A Decade of “Pain” to follow a Decade of “Gain?” CANACERO September 11, 2013 Four Mega-Trends Will Determine the Outlook Slower demand growth, economic uncertainty, overcapacity and increased competition are likely to result in a difficult environment for the steel industry through 2015-2017 and perhaps beyond. Chinese steel demand growth an increasingly important “wildcard.” End of steel’s “Age of Metallics” “Flattened” cost curve exacerbating the competition for the last tonne and delaying output cuts by steel mills. Currency weakness in Developing World ex-China adding a new wrinkle. Is anyone prepared for the massive avalanche of Chinese steel scrap in the decade ahead, along with the accompanying ramifications on the global industry structure? Unbalanced Global Steel Demand & Output Fixed Asset Investment = Key Driver of Steel Demand China versus United States in 2010: Economic Indices versus Apparent Steel Consumption China United States % of ASC ASC/GDP mt/bil.USD bil.USD % of GDP ASC Ratio: China/USA bil.USD % of GDP ASC % of ASC ASC/GDP mt/bil.USD Gross Fixed Capital Formation 2,877 48.7% 563 93.4% 0.1957 1,756 12.0% 68 74.7% Non Residential GFCF ASC 0.0387 1.64 8.28 8.10 2,049 34.6% 413 68.5% 0.2016 1,366 9.3% 51 56.0% 0.0373 1.50 Commercial and Health Care 23 0.4% 3 0.5% 0.1281 92.8 0.6% 4 4.4% 0.0431 0.25 0.75 Industrial Equipment 286 4.8% 90 14.9% 0.3151 160.7 1.1% 3 3.3% 0.0187 1.78 30.00 Information Processing 28 0.5% 3 0.5% 0.1053 600.1 4.1% 1 1.1% 0.0017 0.05 3.00 M anufacturing 888 15.0% 175 29.0% 0.1970 41.8 0.3% 16 17.6% 0.3828 21.25 10.94 M ining Exploration, Shafts and Wel 115 1.9% 23 3.8% 0.1999 105.8 0.7% 4 4.4% 0.0378 1.09 5.75 Power and Communication 153 2.6% 26 4.3% 0.1700 84.1 0.6% 7 7.7% 0.0832 1.82 3.71 Transportation 332 5.6% 71 11.8% 0.2142 113 0.8% 11 12.1% 0.0973 2.93 6.45 Other Equipment 223 3.8% 22 3.6% 0.0985 167.2 1.1% 5 5.5% 0.0299 1.34 4.40 Residential 829 14.0% 150 24.9% 0.1810 390 2.7% 17 18.7% 0.0436 2.12 8.82 Housing- all but social 652 11.0% 120 19.9% 0.1840 126.6 0.9% 12 13.2% 0.0948 5.15 10.00 Social housing 34 0.6% 5 0.8% 0.1471 Other structures 143 2.4% 25 4.1% 0.1754 263.8 1.8% 5 5.5% 0.0% 0.0190 0.54 5.00 Household consumption 2,158 36.5% 38 6.3% 0.0176 10,350 70.6% 24 26.4% 0.0023 0.21 1.58 Auto and parts 300 5.1% 20 3.3% 0.0667 343 2.3% 18 19.8% 0.0525 0.87 1.11 Appliance and furnishings 94 1.6% 12 2.0% 0.1277 260 1.8% 3 3.3% 0.0115 0.36 4.00 Others 1,764 29.8% 6 1.0% 0.0034 9,747 66.5% 3 3.3% 0.0% 0.0003 0.18 2.00 Government consumption 693 11.7% 1 0.2% 0.0014 3,005 20.5% 1 1.1% 0.0% 0.0003 0.23 1.00 Net export 186 3.1% 1 0.2% 0.0054 -452 -3.1% -2 -2.2% 0.0044 -0.41 -0.50 5,914 1,341 115 4,410 450 86 100.0% 603 100.0% 0.1020 14,660 100.0% 311 6 47,138 293 19 91 100.0% 0.0062 0.40 4.31 19.17 0.09 1.54 4.45 6.63 Total GDP or ASC Population Million persons Total rebar consumption ( mil.t) GDP per capita (US$ / person) ASC per capita (kg / person) Rebar Consu. per capita (kg / person) *: Detailed Chinese GFCF figures are based on FAI figures reduced by 30% to made them comparable with reported GFCF as a share of GDP. Source: WSD estimates, preliminary Chinese Steel Intensity for FAI and Household Consumption 0.1000 0.0075 0.0070 0.0900 0.0065 Steel intensity of GFCF on real GDP base (left axis) 0.0800 0.0060 0.0055 0.0700 Intensity of consumption and net export on real GDP base (right axis) 0.0050 0.0600 0.0045 0.0040 0.0500 0.0035 0.0400 