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Divider-slide

European Steel Industry

Outlook

TU Clausthal, Metallurgy Colloquium 3 November 2016

Dr. Hans Fischer

CEO Tata Steel Europe

Tata Steel Slide

Contents

1 Macroeconomic and industry developments

2 Opportunities for EU steelmakers

3 Tata’s unique position

1European Steel Industry, Clausthal Metallurgy Colloquium

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The world of steel is continuously evolving - Chinese boom ending

European Steel Industry, Clausthal Metallurgy Colloquium 2

0-5Mt

5-20Mt

20-50Mt

50-200Mt

>200Mt

Steel demand

Size reflects proportion of world's steel demandSize reflects proportion of world's steel demand

Source: worldsteel (MTF, 09-2015)

Global - Apparent steel demand (Mt)Global - Apparent steel demand (Mt)

0

500

1000

China

ROW

19901985 19951980 2000 2005 2010 2015

Tata Steel Slide

Global demand has been exceptionally high during the past decades and is expected to slow down. EU steel demand is expected to grow by c.1% p.a.

European Steel Industry, Clausthal Metallurgy Colloquium 3

Source: worldsteel (MTF, 09-2016)

Global - Apparent steel demand (Mt) Global - Steel demand forecast per region

CAGR up

to 2025

2014

(Mt)

2025

(Mt)

Difference

(Mt)

India 6% 80 146 66

ASEAN 5% 65 111 46

MENA 3% 72 98 26

Turkey 3% 34 47 12

Mexico 2% 24 30 6

CIS 2% 50 63 12

US and Canada 2% 109 130 21

Other 2% 73 85 12

LA (ex. Brazil&Mex) 1% 24 28 3

EU28 1% 154 170 17

Brazil 0% 21 22 1

Korea 0% 56 55 -1

Japan 0% 63 60 -3

China -1% 672 618 -54

World 1% 1499 1660 1610

200

400

600

800

1000

1200

1400

1600

1800

2020

NAFTA

EU

+1% /yr

+1% /yr

+6% /yr

China

2005

C.I.S.

Other Asia

ROW

2010 201520001995199019851980 2025

Tata Steel Slide

China is now being the biggest manufacturer in the world

0%

5%

10%

15%

20%

25%

30%

35%

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

China - Manufacturing (% of global)

Source: Oxford Economics

India

China

Japan

USA

Eurozone

China - Exports of goods (% of global)

0%

5%

10%

15%

20%

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

India

Japan

China

US

Eurozone

4European Steel Industry, Clausthal Metallurgy Colloquium

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80

85

90

95

100

105

110

115

120

201620152014201320122011201020092008

Imports

Exports

Government

Investment

Consumption

GDP

EU GDP split (03/2008=100)

EU investment growth is lagging, resulting in modest machinery and construction output

60

70

80

90

100

110

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Construction

Automotive

Machinery

EU sector output (01/01/2008=100, 3mma1)

¹ 3mma: three month moving average

Source: Eurostat

5European Steel Industry, Clausthal Metallurgy Colloquium

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In EU the relative contribution of manufacturing to the economy declined

Manufacturing gross value added (Q1 2000 = 100)

Source: Eurostat

70

80

90

100

110

120

130

140

2014 20162000 2002 2004 2006 2008 2010 2012

Eurozone

Netherlands

Italy

France

Germany

UK

Manufacturing gross value added (% of GVA)

8%

10%

12%

14%

16%

18%

20%

22%

24%

26%

2008 2010 2012 2014 20161996 1998 2000 2002 2004 2006

From 20% to 16% of GVA

Italy

Eurozone

Netherlands

France

Germany

UK

6European Steel Industry, Clausthal Metallurgy Colloquium

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1.Products included: CR, EZ, GO, NGO, HDG,HR,OCS

2.Abbreviations - E&P: Energy and Power; BE: Building Envelope; DA: Domestic Appliances

Source: Eurofer, worldsteel

Other transport

Other Eng. (E&P)

Construction structures

Other Eng.(rest)

Automotive

Packaging(Cons/Ind)

Other

Building Envelope

Yellow Goods

2025

1.7%pa

12mt

1.2%pa

Consumer durables

20202015

89.9

77.8

84.7

The European strip market is forecast to grow by 12mt by 2025

X% Annual market growth for the period FY15-FY21

Apparent demand strip products EU28 – mt1,2Apparent demand strip products EU28 – mt1,2

Construction

Packaging

Industry

Strip

Automotive

• Steady long-term growth in western Europe• Environmental regulations and desire for climate neutral

buildings drive use of composite materials & functional coatings (e.g. insulating)

• Ongoing optimisation of building efficiency using modelling systems (BIM)

• Overcapacity remain a threat

• EU packaging market to remain stagnant • Health legislative pressure (BPA-free) creates new

opportunities for high-value improved materials (Protact)• Competition with other materials intensified

