title 16 may 2012 katowice conference 2012 : a challening year juergen nusser managing director
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TITLE16 MAY 2012 KATOWICE
CONFERENCECONFERENCE
2012 : A CHALLENING YEAR2012 : A CHALLENING YEAR
JUERGEN NUSSERJUERGEN NUSSERMANAGING DIRECTORMANAGING DIRECTOR
EUROPEAN ECONOMIC CONGRESS 16 MAY 2012 KATOWICE© JUERGEN NUSSER, MD EUROMETAL 2012 : A CHALLENGING YEAR SLIDE 2
16 MAY 2012 KATOWICE
EUROMETAL presentations may include forward-looking information and statements about the steel sector (production, distribution, consuming industries and their stake-holders). Forward-looking statements are not historical facts but have to include financial or other projections & estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, products and services, and statements regarding future performance.
For EUROMETAL, expectations reflected in such information and statements are reasonable. Any third parties are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of EUROMETAL, that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.
Consequently EUROMETAL • denies all responsibility regarding the said informations and statements• undertakes no obligation to publicly update forward-looking statements, whether as a result of
new information, future events, or otherwise.
ABOUT EUROMETAL PRESENTATIONS
DISCLAIMER
EUROPEAN ECONOMIC CONGRESS 16 MAY 2012 KATOWICE© JUERGEN NUSSER, MD EUROMETAL 2012 : A CHALLENGING YEAR SLIDE 4
2012 : A CHALLENING YEAR2012 : A CHALLENING YEAR
AGENDA
EUROPEAN ECONOMIC CONGRESS
ABOUT EUROMETAL
EUROPEAN ECONOMICS
STEEL PARAMETERS
PRICING POWER SHIFTS
OUTLOOK 2012
EUROPEAN ECONOMIC CONGRESS 16 MAY 2012 KATOWICE© JUERGEN NUSSER, MD EUROMETAL 2012 : A CHALLENGING YEAR SLIDE 5
ABOUT EUROMETAL
ASSOCIATION OF EUROPEAN DISTRIBUTORS
OF STEEL, TUBES AND METALS
EUROPEAN STEEL TRADING STUDY GROUP
EUROPEAN ASSOCIATION OF FLAT STEEL SERVICE CENTERS
FEDERATION OF EUROPEAN NATIONAL ASSOCIATIONS OF
STEEL, TUBE AND METAL DISTRIBUTION
COVERING ALL ASPECTS & TYPESOF STEEL INTERMEDIATIONIN THE EUROPEAN UNION AND BEYOND
3.500 GROUPS & COMPANIESMORE THAN 100.000 EMPLOYEES
MORE THAN 80 MLN TONNES OF SALES
24 OCTOBER 2011: IMPLEMENTATION OF THE NEW EUROMETAL
EUROPEAN ECONOMIC CONGRESS 16 MAY 2012 KATOWICE© JUERGEN NUSSER, MD EUROMETAL 2012 : A CHALLENGING YEAR SLIDE 6
2012 : A CHALLENING YEAR2012 : A CHALLENING YEAR
JUERGEN NUSSERJUERGEN NUSSERMANAGING DIRECTORMANAGING DIRECTOR
16 MAY 2012 KATOWICE
EUROZONEGDP
SEASONALLY ADJUSTED
UNEMPLOYMENTMARCH 2012
SEASONALLY ADJUSTED
. . . WITH THE EUROZONE MOVING TOWARDS RECESSION. . . WITH UNEMPLOYMENT IN EUROPE REACHING A RECORD LEVEL. . . WITH INCREASING RELOCATION AND TECHNOLOGY TRANSFER. . . WITH THE EUROZONE FINANCIAL STATUS DETERIORATING. . . WITH LATEST ELECTION RESULTS CREATING NEW UNCERTAINTIES. . . AND WITH A GLOBAL ECONOMY GOING CRAZY?
2012: A CHALLENING YEAR . . .
MARKET CAPITALISATION96.000.000.000 USD ??
