Sifting Through the Steel Scrap- Heap - OECD.org - … 7.1 WSD.pdf06/12/2013 1 Sifting Through the...
Transcript of Sifting Through the Steel Scrap- Heap - OECD.org - … 7.1 WSD.pdf06/12/2013 1 Sifting Through the...
06/12/2013
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Sifting Through the Steel Scrap-
Heap
OECD Steel Committee
December 6, 2013
AGENDA
Global steel demand and demographics of output
determine the future demand for steel scrap
Steel scrap – the key industry structure “Wildcard”
Q & A
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Unbalanced Global Steel
Demand & Output
Why Will Chinese Steel
Demand Stagnate?
1. Unsustainable apartment construction.
2. FAI in the Chinese West lower economic multiplier
3. Rise in “shadow” loans a danger sign.
4. Municipalities have huge debt.
5. Higher household spending cuts steel intensity.
6. 200 million new urban jobs?
7. Not much net export growth. Strong RMB.
8. Rebar and HRB used far more efficiently.
9. Steel intensity at peak with FAI at 50% of GDP
10. Air & water pollution and water constraints.
11. Capital spending by heavy industry to plummet. 4
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BRIC’s are BRICKS
Sharply lower steel production estimates for
2025
Brazilian forecast cut 32% to 42.5 mmt.
CIS (Russian) forecast cut 28% to 122.7 mmt.
India forecast cut 30% to 115 mmt.
China forecast reduced 12% to 861 mmt.
MENA (increasingly self-sufficient) up 34% to 67 mmt.
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2013e2013/2012
y/y2014e
2014/2013
y/y
CAGR
2008-
2014
2025e
CAGR
2015-
2025
Gross
Capacity
2013
2025
Capacity
2013
Capacity
Utilization
2025
Capacity
Utilization
Advanced Countries 452 -2.4% 464.6 2.7% -0.9% 542 1.3% 599 609 75.5% 89.0%
Japan 108.8 1.5% 110.2 1.3% -1.2% 121.1 0.9% 134.0 141.0 81.2% 85.9%
Western Europe 136.3 -3.0% 140.4 3.0% -2.5% 162.3 1.2% 199.7 179.7 68.3% 90.3%
United States 87.0 -1.9% 89.5 2.9% -0.4% 110.0 1.8% 113.0 125.0 77.0% 88.0%
Small Cap. Adv. 120.2 -5.2% 124.5 3.5% 1.0% 148.2 1.5% 152.8 162.8 78.7% 91.1%
China 780 6.7% 800 2.6% 8.1% 861 0.6% 927 977 84.2% 88.1%
Developing World ex-China 362 -1.5% 370 2.14% 1.6% 496 2.6% 499 621 72.6% 79.9%
Africa 6.8 -7.9% 7.2 7.1% -2.6% 10.0 2.8% 14.1 16.6 47.8% 60.1%
Brazil 33.4 -3.6% 34.0 1.7% 0.1% 42.5 2.0% 46.0 54.9 72.7% 77.5%
CIS 106.6 -4.4% 108.3 1.6% -1.0% 122.7 1.2% 167.0 176.3 63.8% 69.6%
Eastern Europe 12.9 -9.4% 13.4 4.1% -5.2% 17.0 2.0% 19.6 23.6 65.8% 71.9%
Developing Asia 21.7 1.6% 22.4 2.8% 1.3% 40.6 5.2% 29.4 51.7 73.9% 78.5%
India 79.8 3.9% 79.3 -0.6% 6.3% 114.9 3.3% 98.0 132.0 81.4% 87.0%
Latin America 31.2 -1.6% 32.9 5.3% 0.5% 46.8 2.8% 39.2 52.0 79.7% 90.0%
Turkey 34.1 -4.9% 34.6 1.5% 4.4% 34.5 -0.2% 40.3 40.3 84.6% 85.7%
MENA 35.5 3.9% 37.7 6.3% 6.9% 66.7 5.5% 45.1 73.1 78.6% 91.2%
World Total 1,594 2.1% 1,634 2.5% 3.5% 1,898 1.3% 2,025 2,206 78.7% 86.1%
World Ex-China 814 -2.0% 834 2.5% 0.2% 1037.3 1.9% 1,098 1,229 74.2% 84.4%
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Global Steel in the Decade Ahead:
Continued Slow Growth
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AGENDA
Global steel demand and demographics of output determine
the future demand for steel scrap
Steel scrap – the key industry structure “Wildcard”
Q & A
8
Steelmakers’ Metallics
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9
Global Steel Scrap Demand
0.00
0.20
0.40
0.60
0.80
1.00
1.20
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100
200
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500
600
700
800
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Obsolete Scrap Usage Ratio (RHS)
Obsolete Scrap Requirement (LHS)
New Scrap Usage (LHS)
Home Scrap Usage (LHS)
10 Since 2000, global steel scrap trade has increased 40 million tonnes to 99 million tonnes in 2012.
The Developing World and China have accounted for 26, or 65%, of new global demand.
