Outlook for the steel market Sherpa group meeting, Bruxelles, 13 March 2014

Agenda Current situation: global demand is slowly recovering Prospects for global steel demand until 2025 Structure of EU steel exports EU steelmaking excess capacity Financial health of the European steel industry

Apparent consumption of steel by region (Index 2007Q2=100, data from CRU)

Production shares by region, % of world (before and after the crisis)

Steelmaking capacity shares by region (% of world capacity)

Regional steel trade developments (Thousands of tonnes)

Sectors driving steel demand growth (in tonnage) during the next ten years 3 sectors expected to represent 90% of global steel demand growth up to 2025 Construction (68%), driven by residential, infrastructure projects in emerging economies Mechanical engineering (13%) Energy transportation(9%), pipelines, OCTG and other tubes.

Global steel demand by sector in 2011 and 2025 mmt and % of total steel demand CAGR 3.7% 1414 mmt 2349 mmt Source: Metal Bulletin Research

Construction sector value added : growing share of emerging economies Shares in world construction value added in 2025: NAFTA (18.3%), EU (10.8%), Japan (6.2% ), China (24%) China’s construction VA: CAGR 5.9% in a catching-up process 175 airports in China in 2010 compared to 5,194 in the US Urban residential floor space in 2011 was 31 m² per capita in China compared to 82 in the US. The urbanisation rate is expected to reach 51.5% in 2015 (target of 12th Chinese Five-Year Plan): 10 million new urban residents/year India’s construction VA: CAGR 8.1% faster than China but from a much lower base. By 2025, India could have two cities of more than 25 million inhabitants (New Delhi and Mumbai) Strong infrastructure building also expected in South East Asia, Africa and the Middle East.

Global steel demand for energy-related construction in 2011 and 2025 mmt and % of total steel demand CAGR 0% 31 mmt 31 mmt Source: Metal Bulletin Research

Global steel demand in the transportation sector in 2011 and 2025 mmt and % of total steel demand Pipelines CAGR 6.1% CAGR 2.7% 274 mmt 398 mmt Source: Metal Bulletin Research

The steel industry is a major supplier to the energy industry Consumption of steel by energy industries (Mt) 178 MT that is 12 % of total finished steel production Source : Worldsteel, Eurofer, Laplace Conseil analysis & estimates

Reducing quantity of steel per auto will limit growth in steel demanded by auto sector

Strong growth of auto production expected to continue in China

Regional demand for automotive steels, % share

Global excess capacity situation

EU has been a net steel exporter since 2009

EU steel exports have shifted towards African markets from 2007 to 2012.

The structure of exports -capturing the growth opportunity in emerging markets- The share of pipes and tubes (a major export item), has declined from 14.8% (2007) to 13.1% (2012) while bars became the largest export item in 2012. Exports of long products have been increasing steadily supported by robust construction activity in North Africa. Exports of high value-added products (e.g. galvanized sheets) have been increasing along with the growth of the auto sector in emerging markets. EU can take advantage of its good access to growing steel markets in Africa and Middle East.

Demand growing strongly in Europe’s neighbouring regions

EU iron and steel exports (external trade) matrix in 2012 (thousands of tonnes) Source: Eurostat.

Frequent cycles of excess capacity in the EU 57% integrated route 43% EAF

Most flat steels are produced in BF/BOFs Most long steels are produced in EAFs

EBITDA on sales (EU and the rest of the world) in % Sources: Facset, OECD calculations

EBITDA on sales (EU steel industry) and global capacity utilisation ratio in % Sources: Facset, OECD calculations

EBITDA on sales distribution for EU steelmakers in % 47 steelmakers based in the EU out of 633 in the sample Sources: Facset, OECD calculations

EBIT on sales (EU and the rest of the world) in % Sources: Facset, OECD calculations

Debt on Ebitda (%) – European steelmakers Sources: Facset, OECD calculations

Interest on assets (%) – European steelmakers Sources: Facset, OECD calculations

Price to book ratio – European steelmakers Sources: Facset, OECD calculations

Investment on assets – European steelmakers (%) Sources: Facset, OECD calculations

R&D on assets – European steelmakers (%) Sources: Facset, OECD calculations

Thank you for your attention