Materials Technology EC RN ADAS stainless steel Position

Materials Technology / EC R&N AD/AS stainless steel Position Agoria

Agoria’s general position • EU needs free and fair trade on steel ! • Ensuring real competition in the market • Ensuring that competition is balanced • Agoria is not against trade defence instruments per se but they should be used only if: • Real damage to an industry • Global EU picture/interest is taken into account • COMPETITIVE PRICING OF STAINLESS STEEL IS IMPORTANT FOR AGORIA 2

Why is stainless steel important for Agoria? • Agoria has major companies which are users of stainless steel: • • • Automotive industry Mechanical engineering Metal products Construction, Chemical installations… • Most companies are SME’s • Within group of main users cost of stainless steel is up to 60% of finished product cost: • Direct impact on competitiveness with price differential fear of rising imports of finished products • Sector is facing worldwide competition also from China

Arguments against the AD/AS dossier • • • Analogue country No injury No threat of injury No causal link Against the community interest 4

Analogue country US is not appropriate • Quote: ‘The US market is similar to China’ • US market is small compared to China and Europe • Most companies in the US are linked in one or the other way to one of the EU stainless mills in Europe: • One of the major market players in the EU – Outokumpu, by coincidence not a complainant – is also a major player in the US and probably the company prepared to cooperate … 5

Analogue country US is not appropriate • Imports of stainless steel scrap – major resource for the production – is far more limited in the NAFTA region. In Asia the scrap market is far more open to competition which is a crucial difference for the stainless steel market • Some tarif barriers were applied to EU companies exporting to the US (amongst others to Aperam, one of the complianants): • Agoria believes that another analogue country would have been more appropriate • Would Taiwan have been an option – has it market economy status or is it in the same boat as China? • If not Korea would be rather well positioned 6

No injury • Apparent consumption in the EU has remained stable over the investigation period: • Major element which is omitted is that the total demand of stainless steel remained at rather low levels compared to the pre-crisis situation • This leads to major overcapacity in the sector not only in China but also in the EU is already lasting for several years • The complainants production capacity and capacity utilisation remained stable over the investigation period 7

No injury • The capacity utilisation was not changed due to the imports of stainless steel of China & Taiwan: • During the last two years of the investigation period with ‘surging’ imports it even ameliorated back to the values of 2010!! • Whilst EU sales complainants decreased with 6% over the investigation period – probably due to destocking in the supply chain 2010 2011 2012 2013 Imports China 57. 735 99. 083 93. 194 148. 220 Imports Taiwan 128. 562 175. 238 133. 696 169. 948 Complainants production 100% 99% 103% 99% Complainants capacity utilisation 100% 96% 99% EU sales complainants 100% 95% 94% 8

No injury – destocking • Destocking occured during the investigation period: destocking • Between 100. 000 & 80. 000 ton (2011/2012) • Negative impact on the production & capacity use • Combined with production cuts due to consolidation 9

No injury – order intake vs destocking Destocking? 10

No injury: situation of global overcapacity • Stainless steel sector worldwide is suffering from a global overcapacity: • Hence low capacity utilisation is not the impact of high imports of alleged dumped products • EU producers cut production during the period of investigation: • Outukompu closed the meltshop of Krefeld in 2013 and has plans to close the meltshop in Bochum during 2015 main reason high energy costs in Germany • Aperam has indicated that it has cut capacity with 200. 000 ton in 2014 to tackle overcapacity • Overcapacity still due to lower stainless steel demand after the outbreak of the economic crisis 11

Apparent stainless steel use in EU • Still at lower levels due to the ongiong economic crisis 12

No injury – market share 3400000 350000 3380000 300000 3360000 250000 3340000 destocking 3320000 3300000 Closure meltshop Germany 3280000 3260000 200000 150000 100000 EU apparent consumption 3240000 Imports China/Taiwan 3220000 50000 3200000 0 2011 2012 2013 13

No injury – market share • Market share of complainants remain high in Europe: • Still over 75% which leads to dominant market players given the strong consolidation (3 major players) • Closure of meltshop (TK) in 2013 and reduction of capacity in 2014 (Aperam) had supplementary short term impact 14