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 5 2012e 2013e 2014e 2015e 2016e 2017e 2018e 2019e 2020e 0.0030 Don’t Underestimate the Power of the “FAI Flywheel” 6 Global FAI vs. Apparent Steel Consumption 12,000 11,625 1,450.00 11,250 1,400.00 10,875 1,350.00 10,500 1,300.00 10,125 1,250.00 9,750 1,200.00 9,375 1,150.00 9,000 1,100.00 8,625 1,050.00 8,250 1,000.00 Apparent Consumption of Steel Products (Right) 7,875 Apparent Consumption of Stel Products (million metric tonnes) Fixed Asset Investment (billion USD) 1,500.00 Fixed Asset Investment (Left) 950.00 Source: IMF, OECD, WSD Estimates 2012e Q4 2012e Q3 2012e Q2 2012e Q1 2011 Q4 2011 Q3 2011 Q2 2011 Q1 2010 Q4 2010 Q3 2010 Q2 2010 Q1 2009 Q4 2009 Q3 2009 Q2 2009 Q1 2008 Q4 2008 Q3 2008 Q2 2008 Q1 2007 Q4 2007 Q3 2007 Q2 2007 Q1 2006 Q4 2006 Q3 2006 Q2 2006 Q1 2005 Q4 2005 Q3 2005 Q2 2005 Q1 2004 Q4 2004 Q3 2004 Q2 900.00 2004 Q1 7,500 7 2012e Q4 2012e Q3 2012e Q2 2012e Q1 2011 Q4 2011 Q3 2011 Q2 2011 Q1 2010 Q4 2010 Q3 2010 Q2 2010 Q1 6,000 2009 Q4 2009 Q3 2009 Q2 2009 Q1 2008 Q4 2008 Q3 2008 Q2 2008 Q1 2007 Q4 2007 Q3 8,250 2007 Q2 2007 Q1 2006 Q4 2006 Q3 2006 Q2 2006 Q1 2005 Q4 2005 Q3 2005 Q2 2005 Q1 2004 Q4 2004 Q3 2004 Q2 8,500 Fixed Asset Investment (Left) 8,000 475.00 7,750 450.00 7,500 425.00 7,250 400.00 7,000 375.00 6,750 350.00 6,500 325.00 6,250 300.00 Apparent Consumption of Steel Products (Right) 275.00 5,750 250.00 5,500 225.00 Apparent Consumption of Stel Products (million metric tonnes) 2004 Q1 Fixed Asset Investment (billion USD) Advanced Countries FAI v. ASC (Absolute Figures) 525.00 500.00 8 2012e Q4 2012e Q3 2012e Q2 2012e Q1 2011 Q4 2011 Q3 2011 Q2 2011 Q1 2010 Q4 2010 Q3 2010 Q2 2010 Q1 1,800 2009 Q4 2009 Q3 2009 Q2 2009 Q1 2008 Q4 2008 Q3 2008 Q2 2008 Q1 2007 Q4 2007 Q3 2007 Q2 2007 Q1 2006 Q4 2006 Q3 2006 Q2 2006 Q1 2005 Q4 2,800 2005 Q3 2005 Q2 2005 Q1 2004 Q4 2004 Q3 2004 Q2 2,900 Fixed Asset Investment (Left) 2,700 350.00 2,600 340.00 2,500 330.00 2,400 320.00 2,300 310.00 2,200 300.00 2,100 290.00 2,000 280.00 1,900 270.00 Apparent Consumption of Steel Products (Right) 260.00 1,700 250.00 1,600 240.00 9 Apparent Consumption of Stel Products (million metric tonnes) 2004 Q1 Fixed Asset Investment (billion USD) Developing World ex-China FAI vs. ASC 370.00 360.00 2012e Q4 2012e Q3 2012e Q2 2012e Q1 2011 Q4 2011 Q3 2011 Q2 2011 Q1 2010 Q4 2010 Q3 2010 Q2 2010 Q1 2009 Q4 2009 Q3 2009 Q2 2009 Q1 2008 Q4 2008 Q3 2008 Q2 2008 Q1 2007 Q4 $1,800 2007 Q3 2007 Q2 2007 Q1 $600 2006 Q4 $700 2006 Q3 2006 Q2 2006 Q1 2005 Q4 2005 Q3 2005 Q2 2005 Q1 2004 Q4 2004 Q3 2004 Q2 $2,000 700 $1,900 670 Steel Products Apparent Consumption (Right) $1,700 610 $1,600 580 $1,500 550 $1,400 520 $1,300 490 $1,200 460 $1,100 430 $1,000 400 $900 370 $800 340 Fixed Asset Investment (Left) 310 280 $500 250 10 Apparent Consumption of Stel Products (million metric tonnes) 2004 Q1 Fixed Asset Investment (billion USD) China FAI v. ASC (Absolute Figures) 640 Chinese Construction Market “House of Cards?” Chinese Construction Market “House of Cards?” China FAI Long-Term Outlook Increased consumption (and reduced FAI) as a share of GDP likely to mean much slower steel demand growth (outright contraction??) 