Demand for imported steel scrap
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30
45
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mil
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etr
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Global Exports of Steel Scrap
Developing World Imports of Steel Scrap
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11 Turkey has become the world’s largest importer of steel scrap, accounting for 23% of imports in
2012. Combined the top 10 scrap importing countries account for 75% of global trade.
Top Importers of Steel Scrap:
2005 versus 2012
0
5
10
15
20
25
Turkey South Korea India Bellux Germany China Italy Taiwan Spain UnitedStates
Imp
ort
s (
millio
ns o
f to
nn
es)
2012 2005
12 In 2012, total global trade of steel scrap was 100 million tonnes, of which the United States
accounted for 21%. The top 10 exporters of scrap account for 76% of all exports.
Top Exporters of Steel Scrap:
2005 versus 2012
0
5
10
15
20
25
United States Germany Japan UnitedKingdom
France Netherlands Russia Canada Bellux
Ex
po
rts
(m
illi
on
s o
f to
nn
es)
2012 2005
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Global Steel Scrap Supply
0
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12000
1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
mill
ion
me
tric
to
nn
es
Global Scrap Reservoir 1940-2010
Advanced Economies
Developing World ex-China
China
Advanced and Industrialized Developing Economies have been the dominant source of steel
scrap supply growth in the past 30+ years. In 2012, 82% of all scrap exports originated from
Advanced Countries
14
The Global Metallics Balance system calculates that China’s steel scrap reservoir that is 10-40
years old will expand from 12.1 billion tonnes in 2012 to 25.4 billion tonnes in 2035. By 2035,
China’s steel scrap reservoir may account for 49% of the global reservoir versus 16% in 2013.
Chinese Obsolete Scrap: Are you ready for arrival?
0
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2012
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2035
China
Developing World ex-China
Advanced Countries
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15 When net-exports of steel scrap are accounted for as a part of Advanced Country obsolete steel
scrap demand, a significantly “tighter” supply-demand balance of steel scrap is implied.
Advanced Country Steel Scrap Surplus Not
as Abundant at Second Glance
150
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Trade Adjusted Obsolete Scrap Demand
Average Scrap Reservoir 10-40 Years Old
16 WSD assumes three sources of obsolete steel scrap: automotive (avg. age 5-15 yrs.), appliances
(avg. age 10-15 yrs.), and structural steel and capital equipment (avg. age 20-60 yrs.)
USA Steel Scrap Reservoir
Demographics
0
10
20
30
40
50
60
70
1980 1985 1990 1995 2000 2005 2010 2011 2012 2013e 2014e 2015e 2016e 2017e
Auto Appliances Structural/Capital Equipment
mil
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n m
etr
ic t
on
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s
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17 WSD’s alternative scrap calculation methodology implies a constant replenishment of the US
reservoir due to the continued cycle of consumer durables into the scrap reservoir.
USA Reservoir Comparison
18
Chinese steel consumption allocated to autos and appliances accounted for about 4% of steel
consumption in 2012 versus approximately 27% in the United States. The size of the Chinese
reservoir is largely a function of the “lifespan” of structural steels and capital equipment.
Chinese Steel Scrap Supply Demographics
0
20
40
60
80
100
120
1980 1985 1990 1995 2000 2005 2010 2013e 2014e 2015e 2020e 2025e
Auto Appliances Structural/Capital Equipment
millio
n m
etr
ic t
on
nes
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19
Assuming that the avg. age of structural steel and capital equipment is 20-60 years old, WSD’s
calculations imply a scrap deficit of 38 million tonnes in 2013, 30 mmt in 2015 and a surplus of
steel scrap of 20 mmt in 2025.
Chinese Steel Scrap Supply-Demand:
Obsolete Scrap Reservoir (20-60 yrs. old assumption)
0
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millio
n m
etr
ic t
on
nes
Average Reservoir 10-40 Years Old
Obsolete Scrap Demand
Segmented Reservoir Calculation 20-60 year old assumption
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Assuming that the avg. age of structural steel and capital equipment is 15-45 years old, WSD’s
calculations imply a scrap deficit of 26 million tonnes in 2013, 17 mmt in 2015 and a surplus of
steel scrap of 72 mmt in 2025.
Chinese Steel Scrap Supply-Demand:
Obsolete Scrap Reservoir (15-45 yrs. old assumption)
0
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Average Reservoir 10-40 Years Old
Obsolete Scrap Demand
Segmented Reservoir Calculation 15-45 year old assumption
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21
WSD forecasts the global surplus of steel scrap will rise from 14 million tonnes in 2013 to 104
mmt in 2025. Assuming the avg. age of structural/capital reservoir China is 15-45 years old,
China accounts for 69% of the surplus in 2025.
Global Steel Scrap Supply-Demand Forecast
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etr
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nes
Obsolete Scrap Reservoir
Obsolete Scrap Reservoir
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What does it all mean?
Initial fork in the road is a policy matter: Steel scrap currently has a 40% export duty
Precedent based on revocation of the 40% export duty on coke
Assuming the “excess” scrap is contained in China: Oversupply = price decline = stimulus for substitution to the degree
possible
Increased consumption in the BOF
Increased EAF output – energy grid a constraint, good for “green” policy targets
Assuming the “excess” scrap is available to the global market: Oversupply = price decline = stimulus for substitution to the degree
possible
Increased consumption in the BOF unlikely
Temporary cost advantage for the EAF industry possible, other upstream sectors affected
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Thank You