Global Steel

Industry Profile

Reference Code: 0199-0998

Publication date: May 2005

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Global - Steel
© Datamonitor (Published May 2005) Page 2
EXECUTIVE SUMMARY

EXECUTIVE SUMMARY

Market Value

The global steel market grew by 48.8% in 2004 to reach a value of $822.2 billion.

Market Value Forecast

In 2009, the market is forecast to have a value of $1,076.8 billion, an increase of

31.0% since 2004.

Market Volume

The market grew by 7.5% in 2004 to reach a volume of 1,777.5 million metric tons.

Market Volume Forecast

In 2009, the market is forecast to have a volume of 2,203.8 million metric tons, an
increase of 24.0% since 2004.

Market Segmentation I

Crude steel is the leading sector, accounting for 58.1% of the market.

Market Segmentation II

In terms of value, Asia-Pacific accounted for 48.3% of the market in 2004.

Market Share

Mittal steel is the leading player within the market, accounting for 2.4% of the
market's value.

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© Datamonitor (Published May 2005) Page 3
CONTENTS

TABLE OF CONTENTS

EXECUTIVE SUMMARY 3

CHAPTER 1 Market Overview 7

1.1 Market Definition 7

1.2 Research Highlights 7

1.3 Market Analysis 8

CHAPTER 2 Market Value 10

CHAPTER 3 Market Volume 11

CHAPTER 4 Market Segmentation I 12

CHAPTER 5 Market Segmentation II 13

CHAPTER 6 Market Share 14

CHAPTER 7 Competitive Landscape 15

CHAPTER 8 Leading Companies 16

8.1 Mittal Steel Company N.V. 16

8.2 Arcelor 16

8.3 Nippon Steel Corporation 16

8.4 POSCO (Formerly Pohang Iron & Steel Co., Ltd.) 17

CHAPTER 9 Market Forecasts 18

9.1 Market Value Forecast 18

9.2 Market Volume Forecast 19

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CONTENTS

CHAPTER 10 Further Reading 20

10.1 Sources 20

10.2 Related Datamonitor Research 20

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CONTENTS

LIST OF TABLES

Table 1: Global Steel Market Value: $ billion, 2000-2004 ............................................... 10

Table 2: Global Steel Market Volume: Metric Tons million, 2000-2004........................... 11

Table 3: Global Steel Market Segmentation I: % Share, by Value, 2004 ........................ 12

Table 4: Global Steel Market Segmentation II: % Share, by Value, 2004 ....................... 13

Table 5: Global Steel Market Share: % Share, by Value, 2004....................................... 14

Table 6: Global Steel Market Value Forecast: $ billion, 2004-2009 ................................ 18

Table 7: Global Steel Market Volume Forecast: Metric Tons million, 2004-2009 ........... 19

Global - Steel
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MARKET OVERVIEW

CHAPTER 1 MARKET OVERVIEW

1.1 Market Definition

The steel market consists of the production of crude steel, blast furnace (pig) iron and
direct reduced iron. Market values have been calculated using global annual average
steel and iron prices. Market shares reflect revenues earned in this market during the
last year for which financial data was available for all companies listed.

Any currency conversions used in this report have been calculated using constant
2004 annual average exchange rates.

1.2 Research Highlights

Following a period of heavy decline prior to 2002, the global steel market has
experienced rapid growth in the last few years, due to an upsurge in demand from the
rapidly expanding Chinese market.

Heavy demand and undersupply produced large price rises for steel in 2004, but as
production levels increase and demand becomes more stable, steel prices are
expected to come down.

The major players in the steel industry are in a much more stronger position today
than in the 1997-2001 period. This can be seen in improved operating results
following higher demand and prices for steel and falling production costs.

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MARKET OVERVIEW

1.3 Market Analysis

Following a period of heavy decline prior to 2002, the global steel market has
experienced rapid growth in the last few years. The industry, which consists of
producers of iron and steel and related products, has benefited from a massive
increase in demand from the rapidly expanding Chinese economy. Producers have
struggled to match these increases in demand, leading to market undersupply and
large rises in prices for iron and steel products.

The global steel market was worth $822.2 billion in 2004, having expanded at a
compound annual growth rate (CAGR) of 17.1% since 2000. This performance was in
stark contrast to that of the previous five years when declining demand and a price
slump saw market revenues drop rapidly. However, between 2002-2004, the market
value growth was driven by prices that rose by over 67% as increasing consumption
levels rapidly depleted inventories that had previously been reduced through
production cutbacks.

