Confidential For the particpants.
World Steel Market
May, 2017
0 Confidential
Introduction of NSSMC
1 Confidential Corporate History
CY1857 CY1897 Japan’s first blast furnace went Sumitomo Cooper Plant was into Operation at Kamaishi. established.
CY2002 Announced alliances among NSC and SMI, Kobe Steel
CY2011 Agreed to commence consideration of merger
October 1, 2012
2 Confidential Overview of NSSMC
NIPPON STEEL & SUMITOMO METAL CORPORATION Trade Name “NSSMC”
Representative Director, Chairman and CEO Shoji MUNEOKA Representative Representative Director, President and COO Hiroshi TOMONO
L o c a t i o n of H e a d O f f i c e Chiyoda-ku, Tokyo, Japan
Foundation Day October 1, 2012
Steelmaking and steel fabrication / Engineering / B u s i n e s s Chemicals / New materials / System solutions
Stated Capital 419.5 bn yen
Fiscal Year End March 31
3 Confidential The World Top-Ten Players by Crude Steel Production
unit:millions of tonnes
2002 2007 2011 2014 2015
vs 2013 vs 2014
1 Arcelor (EU) 44 1 ArcelorMittal (EU) 116 1 ArcelorMittal (EU) 97 1 ArcelorMittal (EU) 98 +2% → 1 ArcelorMittal (EU) 97 -1%
2 LNM Group (EU) 35 2 Nippon Steel (JPN) 36 2 Hebei Group (CHN) 44 2 NSSMC (JPN) 49 -2% ↑ 2 Hesteel Group (CHN) 48 +1%
3 Nippon Steel (JPN) 30 3 JFE (JPN) 34 3 Baosteel Group (CHN) 43 3 Hebei Group (CHN) 47 +3% ↓ 3 NSSMC (JPN) 46 -6%
4 POSCO (KO R) 28 4 POSCO (KO R) 31 4 POSCO (KO R) 39 4 Baosteel Group (CHN) 43 -1% ↑ 4 POSCO (KOR) 42 +1%
5 Shanghai Baosteel (CHN) 20 5 Baosteel (CHN) 29 5 Wuhan Group (CHN) 38 5 POSCO (KO R) 41 +8% ↓ 5 Baosteel Group (CHN) 35 -19%
6 Corus (EU) 17 6 Tata Steel (IND) 27 6 Nippon Steel (JPN) 33 6 Shagang Group (CHN) 35 +1% → 6 Shagang Group (CHN) 34 -3%
7 Thyssen Krupp (EU) 16 7 Anshan-Benxi (CHN) 24 7 Shagang Group (CHN) 32 7 Ansteel Group (CHN) 34 +2% → 7 Ansteel Group (CHN) 33 -5%
8 NKK (JPN) 15 8 Jiangsu Shagang (CHN) 23 8 Shougang Group (CHN) 30 8 Wuhan Group (CHN) 33 -16% ↑ 8 JFE (JPN) 30 -5%
9 Riva (EU) 15 9 Tangshan (CHN) 23 9 JFE (JPN) 30 9 JFE (JPN) 31 +1% ↑ 9 Shougang Group (CHN) 29 -7%
10 US Steel (USA) 14 10 US Steel (USA) 22 10 Ansteel Group (CHN) 30 10 Shougang Group (CHN) 31 -2% ↑ 10 Tata Steel Group (IND) 26 +0%
World Total 904 World Total 1,347 World Total 1,536 World Total 1,670 World Total 1,621 Top 5 Total 156 (17%) Top 5 Total 246 (18%) Top 5 Total 262 (17%) Top 5 Total 279 (17%) Top 5 Total 268 (17% )
Top 10 Total 234 (26%) Top 10 Total 363 (27%) Top 10 Total 417 (27%) Top 10 Total 444 (27%) Top 10 Total 420 (26% ) China 182 (20%) China 490 (36%) China 702 (46%) China 823 (49%) China 804 (50% )
11 Kawasaki (JPN) 14 11 Wuhan Steel Group (CHN) 26 -22%
13 Sumitomo Metal (JPN) 12 20 Sumitomo Metal (JPN) 14 27 Sumitomo Metal (JPN) 13 21 Benxi Steel (CHN) 15 -8%
74 Nisshin Steel (JPN) 4 -6%
source: WSA World Steel in Figures 2016
4 Confidential The World Top-Ten Players by Crude Steel Production
