compare the world steel and copper markets: similarities and differences

ASSIGNEMENT INTERNATIONAL ECONOMICS & POLITICS

Subject area Global steel & copper markets Raw material markets analysis Commodities exchanges

Project supervisor Prof. Dr. Jean-‐Daniel Clavel

Submitted by Alain Mermoud [email protected]

Date 04.01.10

January 10

Compare the world steel and copper markets: similarities and differences


Alain Mermoud MSc BA 2010 4 January 2010

2

Table of Contents

Executive summary ................................................................................................3

Abbreviations.........................................................................................................3

1 Introduction .....................................................................................................4

2 Parameters & framework conditions ................................................................4 2.1 History.........................................................................................................................................................4 2.2 Strategic position and major economic sectors ........................................................................4 2.3 Political situation and legal issues ..................................................................................................6 2.4 Cultural aspect .........................................................................................................................................6 2.5 Environment.............................................................................................................................................6 2.6 Production process................................................................................................................................6 2.7 Product specificities ..............................................................................................................................7 3 Analysis ............................................................................................................7 3.1 Economic analysis ..................................................................................................................................7 3.2 Position of steel and copper in international trade.................................................................7 3.3 Macroeconomic parameters ..............................................................................................................8 3.4 Business structures usually used ....................................................................................................8 3.5 Major trading partners – overall world exports & imports .................................................9 3.6 Market facts & figures........................................................................................................................ 10 3.7 Extent of international integration.............................................................................................. 10 4 Potential outcomes......................................................................................... 10

5 Personal assessment....................................................................................... 11

6 Prospects........................................................................................................ 11

7 Conclusion ...................................................................................................... 12 Bibliography ...................................................................................................................................................... 13 Attachments....................................................................................................................................................... 14 Statistics & tables ............................................................................................................................................ 15



3

Executive summary

Steel is essential for economic growth; as it is primarily used for housing and construction, infrastructures, transport and energy delivery. Indeed, this metal is the second most important commodity (15%) after oil. The worldwide steel industry has not escaped the current economic downturn and recession. The industry has responded rapidly with production cuts, to ensure supply matches demand. The main producer countries are China, Japan, and the USA. The largest companies are ArcelorMittal, Nippon Steel and Baosteel Group. Almost 40% of the steel production is exported internationally.

Copper is a key raw material used worldwide in the industrial development. Its unique physical and chemical properties (ductility, malleability, conductivity, corrosion resistant, etc.), make it a superior material for use in constructions (almost 37% of the market), telecommunications, transportations, etc. The principal source of world copper supply is from mine production and recycling (12%). Latin America is the biggest contributor to mine production at 45%, followed by former Eastern Bloc countries at 19%, Oceania at 18% and North America at 12%.

The steel and copper markets face similar issues such as sustainable development (necessity to reduce CO2 emissions) and the global economic crisis, which reduce demand and therefore leads quickly to overcapacity. Both markets are often considered as being indicators of economic progress, because of their critical role played in infrastructures and overall development.

Abbreviations

SHME Shanghai Metal Exchange LME London Metal Exchange COMEX/NYMEX Commodity Exchange Division of the New York Mercantile Exchange EU European Union GDP Gross Domestic Product GNP Gross National Income OECD Organization for Economic Co-‐operation and Development FTA Free Trade Agreement LTO Long-‐Term Orientation ICSG International Copper Study Group WSA World Steel Association GSSA Global Steel Sectoral Approach SWOT Strength Weakness Opportunities Threats WTO World Trade Organization



4

1 Introduction

The copper and the steel markets shares some characteristics but are also different, in terms of extraction, use, recycling, supply, etc. The purpose of this study is to expose both differences and similarities of these two raw materials.

Copper and steel are closely linked with the rise of modern societies, and therefore the value of the metals grows with the development of emerging countries. Indeed, both steel and copper are essential for economic growth; as they are primarily used for infrastructure, transport, energy delivery, housing and construction. Factors such as mine supply growth, the development of new technologies, the general health of the economy have a direct impact on the market of both commodities.

The recent financial crisis has given unique indicators on how the global copper and steel markets react – both similarly and differently -‐ in a period of economic turbulences and recession. This assignment also aims to analyze new trends and the general perspective for the coming years.

The data and statistics are mainly collected from the OECD, the “World steel in figures 2009” from the WSA and the “World Copper Factbook 2009” from the ICSG. Regarding the methodology of the research, several tools given in class are used such as the SWOT analyze or the Porter generic strategies.

While the two metals are closely linked to the economic and industrial development worldwide, it is certain that they both will contribute to the development of society well into the future.

2 Parameters & framework conditions

2.1 History Steel is an alloy of iron and carbon. Iron is found on the earth’s crust, like most metals, only in the form of an ore, which can still be found in abundance around the globe. Steel is already mentioned in the Bible. Evidence of the first production of high carbon steel was founded in India by about 300 BC. Modern steelmaking started in Europe in the 1600s using coke instead of charcoal. Historically, steel and iron were separate products, but today they are usually classified in the same entity commonly called “the iron and steel industry”. Today, stronger alloys and lighter metals have been invented.

Copper was one of the first metals used by mankind to make jewelry and currency coins. During the Roman era, this material was mainly extracted in Cyprus, relating to Copper's original name of Cyprium, "metal of Cyprus", later to be called Cuprum late to be known as Cuprum. During the Copper Age (3500 to 1700BC.) the material was mainly used to make tools and weapons. In the 18th and 19th century, the inventions based on magnetism and electricity involved copper in the Industrial Revolution and gave it a new impulse in the modern world. Mammals and different organic life forms also use copper as a vital element of nutrition. Excess and deficiencies can be dangerous to health.

