Steel Market Outlook AM/NS Calvert
Agenda ArcelorMittal at a glance USA Steel Market Outlook Global Steel Outlook and Raw Materials Trade Questions 1
The world s leading steel and mining company ArcelorMittal is the world's leading steel and mining company, with around 200,000 employees in more than 60 countries. ArcelorMittal is the leader in all major global steel markets, including automotive, construction, household appliances and packaging, with leading R&D and technology, as well as sizeable captive supplies of raw materials and outstanding distribution networks. An industrial presence in 19 countries exposes the company to all major markets, from emerging to mature. ArcelorMittal values geographical breadth, product diversity and raw materials security. Around 38% of our steel is produced in the Americas, 47% in Europe and 15% in other countries such as Kazakhstan, South Africa and Ukraine. Underpinning all our operations is a philosophy to produce safe, sustainable steel 2
Top Steel-Producing Companies (2015) millions of metric tons ArcelorMittal China Baowu HBIS NSSMC Posco Shagang Ansteel JFE Steel Shougang Tata Steel Shandong Nucor Hyundai Maanshan Thyssenkrup 27 25 23 22 20 19 17 30 33 33 42 46 46 64 95 0 20 40 60 80 100 3
ArcelorMittal Mining portfolio Key assets and projects Canada Baffinland 50% Bosnia Iron Ore 51% Ukraine Iron Ore 95.13% Canada AMMC 85% Kazakhstan Iron Ore USA Iron Ore USA Coal Kazakhstan Coal Mexico Iron Ore Iron ore mine Coal mine Liberia Iron Ore 85% Brazil Iron Ore Geographically diversified mining assets * Includes share of production 4
Strong track record of successful integration Arbed Belgo Bremen Arbed Huta Warsawa Acesita Sonasid Sidmar Aceralia Aristain UCIN Velasco Aceralia CST Belgo Arcelor Brazil Dofasco Usinor Acindar Sacilor Ugine Usinor Cockerill/EkoStahl Trinidad Ispat Intl Hunan Valin Sibalsa Sidbec Hamburg Ruhrort Hochfeld Inland Unimetal Karmet Alfasid Sidex Novahut PHS Hunedoara BH Steel LNM Jones & Laughlin Youngstown Sheet & Tube J&L Republic Bethlehem Lukens LTV Bethlehem ISG Kryvorizhstal Iscor Acme National Steel Weirton Steel Korf Group Georgetown 5/22/2018 5
Steel Consuming Markets The ArcelorMittal Orbit
Steel markets direction in 2018 Auto Residential Construction Non-residential Construction Machinery Appliance Infrastructure Energy Auto growth is in Mexico in 2018. USA market is flat. Non-res construction will add about 1m tons in 2018. After being negative in 2015 and 2016 energy activity is seeing positive demand in 2017 & 2018. 2016 4.9 2017 9.9 2018 11.1 Steel inventories started 2017 at low levels, started to rebuild in Q4, and will continue to rebuild in 2018. Steel Inventories Source: AMUSA analysis
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Average Daily Shipment Rate: Y/Y % Change Flat Roll Plate Pipe & Tube 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% Jan 2014 Apr Jul Oct Jan Apr Jul Oct Jan Apr 2015 2016 Jul Oct Jan 2017 Apr Jul Oct Jan 2018 Shipments Flat Roll Plate Pipe & Tube Mar 2017 2,455 331 222 Mar 2018 2,361 357 211 Diff: Tons 94 26 10 Diff: % 4% 8% 5%
USA apparent steel consumption Short tons % change (in millions) 2013 106 1% 2014 118 12%* 2015 106-11% 2016 101-5% 2017 106 5% 2018 110 4% *About 3 million tons of the 2014 increase was an inventory overbuild due to a late year surge in imports.
