Steel and Iron Ore Market Perspectives - Sergio Espeschit Vale's Director for Middle East 17th Middle East Iron and Steel Conference Dubai ...
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Steel and Iron Ore Market Perspectives
Sergio Espeschit
Vale’s
V l ’ Di
Director
t ffor Middl
Middle E
Eastt
17th Middle East Iron and Steel Conference
Dubai, December 11th, 2013
Disclaimer
“ This presentation may include statements that present Vale's expectations
about future events or results. All statements, when based upon expectations
about the future and not on historical facts, facts involve various risks and
uncertainties. Vale cannot guarantee that such statements will prove correct.
These risks and uncertainties include factors related to the following: (a) the
countries where we operate, especially Brazil and Canada; (b) the global
economy; (c)
( ) the
h capital
i l markets;
k (d) the
h mining
i i and d metalsl prices
i and
d their
h i
dependence on global industrial production, which is cyclical by nature; and (e)
global competition in the markets in which Vale operates. To obtain further
information on factors that may lead to results different from those forecast by
Vale, please consult the reports Vale files with the U.S. Securities and Exchange
Commission (SEC), the Brazilian Comissão de Valores Mobiliários (CVM), the
French Autorité des Marchés Financiers (AMF) and The Stock Exchange of Hong
K
Kong Li it d and
Limited, d in
i particular
ti l the
th factors
f t di
discussed
d under
d “Forward‐Looking
“F d L ki
Statements” and “Risk Factors” in Vale’s annual report on Form 20‐F.”
2
Agenda Iron ore and steel market outlook Vale’s expansion projects Vale in Oman
Iron ore seaborne demand and global crude steel production will grow
34% and 23% respectively until 2020, mainly driven by Asia and Emerging
Economies Crude Steel Production
Rest of the World (Mt) World (Mt) Asia (Mt)
Growth
Growth 2012
2012 ‐ 2020:
– 2020: +21%
+21% Growth
Growth 2012
2012 ‐ 2020:
– 2020: +23%
+23% Growth
Growth 2012
2012 ‐ 2020:
– 2020: 24%24%
Seaborne Iron Ore Imports
Growth
58% 45%2012
Growth – 2020:
34%
2012 +25%
‐ 2020:35%
25% Growth
Growth2012
2012– ‐2020:
2020:+34%
34% Growth
Growth2012
2012– ‐2020:
2020:35%
35%
The shift to Asia will continue but at lower pace
Seaborne iron ore market penetration is much higher in Asia and emerging economies than developed
nations
Developed/traditional economies have more availability of scrap or captive mines (NAFTA, CIS, Europe)
Source: Vale estimates
Steel intensity of GDP indicates that China, the main market for iron ore
has a long way to go before peaking
Steel intensity of GDP
1.400
on per Capiita (kg)
South Korea (1970 to 2011)
)g 1.200
K
(
at China (1978 to
i 1.000
p
ac 2011) Japan (1980 to 2011)
r
e
p 800
onsumptio
n USA (1947 to 2011)
o
it
p
m 600 Germany (1970 to 2011)
u
s
n
de Steel Co
o
cl 400
e
e
ts
e 200 Brazil (1947 to 2011)
d
u
Crud
rC
India (1950 to 2011)
0
0 10.000 20.000 30.000 40.000 50.000
GDP per capita (US$, 2005, Real)
Source: WSA, IMF, Vale analysis
MENA continues to be the top net importing steel region in the world. The
delay in steel projects in the region means that it will likely remain for
some years more
MENA Crude Steel Production and Finished Steel Demand (Mt)
Crude Steel Production Finished Steel Consumption
60
CAGR 2009‐2017: 8.5% CAGR 2009‐2017: 4.6%
50
40
30
20
10
0
2009 2010 2011 2012 2013e 2014e 2015e 2016e 2017e
*MENA: Saudi Arabia, Qatar, UAE, Oman, Bahrain, Iraq, Kuwait, Jordan, Syria, Egypt, Libya, Algeria, Morocco, Tunisia ‐
Source: CRU
The integration of steel mills and growth of DRI production in MENA is the
main driver of seaborne DR pellet demand
MENA DRI Production and DR Pellet Demand Forecast (Mt)
DRI Production DRP Seaborne Demand
50
CAGR 2013‐2018: 11.1%
40
30
20
10
0
2007 2008 2009 2010 2011 2012 2013e 2014e 2015e 2016e 2017e 2018e
*MENA: Saudi Arabia, Qatar, UAE, Oman, Bahrain, Egypt, Libya
Source: Midrex, Vale estimates (base case)
Vale’s total iron ore supply will increase smoothly in the coming years
Vale’s total iron ore supply
pp y forecast (Mt)
( )
453
411
376
348
321
2014f 2015f 2016f 2017f 2018f
Own Production Third Parties Purchase
Quantity and Quality
(Mt)
Average quality:
64.02% Fe 65.00%
4.45% SiO2 2.89%
1.26% Al2O3 1.07%
0.048% P 0.049%
23% Seaborne market share 29%
¹ S11D expected to reach 90Mt in 2018.