2.2 Strategic position and major economic sectors Steel is the basic raw material for economic development. Before the introduction of modern production techniques, it was considered as expensive and was therefore only



5

used when no cheaper alternative existed (swords, knives, razors). Nowadays steel is used widely in the construction of roads, buildings, railways and other infrastructures supported by a steel skeleton (airports, bridges, skyscrapers, etc.).

Humans started to use copper (chemical symbol Cu) at least 10,000 years ago and this material is closely linked with the development of the modern civilization. Even today copper-‐based products are still used in a huge range of industry and domestic activities.

Steel Consumption and Markets

Steel consumption by end-user market in OECD*

World steel market by product 2008

Steel consumption by region

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2.3 Political situation and legal issues Steel industry was delicensed and decontrolled in 1992. However, some actors of the steel and copper markets are sometimes tempted by protectionism, which can lead to distorted markets. For instance, in March 2002 the USA placed temporary tariffs on imported steel, in order to protect steel makers. The EU decided that it would impose retaliatory tariffs, risking to start a trade war. In 2002, the WTO came out against the steel tariffs, arguing that they were a violation of the USA’s WTO tariff-‐rate commitments. This example shows how these two markets are also closely linked to diplomacy.

2.4 Cultural aspect Steel and copper will continue to play a key role in the metal industry in the future years. Indeed, steel and copper-‐based alloys will still be used in a wide range of applications of daily life. Plastics and synthetics could eventually replace some steel-‐based product in the next years.

2.5 Environment The extractions, transport and production of those two raw materials have an impact on the environment. Efficient use of these natural resources is critical for sustainable development. CO2 emissions in the steel sector are primarily the result of burning fossil fuels during the production of iron and steel. That’s way, the post-‐Kyoto negotiations are important for the steel industry, which has an ambitious program for every steel company in the world to measure its CO2 emissions. Another ecological challenge will be to reduce the huge consumption of electricity needed for steel production. Otherwise, steel is one of the most recycled materials in the world. This table shows the recycled steel consumption and apparent domestic supply in 2008, in million metric tons.

(source : Worldsteel association)

The process of mining copper results in a significant byproduct of water pollution. Acid drainage is used frequently in the mining of copper and thus harmful atmospheric emissions of sulphur and heavy metal particles are released into the air during the refining and smelting process.

2.6 Production process Professionals, like geologists, research for clues that show the presence of copper in nature. Once the ecological, geological, legal and economic issues are resolved, mining can start (leaching, surface, or underground mining). Open-‐pit mining is the method mainly used worldwide. First, the copper-‐bearing ores have to be extracted and mined. To obtain 30% of copper concentrate, the ore has to be crushed and grinded, followed by the concentration by flotation. In the next step, the concentration is boiled to a distinct smell in order to obtain a "matte" with 60% copper. The next step processes the molten matte in a converter, resulting in 99% copper, called “blister copper”. Recycled copper is called “secondary copper” and it cannot be differentiated from “primary

worldsteel.org

Recycled steel Recycled steel is a key input needed for all steelmaking process routes.

Steel is one of the few magnetic metals. It is easy to separate from waste streams. About 80% of post-consumer steel is recycled.1

By sector, steel recovery rates are estimated at 85% for construction, 85% for automotive, 90% for machinery, and 50% for electrical and domestic appliances.1 Recycled steel supply is expected to fall short of demand by 2012.5

Recycled steel (scrap) can be collected from excess material in steel facilities and foundries (home scrap) or downstream production processes (industrial scrap) and from discarded products (obsolete scrap).!e availability of home and industrial scrap is closely related to current domestic steel production levels while the availability of obsolete scrap is closely related to levels of past steel production, average product lives and e"cient recycling programmes.EAFs can be charged with 90 to 100% of recycled steel, Basic Oxygen Furnaces with up to 30% (see Figure 2).7

Scrap prices vary greatly for di#erent qualities. In 2008 (May-July) the price for heavy melting steel scrap (HMS) reached US$520/t while shredded scrap prices reached US$600/t.6

Currently, the use of recycled steel appears to be limited only by availability and price, not the processing capacity in the world’s steel mills (see Table 1).1

Responsible management of natural resources!e steel industry is highly e"cient in its use of raw materials with technology available today. Key contributing factors include high material e"ciency rates, by-product recycling and steel recycling.Steelmaking is nearing zero-waste, with current material e"ciency rates at around 97%. !e recycling and use of by-products from steelmaking is up to 98% in some countries.1

Slag is the main steelmaking by-product; it is mostly used in cement production, reducing CO2 emissions by around 50%.11 It can also be used in roads (substituting aggregates), as fertiliser (slag rich in phosphate, silicate, magnesium, lime, manganese and iron), and in coastal marine blocks to facilitate coral growth thereby improving the ocean environment.1

Gases produced during steelmaking are fully reused as an energy source either in the blast furnace and reheating furnaces or in power generation plants within the steelworks, saving fossil fuels. Coke oven gas contains about 55% hydrogen and may prove an important hydrogen source in the future.10

Footnotes

From World Steel Association data or publications (worldsteel.org)1. Mineral Information Institute (mii.org)2. “Analysis of economic indicators of the EU metals industry: the impact of raw materials and energy supply on competitiveness.” European 3. Commission, 2006“Iron Ore,” Mineral Commodity Summaries. U.S. Geological Survey, 2007 (minerals.usgs.gov)4. EconStatsTM (econstats.com)5. Metal Bulletin Research, Steelmaking Raw Materials Monthly Issue 146, July 20086. Coal & Steel Facts 2007. World Coal Institute. worldcoal.org7. “Steel Industry and the Environment, Technical and Management Issues.” IISI and UNEP Technical Report No. 38. 1997.8. Metal Bulletin, Issue no. 9042, April 2008.9.