Following the rapid upsurge in demand from Asia-Pacific and China in particular since
2001, producers have attempted to increase capacities worldwide, but have been
unable to match the increases in demand. In 2004, 1.78 billion metric tons of iron and
steel products were produced globally, following expansion at a CAGR of 4.9% since
2000.

Asia-Pacific is the world’s leading producer of steel, with an output of 889.3 million
metric tons in 2004, which was equivalent to 50% of the global total. Iron and steel
production in the region increased at a CAGR of 9% between 2000-2004, compared
to just 2.3% in Europe over the same period. Production in the US declined by 2.4%
between 2000-2004, reflecting a number of bankruptcies and layoffs as many weaker
players collapsed in the harsh operating environment prior to 2002.

In terms of both value and volume, the largest sector of the global steel market is
crude steel, which accounted for 58.1% of the market value share in 2004. Of the
1.03 billion metric tons of crude steel produced globally in 2004, Asia-Pacific
produced 38.25%, while Europe produced 31.2%. In comparison, there were 703
million metric tons of blast furnace iron produced worldwide during 2004, of which
Asia-Pacific produced 56% and Europe 29.6%.

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MARKET OVERVIEW

Looking forward, demand is expected to slow during the next few years and as
production levels steadily increase and reduce the undersupply position, prices are
forecast to fall. However, following a period of heavy consolidation during the last five
years, the industry is better placed to manage the demand and supply position,
therefore, prices are unlikely to plummet in the way they did during the late 1990s. As
a result, the global steel market is expected to have reached a value of $1.08 trillion
by 2009, which equates to a CAGR of 5.5% since 2004.

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MARKET VALUE

CHAPTER 2 MARKET VALUE

The global steel market grew by 48.8% in 2004 to reach a value of $822.2 billion.

The compound annual growth rate (CAGR) of the market in the period 2000-2004
was 17.1%.

Despite past decline, the market has experienced recent growth. The largest growth
came in 2004 when the market increased by 48.8%.

Table 1: Global Steel Market Value: $ billion, 2000-2004

Year $ billion % Growth

2000 436.7
2001 366.4 -16.10%
2002 431.1 17.60%
2003 552.7 28.20%
2004 822.2 48.80%

CAGR, 2000-2004: 17.1%

Source: Datamonitor D AT AM ON IT O R

Figure 1: Global Steel Market Value: $ billion, 2000-2004

$ billion % Growth

900 60.0%
800 50.0%
700 40.0%
600
% Growth

30.0%
$ billion

500
20.0%
400
10.0%
300
200 0.0%
100 -10.0%
0 -20.0%
2000 2001 2002 2003 2004

Source: Datamonitor D AT AM ON IT O R

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MARKET VOLUME

CHAPTER 3 MARKET VOLUME

The global steel market grew by 7.5% in 2004 to reach a volume of 1,777.5 million
metric tons.

The compound annual growth rate (CAGR) of the market volume in the period 2000-
2004 was 4.9%.

The strongest growth was in 2004 when the market grew by 7.5%.

Table 2: Global Steel Market Volume: Metric Tons million, 2000-2004

Metric Tons
Year million % Growth

2000 1,465.4
2001 1,476.3 0.70%
2002 1,557.4 5.50%
2003 1,653.1 6.10%
2004 1,777.5 7.50%

CAGR, 2000-2004: 4.9%

Source: Datamonitor D AT AM ON IT O R

Figure 2: Global Steel Market Volume: Metric Tons million, 2000-2004

Metric Tons million % Growth

2,000 8.0%
1,800 7.0%
Metric Tons million

1,600
6.0%
1,400
% Growth

1,200 5.0%
1,000 4.0%
800 3.0%
600
2.0%
400
200 1.0%
0 0.0%
2000 2001 2002 2003 2004

Source: Datamonitor D AT AM ON IT O R

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MARKET SEGMENTATION I

CHAPTER 4 MARKET SEGMENTATION I

Crude steel is the leading sector, accounting for 58.1% of the global steel market.

Blast furnace iron and direct reduced iron form 39.4% and 2.5% of the global steel
market, respectively.