EUROPEAN ECONOMIC CONGRESS 16 MAY 2012 KATOWICE© JUERGEN NUSSER, MD EUROMETAL 2012 : A CHALLENGING YEAR SLIDE 7
SINCE Q4/2008 WE WE HAVE SEEN RECOVERY - BUT . . .
EUROPEAN ECONOMICS
EUROPEAN ECONOMIC CONGRESS 16 MAY 2012 KATOWICE© JUERGEN NUSSER, MD EUROMETAL 2012 : A CHALLENGING YEAR SLIDE 8
IN 2012 FINANCIAL PARAMETERS RULE THE ECONOMIC WORLD
EUROPEAN ECONOMICS
EUROPEAN ECONOMIC CONGRESS 16 MAY 2012 KATOWICE© JUERGEN NUSSER, MD EUROMETAL 2012 : A CHALLENGING YEAR SLIDE 9
27 FEBRUARY 2012: PUBLICATION OF THE EEAG REPORT 2012
NOT REALLY AN ENCOURAGING OUTLOOK FOR 2012
EUROPEAN ECONOMICS
EUROPEAN ECONOMIC CONGRESS 16 MAY 2012 KATOWICE© JUERGEN NUSSER, MD EUROMETAL 2012 : A CHALLENGING YEAR SLIDE 10
A MACROECONOMIC RECESSIONA MACROECONOMIC RECESSIONINTENSIFIES STRUCTURAL CHANGE OF INDUSTRIAL PRODUCTIONINTENSIFIES STRUCTURAL CHANGE OF INDUSTRIAL PRODUCTIONHARDLY EVER AGAIN REACHING THE FORMER LEVELHARDLY EVER AGAIN REACHING THE FORMER LEVEL
ECONOMIC CYCLEECONOMIC CYCLE
STRUCTURAL CHANGESTRUCTURAL CHANGE
IN MATURE AND SATURATED ECONOMIESIN MATURE AND SATURATED ECONOMIESTHE SHORT TERM UPSWINGS AND DOWNSWINGS OF THE MACROECONOMIC CYCLETHE SHORT TERM UPSWINGS AND DOWNSWINGS OF THE MACROECONOMIC CYCLESLOW DOWN OR SPEED UP CONTINUOUS AND LONG TERM STRUCTURAL CHANGESLOW DOWN OR SPEED UP CONTINUOUS AND LONG TERM STRUCTURAL CHANGE
EUROPEAN ECONOMICS
DIFFERENCE BETWEEN ECONOMIC CYLES AND STRUCTURAL CHANGE
EUROPEAN ECONOMIC CONGRESS 16 MAY 2012 KATOWICE© JUERGEN NUSSER, MD EUROMETAL 2012 : A CHALLENGING YEAR SLIDE 11
1.400
1.200
1.000
800
600
400
200
0
TO REACH 1.294 MTO IN 2010 (14% Y-O-Y)
1.2% pa
7,1% pa
14% pa
IN MLN TO
1990 20001995 20051981 1985 2010
STEEL PARAMETERS
GROWTH OF GLOBAL STEEL DEMAND CONTINUES . . .
EUROPEAN ECONOMIC CONGRESS 16 MAY 2012 KATOWICE© JUERGEN NUSSER, MD EUROMETAL 2012 : A CHALLENGING YEAR SLIDE 12
1.400
1.200
1.000
800
600
400
200
01990 20001995 20051981 1985 2010
. . . IN WHICH EUROPEAN STEEL DEMAND HAS ALMOST NO PART
BUT STRUGGLES TO COME BACK TO HISTORIC AVERAGES
IN MLN TO
240
200
160
120
80
40
01981 1985 1990 20001995 2010
153
125
189
207197
2005
173179
169167169
STEEL PARAMETERS
EUROPEAN ECONOMIC CONGRESS 16 MAY 2012 KATOWICE© JUERGEN NUSSER, MD EUROMETAL 2012 : A CHALLENGING YEAR SLIDE 13
DOWNWARD TREND OF GLOBAL CRUDE STEEL PRODUCTION
STEEL PARAMETERS
40
60
80
100
120
140
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
MLN TONS
?