10. Legal Status of Slags, Position Paper, January 2006, pages 2 and 10. The European Slag Association (Euroslag).11.

TABLE 1: RECYCLED STEEL CONSUMPTION AND APPARENT DOMESTIC SUPPLY 2007, MILLION METRIC TONS (MMT)1

Recycled steel consumption

Apparent domestic supply

EU-27 115.6 117.8Other Europe 25.3 10.9CIS 50 58.2NAFTA 81.3 96.1Central/South America 14.3 14.4Asia 189.2 172.8World 481.9 478.9

FIGURE 2: RECYCLED STEEL USE IN STEELMAKING

Steel recyclingSteel products naturally contribute to resource conservation through their lightweight potential, durability and recyclability. At the end of a product’s life, steel’s 100% recyclability ensures that the resources invested in its production are not lost and can be infinitely reused.More steel is recycled worldwide annually than all other materials put together, with an estimated 459 million metric tons (mmt) being recycled in 2006, about 37% of the crude steel produced that year.1 Recycling this steel:

avoided 827mmt of CO2 emissionssaved 868 mmt of iron ore, and saved the energy equivalent of 242 mmt of anthracite coal.1

WORLDSTEEL FACT SHEET

Last updated: October 2008



7

copper”. Because of this similarity, copper is one of the most recycled metals. Copper is mainly shipped to customers or to be manufactured as wire rod, ingot, cathode or billet.

Modern steelmaking began with the Bessemer process introduced in 1858, using directly with pig iron as raw material. This was the first inexpensive industrial process for the cheap mass-‐production of steel from molten pig iron. In the 1950s, this technique was rendered obsolete by the Linz-‐Donawitz process of basic oxygen steelmaking, which limits impurities. Consequently, this technique uses a lot of electricity (about 440 kWh per metric ton).

2.7 Product specificities Key raw material inputs needed in steelmaking include iron ore, coal, limestone, and recycled steel. Iron ore is one of the most abundant metallic elements. Coal is also a key material in steel productions. Another major feature is the continuous improvement of steel grades. Indeed, 50% of today’s steel grades were not available ten years ago.

Copper can be alloyed to tin or aluminum (to make bronzes) or zinc (to make brass) to form new characteristics and to improve its thermal and electric conductivity. Copper is a natural metal than can easily be found in nature and is easily recycled without any lost of its physical or chemical properties. Copper is energy and thermal efficient, meaning heat and electricity can circulate in copper wires more easily compared to other metals. Thus, copper has antimicrobial properties, which are much appreciated in the healthcare field and for transporting drinkable water.

3 Analysis

3.1 Economic analysis Because copper and steel are an input in almost all construction projects, the demand tends to rise when there is a construction upturn in main consuming countries. Also, in a period of a slack demand (such as the mid-‐1980s and 1998-‐2002) there is an excess of production over final demand, which results in an overload of stock. This abundance makes these two markets rather different than other perishable commodities. In order to moderate price fluctuation, the stocks and inventories are built up when demand is low and run down when it is high.

3.2 Position of steel and copper in international trade Steel and copper are commodities like any other in the global economy, as they are traded between producers and consumers. Price regulation of iron & steel was abolished in 1992, since then steel prices are determined by the interplay of market forces. The producers sell their actual or next production to customers, who transform the metals into alloys or shapes, in order to allow downstream fabricators to transform

Steel Production by Process

Crude steel production by process and region 2008

Crude steel production by process 2008



8

them into several end-‐use products. The settlement price is important to consider for the present day (spot price) or for in the future. Copper can be traded over three commodity exchanges: the SHME (traded in lots of 5 tons and quoted in Renminbi per ton), the LME (traded in 25 tons lots and quoted in US dollars per ton), and the COMEX/NYMEX (traded in lots of 25,000 pounds and quoted in US cents per pound). Prices are set by offer and bid, reflecting the market’s perception of demand and supply. In 2008, steel started to be traded as a commodity in the LME. In order to fix a price in the future and to provide a hedge against price variations, the exchanges also provide futures and option contracts.

The following tables show that the current prices sit between cyclical low and high prices since 2004 and that the copper market suffered less from the financial crisis in 2009.

3.3 Macroeconomic parameters The demand of copper and steel boomed in 2004-‐2005 due to strong Chinese demand and general economic upturn worldwide. Since 2000, several Indian and Chinese steel firms entered the market like Shagang Groupe, Shangai Baosteel Groupe, Tata Steel (which bought Cornus Group in 2007). Arcelormittal is the world’s largest steel producer. China is the top producer or steel with about 30% of the global market. World copper reserves have increased from 90 million tons in 1950 to 280 million tons in 1970 and 490 million tons in 2007.

3.4 Business structures usually used The mine supply growth, technological, economical and societal factors are related to the supply and demand of copper. When an area needs more copper, new plants and mines are built and existing ones expanded. In times of market surplus, the current operations are scaled back or even closed down, and expansions are delayed or canceled.