13 India v. China Minimizing Potential Indian GDP Components 2008-2012 Consumer GDP Price Savings Investment (% y/y) Inflation (%GDP) (%GDP) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 3.9% 4.6% 6.9% 7.7% 9.0% 9.4% 10.1% 6.2% 5.0% 11.2% 7.7% 4.0% 4.0% 3.8% 4.3% 3.8% 3.8% 4.2% 6.2% 6.4% 8.3% 10.9% 12.0% 8.9% 9.3% Source: IMF, WSD Estimates 23.3% 22.9% 25.3% 27.6% 31.4% 32.9% 34.2% 37.0% 32.2% 34.9% 33.7% 31.9% 29.8% 24.2% 22.6% 23.9% 26.1% 31.2% 34.2% 35.3% 37.7% 34.6% 37.0% 36.9% 35.3% 34.9% Investment (% Change y/y) Steel Demand (% y/y) -3.1% 10.7% 16.6% 28.8% 19.4% 12.7% 17.7% -2.4% 12.2% 11.0% 3.1% 2.8% 0.7% 4.1% 6.6% 4.2% 51.2% 6.8% 12.9% 0.4% 26.4% 4.1% 9.2% 0.3% India v. China Minimizing Potential 700 60.0% 600 50.0% 500 400 30.0% 300 20.0% 200 10.0% 100 0 0.0% 2001 2002 2003 China Steel Dmnd 2004 2005 2006 India Steel Demand 2007 2008 2009 China FAI (rhs) 2010 2011 India FAI (rhs) % GDP Million Tonnes 40.0% India v. China Minimizing Potential 60.0% 160 140 50.0% 120 40.0% 30.0% 80 60 20.0% 40 10.0% 20 0.0% 0 2001 2002 2003 2004 2005 India Steel Dmnd @ China Growth Rate 2006 2007 India Steel Demand 2008 2009 2010 China FAI (rhs) 2011 India FAI (rhs) % GDP Million Tonnes 100 Global Steel in the Decade Ahead: Continued Slow Growth 17 Four Mega-Trends Will Determine the Outlook Slower demand growth, economic uncertainty, overcapacity and increased competition are likely to result in a difficult environment for the steel industry through 2015-2017 and perhaps beyond. Chinese steel demand growth an increasingly important “wildcard.” End of steel’s “Age of Metallics” “Flattened” cost curve exacerbating the competition for the last tonne and delaying output cuts by steel mills. Currency weakness in Developing World ex-China adding a new wrinkle. Is anyone prepared for the massive avalanche of Chinese steel scrap in the decade ahead, along with the accompanying ramifications on the global industry structure? Global Steel Production & Methodology: China Driving the “Bus” 1200 166 1000 151 800 267 136 209 600 300 140 +31% 400 +19% 690 289 183 164 104 527 152 444 200 +43% 182 181 209 147 183 0 2003 2007 2009 2013f 39 44 49 2003 2007 2009 BOF 80 2013f EAF China Advanced Developing China’s prodigious and rapid growth via the BF/Integrated route changed the landscape of global steel production 19 Global Iron Ore Demand ∆ = 697 Million tonnes 2750 Δ= 307 Million Tonnes 2500 Δ= 703 Million Tonnes 2250 2000 519 445 1750 409 409 408 397 1500 407 416 365 442 398 1250 414 409 396 1000 309 357 439 750 500 432 874 925 2009 2010 1,010 1,047 2011 2012 1,125 1,177 1,211 2013 2015 2020 751 250 341 0 2003 2007 China Advanced Developing Global iron ore demand has increased 703 million tonnes since 2003, of which China has accounted for 669 million tonnes (95%). 20 Chinese Iron Ore Supply 1200 1000 361 323 Million Metric Tonnes 800 264 600 368 306 305 323 284 400 628 209 193 200 149 0 70 142 92 161 111 148 208 275 326 383 619 687 735 444 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Imports Production Domestic production has increased 7.7% CAGR since 2000, while imports have grown 22% CAGR and account for 61% of the total requirement. 21 Iron Ore Price and Demand 1300 $230 Average Annual Price of Iron Ore Delivered to Hebei Province $210 1100 $190 1000 $170 900 $150 800 $130 Iron Ore Price Trendline 700 $110 600 $90 Chinese Iron Ore Demand 500 $70 2015 2014 2013 2012 2011 2010 2009 2008 2007 $30 2006 300 2005 $50 2004 400 2003 USD per Tonne Million Metric Tonnes 1200 While Chinese demand increased 198% (14.6% CAGR) since 2003, the price of ore delivered to China has increased 293% (18.7% CAGR). 