GROWTH TREND BEFORE 2008 RECESSION
RECOVERY TREND AFTER RECESSION
DOWNWARD TREND SINCE MAY 2011
CRISIS TREND INTO 2008 RECESSION
CRU WORLD STEEL CONFERENCE LONDON FEBRUARY 2012
A CONSEQUENCE OF A NEGATIVE TREND OF GLOBAL STEEL CONSUMPTION
EUROPEAN ECONOMIC CONGRESS 16 MAY 2012 KATOWICE© JUERGEN NUSSER, MD EUROMETAL 2012 : A CHALLENGING YEAR SLIDE 14
-1
0
1
2
3
4
5
6
7
8
9
10
APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV
CHANGE IN % Y-O-Y
2010 2011
9 9
8
7
8
9
7
8
9
7 7
5 5
4
3
4
5
2
1
-0,2
COULD THIS BE A DEJA VUE EXPERIENCE ?
INDUSTRIAL PRODUCTION IN EU-27 HAS TURNED TO ZERO
STEEL PARAMETERS
EUROPEAN ECONOMIC CONGRESS 16 MAY 2012 KATOWICE© JUERGEN NUSSER, MD EUROMETAL 2012 : A CHALLENGING YEAR SLIDE 15
WINNERS, SURVIVORS AND LOSERS IN THE PAST FIVE YEARS
- 10 %
+ 6 %+ 10 %
+ 5 %
+ 14 %
+ 28 %+ 23 %
CHINA, LATIN AMERICA AND THE MIDDLE EAST ARE THE UNCONTESTED WINNERS
THE MATURE ECONOMIES EU AND NAFTA ARE THE CLEAR LOSERS
- 20 %
2011 APPARENT STEEL USE, FINISHED PRODUCTSAS COMPARED TO HIGH CYCLE 2007, IN %
AFRICA MID EASTEU-27 CHINAASIA-PCF LATIN.AMCISNAFTA OTHER EU WORLD
+ 63 %
+ 21 %
STEEL PARAMETERS
EUROPEAN ECONOMIC CONGRESS 16 MAY 2012 KATOWICE© JUERGEN NUSSER, MD EUROMETAL 2012 : A CHALLENGING YEAR SLIDE 16
THE EUROPEAN UNION IS NO MORE A WINNING MARKET
- 44 %
- 17 %
+ 3 %
+ 21 %
- 7 %
STAGGERING LOSSES IN MAIN EU MARKETS SPAIN, UK, ITALY AND FRANCE
CHARACTERISE THE EUROPEAN PICTURE
ONLY POLISH STEEL CONSUMPTION IS EXPECTED TO COMPLETELY RECOVER FROM LAST YEARS CRISIS
- 26 %- 23 % - 20 %
2011 APPARENT STEEL USE, FINISHED PRODUCTSAS COMPARED TO HIGH CYCLE 2007, IN %
FRANCE GERMANYUK POLANDITALYSPAIN EU - 27 WORLD
STEEL PARAMETERS
EUROPEAN ECONOMIC CONGRESS 16 MAY 2012 KATOWICE© JUERGEN NUSSER, MD EUROMETAL 2012 : A CHALLENGING YEAR SLIDE 17
WILL STEELMAKING AND STEEL DISTRIBUTION BECOME A « CONVERTER » BUSINESS? WILL STEELMAKING AND STEEL DISTRIBUTION BECOME A « CONVERTER » BUSINESS?