Table 3: Global Steel Market Segmentation I: % Share, by Value, 2004

Category % Share

Crude Steel 58.10%

Blast Furnace Iron 39.40%
Direct Reduced Iron 2.50%

Total 100.0%

Source: Datamonitor D AT AM ON IT O R

Figure 3: Global Steel Market Segmentation I: % Share, by Value, 2004

Direct Reduced
Iron
2.5%

Blast Furnace
Iron
39.4%
Crude Steel
58.1%

Source: Datamonitor D AT AM ON IT O R

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MARKET SEGMENTATION II

CHAPTER 5 MARKET SEGMENTATION II

In terms of value, Asia-Pacific accounted for 48.3% of the global steel market in 2004.

In comparison, Europe and US formed 31.1% and 8.1% of the global steel market,
respectively.

Table 4: Global Steel Market Segmentation II: % Share, by Value, 2004

Geography % Share

Asia-Pacific 48.30%
Europe 31.10%
Rest of the World 12.40%
US 8.10%

Total 100.0%

Source: Datamonitor D AT AM ON IT O R

Figure 4: Global Steel Market Segmentation II: % Share, by Value, 2004

US
Rest of the 8.1%
World
12.4%

Asia-Pacific
48.3%

Europe
31.1%

Source: Datamonitor D AT AM ON IT O R

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MARKET SHARE

CHAPTER 6 MARKET SHARE

Mittal steel is the leading player within the global steel market, accounting for 2.4% of
the market's value.

Arcelor, Nippon Steel, and POSCO generate 1.8%, 1.6%, and 1.5% of the global
steel market. Together the top four players account for less than 8% of the global
steel market.

Table 5: Global Steel Market Share: % Share, by Value, 2004

Company % Share

Mittal Steel 2.40%

Arcelor 1.80%
Nippon Steel 1.60%
POSCO 1.50%
Other 92.60%

Total 100.0%

Source: Datamonitor D AT AM ON IT O R

Figure 5: Global Steel Market Share: % Share, by Value, 2004

Mittal Steel
2.4%
Other
Arcelor
92.6%
1.8%

Nippon Steel
1.6%

POSCO
1.5%

Source: Datamonitor D AT AM ON IT O R

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COMPETITIVE LANDSCAPE

CHAPTER 7 COMPETITIVE LANDSCAPE

The experiences of the 1997-2001 period, when the harsh operating environment led
to the collapse of a number of players in Europe and the US and consolidation activity
worldwide, has led to the development of a far stronger global steel industry. Most of
the major players can point to vastly improved operating results since 2001, with
rising outputs and prices driving revenue growth, and falling per ton costs leading to
improved margins.

Since the late 1990s, the global steel industry has been characterized by most
companies reorganizing internal operations and, for the larger players, high levels of
M&A activity. Reductions in raw material stocks and production capacities as part of
this consolidation process, meant that the industry was unable to meet the rapid
upsurge in demand for steel created by the booming Chinese economy post-2001,
which led to large price increases between 2002-2004. However, in the aftermath of
this rapid turnaround from boom to boost, a number of large global leaders have
emerged, which appear financially stronger than their predecessors and better placed
to exert some level of influence over market prices.

The leadership position in the global steel industry has rapidly changed hands over
the last few years, reflecting the high levels of M&A activity witnessed since 2000.
Prior to the emergence of Mittal Steel, whose acquisition of International Steel Group
propelled it to the number one position in 2004, Arcelor was the global market leader,
following its birth from the merger of three of Western Europe’s leading producers.
However, the global industry remains fragmented, with the top four players controlling
less than 8% of the market value share.

Further M&A activity is expected during the next five years, as the industry leaders
look to acquire greater influence over market pricing, thereby reducing their
vulnerability to any future decline in demand. The most attractive acquisition targets
appear to be those based in the rapidly growing markets of Eastern Europe and Asia-
Pacific. In contrast, many US players may find it difficult to find suitors, as the high
value of redundancy and early retirement packages issued during the period of
consolidation have created multi-billion dollar burdens that restrict their financial
dealings.

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LEADING COMPANIES

CHAPTER 8 LEADING COMPANIES

8.1 Mittal Steel Company N.V.

Mittal (formerly Ispat International) is a provider of finished and semi-finished steel

products. Its products include flat and long products, wire rod, coated steels, and
tubes and pipes. The company is headquartered in Rotterdam, the Netherlands.

For fiscal 2004, the company generated revenues of $22.19 billion and a net income
of $4.701 million.