Credit Suisse 2009 Global Steel and Mining Conference 5

60

80

100

120

140

160

180

200

220

1/1/2009 3/1/2009 5/1/2009 7/1/2009

1 January 2009 = 100

Spot iron ore (62% Fe, fob)

Aluminium

Copper

Thermal coal (NEWC)

Source: LME, SBB, Reuters Ecowin

0 100 200 300 400 500

Aluminium

Copper

Thermalcoal

Iron ore *

Index (Low Price=100)

Current Spot

Cyclical High*

Cyclical Low*

* Iron ore CFR China, prices from Dec 04

Source: SBB, LME, Energy Publishing

Cycle here is defined as the period from January 2004 to Mid 2008. Highs and lows of monthly prices are taken.

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3.5 Major trading partners – overall world exports & imports The following table shows the world steel trade by area

(source : World steel in figures, World Steel Association, 2009)

24 25

ExportingRegion

Destination Euro

pean

Uni

on (2

5)

Othe

r Eur

ope

CIS

NAFT

A

Othe

r Am

eric

a

Afric

a an

d M

iddl

e Ea

st

Chin

a

Japa

n

Othe

r Asia

Ocea

nia

Tota

l Im

ports

of w

hich

: ext

ra-r

egio

nal i

mpo

rts

European Union (25) 127.7 4.6 15.9 1.9 2.1 0.6 11.1 0.4 4.8 0.2 169.3 41.6

Other Europe 10.8 0.1 9.3 0.0 0.1 0.0 0.6 0.1 0.3 0.0 21.3 21.3

CIS 1.8 2.6 9.7 0.0 0.5 0.0 1.5 0.1 0.3 0.0 16.6 6.9

NAFTA 6.4 0.2 2.5 16.7 4.4 0.2 4.5 2.6 4.6 0.3 42.4 25.7

Other America 1.3 0.0 1.8 1.3 4.6 0.1 2.0 0.5 0.7 0.0 12.3 7.7Africa 4.2 0.2 4.7 0.2 0.5 2.2 1.9 0.4 1.1 0.0 15.3 13.2

Middle East 3.7 4.0 12.3 0.2 0.2 2.5 8.6 1.3 4.0 0.0 36.7 34.2

China 1.2 0.0 1.4 0.2 0.0 0.1 - 6.2 8.1 0.0 17.2 17.2

Japan 0.1 0.0 0.0 0.0 0.0 0.0 0.9 - 3.7 0.0 4.8 4.8

Other Asia 4.4 0.0 8.9 1.1 2.1 0.6 34.6 23.6 19.8 0.5 95.5 75.7

Oceania 0.3 0.0 0.0 0.0 0.0 0.0 0.6 0.5 1.0 0.4 2.8 2.5

Total Exports 161.8 11.6 66.4 21.7 14.4 6.4 66.4 35.6 48.5 1.5 434.3 250.7

of which: extra-regional exports*

34.1 11.6 56.7 5.0 9.8 1.7 66.4 35.6 28.7 1.1 250.7

Net Exports (exports - imports) -7.5 -9.7 49.8 -20.7 2.1 -45.7 49.2 30.9 -47.0 -1.4

* - excluding intra-regional trade marked

WORLD STEEL TRADE BY AREA2007

million metric tons

MAJOR IMPORTERS AND EXPORTERS OF STEEL

2007

Rank Total Exports

1 China 66.42 Japan 35.63 European Union (27)1 34.14 Ukraine 30.35 Germany2 29.96 Russia 29.47 Belgium - Luxembourg2 26.68 South Korea 18.39 France2 18.2

10 Italy2 17.911 Taiwan, China 11.112 Netherlands2 10.713 Brazil 10.414 United States 9.815 United Kingdom2 9.516 Spain2 8.017 Austria2 7.018 Turkey 6.919 Canada 6.820 India 6.6

Rank Total Imports

1 European Union (27)1 41.62 United States 27.73 Germany2 27.44 South Korea 26.25 Italy2 24.66 Belgium - Luxembourg2 19.27 France2 18.18 China 17.29 Spain2 15.0

10 Turkey 13.511 Iran 12.212 Thailand 9.813 United Kingdom2 9.314 Taiwan, China 9.215 Netherlands2 8.816 Viet Nam 8.517 Poland2 8.018 Canada 8.019 India 7.720 Russia 7.3

Rank Net Exports(exports - imports)

1 China 49.22 Japan 30.93 Ukraine 28.14 Russia 22.15 Brazil 8.86 Belgium - Luxembourg2 7.47 Austria2 2.88 South Africa 2.59 Germany2 2.4

10 Slovakia2 2.311 Netherlands2 1.912 Taiwan, China 1.913 Kazakhstan 1.214 Venezuela 0.715 Moldova 0.6

Rank Net Imports(imports - exports)

1 United States 17.92 Iran 11.73 Viet Nam 8.34 South Korea 7.95 European Union (27)1 7.56 Spain2 7.17 Thailand 7.08 Italy2 6.79 United Arab Emirates 6.6

10 Turkey 6.611 Saudi Arabia 4.212 Indonesia 4.213 Hong Kong, China 3.714 Philippines 3.415 Poland2 3.1

1 Excluding intra-regional trade2 Data for individual European Union (27) countries include intra-European trade

million metric tons

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3.6 Market facts & figures In the last century, the demand for copper has increased from 500 thousand metric tons to over 18 million metric tons in 2007 as demand over this period grew by an average of 4% / year. From 1960 until 2006 demand for copper in Asia jumped from 455 thousand metric tons to around 8000 thousand metric ton. The average annual growth rate of the copper market since 1900 is 4%. Chile has increased its production of copper from 14% in 1960 to 36% in 2006, making South America the biggest producer worldwide. Chile contains 5 of the top 10 and 8 of the top 20 copper mines by capacity in the world.

