Bluescope Steel Limited · ASX:BSL
Bluescope Steel — Investor Presentation (May 2004)
21 slides from Bluescope Steel's investor presentation, May 18, 2004
Slide 1: Global Steel
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Slide 2: Investors have...poor returns from the steel sector
re Investors have pe “Poor returns over the long term, high volatility, relatively small size and constrained liquidity has moved the steel sector to the fringe of the equity investment universe” ABN Amro (early this decade)
Slide 3: Structural issues have caused poor steel industry returns
‘Structural issues have caused poor steel industry returns
Slide 4: Recent dramatic rises in global steel prices may suggest structural improvement
___ However, recent dramatic rises in global steel ‘Piles . may suggest structural Peprovenient — CRU Global Steel Price Index (Index April 1994 = 100) 160 + — Global —Flat Products »* Long Products 140 120 + 80 + 60 7 rey rr &@ 8 & £9 GF & £ a oO coo © £ ag go £ a 9 £2 ¢ Se FSF Ass FFP ESS SARTRE S
Slide 5: Global economic growth - synchronised
Global economic growth - synchronised Global steel demand, especially China Supply/demand gap in China Industry behaviour in OECD/privatisations Input costs Different pattern for capacity additions
Slide 6: Strong global economic growth outlook
Strong global economic growth outlook | : : . Real Global GDP % Growth 5% Forecast 4% 3% 7 2% 4 1% 4 0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2010 Source: Consensus Economics, |S!
Slide 7: Synchronised growth in OECD
ronised growth inOECD = OECD Leading Indicators 6 Month Annualised % Change 15 5 ——US — Europe » Japan Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Source: OECD 7
Slide 8: Forecast growth in China, India, Russia, Brazil
= Ny Forecast { oa KRM ON BRO & 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 — China — India » Russia — Brazil Source: Consensus Economics, |IS! 8
Slide 9: Australia performing strongly - including steel using sectors
Australia performing strongly — including steel using sectors ~ Australian GDP Growth (%, pa) inflation, Interest Rates & Unemployment (%, pa) 6% 20% Forecast 5% VAN 16% + 4% — ° \ fr wv \ 12% 3% mn \ V o% fo ow Nf as 0% AJ 0% $0 Day Bank Bills Unemployment Rate 90 92 94 96 98 ‘oo 02 04 ‘06 90 92 94
Slide 10: Global steel demand growing strongly - largely driven by China
Global steel demand growing strongly - largely ‘driven by China _ a Global Steel Demand - IISI Base Case (million tonnes) 1,200 Forecast 1,090 eee China m8 ROW —@ World oe / : 963 929. 4,000 800 By 2010, China may be 35% of global demand, vs 27% in 2003 400 200 1995 1996 1997 1998 1999 2000 2001 200
Slide 11: Has the steel industry returned to the demand seen before the oil crash
_ Has the steel industry returned © the demand aon h seen - _ before the ae oil crash - World Steel Consumption by Region (million tonnes crude steel) China Japan Other Asia West Europe East Europe Ex Soviet Oceania, Mid East, Africa Canada USA 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
Slide 12: There is currently a large Supply / Demand gap in China
There is currently a large Supply / Demand gap in China ee Chea sleep, fer when one wakes =8 will shake ue world 7. - Napoleon Total Chinese Steel Imports (million tonnes) 1999 2000 2001 2002 Fiat Products Long Products Source : Macquarie Bank, ‘The Steel, lron Ore & Coal Outlook’, Jan 04 12
Slide 13: China is experiencing massive capacity growth
China is experiencing massive capacity growth — Estimated Chinese Industry Capacity Expansion from 2002 vs 2006 (million tonnes) 267 lronmaking Steelmaking Hot Strip Mills Cold Rolling Mills Source: HB Advisors/Rothschild, ‘China — Should We Be Scared?’, Feb 04, World Steel Dynamics 13
Slide 14: Consolidation in OECD
Consolidation in OECD Production Share of Top 3 Steelmakers in Each Region (%, 1998 vs 2003) 50% & 2001 EB, inc. Source : POSCO, ‘POSCO Growth & Innovation, Jan 04 14
Slide 15: Input costs are rising - Scrap
"Input costs are rising - Scrap _ US #1 Heavy Melting Scrap (US$/ mt) 240 5 220 | 200 | 180 | 160 | 140 4 120 4 100 4 80 60+ 90°91 92 93 94 95 96 97 98 99 00 01 02 03° Source: Datastream 18
Slide 16: Input costs are rising - Steelmaking raw materials
Input costs are rising — Steelmaking raw materials _ Aus-Japan fron Ore Reference Prices Aus-Japan Coal Reference Prices 50 60 55 _ @ 504 8 2 = @ 45 + 5 § 40 8 x 8 35 3 4 8 30- 25 Hard Coking Coal Fines — Lumps 25 1 - 9 Thermal Coal 20 20 ; : ¢ ; ? ' te ce oO eo x oe 0 he eal a Q = Ms aed 3S o 6 S&S
Slide 17: Increased Chinese demand is causing rise in input costs
‘Increased Chinese demand i is causing rise in input costs. Curr muy no excess seaborne for ore capacity © Seaborne lron Ore Demand Vs Theoretical Capacity (million tonnes) DEMAND Theoretical capacity 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2010 Source: IIS! v7
Slide 18: Shipping costs have risen dramatically
Shipping costs have risen dramati sally: Global fleet cannot meet demand — - exacerbated by port congestion Shipping rates (Index) 8,000 —BDlindex © —BClindex 1995 1996 1997 1998 1999 2000 2001 2002 2003 Port Congestion index - Aust Coal Ports 16 SSY Coal Port Congestion Index —— Jan- Mar- May- Jul-
Slide 19: Other raw material costs also increasing
Other raw material costs also increasing __ re 30: Base metal prices (rebased January 2001}, 2001-2004 260 7 ------------ gern 230 4 2104 180 170 4 150 7 130 5 no +, 90 £2 705 50 T T T T T : T 1 Jani Jun Novell Aprel2 Sepd2 PebO03 Jule Dect May-Od mom ATTN LATE vos COD DT mms Pl: Kael Dour: Qataarre
Slide 20: Global economic growth - synchronised
Global economic growth - synchronised Global steel demand, especially China Supply/demand gap in China Industry behaviour in OECD/privatisations Input costs Different pattern for capacity additions 20
Slide 21: Implications
Implications Don’t expect a weak Chinese economy any time soon Steel prices are likely to remain high for some time Pressure for structural change in finished products pricing An inflationary phase? 24