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KeyBanc Capital Markets Inc. Metal Research

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KeyBanc Capital Markets Inc. Metal Research Buckle-up: Metals Volatility Continuing As Global Recovery Unfolds SMA: January, 2011 Mark Parr, CFA 216-689-0269 – PowerPoint PPT presentation

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Title: KeyBanc Capital Markets Inc. Metal Research


1
KeyBanc Capital Markets Inc. Metal Research
  • Buckle-up Metals Volatility Continuing As Global
    Recovery Unfolds
  • SMA January, 2011
  • Mark Parr, CFA 216-689-0269
  • Philip Gibbs 216-689-0312
  • Jason Brocious 216-689-0289
  • KeyBanc Capital Markets Inc., Member
    NYSE/FINRA/SIPC
  • Important disclosures for the companies mentioned
    in this report can be found at https//key.bluemat
    rix.com/Disclosure.

2
Since 1981 a 1 change in global GDP change has
typically resulted in a 4 change in steel
production
Source International Iron Steel Institute
(IISI)
3
BRIC Influence to Dominate
  • Emerging markets marginal GDP contribution
    expected to overwhelm developed economies for the
    foreseeable future, especially for materials
  • Consolidation and enhanced financial
    strength/flexibility add incrementally to
    domestic steel industry fortunes

4
Emerging Economies Becoming Dominant Source of
Growth
5
Emerging Economies Growth Is Much More Steel
Intensive
Source World Bank and OECD
6
Emerging Economies Growth Is Much More Steel
Intensive
Source World bank and OECD
7
Asian Production Decoupling from R.O.W.
Source International Iron Steel Institute
(IISI)
8
Domestic Metal Spreads Decoupling from Domestic
Demand Levels
Source Purchasing Magazine Steel Business
Briefing RMDAS
9
Source Institute for Supply Management (ISM)
10
Source U.S. Census Bureau (M3 Survey)
11
ABI 3 Month Moving Average Lagged 9 Months vs.
Private Non-Residential Construction Spending
Growth ( Y/Y)
Source Census Bureau, The American Institute of
Architects Architectural Billings Index, KBCM
Estimates
12
Source U.S. Census Bureau Moodys The American
Institute of Architects Architectural Billings
Index
13
Source U.S. Census Bureau
14
Source Corelogic National Association of
Realtors RealtyTrac
15
Remodeling activity expected to grow after 3
years of decline
Source U.S. Census Bureau Harvard University
Center for Housing Studies
16
Source Specialty Steel Industry of North America
17
Source American Association of Railroads
18
Source American Association of Railroads
19
Source ATA IATA Bloomberg KeyBanc Capital
Markets Inc estimates
20
Source Boeing, Airbus
21
Supply Remains Constructive
  • Mills have kept supply in check, awaiting better
    signs of real demand
  • Trade balance for steel helped by weak dollar,
    stronger foreign markets
  • Inventories highly constrained

22
Source International Iron Steel Institute
(IISI)
23
Supply Chain Decoupling vs. Previous Cycles
Flat-rolled and Long Product Months-On-Hand
Comparison Through December
Source Metals Service Center Institute (MSCI)
24
Source U.S. Census Bureau
25
Source U.S. Census Bureau
26
Dollar vs. Trade-Weighted Baskets of Foreign
Currency
Source St. Louis Federal Reserve
27
Commodity Volatility Intact
  • Dependence on Emerging Markets creates more
    dynamic demand patterns
  • More attractive financial returns is attracting
    capital for the first time in several decades
  • No real end in sight
  • Buckle up!

28
Source Bloomberg
29
Source Steel Business Briefing The Steel Index
KeyBanc Capital Markets Inc.
30
Source The Steel Index
31
Source RMDAS, KeyBanc Capital Markets Inc.
estimate
32
Reduced coking coal supply due to Australia
flooding could drive this multiple higher, as
steelmakers can substitute some scrap for hot
metal
Source RMDAS, Steel Business Briefing KeyBanc
Capital Markets Inc. estimate
33
Source RMDAS, Steel Business Briefing KeyBanc
Capital Markets Inc. estimate
34
Pricing Decoupling from Domestic Demand
Source US Geological Survey Steel Business
Briefing
35
Pricing Decoupling from Domestic Demand
Source US Geological Survey Steel Business
Briefing
36
Raw Materials Decoupling from Domestic Demand
Source US Geological Survey Energy Information
Administration KeyBanc Capital Markets Inc.
37
Raw Materials Decoupling from Domestic Demand
Source US Geological Survey WorldSteel Energy
Information Administration
38
Steel ETF Movements vs. Currency and Crude Oil
Source St. Louis Federal Reserve
39
Source Australian Bureau of Meteorology Google
Trends
40
Source Australian Bureau of Meteorology Google
Trends
41
 
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