The following table shows the geographical distribution of steel production and use in 2008:

(source : World steel in figures, World Steel Association, 2009)

For details, please refer to the attached statistics & tables.

3.7 Extent of international integration New steel futures contracts introduced in 2008 in the LME have filled an information gap and extend the international integration of the steel market. However, some major producers have said that industry consolidation is a better way forward than futures contracts, which enable the steel industry to hedge against volatility in steel prices.

4 Potential outcomes

This paper could help an investor looking for opportunities in the steel or copper market. Based on the information available in this document, he would be able to compare the two markets and make up his choice for an investment responding to his needs. The steel market is probably attractive on a short-‐term basis, due to the new derivates available on the LME and the particular low prices. The copper market will probably be less speculative in the next month and would probably be more adapted on a long-‐term investment, as copper will stay a key material for future economic development worldwide.

14 15

STEEL PRODUCTION AND USE:GEOGRAPHICAL DISTRIBUTION

2008

Production

Use (fi nished steel products)

World total: 1,327 million metric tons crude steel

Others comprise:Africa 1.3%Middle East 1.3%

Central and South America 3.7%Australia and New Zealand 0.6%




1998

Others comprise:Africa 1.6 %Middle East 1.2 %

CIS 3.5%

Other Europe 2.5%

China16.0%

NAFTA21.4%

Japan10.2%

Other Asia13.9%

EU (27)22.7%

Others9.8%

CIS 4.2%

Other Europe 2.4%

China35.5%

NAFTA10.8%

Japan6.4%

Other Asia15.2%

EU (27)15.2%

Others10.2%

CIS 9.5%

Other Europe 2.2%

China14.7% NAFTA

16.6%

Japan12.0%

Other Asia11.5%

Others8.9% EU (27)

24.6%CIS

8.6%

Other Europe 2.4%

China37.7%

NAFTA9.3%

Japan9.0%

Other Asia11.2%

EU (27)14.9%

Others6.8%


World total: 777 million metric tons crude steelProduction

Central and South America 4.8 %Australia and New Zealand 1.2 %



World total: 692 million metric tons World total: 1,198 million metric tons14 15


2008

Production


World total: 1,327 million metric tons crude steel






1998

Others comprise:Africa 1.6 %Middle East 1.2 %

CIS 3.5%

Other Europe 2.5%

China16.0%

NAFTA21.4%

Japan10.2%

Other Asia13.9%

EU (27)22.7%

Others9.8%

CIS 4.2%

Other Europe 2.4%

China35.5%

NAFTA10.8%

Japan6.4%

Other Asia15.2%

EU (27)15.2%

Others10.2%

CIS 9.5%

Other Europe 2.2%

China14.7% NAFTA

16.6%

Japan12.0%

Other Asia11.5%

Others8.9% EU (27)

24.6%CIS

8.6%

Other Europe 2.4%

China37.7%

NAFTA9.3%

Japan9.0%

Other Asia11.2%

EU (27)14.9%

Others6.8%


World total: 777 million metric tons crude steelProduction

Central and South America 4.8 %Australia and New Zealand 1.2 %



World total: 692 million metric tons World total: 1,198 million metric tons



11

5 Personal assessment

The SWOT analysis is an adequate instrument to assess and compare the two markets

SWOT STEEL MARKET

Strength Opportunities

-‐ Stability in some emerging economies -‐ Strong CO2 emissions measures -‐ Global policy & perspective (GSSA)

-‐ Export-‐facilitating measures -‐ Non-‐tariff barriers in emerging Asia -‐Modern steelmaking with advanced technologies

Weakness Threats

-‐ The economic crisis has pushed the industry into recession -‐ Construction sector accounts for half of world demand -‐ Will demand go down when the stimulus ends?

-‐ Overcapacity: steelmaking capacity continuing to increase despite the market downturns -‐ Uncertainties regarding public construction activity

SWOT COPPER MARKET

Strength Opportunities

-‐ Shipping costs not an issue… now -‐ Easily recyclable -‐ Energy efficient (good conductivity)

-‐ Emerging markets -‐ Economy recovery -‐ Healthcare (antimicrobial properties)

Weakness Threats

-‐ Market power/concentration -‐ Coal used for mining (CO2 emissions) -‐ Water supply in dry mining districts

-‐ Falling ores grades (USA, Chile) -‐ Project finance: high interest rates may reduce investments -‐ Capital cost overruns (US dollar inflation)

6 Prospects

The global trend in the UE and the USA is on consolidation of industry. The focus is now on technological improvement and new products. The Chinese steel industry seems to be currently staggering, but considering its population of 1.3 billion people; the per capita steel consumption is below than in the EU or the USA. China has recently become a net exporter of steel, meaning that China also reached a level of production saturation and it steels industry needs to be consolidated and reorganized in coming years rather than an expanded.



12

7 Conclusion

The steel and copper markets are often considered as being indicators of economic progress, because of their critical role played in infrastructures and overall development. The volume of steel and copper consumed is a good barometer to measure development and economic progress, as they are both basic raw materials. The intense use of copper relates to the demand and consumption in economic activity. When less developed regions expand their infrastructure the price goes up. Indeed, both raw materials are inputs into major industries in main countries worldwide.

Like other markets, which have a perfect competitive structure, there is a homogenous product and the global price is determined by the supply and demand. In both cases copper and steel markets are in perfect competition, because there are very large producers and consumers. However, in both cases the global market is large, compared to the output of even the biggest company (each firm is a price-‐taker). Thus, both steel and copper can be produced in many parts of the globe.