RAW MATERIALS PRODUCERS
STEELPRODUCERS
STEELDISTRIBUTION
STEELEND USERS
STEEL PRICE HEDGING & RESALE
IRON ORE SURCHARGEIRON ORE SPOT
PRICING
SCRAPSURCHARGE
VOLATILESCRAP PRICING
ALLOY SURCHARGE
VOLATILE METALEXCHANGE PRICING
SHORT TERMPRICE CONTRACTS
MARKET PRICING IS LOSING IMPORTANCEMARKET PRICING IS LOSING IMPORTANCE
TO SURCHARGE-MODELS, PRICE INDEXING AND HEDGINGTO SURCHARGE-MODELS, PRICE INDEXING AND HEDGING
THE PROBABLE ANSWER TO THIS:THE PROBABLE ANSWER TO THIS:
PRICING POWER SHIFTS
POWER SHIFT TO RAW MATERIALS KILLS MARKET PRICING
EUROPEAN ECONOMIC CONGRESS 16 MAY 2012 KATOWICE© JUERGEN NUSSER, MD EUROMETAL 2012 : A CHALLENGING YEAR SLIDE 18
RAW MATERIAL’S PRODUCERS SHARE IN VALUE CHAIN ALLOCATION IS OVER 70 %RAW MATERIAL’S PRODUCERS SHARE IN VALUE CHAIN ALLOCATION IS OVER 70 %
OVER THE LAST STEEL CYCLE, VALUE ALLOCATION IN THE STEELVALUE CHAIN DID SHIFT DRAMATICALLY TOWARDS RAW MATERIAL PRODUCERS
PRICING POWER TURNING UPSTREAM
2004
STEEL
COAL
IRON ORE
2009
STEEL
COAL
IRON ORE
9 %
41% 9 %
31% 82%
28%
POWER SHIFT FROM STEEL TO RAW MATERIALS PRODUCERS
PRICING POWER SHIFTS
EUROPEAN ECONOMIC CONGRESS 16 MAY 2012 KATOWICE© JUERGEN NUSSER, MD EUROMETAL 2012 : A CHALLENGING YEAR SLIDE 19
THERE ARE 40 - 50 MLN TONS OF OVERCAPACITY IN EUROPETHERE ARE 40 - 50 MLN TONS OF OVERCAPACITY IN EUROPE
WITH REAL STEEL CONSUMPTION IN MATURE MARKETS DECLINING EXCESS CAPACITY OF STEEL PRODUCTION COULD ASK FOR PRICE CONCESSIONS
PRICING POWER TURNING DOWNSTREAM?
UNUSEDCAPACITY
USEDCAPACITY
STEEL PRODUCTION
SUSTAINABLEDEMAND
STEEL CONSUMPTION
PRICING?
PRICING POWER SHIFTS
POWER SHIFT FROM STEEL PRODUCERS TO STEEL END USERS?
EUROPEAN ECONOMIC CONGRESS 16 MAY 2012 KATOWICE© JUERGEN NUSSER, MD EUROMETAL 2012 : A CHALLENGING YEAR SLIDE 20
A SIGNIFICANT TREND TO A STRUCTURAL MARGIN SQUEEZE
SUCH A DEVELOPMENT WOULD OF COURSE HEAVILY AFFECT STEEL DISTRIBUTIONSUCH A DEVELOPMENT WOULD OF COURSE HEAVILY AFFECT STEEL DISTRIBUTION
STEEL PRODUCERS LEFT WITHOUT ANY PRICING POWER?
PRICING POWER SHIFTS
EUROPEAN ECONOMIC CONGRESS 16 MAY 2012 KATOWICE© JUERGEN NUSSER, MD EUROMETAL 2012 : A CHALLENGING YEAR SLIDE 21
CONSIDERING THE IMPLEMENTED CAPACITIES AND SUSTAINABLE DEMANDCONSIDERING THE IMPLEMENTED CAPACITIES AND SUSTAINABLE DEMAND
ALSO FOR EUROPEAN STEEL DISTRIBUTION
PRICING POWER SHIFTS
PRICEPRESSURE
DISTRIBUTION CAPACITY
230 MLN TONS
SUSTAINABLEDEMAND
160 MLN TONS
110 MLN TONSDISTRIBUTION
A SIGNIFICANT TREND TO A STRUCTURAL MARGIN SQUEEZE
EUROPEAN ECONOMIC CONGRESS 16 MAY 2012 KATOWICE© JUERGEN NUSSER, MD EUROMETAL 2012 : A CHALLENGING YEAR SLIDE 22
EUROPEAN STEEL WILL ONLY MOVE AT A SLOW PACE
210
120
155158
161 F
174 F
APPARENT DEMAND OF FINISHED STEEL PRODUCTS
220
200
180
160
140
120
100
802000 2002 2004 2006 2008 2010 2012 2014 2016
IN MLN TONNES: EU 27 + 3 + ALBANIA & FORMER YUGOSLAVIA
A DIFFICULT RECOVERY TO THE LONGTERM HISTORIC LEVELAFTER A REAL BUBBLE AND THE FOLLOWING STEEP DECLINE
?
