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The Metallurgical Industry, Steel market
Forecasts for the future
Sanjay Samaddar
CEO & Chairman of the Board, ArcelorMittal Poland
Katowice, 18th May 2011
Europe in the scheme of world economics
We live in a “Two Speed World”
Real GDP Growth Forecast 2011-2012
Percentage Growth
© IMF April 2011 Source: World Economic Outlook
Different speed of advanced and emerging & developing economies growth 
GDP to grow by 2.5% and 6.5% respectively
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BRIC countries GDP…
…will continue to grow faster than G7
50
40
35
2001-2010
45
2000
2011-2020
30
2010
25
2020
35
20
15
% Global Growth
US$ trn
40
30
25
20
15
10
10
5
5
0
0
G7
BRIC
N-11
Other
Other
Developed Emerging
Markets
Markets
China
Russia
India
Brazil
BRICs
G3
Source: GS Global ECS Research, 2010
By 2020 it is expected that BRICs to account one third of the global
economy (in PPP terms) and contribute about 49% of global GDP Growth*
*Goldman Sachs May 2010
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World Steel Production 2010
ROW
11.7%
Russia
4.7%
Ukraine
2.4%
Steel Production
China
44.3%
EU-27
12.2%
World: 1, 414 MT
Asia: 898 MT
Brazil
2.3%
EU 27: 173 MT
USA
5.7%
Japan
7.8%
Source: World Steel Association
India
4.7%
South Korea
4.1%
 Global annual steel production will grow from 1.4 billion in 2010 to 2.3
billion tonnes in 2020. This growth will entirely be generated outside
Europe, most of it in emerging economies, with an increase in CO2
emissions in the range of 2.5 billion tons in the global steel sector.
(Source: EUROFER, 2011)
 Post crisis …Europe is the No #2 steel producer in the world
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Challenges for Europe…
The “Global” Challenge
80% Growth in emerging
economy
High productivity
ambition
Resources scarce in
Europe
Flexibility and
Volatility
21% CO2 reduction
versus 2005 needed in
10 years
Low Inventory
Low Lead Times
Oil and Natural Gas
depletion in 2050
McKinsey, 2010
Customer oriented
products
FOCUS on EXCELLENCE
ATTRACT THE BEST AND BRIGHTEST PEOPLE
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Resources will be scarce in Europe
Pricing of Raw materials no longer driven by
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European consumption
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Oil Price Could Limit Economic Growth
“Green” strategy is the only way to preserve growth8
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•
•
The Climate Change Challenge
Steel industry as part of the global CO2 emission picture
Emissions 2030 (BAU)
70GtCO2eq/y
Emissions 2005
46GtCO2eq/y
4%
21% of total emissions
* *
16%
28% of total emissions
5%
14%
6%
10%
*
6%
* 6%
*
15%
11%
*
8%
*
8%
*
6%
*
16%
18%
*
18%
18%
Source: McKinsey: Pathways to a Low-Carbon Economy
*
18%
Cement
Chemicals
Iron & Steel
Petroleum & gas
Transport
Buildings
Other
Agriculture
Forestry
*
dark part refers to indirect
emission of power generation linked
to each activity
Today, the steel industry is responsible (directly and indirectly) for 6% of the
world’s CO2 emissions and will be 8% in 2030 if no actions are taken.
Effective abatement policies will lead to huge costs for industry and society.
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European industrial policy…
…requires a strong coordinated appraoch
ENVIRONMENT
Climate change
Industrial
emissions
SOCIAL
Salary cost
Education
Industrial
Policy
COMMERCIAL
POLICY
Access to raw
materials
Trade barriers
ENERGY
Competitive prices
Compensation for
indirect costs
R&D
Breakthrough
Energy-efficiency
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Climate Change
Impact of EU ETS / 2050 Roadmap
EU ETS Benchmarks agreed in December 2010 not
to grant 100% free allocations notwithstanding
carbon leakage status of steel sector
Carbon leakage will be a reality for the steel
sector as allowance shortages will exist in EU
ETS III
EU Commission 2050 Roadmap for Low
Carbon Economy suggests higher GHG
emission reduction target (80%)
Currently available technologies in the steel sector do not allow
further reduction of CO2 emissions  the EU ETS system is not an
incentivizing but a penalizing system
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Energy market
Steel industry needs a market that warrants, in the longterm, at least for base-load consumption:
Competitive electricity prices  sustainable global
competitiveness for European industry
Security of supply for continuous power delivery
The rights to conclude long-term bilateral contracts
(cost +) warranting visibility for investments
To avoid abnormal “windfall profits” from generators
Avoid direct and indirect CO2 impact for carbon leakage
industry
Need for a market that is capable of delivering competitive
prices adapted to steel industry needs
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Commercial Policy and R & D
Access to raw materials (iron ore; coal) at reasonable cost is essential
ArcelorMittal supports EU three pillar approach to raw materials, including
focus on recyclability
EU should adopt trade defence measures to oppose unfair trade practices and
ensure international level playing field
Focus on industry driven initiatives and link with 2020 program  Concept
of a Common Strategic Framework (one stop shop)
Strong funding for breakthrough technologies (e.g. ULCOS)
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Summary
Steel industry faces several challenges
Challenges
• Unpredictability of the market
• Volatility of raw material prices
• Climate Change responsibility 
CO2 allowances
Mitigations
•Adequate market intelligence and trading
capability  need to find value-generating niches
•Implementation of varied sourcing and sales
models  flexibility:
Raw-material sourcing optimization
• Increasing energy costs
Capacity & Inventory management
• Shift of consumption and
production from traditional to
emerging markets
High level of end-to-end value-chain
• European competitiveness
threatened by lack of level playing
field
• Risk of sudden import surge from
outside EU
•Long term adaptive strategy  diversifiedcapacity networks, resource adaption and lean
management, cutback and subsequent use of
external services
•Focus on innovation (R&D): improving profitability
and fueling growth
•Rigid system  quality
Source: BCG Dec 2010
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Thank you!!!
Copyright © ArcelorMittal
Sanjay Samaddar
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