Both industries have to face the environmental issues and the sustainable development challenge for the coming years. They will also have to face reduction in workforce, as they will not be labor-‐intensive industry as they used to be.

Summing up, as both markets are closely linked to the economic and industrial development worldwide, they will benefit from the global economy recover which should happen in the year 2010. Therefore, they will stay attractive to investors on a long-‐term basis and this way it is certain that it will contribute to the development of society well into the future.



13

Bibliography

World steel in figures, World Steel Association, 2009, ISSN : 1379-‐9746, 27 p.

The World Copper Factbook 2009, International Copper Study Group, 2009, 67 p.

La tribune des métaux, Veron & Cie, novembre – décembre 2009, ESSN 1167.4849

Safe Sustnainable Steel, ArcelorMittal Factbook 2008, published in June 2009, 126 p.

Economics -‐ Eleventh Edition, Lipsey & Chrystal, Oxford University Press 2007, 665 p., ISBN 978-‐0-‐19-‐928641-‐6

La Chine influence plus que jamais le marché de l’acier, Eric Louvet, in Le Temps 31.08.09

Consulted websites:

http://www.trademap.org (04.01.10)

http://stats.oecd.org (04.01.10)

http://www.intracen.org (04.01.10)

http://stat.wto.org (04.01.10)

http://www.ft.com (04.01.10)

http://europe.wsj.com (04.01.10)

http://www.letemps.ch (04.01.10)

https://www.cia.gov/library/publications/the-‐world-‐factbook (04.01.10)

Contacted reference of expertise:

Mr. Eric Louvet, Senior Advisor Metals & Mining BNP Paribas (Suisse) SA, Geneva.



14

Attachments

Table of content

Annual steel prices, Europe……………………………………………………………………………………p.15

Copper stocks, prices and usage………………………………………………………………..……………p.15

Apparent steel use per capita 2002 to 2008……………………………………………………………p.16

Intensity of refined copper use 2008………………………………………………………………………p.17

World crude steel production 2008 in millions of metric tones…………………………..……p.17

Crude steel production by process and region 2008………………………………………..………p.17

Copper production and usage by country, 2008………………………………………………………p.18

Top steel-‐producing producing companies 2007 and 2008……………………………..………p.18

Major steel-‐producing countries 2007 and 2008………………………………………..……………p.18

Top 20 copper mines by capacity 2009…………………………………………………..………………p.19

Top 20 copper fabricating plants by capacity 2008…………………………………………………p.19



15

Statistics & tables

Annual steel prices, Europe*

Steel Prices

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16 17

APPARENT STEEL USE PER CAPITA2002 TO 2008

kilograms fi nished steel products

APPARENT STEEL USE2002 TO 2008

2002 2003 2004 2005 2006 2007 2008Austria 3.1 3.1 3.3 3.5 4.1 4.1 4.0Belgium - Luxembourg 4.5 4.0 4.8 4.6 5.5 5.8 5.6Czech Republic 4.2 4.4 5.2 5.2 6.0 6.6 6.5France 17.2 15.6 16.7 14.8 16.2 16.6 15.3Germany 31.6 31.9 36.3 35.3 39.2 42.7 41.5Italy 29.5 31.8 33.2 31.6 36.6 36.6 34.3Netherlands 4.0 3.4 3.5 3.6 3.5 3.5 3.2Poland 7.7 7.3 8.5 8.4 10.7 12.1 11.4Romania 2.8 3.1 3.3 3.5 4.2 5.1 4.3Spain 19.7 21.0 21.1 20.9 23.6 24.5 19.6Sweden 3.3 3.6 4.0 4.1 4.5 4.8 4.9United Kingdom 12.6 12.3 13.2 11.4 12.9 12.7 11.7Other EU (27) 18.5 18.5 19.5 18.6 21.7 23.0 20.0European Union (27) 158.7 160.1 172.4 165.5 188.6 198.1 182.1Turkey 12.3 14.6 16.2 18.5 21.3 23.6 21.3Others 5.3 5.3 6.4 6.6 7.7 8.0 7.6Other Europe 17.5 19.9 22.6 25.1 28.9 31.6 28.9Russia 24.9 25.3 26.3 29.3 34.9 40.4 35.4Ukraine 5.5 6.4 5.8 5.6 6.7 8.3 6.9Other CIS 3.5 0.7 0.8 0.8 1.0 1.3 1.3CIS 34.0 37.0 38.1 41.5 48.9 56.6 49.9Canada 15.9 15.5 17.4 16.8 18.1 15.5 15.0Mexico 14.3 14.9 16.0 16.1 18.0 17.8 17.3United States 107.3 100.8 117.4 105.4 119.6 108.0 97.5NAFTA 137.5 131.3 150.8 138.3 155.7 141.3 129.7Argentina 1.7 2.8 3.6 3.7 4.5 4.6 4.8Brazil 16.5 16.0 18.3 16.8 18.5 22.1 24.0Venezuela 1.6 1.5 2.4 2.7 3.1 4.0 3.3Others 7.7 7.1 8.6 9.1 10.1 11.0 12.1Central and South America 27.7 27.6 33.0 32.5 36.4 41.9 44.4Egypt 5.5 4.2 3.8 5.0 4.6 5.5 6.5South Africa 4.9 4.1 4.9 4.7 6.0 6.0 6.1Other Africa 8.7 10.0 11.1 11.9 12.2 13.6 13.5Africa 19.1 18.3 19.9 21.5 22.9 25.1 26.2Iran 11.3 14.7 14.5 15.6 14.6 16.1 15.6Other Middle East 12.9 14.2 15.2 17.9 20.3 24.2 27.5Middle East 24.1 28.9 29.8 33.5 34.9 40.3 43.1China 191.3 240.5 275.8 340.2 369.8 413.7 425.7India 30.7 33.1 35.3 39.9 45.6 49.5 52.6Japan 71.7 73.4 76.8 76.7 77.3 79.6 76.4South Korea 43.7 45.4 47.2 47.1 50.2 55.2 58.6Taiwan, China 20.4 19.9 22.1 19.9 19.8 18.1 16.7Other Asia 41.6 41.9 45.8 50.2 47.4 55.2 54.6Asia 399.4 454.2 503.0 574.1 610.1 671.3 684.6Australia and New Zealand 7.2 7.5 8.0 7.9 7.9 8.6 9.2World 825.2 884.7 977.6 1,040.0 1,134.4 1,214.8 1,198.1