Global Markets and Raw Materials AM/NS Calvert
Raw Materials Cost Drivers WSA - Global Apparent Steel Consumption million metric tons ASC ASC % Change Y/Y % Change Y/Y WSA - Global ASC Growth Forecast by Region % Change Y/Y 2017 2018f 2,300 2,200 2,100 2,000 1,900 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1,000 9.2% 1,139 2006 1,218 2007 1,226 0.7% -6.1% 1,151 2008 2009 13.7% 1,308 2010 7.9% 1,412 2011 1.9% 1,439 2012 6.2% 1,528 2013 1,540-2.6% 0.7% 1,500 2014 2015 1.1% 1,516 2016 4.7% 1,587 2017 1.8% 1,616 2018f 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% NAFTA EU28 CIS C&S America* China Global 6.4% 2.5% 6.1% 3.8% 8.3% 4.7% 3.0% 2.0% 2.3% 6.2% 0.0% 1.8% * Central and South America Source: World Steel Association Short Range Outlook (April 2018)
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Coking Coal MBR Jan 2014 2017 YTD $350 $300 $250 $200 $150 $100 93 91 91 76 74 79 $50 Source: MBR 96 194 116 234 301 262 258 186 175 161 155 145 240 240 228 197 203 184 188 165 217 15 188 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Jul-17 Mar-18 Apr-18 HCC 2016 Average 2017 Average 2018 Average Coking Coal Price Premium Hard Coking Coal $/tonne FOB DBCT
Trade AM/NS Calvert
USA Apparent Steel Consumption million of short tons 140 120 100 80 60 40 20 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Drop in ASC in select recessions 1953 22% 1957 22% 1973 23% 1981 27% 2009 41% Source: AISI, AM Marketing 5/22/2018
Manufacturing and Indirect Steel Trade Deficits Sources: U.S. Census (manufacturing trade deficit in $ billions); AISI (indirect steel trade deficit in net tons) $ Billion Net Annual Trade $0 -$100 -$200 -$300 -$400 -$500 -$600 -$700 -$800 -$900 -$1,000 U.S. Manufacturing Trade Deficit Source: U.S. Census *2017 annualized based on data through July 50% 48% 51% 50% 49% 46% 45% 43% 2010 2011 2012 2013 2014 2015 2016 2017 ROW (300) (348) (337) (339) (389) (446) (476) (511) China (298) (325) (349) (341) (374) (387) (392) (377) -30 2010 2011 2012 2013 2014 2015 2016 ROW -6.2-7.1 (8.0) -8.2-10.6-13.2-15.4 The U.S. manufacturing trade deficit is projected at $868 billion in 2017 (based on 7 months of data annualized), a increase of $2 billion from 2016. The U.S. indirect steel trade deficit posted another sizable increase in 2016, climbing to 23.9 million net tons from 21.4 million net tons in 2015. In 2016, China accounted for well over one-third (35.6%) of the total U.S. indirect steel trade deficit. Indirect Steel Deficit Million Net Tons 0-5 -10-15 -20-25 U.S. Indirect Steel Trade Deficit Source: AISI 53% 47% 47% 47% 42% 38% 36% China -5.7-6.3-7.0-7.2-7.7-8.2-8.5 18 18
Weekly US raw steel production Capacity utilization 100% 95% 90% As of 5/5/18 74.8% 85% 80% 75% 70% 65% 60% 55% 50% 45% 40% Weekly Utilization 2011 2012 2013 2014 2015 2016 2017 2018 Source: American Iron & Steel Institute
Steel imports million of short tons/quarter 10 Finished steel imports 9 8 7 6 5 4 3 2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2013 2014 2015 2016 2017 20 Source: Department of Commerce and AISI
Steel imports market share by year 140 120 22% 24% 29% 24% 23% 30% 26% 27% 100 22% 22% 80 60 22% 40 20 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: AISI ASU Finished imports Column1 21
U.S. Flat Roll Imports and Import % of ASC (Carbon Only) 0.30 0.25 0.20 0.15 0.10 0.05 0% 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 Import % of ASC 2013 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2014 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2015 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2016 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2018 Jan Total Monthly Imports (1000s of s.tons) Imports (short tons) Import Share of ASC Annual Average (Import % of ASC) Annual Avg 2018 Year 2013 2014 2015 2016 2017 2018 YTD (Mar) Average Import % of ASC 14% 21% 21% 18% 17% 16%
2018 steel imports 23
Trade TPP NAFTA NAFTA local content rule VAT Other ally duty 232 Exemptions granted to Canada, Mexico, Australia, Argentina, South Korea, Brazil and the EU. Exemption status will expire as of June 1, 2018, subject to President Trump s review. S. Korea and Brazil have negotiated bi-lateral agreements Trade decisions from 2016 still stand Steel is just a pawn in the larger game of trade 24
Summary In 2017 and 2018 steel markets are seeing expansion after 2 years of contracting Energy is a major contributor to the improvement Raw materials will remain volatile for the next several years Consumer confidence and business confidence are surging since the 2016 election The current administration s policies are focused on creating a strong revival of industrial markets 2016 decisions on trade will continue to limit the impact of imports. The impact of 232 is as yet uncertain. Unlike the last few years the risk is more to the upside than the down side 25