22 Capacity Expansion Pipeline Running Away from Demand 2013 Upcoming Iron Ore Projects (million tonnes) Region Project Status Gross Capacity CIS Closed, reopen/plans Feasibility North America Construction Feasibility Operating, exp/constr Operating, exp/plans Oceania Conceptual Construction Feasibility Operating, exp/constr Operating, exp/feasib South America Conceptual Construction Feasibility Operating, exp/constr Operating, exp/plans Prefeasibility Operating 3.5 3.5 7.5 5.0 2.5 32.0 7.0 3.0 8.0 14.0 137.8 15.0 63.0 15.0 1.8 43.0 147.5 10.0 19.5 19.5 42.0 4.1 50.0 2.4 Under Construction/Operating Conceptual/Prefeasibility/Feasibility Operating Expansion-Planning Stage Closed-Reopen Plans Grand Total 147.2 158.0 18.1 5.0 328.3 Construction Europe Source: UNCTAD & WSD estimates 2014 Upcoming Iron Ore Projects (million tonnes) Region Project Status Europe Gross Capacity Conceptual Feasibility Operating, exp/constr Operating, exp/plans South America Operating, exp/plans Feasibility Operating, exp/constr 9.5 2 7.5 112.8 15 80.8 14 3 61.3 10 24 27.3 Under Construction/Operating Conceptual/Prefeasibility/Feasibility Operating Expansion-Planning Stage Closed-Reopen Plans Grand Total 41.3 119.8 13.0 9.5 183.6 Closed, reopen/plans Closed, reopen/plans Oceania Source: UNCTAD & WSD estimates 23 Chinese Domestic Iron ore Production Cost Chinese Iron Ore Cost Curve (Normalized to 62% Fe) $180 $160 $140 Dollars per tonne $120 $100 $80 $60 $40 $20 Source: WSD World Iron Ore Cost Curve 500 450 400 350 300 250 200 150 100 50 0 $0 Cumulative Capacity (Million Tonnes) Chinese “high-cost” production may amount to only ~75 million tonnes – figure that is easily displaced by lower-cost imported material a 24 Global Iron ore Production Cost World Iron Ore Cost Curve (normalized 62% Fe) $180 The cost curve database includes for nonChina, 45 operating and 10 planned mines with a total capacity of 864 million tonnes, FOB the port of export; and for China, 45 individual mines, 10 steel-mill-weighted average cost mines and 21 provincial composite cost mines,FOB mine. The combined capacity of all the Chinese mines is 438 million tonnes. $160 $140 Dollars per tonne $120 $100 $80 $60 $40 $20 Source: WSD World Iron Ore Cost Curve 1,400 1,200 1,000 800 600 400 200 0 $0 Cumulative Capacity (Million Tonnes) Chinese “high-cost” production may amount to only ~75 million tonnes – figure that is easily displaced by lower-cost imported material a 25 Four Mega-Trends Will Determine the Outlook Slower demand growth, economic uncertainty, overcapacity and increased competition are likely to result in a difficult environment for the steel industry through 2015-2017 and perhaps beyond. Chinese steel demand growth an increasingly important “wildcard.” End of steel’s “Age of Metallics” “Flattened” cost curve exacerbating the competition for the last tonne and delaying output cuts by steel mills. Currency weakness in Developing World ex-China adding a new wrinkle. Is anyone prepared for the massive avalanche of Chinese steel scrap in the decade ahead, along with the accompanying ramifications on the global industry structure? Wide Disparities between the “Haves” & “Have Nots” Pig Iron / Hot Metal Average Production Cost by Region 700 600 500 Energy Credit Energy Other 300 Labor 200 Scrap Iron Ore 100 Coal/Coke 0 Global Average USA Integrated Latin America South Korea Japan India Western Europe Eastern Europe CIS China Brazil -100 Australia $ per tonne 400 Despite rising I.O. and coal costs, Indian producers are well-positioned