2002 2003 2004 2005 2006 2007 2008Austria 384.0 382.1 399.6 419.4 492.9 495.7 472.2Belgium - Luxembourg 417.9 375.1 440.3 423.6 505.1 530.6 510.6Czech Republic 409.6 432.7 508.1 513.7 585.9 644.6 639.3France 287.7 259.2 275.5 243.4 263.5 269.6 247.4Germany 383.4 386.6 438.8 426.6 474.6 517.2 502.4Italy 507.6 545.7 567.8 538.8 622.7 621.6 582.0Netherlands 246.8 210.3 216.7 221.9 215.0 211.5 191.5Poland 200.7 190.6 221.4 219.2 279.5 316.5 299.6Romania 129.5 141.1 149.6 161.8 195.1 235.5 200.4Spain 475.7 497.8 493.3 481.8 538.6 552.6 440.5Sweden 366.0 398.0 444.3 453.8 492.2 531.6 532.2United Kingdom 212.0 206.3 219.7 189.4 212.4 209.1 191.4Other EU (27) 265.6 265.5 279.4 265.6 309.7 328.2 284.6European Union (27) 327.0 328.6 352.8 337.5 383.5 401.9 368.9Turkey 174.8 205.3 224.7 254.1 287.8 314.6 281.2Others 140.3 141.3 170.1 174.1 203.3 214.3 202.4Other Europe 163.0 183.6 206.4 227.4 259.8 281.6 255.4Russia 170.6 174.2 181.7 203.2 243.8 283.4 249.6Ukraine 115.5 134.7 121.9 118.5 144.3 179.7 151.2Other CIS 51.8 27.8 31.1 30.4 37.7 47.4 47.6CIS 129.9 141.9 146.7 160.2 189.2 219.6 194.2Canada 508.0 490.4 543.9 521.9 556.1 471.7 451.5Mexico 140.5 145.7 155.0 154.0 171.1 167.3 160.2United States 368.8 343.2 395.4 351.4 394.9 353.1 315.6NAFTA 324.3 306.8 348.9 316.9 353.4 317.4 288.4Argentina 46.4 74.8 93.3 95.5 114.7 116.9 119.9Brazil 92.0 87.8 99.4 90.0 97.9 115.2 123.6Venezuela 63.4 57.3 91.3 101.0 113.8 143.9 118.3Others 46.5 42.5 50.4 52.8 58.2 62.4 67.4Central and South America 66.5 65.3 77.2 74.8 82.9 94.1 98.4Egypt 80.2 59.5 53.7 68.2 62.1 72.4 85.1South Africa 104.6 87.3 104.0 97.6 125.0 123.3 124.7Other Africa 14.9 17.7 18.1 19.9 19.7 21.8 20.9Africa 29.7 28.1 28.9 31.5 32.7 35.3 36.0Iran 167.1 216.1 211.5 225.4 208.5 226.1 216.0Other Middle East 153.8 165.3 172.5 197.1 217.9 253.9 280.7Middle East 159.7 187.7 189.6 209.3 213.8 242.0 253.3China 148.5 185.4 211.4 259.1 280.0 311.4 318.5India 28.4 30.1 31.6 35.2 39.6 42.4 44.3Japan 562.4 575.2 600.9 599.9 604.4 622.0 597.2South Korea 924.6 955.4 990.3 984.4 1 044.2 1 144.8 1 210.4Taiwan, China 907.4 878.4 969.3 869.7 860.4 780.1 717.8Other Asia 48.4 48.0 51.8 56.0 52.0 59.7 58.3Asia 116.6 131.0 143.5 162.0 170.3 185.4 187.1Australia and New Zealand 298.1 308.3 327.0 321.2 315.8 340.7 359.3World 140.0 148.4 162.1 170.7 184.1 195.1 190.4