OUTLOOK 2012
EUROPEAN ECONOMIC CONGRESS 16 MAY 2012 KATOWICE© JUERGEN NUSSER, MD EUROMETAL 2012 : A CHALLENGING YEAR SLIDE 23
EUROPEAN STEEL WILL ONLY MOVE AT A SLOW PACE
EXAMPLE: FLAT PRODUCTSSINCE THE 2008 CRISIS, THE RELATIVE WEIGHT OF DIRECT SALES OF EUROPEAN PRODUCERS
TO END USERS HAS DECLINED TO THE BENEFIT OF THE DISTRIBUTION SEGMENT.
THIS TRANSLATES A NEED OF THE END USERS FOR IMPROVED SERVICES
DRIVEN BY A MORE STRINGENT WORKING CAPITAL REQUIREMENT.
HOWEVER, THE BUSINESS MODEL OF THE DISTRIBUTION SEGMENT
CREATES MORE VOLATILITY IN THE APPARENT DEMAND AND PRICING.
OUTLOOK 2012
EUROPEAN ECONOMIC CONGRESS 16 MAY 2012 KATOWICE© JUERGEN NUSSER, MD EUROMETAL 2012 : A CHALLENGING YEAR SLIDE 24
DISTRIBUTION- 2 MLN TOEND USERS- 2 MLN TO
147 MLN TO??
EUROPEAN APPARENT DEMAND OF FINISHED STEEL PRODUCTS
158 MLN TO
APPARENTDEMAND 2011
APPARENTDEMAND 2012
THE MISSING RESTOCKINGTHE SOVEREIGN DEBT CRISIS AND
SLUGGISH INDUSTRIAL PRODUCTIONCOULD LEAD TO A SIGNIFICANT
DECREASE OF APPARENT DEMAND
POSSIBLE LOSSESIN DEMAND
POSSIBLE LOSSESBY DESTOCKING
HOPEFULLY THIS WILL REMAIN A WORST CASE SCENARIO!
OUTLOOK 2012
THE FORECASTED 2012 APPARENT DEMAND COULD BE ENDANGERED
AUTOMOTIVE- 1,5 MLN TO
OTHERS- 2 MLN TO
MACHINERY- 3,5 MLN TO
EUROPEAN ECONOMIC CONGRESS 16 MAY 2012 KATOWICE© JUERGEN NUSSER, MD EUROMETAL 2012 : A CHALLENGING YEAR SLIDE 25
EUROPEAN ECONOMIC CONGRESS
DEFINITELY YES!AT LEAST PARTLY YES!MOST LIKELY YES!. . . . A CHALLENGE ALSO FOR EUROMETALTHEREFORE BETTER PREPARE FOR SOME HASARDS . . . .. . . . AND EVENTUALLY POSSIBLE COLLISIONS!
SO FINALLY - WHAT WILL WE HAVE TO FACE THIS YEAR?
TITLE16 MAY 2012 KATOWICE
CONFERENCECONFERENCE
2012 : A CHALLENING YEAR2012 : A CHALLENING YEAR
JUERGEN NUSSERJUERGEN NUSSERMANAGING DIRECTORMANAGING DIRECTOR
THANK YOU FOR YOUR ATTENTIONTHANK YOU FOR YOUR ATTENTION