• EU shows slow recovery to 2007 levels by 2020• EU import threats continue (subdued by anti-dumping)• Anti-dumping legislation may limit export to NAFTA• Various niches to explore, e.g. coated steels and steels

that easier to handle and form

• Growth in light vehicle production (18 to 20 m/yr by ’20)• CO2 regulation drives tailpipe emission targets and shift

to electric vehicles• Growth in high-strength steels to enable light weighting• Growth in new plating and electrical steels for

electric/hybrid powertrains and automotive batteries

2.0%

0%

1.2%

2.3%

Key market developmentsKey market developments

European Steel Industry, Clausthal Metallurgy Colloquium 7

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Contents

1 Macroeconomic and industry developments

2 Opportunities for EU Steel makers

3 Tata’s unique position

8European Steel Industry, Clausthal Metallurgy Colloquium

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50% text / Two images

9

HELPING OUR CUSTOMERS SUCCEED

PRODUCTQUALITY

RESPONSIVENESSDELIVERY

PERFORMANCE

INNOVATION AND DIFFERENTIATION

European Steel Industry,

Clausthal Metallurgy

Colloquium

Tata Steel Slide

Excess capacity is especially high in China and EU

1 Effective overcapacity is 92.5% of nominal crude steel capacity (worldsteel)

Source: worldsteel, TSE Group Strategy

Global overcapacity1 by region (Mt)

0

100

200

300

400

500

600

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

ROW

NAFTA

EU

Other Asia

China

10European Steel Industry, Clausthal Metallurgy Colloquium

Figures are indicative

60%

65%

70%

75%

80%

85%

90%

1975 1980 1985 1990 1995 2000 2005 2010 2015

Long term global capacity utilisation (%)

China growth

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Consolidation: Ten out of the largest twenty steel producers are Chinese companies, nevertheless the industry is still very fragmented

15

16

16

17

17

19

20

20

22

26

26

29

30

33

34

35

42

46

48

97

Hebei I&S

NSSMC

ArcelorMittal

POSCO

Jianlong

Ansteel

Shagang

JFE

Tianjin Bohai

NLMK

Wuhan

Shougang

Nucor

TKS

Maanshan

Hyundai Steel

Shandong

Tata Steel

Gerdau

Baosteel

2015: Top 20 producers (Mt crude steel)

Source: worldsteel, LMC, CRU

11European Steel Industry, Clausthal Metallurgy Colloquium

26%27%

26%25%

20%21%

0%

5%

10%

15%

20%

25%

30%

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

20%21%

19%

29%

26%

Market share of top-10 steelmakers

For reference:

• Automotive industry: top-10 have ~70% share

• Seaborne iron ore: top-4 have ~67% share

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International steel trade increased significantly. China is now the largest exporter having been a net importer

European Steel Industry, Clausthal Metallurgy Colloquium 12

Global trade between

regions totalled 165Mt

for 2003 compared to

270Mt for 2015Source: ISSB

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International steel trade increased significantly. China is now the largest exporter having been a net importer

European Steel Industry, Clausthal Metallurgy Colloquium 13

Global trade between

regions totalled 165Mt

for 2003 compared to

270Mt for 2015Source: ISSB

Tata Steel Slide

Lack of level playing field in Europe make it an attractive market for imports

Source: OECD, WTO

Brazil – import dutiesBrazil – import duties

USA – ‘Buy American’

and import licences

USA – ‘Buy American’

and import licences

Argentina – import licenses

and reference prices

Argentina – import licenses

and reference prices

EU remains an open marketo Steel import duties very low%o Strict state aid ruleso Open procurement process

EU remains an open marketo Steel import duties very low%o Strict state aid ruleso Open procurement process

Columbia – Labelling and

certification scheme

Columbia – Labelling and

certification scheme

Mexico – Increase

import tariffs

Mexico – Increase

import tariffs

14European Steel Industry, Clausthal Metallurgy Colloquium

China – VAT export,

subsidies and FDI prohibition

(foreign control taking)

China – VAT export,

subsidies and FDI prohibition

(foreign control taking)

Thailand – Mandatory

certification national standards

Thailand – Mandatory

certification national standards

Turkey – Increase import

tarifs and trade-related

measures

Turkey – Increase import

tarifs and trade-related

measures

India – Increase import tariffs

and mandatory certification

national standards

India – Increase import tariffs

and mandatory certification

national standardsMorocco – Import duties Morocco – Import duties

Indonesia - Mandatory

certification national standards

Indonesia - Mandatory

certification national standards

Egypt – Increase

import tariffs

Egypt – Increase

import tariffs

Algeria – Franchise control system

and – Iicrease import tariffs

Algeria – Franchise control system

and – Iicrease import tariffs

Saudi Arabia – ‘Buy Saudi’ for

steel & increase of import tariffs

Saudi Arabia – ‘Buy Saudi’ for

steel & increase of import tariffs

Taiwan – Product

Certification Scheme

Taiwan – Product

Certification Scheme

Iran – ‘Buy Iranian steel’ Iran – ‘Buy Iranian steel’