unit:millions of tonnes 2015 2015 (after margers, officially announced and reportd)
vs 2014
1 ArcelorMittal (EU) 97 -1% 1 ArcelorMittal (EU) 97
2 Hesteel Group (CHN) 48 +1% 2 Hesteel Group + Shougang Group (CHN) 76 to be reported
3 NSSMC (JPN) 46 -6% 3 Baosteel Group + Wuhan Steel Group (CHN) 61 official announcement
4 POSCO (KOR) 42 +1% 4 NSSMC + Nisshin Steel (JPN) 50 official announcement
5 Baosteel Group (CHN) 35 -19% 5 Ansteel Group + Benxi Steel (CHN) 47 to be reported
6 Shagang Group (CHN) 34 -3% 6 POSCO (KOR) 42
7 Ansteel Group (CHN) 33 -5% 7 Shagang Group (CHN) 34
8 JFE (JPN) 30 -5% 8 JFE (JPN) 30
9 Shougang Group (CHN) 29 -7% 9 Tata Steel Group (IND) 26
10 Tata Steel Group (IND) 26 +0% 10 Shandong Steel Group (CHN) 22
World Total 1,621 World Total 1,665 Top 5 Total 268 (17% ) Top 5 Total 332 (20% ) Top 10 Total 420 (26% ) Top 10 Total 486 (29% ) China 804 (50% )
11 Wuhan Steel Group (CHN) 26 -22%
21 Benxi Steel (CHN) 15 -8%
74 Nisshin Steel (JPN) 4 -6% source: WSA World Steel in Figures 2016
5 Confidential Location of Steel Mills in Japan NSSMC will develop business in overseas markets based on manufacturing strength of its manufacturing bases in Japan.
Muroran Works Works R & D Laboratory Amagasaki Research Kamaishi and Development Works Oita Works Center Naoetsu Hikari Pipe & Tube Div. Works Amagasaki Works Osak Steel Tokyo Works Kashima Hirohata Works Works Yawata Works Works Hasaki Research and Kokura Works Development Center Kimitsu Nagoya Works Works Oita Works Wakayama Works Research & Engineering Center (Futtsu) Sakai Works 6 Confidential Business Strategy ～ 2017 Mid-Term Plan ～
7 Confidential
Steel Market Update
8 Confidential Crude Steel Production (source : World Steel Association)
[million tonnes] 1.800
▲3%, ▲49 1.600 PR CHINA JAPAN +85%, +766million tonnes INDIA (+7% growth rate per annual) 1.400 USA RUSSIA 823 rest of the World 822 804 1.200 702 717 639 490 512 421 1.000 356 577 273 222 182 800 120 111 116 119 108 107 111 105 112 110 113 53 111 49 74 78 87 108 33 58 81 89 46 98 69 600 29 32 99 91 88 86 89 88 nsteelir2004\Japanese\I 100 95 80 87 79 94 72 92 71 69 64 69 R Material\0411_IR 66 66 67 70 69 72 71 60 61 58 material E_03.ppt 400 60
493 513 492 498 486 479 485 434 450 478 471 467 473 200 389 9
0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 9 5/12/2017 1:48 PM Confidential Crude Steel Production(source : World Steel Association)
unit : million tonnes 2002 2007 2014 2015
WORLD TOTAL 904 △443 (△49%) 1,347 △323 (△24%) 1,670 ▼49 (▼3%) 1,621 ASIA 395 (44%) △362 (△92%) 757 (56%) △322 (△43%) 1,080 (65%) △31 (△3%) 1,110 (67%) EU28 188 (21%) △22 (△12%) 210 (16%) ▼44 (▼21%) 166 (10%) △0 (△0%) 166 (10%) NORTH AMERICA 123 (14%) △10 (△8%) 133 (10%) ▼15 (▼11%) 118 (7%) ▼8 (▼7%) 110 (7%) CIS 101 (11%) △23 (△23%) 124 (9%) ▼16 (▼13%) 108 (7%) ▼7 (▼6%) 102 (6%) others 97 (11%) △26 (△27%) 123 (9%) △76 (△62%) 199 (12%) ▼65 (▼33%) 133 (8%)
