Structure of Presentation Where are we Now? Influences in 2006 Forecasts for 2006 Managing Volatility/Risk SBB Presentation 19-11-05 at MEsteel-SBB Dubai.

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Presentation transcript:

Structure of Presentation Where are we Now? Influences in 2006 Forecasts for 2006 Managing Volatility/Risk SBB Presentation at MEsteel-SBB Dubai Dinner

An Industry in Transition Long Term Changes Companies Consolidate Consumption Growth Shifts Capital markets Costs and Prices – cycles to continue SBB Presentation at MEsteel-SBB Dubai Dinner

Linked Price Cycles Scrap Commodity steels Iron ore, coke, coal Quality steels Sentiment SBB Presentation at MEsteel-SBB Dubai Dinner

Today’s Market Binge Buying and Hangover November 2005: US and EU: stocks returning to normal; prices rising in US Asia: stocks rising; prices sliding Price collapse from March SBB Presentation at MEsteel-SBB Dubai Dinner

Near Term Influences on the Steel Price in 2006 SBB Presentation at MEsteel-SBB Dubai Dinner

Long Term Influences on the Steel Price in 2006 SBB Presentation at MEsteel-SBB Dubai Dinner

Chinese Production Mill t SBB Presentation at MEsteel-SBB Dubai Dinner

China Engine of Global Steel Economy? Growing Consumption gap? … exports… plant closures ? Fragmented industry Inefficient Capital intensive SBB Presentation at MEsteel-SBB Dubai Dinner

Strong growth Raw materials availability Growth in infrastructure Low kg/head consumption CIBERT Russia Brazil India Cons kg/head Source: IISI, SBB Estimates SBB Presentation at MEsteel-SBB Dubai Dinner

Real GDP Growth (% change) e2006e Middle East China India U.A.E Turkey Newly Industrialised Asian Economies Major Advanced Economies ASEAN SBB Presentation at MEsteel-SBB Dubai Dinner

Global Capacity Utilization 89.2% 87.1% Mill t 79% SBB Presentation at MEsteel-SBB Dubai Dinner

Nascent Global Companies Posco Shougang Bluescope Mechel JFE Nippon Tata Global Essar CMC Baosteel Evraz ThyssenKrupp More Global Companies US Steel Ternium Gerdau Duferco Mittal Severstal Arcelor SBB Presentation at MEsteel-SBB Dubai Dinner

Higher Iron Ore Prices WinnersLosers $/t Forecast SBB Presentation at MEsteel-SBB Dubai Dinner

Volatile Scrap ($/t) Source: SBB SBB Presentation at MEsteel-SBB Dubai Dinner

More Reactive to Sentiment “US sets the tune” Changeable Spot Prices - Expectations - Inventories - International trade Sentiment SBB Presentation at MEsteel-SBB Dubai Dinner

Trade Flows in 2006 Japan to export more globally Ukrainian exports to rise Russian exports may decline US imports to rise EU exports stable China: exports to rise? SBB Presentation at MEsteel-SBB Dubai Dinner

Turnaround in Imports SBB Presentation at MEsteel-SBB Dubai Dinner

4th Quarter of 2005 US and EU: Stocks back to normal: Prices rising in US; Europe…? Asia: Stocks rising Prices weakening SBB Presentation at MEsteel-SBB Dubai Dinner

Price Outlook 2006: HRC $/t Source: Steel Business Briefing Forecast SBB Presentation at MEsteel-SBB Dubai Dinner

Price Outlook 2006: Rebar $/t Source: Steel Business Briefing Forecast SBB Presentation at MEsteel-SBB Dubai Dinner

Price Outlook 2006: HRC $/t Source: Steel Business Briefing Global Forecast N. American Forecast European Forecast SBB Presentation at MEsteel-SBB Dubai Dinner

Source: Steel Business Briefing Eu $/t Forecast Price Outlook 2006: HRC $/t & Euro/t European Average Nov 2005Dec 2006 Eu Euro/t Forecast SBB Presentation at MEsteel-SBB Dubai Dinner

Price Outlook 2006: Rebar $/t Global Forecast Source: Steel Business Briefing N. American Forecast European Forecast SBB Presentation at MEsteel-SBB Dubai Dinner

Source: Steel Business Briefing Price Outlook 2006: Beams $/t World Average SBB Presentation at MEsteel-SBB Dubai Dinner

Source: Steel Business Briefing Price Outlook 2006: Beams $/t Global Forecast N. American Forecast European Forecast SBB Presentation at MEsteel-SBB Dubai Dinner

Source: Steel Business Briefing Eu $/t Forecast Price Outlook 2006: Beams $/t & EUR/t European Average Eu Euro/t Forecast SBB Presentation at MEsteel-SBB Dubai Dinner

Contract prices : 2006 Fewer multi-year deals Up to 5-15% rise in 2006 (if Q4 stabilises) Impacts on financial results Linkage to raw materials SBB Presentation at MEsteel-SBB Dubai Dinner

Managing Volatility/Risk Risks in 2006: China; volatile scrap, excessive stocks, sentiment, lack of transparency …… Managing risk: Hedging: OTC, surcharges, indexation, LME?, active exchanges More Annual Contracts Managing Capacity SBB Presentation at MEsteel-SBB Dubai Dinner