Kazakhstan – Import duties Kazakhstan – Import duties

Malaysia - Mandatory

certification national standards

Malaysia - Mandatory

certification national standards

Vietnam – Increase

import tariffs

Vietnam – Increase

import tariffs

Russia – increase import tariffs Russia – increase import tariffs

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Circular Economy:Steel is an essential CO2 mitigation enabler through improved products

Case studyCase study

Net CO2 reduction potential

per year from 2030 onward2

Net CO2 reduction potential

per year from 2030 onward2

Emission from steel

production3

Emission from steel

production3

Ratio between annual CO2

reduction/ one-off emission

Ratio between annual CO2

reduction/ one-off emission

1. Bioenergy

2. Net reduction refers to reduction attributable to steel

3. Refers to the emissions related to the amount of steel needed for the specific application

Source: BCG, Steel Institute VDeH

49.6

6.3

6.9

19.6

22.2

69.7

103.0

200100500

165.9

5.3

14.0

3.2

1.2

0.2

3.0

0.7

500

42.1

Energy

industry

Household/

industry

Traffic

1

2

3

4

5

6

7

8

Efficient fossil fuel

powerplants

Offshore wind power

Other renewables1

Efficient transformers

Efficient e-motors

Weight reduction cars

Weight reduction trucks

Combined heat/power

~155:1

~23:1

~148:1

~17:1

~2:1

<1

~9:1

∑~443Mt ∑~70Mt ~6:1

~4:1

Mt CO2 p.a.

Mt CO2 p.a.

15European Steel Industry, Clausthal Metallurgy Colloquium

SlideTata Steel 16European Steel Industry, Clausthal Metallurgy Colloquium

Digital: Why should steelmakers do something about Industry 4.0?

Industry 4.0

All buzzwords are on the mountain Wait or act?

Tata Steel SlideEuropean Steel Industry, Clausthal Metallurgy Colloquium 17

Digital & Industry 4.0

Digital enabled Support functions

SlideTata Steel 18European Steel Industry, Clausthal Metallurgy Colloquium

Steel 4.0: Map of enablers and propositions

PerspectiveBusiness Manufacturing

Pro

du

cts

Pro

ce

ss

es

Propositions

Enablers

First

principles

models

Remote

maintenance

Prescriptive

maintenance

Flexible

scheduling

Dynamic

recipe

control

One-man

operated

plant

Asset-health

sensors /

monitors

Smart

sensors

Full

product

info

Product data

infrastructure

Dynamic

control

Full

capacity

usage

Fault

detection &

diagnosisVirtual

manu-

facturing

Fast product

development

Rapid

problem

solving

Big data

/ deep

learning

Track and

trace

Global

position

sensors

Dynamic

pricingIntegrated

customer’

demands

Proactive

suggestions

Full

forward plan

per coil

Stock

insight for

customers

Dynamic

delivery

Integrated

supply chain

Insight

of flows at

customer

Automated

planning &

scheduling

Zero

stocks

Smart

Robotics

Auto-

guided

transport

Balance of

costs and

benefits

Trans-

parency

Process

optimisation

@customerSales of

arisings

Ord

er

monito

ring

tool

Business

synergies

Serious

gaming

R

A

G

No activity

In progress

Business as usual

Optimal

spare part

position

Zero

defect

Operator

training

Tata Steel Slide

Contents

1 Macroeconomic and industry developments

2 Industry overcapacity, profitability and trade

3 Tata’s unique position

19European Steel Industry, Clausthal Metallurgy Colloquium

Tata Steel Slide

Introduction to the Tata Group

One of the world’s fastest-growing and most reputable corporations

Founded in 1868

Operations in more than 100 countries and 600,000 employees

Total revenues of more than $109 billion (68% from outside India)

Ranked world’s 11th most reputable and 17th most innovative company

Promoter company Tata Sons 66% owned by philanthropic trusts

£100 million invested in community projects every year

Tata Group

20European Steel Industry, Clausthal Metallurgy Colloquium 20

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Tata Group Opportunities

21European Steel Industry, Clausthal Metallurgy Colloquium

WEARABLES NUTRACEUTICALS FUEL CELLS ROBOTICS

WELLNESS ENERGYFUTURE

WORKPLACEIoT

PLATFORM SOFTWARE – Tata Consultancy Services

PLATFORM MATERIALS – Tata Steel

Titan Tata Chemicals Tata Power TCS, Titan

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Ways of Working: standards and cross assessments

European Steel Industry, Clausthal Metallurgy Colloquium 22

Tata Values: Pioneering, Unity, Integrity, Excellence, Responsibility

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Wrap-up

23European Steel Industry, Clausthal Metallurgy Colloquium

2

1

3

Although EU GDP grows 1% p.a. the next years, the EU is experiencing a

relative decline in manufacturing activity

China has become the world’s largest manufacturer yet suffers from

overcapacity and is exporting significant amounts of steel

There is no level playing field

The EU steel industry is fragmented and profitability is under pressure

Our CO2 footprint need to improve

Digital opens up new opportunities

Tata Group offers Tata Steel exciting opportunities