TOP 10 countries 641 (71%) △396 (△62%) 1,036 (77%) △354 (△34%) 1,390 (83%) ▼42 (▼3%) 1,348 (83%) 1 PR CHINA 182 (20%) △307 (△169%) 490 (36%) △333 (△68%) 823 (49%) ▼19 (▼2%) 804 (50%) 2 JAPAN 108 (12%) △12 (△12%) 120 (9%) ▼10 (▼8%) 111 (7%) ▼6 (▼5%) 105 (6%) 3 INDIA 29 (3%) △25 (△86%) 53 (4%) △34 (△63%) 87 (5%) △2 (△2%) 89 (6%) 4 USA 92 (10%) △7 (△7%) 98 (7%) ▼10 (▼10%) 88 (5%) ▼9 (▼11%) 79 (5%) 5 RUSSIA 60 (7%) △13 (△21%) 72 (5%) ▼1 (▼1%) 72 (4%) ▼1 (▼1%) 71 (4%) nsteelir2004\Japanese\I 6 KOREA R 45 (5%) △6 (△13%) 52 (4%) △20 (△39%) 72 (4%) ▼2 (▼3%) 70 (4%) R Material\0411_IR 7 GERMANY 45 (5%) △4 (△8%) 49 (4%) ▼6 (▼12%) 43 (3%) ▼0 (▼0%) 43 (3%) material E_03.ppt 8 BRAZIL 30 (3%) △4 (△14%) 34 (3%) △0 (△0%) 34 (2%) ▼1 (▼2%) 33 (2%) 9 TURKEY 16 (2%) △9 (△56%) 26 (2%) △8 (△32%) 34 (2%) ▼3 (▼7%) 32 (2%) 10 UKLAINE 34 (4%) △9 (△26%) 43 (3%) ▼16 (▼36%) 27 (2%) ▼4 (▼15%) 23 (1%) 10 source: WSA World Steel in Figures 2016
10 5/12/2017 1:48 PM Confidential Steel Product Prices / Hot Rolled Coil (HRC) us$1.000
＜Profit and Loss Result of Chinese Steel Companies affiliated with CISA＞ 2016 2013 2014 2015 Q1 Q2 Q3 Q4 Jan-Sep us$900 PL 3.4 4.8 ▲10.1 ▲1.4 3.1 2.0 - 3.9 ROS ＋0.6% ＋0.8% ▼2.2% ▼1.5% ＋2.8% ＋1.8% - ＋1.3% *UNIT：US$ billion (CYN1=US$0.156349)、**CISA：China Iron and Steel Association
us$800
us$700
us$600 USA Sep-16; us$570 EUROPE Oct-16, us$559 (+$160) us$500 Sep-16, us$492 (+$140) CHINA Sep-16, us$491 (+137) HRC prices (World Oct-16, us$421 (+$129) Average) us$400 Nov-15; us$399 Sep-16, us$412 (+$120) ＜HRC Price trend＞ Feb-16; us$352 ✔ HRC Price revel: 500$/MT Nov-15; us$354 us$300 ✔ After hitting the bottom around $400 in USA, $450 in Euro and $300 in China, Prices jump up sharply and then declined. Nov-15; us$292 ✔ Prices are still $130 to $160 higher than the bottom prices.
us$200
11 Confidential Reduction of Production Capacity in China Chinese government expressed serious concern to reduce redundant capacity.
4th Jan Mr. Li Kequian Expressed strong needs of reduction of redundant Premier of China production capacity in Chinese Steel and Coal industry. 22nd Jan State council of Expressed a target capacity reduction of 100 – 150 China Million Ton in five Years
22nd Jan Ministry of Establishment for funding of 40Billion RMB Finance of China (6Billion USD) for restructuring of Chinese Steel Industries 26th Jan Mr Xi Jinping Expedited to establish a concrete plan to reduce President of China capacity (Reformation of Supply Side) Feb OECD Plan to establish an organization to monitor capacity reduction in China
12 Confidential Main Raw Material prices / Quarterly fixed prices
【US$/MT】 US$350 QTR prices：Iron Ore
QTR prices：Coking Coal US$300 Coking Coal Prices: ✔4th QTR 2016 Price has taken a jump, +116%, or +$107.5 higher than 3rd QTR, after 2-QTR consecutive gentle rise.
