Experiences with Structural Adjustment of the Austrlaian ... - Arrium

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Experiences with Structural Adjustment of the Austrlaian ... - Arrium

Experiences with Structural Adjustment ofthe Australian Steel industryPresentation by Dr Bob everyManaging Director and CEO of OneSteel LimitedSpetember9, 2004Contents• Global Industry Landscape• Australian Industry Landscape• Impact of Current Trends in a HistoricalContext• The Future of SteelSlide 21


Global Steel Industry LandscapeGlobal Steel Industry Landscape• Period from 1970 to 2000– Global Over-capacity• 800 million tonnes demand• 950 million tonnes capacity– Fragmented Industry• 95 players produce more than 2 million tonnes p.a• Top player only produce 5% of total production• Since 2000– Some consolidation is occurring– China has grown dramatically – 25% of world demand– Mega or niche to succeedSlide 42


Steel in the Global ContextIndex, 1990 =10045040035030025020015010050Industrial Production Growth in the 1990s1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000Western Europe Eastern Europe ChinaJapan Other Asia North AmericaSource: EcowinSlide 5Steel in the Global Context'000t crude steel900000800000700000600000500000400000300000200000100000019551958World Steel Consumption by Region19611964196719701973197619791982198519881991199419972000ChinaJapanOther AsiaWestern EuropeEas te r n Eur opeFormer Soviet UnionMiddle EastAfricaOceaniaLatin AmericaCanadaUSASource: IISISlide 63


Steel in the Global Context$US/capita ($1995)700065006000550050004500400035003000250020001500World Steel Consumption and GDP Per Capita, 1950-2010Collapse of USSR led tosteel consumptioncollapse in EasternEuropePost war expansion to1970 led to predictions ofseemingless endlessgrowth1954Asian crisis1961Phase 1199450 55 60 65 70 75 80 85 90 95 100 105 110 115 120 125 130 135 140 145 150 155 160kg steel/capitaChina takesoff!Phase 3199720021989Phase 220051983 19791975197319711970First and second oil prices and subsequentrecessions led to massive light-weightingof steel-containing products2010Source: Macquarie ResearchSlide 7International Steel Production and PricesSlide 84


International Steel Forecast DemandSlide 9Steel in the Global Context• Early signs of a complementary change on theproduction side• Consolidation is occurring- Corus – from merger of British Steel and Hoogovens- Arcelor – from merger of Usinor, Arbed and Aceralia- JFE Steel – from NKK and Kawasaki- U.S. Steel acquired assets of National Steel- Nucor has made four acquisitions over two yearsSlide 105


Steel in the Global Context• So what does this all mean?– We may be entering a new period of growthin international steel – the first time in threedecades– It has the potential to change the balance inthe industry from over to under supplySlide 11Australian Steel Industry Landscape6


Australian Steel Industry Landscape• 1970s– One Large Steel producer – BHP• 1980s– Emergence of Smorgon Steel– Emergence of Australian National Industries (ANI) into Steel• 1990s– BHP constructs Sydney Steel Mill (500K tonne facility)– Smorgon takes over ANI– BHP closes Newcastle steel works (1.5 million tonne facility)• 2000s– BHP spins off OneSteel Limited (long products)– BHP Billiton spins off BlueScope Steel (flat products) – exciting steelSlide 13Australian Steel Industry LandscapeLong ProductFlat ProductSmorgonSteel900,000tonnesOneSteel1.7 milliontonnesBlueScope Steel5 milliontonnesMainly DomesticExportSlide 147


Current Trends and Structural ImpactsScrap Prices$/t$460$440$420$400$380$360$340$320$300$280$260$240$220$200$180$160$140$120$100$80Asian HM1 Scrap PriceJan 1994 to Jul 2004Source : Tex ReportJul-95Jan-96Jul-96Jan-97Jul-97Jan-98Jul-98Jan-99Jul-99Jan-00Jul-00Jan-01Jul-01Jan-02Jul-02Jan-03Jul-03Jan-04Jul-04$US/t$A/tSlide 168


Trends in International Long Product Steel Prices600Long Products International PricesJan 1994 to Jul 2004. (US$)Source : CRUUS$/Tonne (c&f into China) ex Non-CIS550500450400350300250200150Jul-04Jan-04Jul-03Jan-03Jul-02Jan-02Jul-01Jan-01Jul-00Jan-00Jul-99Jan-99Jul-98Jan-98Jul-97Jan-97Jul-96Jan-96Jul-95Jan-95Jul-94Jan-94BEAMS MER.BAR REBARS LC WIRE RODSlide 17Imports into AustraliaAustralian Steel Imports - kt12 m th m oving totals240022002000180016001400Other120010008006004002000BlueScopeSteel RangeOneSteelRangeJan-00May-00Sep-00Jan-01May-01Sep-01Jan-02May-02Sep-02Jan-03May-03Sep-03Jan-04May-04Source: Australian Bureau of Statistics and OST dataSlide 189


Import versus International PricesImport versus International Prices - $AUDFrom January 1999 to June 20042.11. 9Australian DollarAppreciationImpact1.7Index1.51. 31.10.9Jan-99May- Sep-99 99Jan-00May- Sep-00 00Jan-01May- Sep-01 01Jan-02May- Sep-02 02Jan-03May- Sep-03 03Jan-04May-04Basket of Goods (Rebar, Mebar, Structural)Import PriceInternational PriceSource: Australian Bureau of Statistics and OST dataSlide 19Australian Steel Price IndexPrices for Steel Construction Materials from 1990-2004INDEX (1989-90=100)150140130120110CPIStructural steelDecking & claddingSteel in Res Construc10090QUARTERS FROM MARCH 1990 TO JUNE 2004Rebar & meshSteel decking and cladding Structural steel Reinforcing steel bar, fabric and meshWeighted Average of 8 Capital Cities CPISource: Australian Bureau of StatisticsSteel products used in Res constructionSlide 2010


International Freight RatesSource: Clarkson Research StudiesSlide 21Performance of Australian Steel CompaniesShare Price Performance of Australian Steel Companies versus All Ordinaries(Indexed at 100 on 21 July 2002)200180160Australian Steel Companies Index*Index Value140120All Ordinaries Index10080Jul-02Aug-02Sep-02Oct-02Nov-02Dec-02Jan-03Feb-03Mar-03Apr-03May-03Jun-03Jul-03Aug-03Sep-03Oct-03Nov-03Dec-03Jan-04Feb-04Mar-04Apr-04May-04Jun-04Jul-04* Index of the share prices of BlueScope Steel, OneSteel, Sims and Smorgon Steel (not weighted by market capitalisation)Slide 2211


The Future for Steel• Consumption is rising• Consolidation is occurring• Potential to trade steel on internationalexchangesSlide 23Conclusion• Australian steel industry undergone massiverestructuring• An exciting decade ahead- supply and demand changing- potential for a steel futures contract• Australian steel companies are creating value• OneSteel has undergone a process ofreinventionI believe we really are seeing the reinventionof steelSlide 2412