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SBB STEEL MARKETS NORTH AMERICA 2006

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St. Paul. Toronto. Houston. Mobile. Blytheville. Note: Capacity in ... St. Paul, Minnesota. Temper Mill and. Cut-to-Length Line 300,000. Regina, Saskatchewan ... – PowerPoint PPT presentation

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Title: SBB STEEL MARKETS NORTH AMERICA 2006


1
SBB STEEL MARKETS NORTH AMERICA 2006
  • March 6, 2006
  • John Tulloch
  • Executive Vice President and Chief Commercial
    Officer
  • IPSCO

2
Outline
  • IPSCO
  • Steel plate and tubular markets today
  • Comments on
  • Scrap
  • Trade
  • Outlook

3
IPSCO
4
IPSCOS GROWTH 1982 - 2004
Tons
We have grown both sectors over the past 20 years.
Steel by 50 x
Pipe by 4 x
5
  • IPSCO
  • Is Globally Competitive on cost and quality
  • Has Significant Market Share in the plate and
    pipe markets it serves with complimentary product
    lines
  • Leads in New Technologies necessary to make
    value-added steel and energy pipe for the oil
    gas industry
  • Employs a Steel Short strategy across
    complementary product lines which enables IPSCO
    to optimize production and profitability
  • Possesses Financial Flexibility to support a
    selective expansion/acquisition strategy

6
What drives our business?
ENERGY and INFRASTRUCTURE
7
North American Coverage
Houston, Texas Temper Mill and Cut-to-Length Line
300,000
8
Full Year 2005 Industry Leading Profitability
US millions except EPS
  • Fourth consecutive record year of sales and
    production
  • Record operating profit per ton of 259
  • Record full year earnings
  • Record coil and plate production of 3.4M tons
  • Record energy tubular shipments of 775,000 tons

9
IPSCOs near term outlook
  • Believe end-user demand for steel mill products
    will remain relatively stable in 2006
  • Expect high oil and gas prices will continue to
    drive high rig counts and demand for OCTG
    products
  • Expect large diameter pipe mills will run at high
    levels of capacity utilization throughout 2006
  • Anticipate that higher costs of steel making
    inputs will result in some margin compression in
    1Q06

10
Future Growth
  • Increased development of plate and pipe
    capability
  • Incremental growth
  • Additional product scope
  • Additional value added
  • No new greenfield steel mill construction
  • Acquisitions as appropriate

11
Expansion of Value Added Products
  • Normalized Plate
  • Quench and Temper Plate
  • Heavier Gauge Plate
  • Higher Strength As Rolled Plate
  • Blast Painted Plate
  • Additional pipe finishing
  • Heat Treated pipe capacity
  • Enhanced large diameter pipe capability
  • Potential new pipe facilities

12
STEEL PLATE MARKETS TODAY
13
Issues in Steel Markets Today (with a focus on
plate)
  • Demand
  • End use segments are strong
  • Distribution shipments are stable
  • The issue is supply
  • Domestic supply seems to be balanced
  • Imports are a variable
  • Peaking supply
  • Opportunistic
  • Issues
  • Risk of global over supply
  • Country-country price differentials
  • The lag effect of imports

14
Energy Infrastructure
15
Financial Reports Very strong 2005, positive
volume, price and profit outlook
16
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17
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18
Steel Supply Channels
  • There is some re-evaluation of supply lines
  • OEM complacency of 2002-3 changed to a scramble
    in 2004 and now a more rational evaluation of
    strategic sourcing going forward
  • Long term stability of supply at manageable
    prices
  • Many creative approaches being made by end users
    to make the supply chain work for them
  • This has implications for mills, service centers,
    import supply

19
Energy Tubular Products Robust
High natural gas prices are expected to drive
higher rig counts, which in turn will drive
consumption of energy tubulars
Rig Count Canada
Rig Count US
High drilling activity areas
Source Baker Hughes
20
Large Diameter Pipe Entering New Cycle Ranges
between 10 20 of Plate Consumption
  • Drivers
  • Project-based orders
  • Oil sands product shipment
  • Need for large pipelines to bring natural gas
    from Alaska and Northern Canada to markets
  • Mackenzie Pipeline
  • Alaska Pipeline
  • IPSCO expanding core competency with Frontier
    Pipe Research Unit
  • Production facilities well located to market
  • Additional infrastructure will be required around
    northern pipelines
  • Capacity starting to fill in 2006
  • 2007 looks very promising

Oil Sands Options
East Texas Expansion
Berg
21
SCRAP
22
  • Scrap pricing has been having a leveraged impact
    on the North American industry
  • Linkage to product selling prices through
    surcharges
  • Logically it can be expected to follow the costs
    of other sources of iron units
  • Scrap is a by-product the price will always
    be a market clearing price
  • New scrap substitute growth will have an impact
  • Scrap based regional producers will remain
    amongst the most competitive

23
TRADE
24
Trade
  • Always an alive issue for North American markets
  • Typically trade flows increase as the spread
    between markets expand
  • Offset by
  • Local supply advantages
  • Risk
  • Exchange rates impact these flows
  • Trade remedy actions are driven by
  • Belief in what constitutes fair trade
  • Tactical moves by interested parties
  • Foreign policy considerations
  • As steel imports in to North America increase
    beyond a balance with demand, expect a lot of
    trade remedy pressures to be brought forward

25
Final comments…
  • Will the steel industry be different going
    forward than it has been in the past?

26
Is this a new steel environment?
  • Steel is a growth industry again
  • Supply issues become the factor determining
    whether we have a financially sustainable
    industry model
  • Alfred E Kahns Tyranny of Small Decisions
  • Consolidation moves the industry in the direction
    of sustainability
  • Global consolidation however is not the only
    route to success for individual firms
  • Success will require leadership beyond
    conventional wisdom in the global industry.

27
  • We believe that the demand environment will
    remain positive
  • The restructuring of the global industry will
    continue, based on rational economic behavior
  • Global policy issues will consume more time
  • Adept management will determine which firms
    succeed and which firms struggle

28
THANK YOU
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