Our projects based in our strategy will deliver lower cost, better quality
and lower environmental impact through innovative technologies such as
dry processing and truckless mining
((US$/t
$/ IIron Ore
O Industry’s
I d t ’ Cost
C t Curve
C
CFR China) (Seaborne + China domestic)
~ 30% higher
cost producers
Vale’s current and
future position in
the cost curve
(Mt)
Source: Vale estimatesThe shift to Asia challenge
Our logistic strategy through Very Large Ore Carriers, Transfer Stations and
Distribution Center was designed to better compete in Asia combining low
cost, high quality and flexibility to offer better customer service.
Economies of scale Sohar Shorter time to SOHAR
and lower carbon Valemax Malaysia market, optimized lot
emissions & FTS size and blends A real example
Sohar
FTS
(Philippines)
DC Malaysia
ValemaxVale is investing US$ 37 billion in its iron ore strategy, recovering market share,
reducing cost, improving quality and extending mine life. US$ 18 billion already
invested and US$ 19 billion to be invested up to 2018
Capex Increase
MAIN (US$ billion) Reduce Improve
FOCUS Approved Projects Start up Product Volume
costs quality
(Mtpy)
Carajás Additional 40 Mtpy + Serra Leste 2H13‐ SF 7.9 50
(new processing plant) and CLN 150 1H14
OLUME
Mtpy
j S11D & CLN 230 Mtpy
Carajás py (mine
( + 2H16‐ SF 19.7 90
VO
processing plant, railway and port) 2H18
Conceição Itabiritos 2H13 PF 1.2 12
QUALITY
Y
Vargem Grande Itabiritos 2H14 PF 1.9 10
Conceição Itabiritos II 2H14 PF/SF 1.2 19
Cauê Itabiritos 2H15 PF/ SF 1.5 24
Oman and Tubarão VIII Pelletizing Plants 2H11‐ P 2.6
RISE
1H14
DED
ENTERPR
EXTEND
Teluk
l k Rubiah
b h (DC,
( Malaysia)
l ) 2H14 ‐ 1.4 ‐
VLOC fleet* (19 own + 16 chartered) & ‐ ‐ 3.9 & 0.3 ‐
Floating Transfer Staions / Tubarão P1 up
grade
d
215 Mt of additional capacity: 65Mt of depletion replacement and 150Mt net growth
*VLOC fleet Capex not included in the US$ 37 billion total. Equivalent Shipowners capex considered for chartered tonnage equivalentS11D (mine and plant): the largest project in the iron ore industry
Equipment’s Stockyards
Nominal capacity: 90 Mtpy.
Start‐up: 2H16.
Total Capex: US$ 19.67 billion
(including logistics)
Stripping ratio: 0
0.27.
27
Processing plants Mass recovery: 100%.
Truckless mining, dry processing, no tailings
dam and 70% reduction on greenhouse gases
emissions.
Water saving and forest preservation
EarthworksConceição Itabiritos II
Q li & Extending
Quality E di mines
i life
lif DRP Market
k
Refurbishment of existing Conceição plant (new process flow) to process compact
tab tes.
itabirites.
Primary crushing construction
Production capacity: 19 Mty.
Production split: 32% sinter feed and 68% pellet
feed.
Estimated CAPEX: USD 1.19 billion.
Start‐up: 2H14.
Expected quality: Fe: ~68.10%
SiO2+Al2O3: ~2.66%
P: ~ 0.023%Pelletizing Plant Tubarão VIII
Eighth pelletizing plant in
Tubarão Complex
Nominal capacity: 7.5 Mtpy.
Start‐up: 1H14.
Total Capex: US$ 1,321 million
Realized capex until 3Q13: US$ 1,035millionUpdate ‐ Construction of Malaysia DC ‐ Pictures of August & September
September, 2013Oman Industrial Complex Pelletizing Plant
Total Investment: US$ 2 billion Shareholders: 70%Vale and 30% Oman Oil
Company
Vale: US$ 1.25 billion
Capacity: 9 million tons
SIPC: US$ 0.25 billion
Oman Shipping:
pp g US$
$ 0.50 billion Distribution Center
Shareholders: 100% Vale
Capacity: Handling of 40 million tonsVale Oman – Reliable and Consistent Supplier Just in Time Supplier
(kt) Production
900,000
800,000
700,000
600,000
500 000
500,000
400,000
300,000
200,000
100,000
0
Apr‐11
Jul‐11
Oct‐11
Jan‐12
Apr‐12
Jul‐12
Oct‐12
Jan‐13
Apr‐13
Jul‐13
Oct‐13
Quality
Fe %
68.00
67.50
67.00
66.50
66.00
65.50
65.00
64.50
64.00
13
13
13
13
13
13
13
13
13
13
Jan‐1
Oct‐1
Feb‐1
Mar‐1
Apr‐1
May‐1
Jun‐1
Jul‐1
Aug‐1
Sep‐1Vale in Oman
O – Proud to be here
More than 60% of Omanis after 2 years of operationCreating Value:
The challenges of being a transforming company
Sustainable and Environmentally Job Generation Local Supply
Social Friendly Operation Chain
Responsibility
p y Development
p
• Social projects projected to • Investment of more than • Omanization rate of over 65% • Invested more than US$18
contribute to the development US$50 million to control million in local Omani
of the communities in Oman emissions in the air, soil and • Majority of Omani employees companies in 2013
water from North Al Batinah, the
region where we operateTh k you!! – ﺷﻜﺮا Thank ًﺷﻜ ا Vale Volunteers in Oman
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