US$250 ✔Background: some production troubles in Australia, flood and new regulation of coal production in China.
US$200 US$200 (+116%, +$107.5)
US$150
US$128
US$100 Sep-16; US$92,5
Q1 2016, US$81 (lowest in past 8 years) US$55 US$52 US$50 Iron Ore Prices: (▲2%, ▲$1) ✔4th QTR 2016 Price is about ▲2%, or ▲$1/MT lower than 3rd QTR Q2 2016, US$39 2016, and still the lowest level since 2009. (lowest in past 8 years)
US$0
13 Confidential Seaborne trading Volume of Iron Ore 1
By Country By Company
Others 17% Vale (Brazil) Brazil 25% 27% Others 32%
1,364 million tons/year (2015CY) BHP-Billiton (Australia) Rio Tinto 23% (Australia) Australia 20% 56%
Brazil & Australia share : 83% Top 3 share : 68% (←2014CY 62%) (←2014CY 79%) Source : NSSMC estimate 14 Confidential
Seaborne trading Volume of Iron Ore 2 UNIT : million MT 1600 1600 EXPORT IMPORT
Australia Brasil China Japan 1400 1400 South Africa India Europe South Korea
Others 1200 Others 1200
1000 1000 717 767 579 940 494 933 438 800 800 402 821 746 362 687 310 619 267 444 600 248 600 384 628 319 239 271 210 205 326 322 320 338 147 188 307 400 264 362 400 268 277 243 131 135 132 134 139 140 136 224 132 134 128 131 136 219 45 48 53 54 63 66 187 30 32 37 121 200 26 15 10 65 200 129 133 106 125 26 103 79 113 126 138 132 119 114 116 22 86 90 101 116 4 121 24 90 83 73 61 202 212 206 41 44 44 44 49 74 55 157 166 46 56 65 66 63 113 124 121 111 132 42 99 65 82 85 86 84 88 86 72 76 64 59 50 48 69 0 0 39 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Australia 72% 72% 70% 69% 69% 70% 70% 71% 73% 74% 76% 79% 83% China 28% 35% 41% 45% 49% 53% 70% 62% 65% 67% 69% 70% 69% & Brasil Source : NSSMC estimate 15 Confidential Seaborne trading Volume of Coking Coal 1
By Country By Company
Others (rest of Others (rest of the World) the World) 10% RUSSIA 10% RUSSIA BHP-Billiton 3% 3% (Australia) 27% CANADA CANADA 10% 10% 289 million tons/year USA USA Anglo 13% 13% (2015CY) Australia (Australia) 6% 64% Rio Tinto (Australia) Others 5% Glencore (Australia) (Australia) 13% 13%
Australia & USA share : 77% Australia share : 64% (←2014CY 65%) (←2014CY 79%) Source : NSSMC estimate 16 Confidential
Seaborne trading Volume of Coking Coal 2 UNIT : million MT
350 350 EXPORT IMPORT
China India 300 300 Australia USA Japan Europe 36 Canada Others South Korea Others 52 250 250 64 47 35 25 35 42 200 200 3 185 34 35 169 187 3 30 31 5 3 29 2 5 23 31 60 133 20 19 155 143 14 16 67 150 150 29 65 67 66 69 137 121 132 68 61 63 73 74 76 108 112 125 138 49
100 100 63 49 45 38 44 42 41 56 44 45 38 61 52 46 45 45 61 46 17 48 21 21 36 42 50 22 28 50 27 34 31 35 35 32 22 21 23 26 20 22 23 35 20 21 23 25 27 30 19 59 20 25 25 30 38 32 34 39 35 34 32 34 29 25 23 27 27 28 25 25 16 12 14 17 16 17 18 0 1 4 5 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 India & Australia 61% 62% 66% 64% 72% 68% 67% 64% 56% 60% 61% 65% 64% 9% 12% 13% 12% 14% 16% 31% 27% 25% 28% 36% 33% 29% China
Source : NSC estimate 17