8.2 Arcelor

Arcelor Group is engaged in the production of flat carbon steel, long carbon steel and
stainless steel, as well as the distribution, transformation and trading of these
products. The company has a workforce of about 98,000 people and is
headquartered in Luxembourg.

For the fiscal year ended December 2004, the revenues of Arcelor amounted to
$37.48 billion and net income of the company amounted to $2874 million.

8.3 Nippon Steel Corporation

Nippon Steel Corporation (Nippon Steel) is one of the largest integrated steel makers
in the world. In the fiscal year ended March 2004, the company generated revenues
of $27,683 million..

Steel products account for more than 70% of the company's sales and a dominant
share of the company's operating profits. The company's other operations include
engineering, construction, chemicals, nonferrous metals, ceramics, electronics,
information and services, and urban development. The company also provides
services such as energy, finance, and insurance.

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LEADING COMPANIES

8.4 POSCO (Formerly Pohang Iron & Steel Co., Ltd.)

Pohang Iron and Steel Company Limited (POSCO) is a leading steel producer in
South Korea that manufactures and sells steel products in the domestic market. It
employs about 19,000 people (excluding employees of subsidiaries) and is
headquartered in Pohang, South Korea.

For the fiscal year ended December 2004, revenues totaled $17.2 billion, an increase
of 37.8% over fiscal 2003. Net income for fiscal year 2004 was $3.35 billion, an
increase of 94.5% over fiscal 2003.

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MARKET FORECASTS

CHAPTER 9 MARKET FORECASTS

9.1 Market Value Forecast

In 2009, the global steel market is forecast to have a value of $1,076.8 billion, an
increase of 31.0% since 2004.

The compound annual growth rate (CAGR) of the market in the period 2004-2009 is
predicted to be 5.5%.

Table 6: Global Steel Market Value Forecast: $ billion, 2004-2009

Year $ billion % Growth

2004 822.2 48.80%

2005 913.2 11.10%
2006 989.7 8.40%
2007 1,045.9 5.70%
2008 1,073.7 2.70%
2009 1,076.8 0.30%

CAGR, 2004-2009: 5.5%

Source: Datamonitor D AT AM ON IT O R

Figure 6: Global Steel Market Value Forecast: $ billion, 2004-2009

$ billion % Growth

1,200 60.0%

1,000 50.0%

800 40.0%
% Growth
$ billion

600 30.0%

400 20.0%

200 10.0%

0 0.0%
2004 2005 2006 2007 2008 2009

Source: Datamonitor D AT AM ON IT O R

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MARKET FORECASTS

9.2 Market Volume Forecast

In 2009, the global steel market is forecast to have a volume of 2,203.8 million metric
tons, an increase of 24.0% since 2004.

The compound annual growth rate (CAGR) of the market volume in the period 2004-
2009 is predicted to be 4.4%.

Table 7: Global Steel Market Volume Forecast: Metric Tons million,

2004-2009

Metric Tons
Year million % Growth

2004 1,777.5 7.50%

2005 1,892.0 6.40%
2006 1,989.8 5.20%
2007 2,067.3 3.90%
2008 2,138.1 3.40%
2009 2,203.8 3.10%

CAGR, 2004-2009: 4.4%

Source: Datamonitor D AT AM ON IT O R

Figure 7: Global Steel Market Volume Forecast: Metric Tons million,

2004-2009

Metric Tons million % Growth

2,500 8.0%
7.0%
Metric Tons million

2,000
6.0%
% Growth

1,500 5.0%
4.0%
1,000 3.0%
2.0%
500
1.0%
0 0.0%
2004 2005 2006 2007 2008 2009

Source: Datamonitor D AT AM ON IT O R

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CONTENTS

CHAPTER 10 FURTHER READING

10.1 Sources

This report is based on a combination of primary Datamonitor research, including

online, face-to-face and telephone interviews with consumer and industry players,
and secondary research using various sources (including trade associations, news
providers and others).

Industry Associations

International Iron and Steel Institute

Rue Colonel Bourg, 120
B-1140 Brussels, Belgium
Tele: 32 2 702 8900
Fax: 32 2 702 8899
http://www.worldsteel.org/ix.php

10.2 Related Datamonitor Research

Datamonitor Industry Profiles

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Global Aluminum ($200)
Global Diversified Metals & Mining ($200)
Global Precious Metals and Minerals ($200)
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Global - Steel
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