Transcript R.Manser - The global steel market in 2030

Metal Expert Europe Steel Trade
Conference 2014
The Global Steel Market
in 2030 –
Larger or Smaller? Fatter or
Thinner?
Roger Manser
(ex-SBB founder/
managing editor)
Kestrelman Ltd
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Structure of presentation
1. What is the big picture? The industrial
revolution, steel and global warming
2. Future economic growth, steel demand and
production:
- business as usual or
- a climate change consistent (CCC)
scenario
3. Conclusions
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The big picture: the industrial
revolution, steel & global warming
 What was the “Industrial
Revolution? An economic
explosion from the 18 century
onwards, which enabled real
incomes to overtake population
expansion, resulting in
exponential GDP rises globally
 A step change in innovation/
technology involving much
greater productive use of coal &
oil, as well as iron, and then steel
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 But with CO2
from burning
fossil fuels as the
by-product
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GDP has driven steel demand:
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And similarly CO2 emissions/year
Steel
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So pictorially,
we move from this in 1750
Thmas Gainsborough. Mr. and Mrs.
Andrews c.1750, NG, London
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to this in 1850
Mrs Elizabeth Tackle: the viaduct at
Bathford c.1850: the end of an era with the
Firefly locomotive travelling above the
stage coach. The bridge, built by Isambard
Kingdom Brunel , was completed in 1841.
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and then this in 1950
The Pond, 1950, L.S Lowry
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and finally this, today
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Where are we in (in terms of world
GDP & steel demand) in 2014? (1)
 Coming out of a large global financial bubble: GDP
growth picking up bit-by-bit
 China’s GDP still growing fast economically (7-7.5%),
but now rebalancing away from investment towards
consumption (NB lower steel growth, but from a much
bigger base)
 Most other emerging markets are also expanding, but
more slowly than in recent years, as lack finance with
China’s raw material imports grow only gradually
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Where are we in (in terms of world
GDP & steel demand) in 2014? (2)
 Infrastructure and construction remain the key users of
steel, powered by economic growth, as in India, Turkey,
Mexico, Korea, Indonesia, Africa etc
 Developed countries are growing too, but in a less steel
intensive way (eg robots, internet, )
 Production overcapacity – continues to put pressure on
finished prices
 Many questions about the pace and direction of future
economic growth, due to climate change and other geopolitical questions
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China producing more crude; the rest of the
world relatively stable (monthly numbers)
t/m
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The future world demand for steel?
Let’s contrast:
 Business as Usual (BAU): 2-3%/yr
growth, the consensus scenario: compares
with 5-10% pre-crisis
 A Climate Change Consistent (CCC):
1%/yr growth – a scenario reflecting lower
GDP growth, less fossil fuel use, and resource/
CO2 constraints in steel production
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Business as Usual: driven by China
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BHP, 2014
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
May 2012
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Vale’s contribution....
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In Contrast: A Climate Change Consistent
(CCC) scenario: much lower rates of
growth in economy & steel demand...
“We can expect growing pressure points
around water, food, and energy scarcity as the
century progresses...Hovering over all of this
is the merciless march of climate change.” –
Christine Lagarde, Managing Director, International Monetary Fund. From her
Richard Dimbleby lecture: February 2014
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Wikipedia, Kestrelman
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(2) China rebalancing
FT, Deutsche Bank, 6/13
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China’s economic growth is becoming less
steel intensive
Steel Ease: China steel demand
2011-2030, Oct 2013
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Some other numbers on China’s lower steel
intensity of economic growth
Period
1996-2000
2001-2005
2006-2010
2011-2015
estimate
Average annual real growth
rates (%)
Investment Consumption GDP
8.8
8.9
8.6
14.6
8.6
9.8
16.4
11.1
11.2
6.5
10.4
7.8
2016-2020 3.2
forecast
Dragonomics, Macquarie
Research 4/14
9.8
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Investment
ratio at end
of period
34
40
46
44
39
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And per unit of GDP output [not per head]
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(3) Other emerging markets suffer from
China’s rebalancing & low savings
Low domestic
savings rates
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(4) Climate change: more renewable
power generation, as CO2 price rises
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Accompanied - perhaps - by less investment in
fossil fuel power generation?
And natural
gas prices: up?
or down?
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And – perhaps - more steel in pipelines for oil,
gas & carbon dioxide (CCS), heat/energy
storage, as well as nuclear power
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(5) Lower steel intensity of GDP/capita
In the CCC
scenario:
Decoupling
of GDP
growth rates
& steel used
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(6) Climate change: less steel
Light-weighting: much
less steel in cars: lower
CO2 emissions/km
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By 2020, less than half the weight of a European
car will be ferrous (vs almost 80% in 2000)
100%
90%
80%
Other metals
70%
Glass
60%
Other materials
50%
Plastic/composites
40%
30%
Aluminium
20%
High/medium strength
steel
Other ferrous
10%
Source: OICA, Taub et al, analysis by Roger Emmott
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2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
0%
Lower growth rates in steel demand
in the coming 20 years likely
 A lower rate of growth (eg 1%) in steel consumption
seems possible, if not probable in the period to 2030
 Steel-making overcapacity will continue, as crude
steel production utilisation rates may well remain low
 Over the next 20 years, concerns about climate
change will increase – [was the fossil-fuelled/steelbased industrial revolution a one-off event?]
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How will steel production react to
climate change?
Global GHG abatement cost curve:
Mckinsey: version 2/EDF
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Less steel from blast furnaces, more
from EAFs in due course
More co-generation from
by-product gases
Less high quality
coking coal:
more substitution
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Steel consumption: less demand and
more alloys
CSC, Taiwan
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Overall Conclusions
 A larger or smaller market? Larger perhaps –
some growth, but not as rapid as with BAU;
 Some say that in tonnage terms, finished steel
consumption might even decline.
 More production from scrap/EAFs; possibly more
from DRI
 Fatter or thinner? A leaner industry: - more
efficient, and producing more alloys, and if so,
maybe lower tonnages and higher values
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Thank You
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