

6

Jul-06

Jan-0

7

Jul-07

Jan-0

8

Jul-08

Jan-0

9

Jul-09

Jan-1

0

Jul-10

Jan-1

1

Jul-11

Jan-1

2

Jul-12

Jan-1

3

Jul-13

Jan-1

4

Jul-14

(USD) Spread (German HRC- Rotterdam scrap) German HRC

Rotterdam Scrap 1# HMS Average spread

Source: CRU

Source: CRU

5 August 2014

Steel Price Tracker


Valuation and risks

Valuation and risks for ArcelorMittal (ISPA.AS, Buy, target price E16, current price E10.76)

We use an equal blend of forward EBITDA (7x 2014E) and DCF as our primary

valuation methodology; 7x EV/EBITDA represents the lower end of the current

sector valuation band (c.7-8x). Our DCF assumptions are a 9.6% WACC using

an industry beta of 1.1, a 7% market risk premium and a 3% risk-free rate, as

well as 2% terminal growth to reflect the limited growth prospects for the

industry. Key risks relate to macro, steel prices, raw material costs, project

development and FX rates. Should the improving leading indicators not

translate into a recovery in economic performance as expected by Deutsche

Bank, this would be a risk to demand for steel. Declining commodity prices

and a renewed price shock are risks to our margin assumptions. Lastly,

ArcelorMittal has a large growth appetite, and a stronger-than-expected ramp-

up of the capex budget or a failure to deliver on projects would present further

risks to the downside.

5 August 2014

Steel Price Tracker


Appendix 1

Important Disclosures

Additional information available upon request

Disclosure checklist

Company Ticker Recent price* Disclosure

ArcelorMittal ISPA.AS 10.76 (EUR) 4 Aug 14 7,8,14,17 *Prices are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies

Important Disclosures Required by U.S. Regulators

Disclosures marked with an asterisk may also be required by at least one jurisdiction in addition to the United States. See Important Disclosures Required by Non-US Regulators and Explanatory Notes.

7. Deutsche Bank and/or its affiliate(s) has received compensation from this company for the provision of investment banking or financial advisory services within the past year.

8. Deutsche Bank and/or its affiliate(s) expects to receive, or intends to seek, compensation for investment banking services from this company in the next three months.

14. Deutsche Bank and/or its affiliate(s) has received non-investment banking related compensation from this company within the past year.

Important Disclosures Required by Non-U.S. Regulators

Please also refer to disclosures in the Important Disclosures Required by US Regulators and the Explanatory Notes.

7. Deutsche Bank and/or its affiliate(s) has received compensation from this company for the provision of investment banking or financial advisory services within the past year.

17. Deutsche Bank and or/its affiliate(s) has a significant Non-Equity financial interest (this can include Bonds, Convertible Bonds, Credit Derivatives and Traded Loans) where the aggregate net exposure to the following issuer(s), or issuer(s) group, is more than 25m Euros.

For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr

Analyst Certification

The views expressed in this report accurately reflect the personal views of the undersigned lead analyst about the subject issuers and the securities of those issuers. In addition, the undersigned lead analyst has not and will not receive any compensation for providing a specific recommendation or view in this report. Bastian Synagowitz

http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr

5 August 2014

Steel Price Tracker


Historical recommendations and target price: ArcelorMittal (ISPA.AS) (as of 8/4/2014)

1

23

4 5

6 78

9

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

20.00

Aug 11 Nov 11 Feb 12 May 12 Aug 12 Nov 12 Feb 13 May 13 Aug 13 Nov 13 Feb 14 May 14

Secu

rity

Pri

ce

Date

Previous Recommendations

Strong Buy Buy Market Perform Underperform Not Rated Suspended Rating

Current Recommendations

Buy Hold Sell Not Rated Suspended Rating

*New Recommendation Structure as of September 9,2002

1. 26/08/2011: Hold, Target Price Change EUR17.00 6. 21/10/2013: Upgrade to Buy, Target Price Change EUR14.50

2. 27/06/2012: Hold, Target Price Change EUR16.00 7. 17/12/2013: Buy, Target Price Change EUR15.00



5. 12/07/2013: Hold, Target Price Change EUR10.50

Equity rating key Equity rating dispersion and banking relationships

Buy: Based on a current 12- month view of total share-holder return (TSR = percentage change in share price from current price to projected target price plus pro-jected dividend yield ) , we recommend that investors buy the stock. Sell: Based on a current 12-month view of total share-holder return, we recommend that investors sell the stock Hold: We take a neutral view on the stock 12-months out and, based on this time horizon, do not recommend either a Buy or Sell. Notes:

1. Newly issued research recommendations and target prices always supersede previously published research. 2. Ratings definitions prior to 27 January, 2007 were:

Buy: Expected total return (including dividends) of 10% or more over a 12-month period Hold: Expected total return (including dividends) between -10% and 10% over a 12-month period Sell: Expected total return (including dividends) of -10% or worse over a 12-month period

38 %

55 %

7 %

50 % 38 %

20 %0

50

100

150

200

250

300

350

400

Buy Hold Sell

European Universe

Companies Covered Cos. w/ Banking Relationship

5 August 2014

Steel Price Tracker


Regulatory Disclosures

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Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the

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2. Short-Term Trade Ideas

Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are

consistent or inconsistent with Deutsche Bank's existing longer term ratings. These trade ideas can be found at the

SOLAR link at http://gm.db.com.

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http://www.globalmarkets.db.com/riskdisclosures

David Folkerts-Landau Group Chief Economist

Member of the Group Executive Committee

Guy Ashton Global Chief Operating Officer

Research

Marcel Cassard Global Head

FICC Research & Global Macro Economics

Richard Smith and Steve Pollard Co-Global Heads Equity Research

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Asia Pacific Research

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Deutsche Bank Research, Germany

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Equity Research, Germany

Steve Pollard Regional Head

Americas Research

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