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Steel Production by Process

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MAJOR STEEL-PRODUCING COUNTRIES 2007 AND 2008

million metric tons crude steel productionCountry 2008 2007China 1 500.5 1 494.9Japan 2 118.7 2 120.2United States 3 91.4 3 98.1Russia 4 68.5 4 72.4India (e) 5 55.2 5 53.1South Korea 6 53.6 6 51.5Germany 7 45.8 7 48.6Ukraine 8 37.1 8 42.8Brazil 9 33.7 9 33.8Italy 10 30.6 10 31.6Turkey 11 26.8 11 25.8Taiwan, China 12 19.9 12 20.9Spain 13 18.6 14 19.0France 14 17.9 13 19.2Mexico 15 17.2 15 17.6Canada 16 14.8 16 15.6United Kingdom 17 13.5 17 14.3Belgium 18 10.7 18 10.7Iran 19 10.0 20 10.1Poland 20 9.7 19 10.6South Africa 21 8.3 21 9.1Australia 22 7.6 22 7.9Austria 23 7.6 23 7.6Netherlands 24 6.9 24 7.4Czech Republic 25 6.4 25 7.1Egypt 26 6.2 28 6.2Malaysia (e) 27 6.1 26 6.9Argentina 28 5.5 31 5.4Thailand (e) 29 5.5 30 5.6Sweden 30 5.2 29 5.7Romania 31 5.0 27 6.3Saudi Arabia 32 4.7 35 4.6Slovak Republic 33 4.5 32 5.1Finland 34 4.4 36 4.4Kazakhstan 35 4.3 34 4.8Venezuela 36 4.2 33 5.0Indonesia (e) 37 3.6 37 4.0Luxembourg 38 2.6 38 2.9Byelorussia 39 2.6 40 2.4Greece 40 2.5 39 2.6Viet Nam (e) 41 2.2 42 2.0Hungary 42 2.1 41 2.2Others 24.3 24.3World 1,326.5 1,351.3(e): estimate

TOP STEEL-PRODUCING COMPANIES2007 AND 2008

million metric tons crude steel production2008 2007 2008 20071 103.3 1 116.4 ArcelorMittal 41 6.9 40 7.4 Jiuquan Steel2 37.5 2 35.7 Nippon Steel1 42 6.9 41 7.3 Salzgitter5

3 35.4 5 28.6 Baosteel Group 43 6.8 43 6.9 voestalpine4 34.7 4 31.1 POSCO 44 6.5 39 7.8 Jianlong Group5 33.3 NA 31.1 Hebei Steel Group 45 6.5 44 6.8 BlueScope6 33.0 3 34.0 JFE 46 6.4 46 6.4 Metalloinvest7 27.7 11 20.2 Wuhan Steel Group 47 6.4 47 6.4 Beitei Steel8 24.4 6 26.5 Tata Steel2 48 6.1 60 5.2 Guofeng Steel9 23.3 8 22.9 Jiangsu Shagang Group 49 6.1 51 6.1 SSAB

10 23.2 10 21.5 U.S. Steel 50 6.0 58 5.4 Erdemir11 21.8 NA 23.8 Shandong Steel Group 51 5.9 54 5.9 AK Steel12 20.4 12 20.0 Nucor 52 5.9 52 6.1 Mechel13 20.4 13 18.6 Gerdau 53 5.7 53 6.0 Nanjing Steel14 19.2 15 17.3 Severstal 54 5.6 42 7.0 Ilyich15 17.7 17 16.2 Evraz 55 5.4 61 5.0 Tonghua Steel16 16.9 14 17.9 Riva 56 5.3 56 5.6 Xinyu Steel17 16.0 NA 16.2 Anshan Steel 57 5.2 57 5.5 HKM6

18 15.9 16 17.0 ThyssenKrupp3 58 5.1 NA 4.5 Sanming Steel19 15.0 18 14.2 Maanshan Steel 59 5.0 59 5.3 CSN20 14.1 20 13.8 Sumitomo Metal Ind 60 4.7 63 4.6 HADEED21 13.7 19 13.9 SAIL 61 4.5 68 4.4 Tianjin Tiantie Group22 12.2 23 12.9 Shougang Group 62 4.4 72 4.0 Hebei Jinxi Group23 12.0 21 13.3 Magnitogorsk 63 4.3 62 5.0 Steel Dynamics24 11.3 30 9.7 Novolipetsk 64 4.3 69 4.1 Pingxiang Steel25 11.3 26 11.1 Hunan Valin Group 65 4.3 65 4.5 Ezz Group26 11.0 27 10.9 China Steel Corporation 66 4.0 71 4.1 Nisshin27 10.4 22 13.1 Techint4 67 4.0 70 4.1 Tianjin Steel Pipe28 10.0 28 10.1 IMIDRO 68 3.9 64 4.6 Zaporizhstahl

29 9.9 NA 11.6 Industrial Union of Donbass 69 3.8 NA 3.0 JSW Steel

30 9.9 29 10.0 Hyundai Steel 70 3.7 73 4.0 Lion Group31 9.8 34 8.8 Baotou Steel 71 3.7 75 3.5 AHMSA32 9.2 31 9.3 Taiyuan Steel 72 3.7 NA 3.0 ICDAS33 9.0 33 9.0 Anyang Steel 73 3.6 NA 4.3 SIDOR6

34 8.2 32 9.1 Metinvest 74 3.6 78 3.5 Hangzhou Steel35 8.2 37 8.1 Celsa 75 3.5 NA 2.7 Hebei Jingye Steel36 8.1 38 8.1 Kobe Steel 76 3.5 77 3.5 Chongqing Steel37 8.0 35 8.7 Usiminas 77 3.4 NA 2.7 Commercial Metals38 7.5 45 6.6 Panzhihua Steel 78 3.4 74 3.6 Essar Steel39 7.5 50 6.2 Rizhao Steel 79 3.4 79 3.5 Tokyo Steel40 7.4 NA 7.6 Benxi Steel 80 3.1 NA 3.2 Vizag Steel

(1) - includes part of Usiminas(2) - includes Corus(3) - 50% of HKM included in ThyssenKrupp(4) - includes partial tonnage of SIDOR(5) - includes part of HKM(6) - total production

NA: not applicable



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