to remain among the lowest cost well into the future 27 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Percent Stronger US Dollar to Have Numerous Ramifications USA Trade-Weighted Dollar Value 130 6 years 120 10 years 6 years Source: Bloomberg 7 years 110 9 years WSD estimate 100 90 80 28 WSD’s World Cost Curve for Hot-rolled Band (Including overhead) $850 $800 August 2011 $750 $700 August 2012 USD per Metric Tonne $650 $600 August 2012 $550 $500 $450 $400 $350 $300 0 50 100 150 200 250 300 350 400 450 500 550 600 650 Cumulative Capacity (million metric tonnes) Flattening of the cost curve promotes increased competition and delays production cutbacks 29 when the price plummets below the marginal cost of the high-cost producer World ex-China Hot-rolled Band (Including overhead) $900 $850 $800 August 2011 $750 USD per Metric Tonne $700 $650 August 2012 $600 August 2013 $550 $500 $450 $400 $350 $300 0 50 100 150 200 250 300 350 400 450 500 Cumulative Capacity (million metric tonnes) WSD’s World Cost Curve has flattened substantially since the peak cost period in July 2011. 30 China Hot-rolled Band (Including overhead) $750 August 2011 $700 USD per Metric Tonne $650 $600 August 2012 $550 August 2013 $500 $450 $400 0 20 40 60 80 100 120 140 160 Cumulative Capacity (million metric tonnes) Despite a decline in costs from recent peaks, Chinese producers remain in a difficult position 31 Four Mega-Trends Will Determine the Outlook Slower demand growth, economic uncertainty, overcapacity and increased competition are likely to result in a difficult environment for the steel industry through 2015-2017 and perhaps beyond. Chinese steel demand growth an increasingly important “wildcard.” End of steel’s “Age of Metallics” “Flattened” cost curve exacerbating the competition for the last tonne and delaying output cuts by steel mills. Currency weakness in Developing World ex-China adding a new wrinkle. Is anyone prepared for the massive avalanche of Chinese steel scrap in the decade ahead, along with the accompanying ramifications on the global industry structure? Chinese Scrap Overload 33 Steelmakers’ Metallics 34 Global Steel Scrap Demand 800 1.20 700 1.00 Obsolete Scrap Usage Ratio (RHS) 600 0.80 500 Obsolete Scrap Requirement (LHS) 400 0.60 300 New Scrap Usage (LHS) 0.40 200 0.20 100 Home Scrap Usage (LHS) 0 0.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Obsolete steel scrap demand was 358 million tonnes in 2011 and the recovery rate was the highest on record. In 2012, the obsolete scrap requirement was flat at 358 million tonnes implying a 0.94 recovery rate from the obsolete scrap reservoir 35 that is on average 10-40 years old. Global Steel Scrap Supply Global Scrap Reservoir 1940-2010 12000 China 10000 million metric tonnes 8000 Developing World ex-China 6000 4000 Advanced Economies 2000 0 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Advanced and Industrialized Developing Economies have been the dominant source of steel 36 scrap supply [growth] in the past 30+ years Global Steel Scrap: Price versus Recovery Ratio 500 450 2012 2011 2008 400 Shredded Scrap USD per Gross Ton 350 2010 300 2007 2004 250 2005 2006 2009 200 150 2003 2000 100 2002 2001 50 0.950 0.925 0.900 0.875 0.850 0.825 0.800 0.775 0.750 0.725 0.700 0 Ratio: Trade Adjusted Obsolete Scrap Usage to Average Reservoir 10 -40 years old WSD analysis indicates that the obsolete scrap recovery rate and the price of shredded scrap price 37 are highly correlated with a 0.90 coefficient of correlation. 2013 Metallics Requirements Global Metallics Balance Summary: 2013 (million metric tonnes) Total Metallics Pig Iron DRI/HBI Req' Total Scrap Req' Obsolete Scrap Iron Ore Req' Advanced Countries Japan Western Europe United States Small Cap. Adv. 551 130 164 112 145 266 83 74 35 73 5.6 0.1 2.0 2.2 1.3 280 47 87 75 70 213 174 26 54 52 42 48 398 137 105 45 109 China 953 706 1.7 245 68 1,125 Developing World Ex-China Africa Brazil CIS Eastern Europe Developing Asia India Latin America Turkey MENA 447 8 42 134 16 27 101 37 40 40 174 4 21 73 6 2 45 9 11 3 67.1 1.2 0.2 3.2 0.0 3.1 23.9 10.1 0.3 25.0 206 3 21 58 10 22 32 18 29 12 107 1 13 33 6 11 8 9 22 3 409 10 33 144 9 7 110 33 16 46 1,951 1,146 74.4 730 349 1,931 World Total 38 2025 Metallics Requirements Total Metallics Pig Iron DRI/HBI Req' Advanced Countries Japan Western Europe United States Small Cap. Adv. China Developing World Ex-China Africa Brazil CIS Eastern Europe Developing Asia India Latin America Turkey MENA World Total Total Scrap Req' Obsolete Scrap Iron Ore Req' 665 146 197 143 179 310 100 85 35 90 17.2 0.2 3.2 11.3 2.7 338 46 108 96 87 213 202 22 65 66 50 48 470 162 119 56 134 1,045 760 21.6 263 67 1,240 606 12 54 154 21 49 145 55 42 75 249 5 35 90 6 18 63 12 12 9 108.3 2.0 0.3 0.9 0.0 4.7 36.5 16.5 0.5 46.8 249 5 18 63 15 26 46 27 30 19 123 3 8 38 10 12 12 15 21 4 608 12 53 177 10 38 160 48 17 93 2,316 1,319 147.1 850 392 2,319 39 Chinese Obsolete Scrap: Supply-Demand Balance 250 200 Million Metric Tonnes Obsolete Scrap Reservoir 10-40 Years Old 150 2025: +150million 2020: +67million 100 2015: +12 million 50 Obsolete Scrap Demand Shift: Scrap Deficit to Scrap Surplus 0 2012 Demand and Reservoir: 63 million tonnes and 57 million tonnes 2025 Demand and Reservoir: 67 million tonnes and 220 million tonnes 40 Chinese Obsolete Scrap: Increase BOF Scrap Ratio from 14.5% to 20% 250 200 Million Metric Tonnes Obsolete Scrap Reservoir 10-40 Years Old 2025: +119 million 150 2020: +51 million 100 Obsolete Scrap Demand 50 Shift: Scrap Deficit to Scrap Surplus 0 2012 Demand and Reservoir: 63 million tonnes and 57 million tonnes 2025 Demand and Reservoir: 101million tonnes and 220 million tonnes 41 Chinese Obsolete Scrap: Increase both EAF share of crude steel production to 20% of all Chinese production 250 200 Million Metric Tonnes Obsolete Scrap Reservoir 10-40 Years Old 2025: +117 million 150 2020: +47 million 100 Obsolete Scrap Demand 50 Shift: Scrap Deficit to Scrap Surplus 0 2012 Demand and Reservoir: 63 million tonnes and 57 million tonnes 2025 Demand and Reservoir: 103 million tonnes and 220 million tonnes 42 Chinese Obsolete Scrap: Increase both EAF and BOF related consumption 250 200 Million Metric Tonnes Obsolete Scrap Reservoir 10-40 Years Old 2025:+89 million 150 2020: +32 million 100 Obsolete Scrap Demand 50 Shift: Scrap Deficit to Scrap Surplus 0 2012 Demand and Reservoir: 63 million tonnes and 57 million tonnes 2025 Demand and Reservoir: 131 million tonnes and 220 million tonnes 43 Chinese Obsolete Scrap: Are you ready for arrival? 30000 25000 20000 China 15000 10000 Developing World ex-China 5000 Advanced Countries 0 2035 2034 2033 2032 2031 2030 2029 2028 2027 2026 2025 2024 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2013 Demand and Annual Reservoir: 68 million tonnes and 57 million tonnes 2035 Chinese Annual Reservoir: 400 million tonnes 44 Thank You 45