No injury – profitability Aperam • Complainants claim that profitability declined sharply Aperam 2009 2010 2011 2012 2013 2014 EBITDA 226 410 356 217 292 547 Steel shipments 1. 447. 000 1. 741. 000 1. 749. 000 1. 683. 000 1. 728. 000 1. 813. 000 EDITDA per tonne 156 235 204 129 169 302 186. 297 274. 321 226. 890 318. 168 Imports • But with surging imports, restauration of EBITDA … some statements from press releases Aperam on earnings: • 2011: increase of 7% in volumes in Europe • 2012: volume increase of 14% in Europe • 2013: higher activity in Europe End 2013 - fire in new pickling & annealing line Aperam – alternative sourcing needed 15

No injury – profitability Acerinox • Results 2014: Recovering from the crisis – injury of alleged dumped imports? 16

No injury – profitability Acerinox 17

Impact of nickel sourcing Competitive advantage China given EU is using dominantly stainless steel scrap is disappearing 18

Impact of nickel sourcing • Price setting for stainless steel: • The base price – negociated with customers and depending on market supply and demand, • The alloy surcharge which offsets price increases in raw materials such as nickel, chromium or molybdenium which are quoted on the LME • Difference between EU/China: • EU producers are using an alloy surcharge based on LME price levels • Chinese producers hedge this part of the product price for their customer • Stainless steel companies remain exposed on the price fluctuations of mainly nickel: • Decreasing price levels = decreasing demand of customers due to price decreases driven by decreasing alloy costs (2011/2013) • Potential of financial risks due to non hedging of stainless steel scraps 19

Impact of nickel sourcing • During the investigation period, the nickel price levels dropped: • End 2010 to end 2013 by more than 10. 000 dollar/ton • Clear link to financial results of complainants which declined sharply 2011 -2012 Decrease of 10. 000 dollar/ton 20

No threat of injury – outlook Aperam 21

Community interest • Allegation that there is no significant impact on consumer prices is flawed: • Whilst the end-consumer will not see the difference, the transforming industry will have strong difficulties to cope with Chinese imports of finished products incorporating steel with a more competitive price • The examples shown in the report of the independent consultant omit always the transforming industry which has to cope with competition with finished goods from China • The cost level of SSCR in several intermediate products delivered to certain industries are significant – up to 60%: • Exhaust systems, parts for washing machines, tankcontainers, equipment, etc… • These have to compete with similar products which contain SSCR with an alleged price differential up to 20 to 30% Several Agoria Companies will have to cope with increasing international competition due to differential in price levels 22

Community interest - consolidation • The SSCR market in Europe is dominated by three major players after the recent consolidation period Consolidation in stainless industry Example Europe 1970: 23 mills – 2004: 4 mills – 2014 – 3 mills KRUPP TK AST THYSSEN AVESTA SHEFFIELD AVESTA POLARIT OUTOKUMPU UGINE APERAM ALZ ACERINOX 23

Community interest - consolidation • Former AD case on SSCR – with still three major producers illustrate clearly the problem “Whereas European automobile manufacturers and their suppliers currently source only limited quantities of steel from China, Korea and Taiwan, the imposition of anti-dumping duties would definitely eliminate these countries as a source of supply. This would put European steel producers in a position where they could easily increase their prices even further without risking to lose their automotive customers. From a competition perspective, this is not a desirable outcome. What manufacturers and their suppliers need is more competitionin the European steel market, not less. ” European Automobile Manufacturers Association (“ACEA”), injury comments, 13 March 2008 (at p. 3) Situation has not changed on the contrary: Further consolidation & cutting of overcapacity 24

Community interest - consolidation • TODAY: Platts – Mc. Graw & Hill Finance (9/1/2015) – investments bank Jefferies: • Following several years of restructuring led by consolidation and capacity closures, the European stainless industry "is now hitting an inflection point, " the bank suggested. Led by Outokumpu and with additional closures from Aperam and Thyssen. Krupp, 30% of regional melt capacity should be shuttered by 2016, and utilisation rates should grow from 65% in 2010 -11 towards 81% by 2017, Jefferies said, adding: "As utilisation rates rise, pricing discipline should significantly improve and base prices gradually increase. " This is not indicating healthy competition and has a negative impact on our industry 25

Conclusion • The alleged injury by Eurofer is rather questionable given that: • Demand over the investigation period was still low compared to pre-crisis period & linked to huge overcapacity also in the EU • Some other events had potential negative impact on EU industry (fire @Aperam & restructurering costs) • Chinese producers have (had) price benefit given that main production is through primairy versus scrap route in EU • Important destocking occured during investigation period with potential impact on shipments • Falling nickel prices had an important impact on the market demand • • • Threat of injury is not imminent given the good results of Aperam & Acerinox in 2014 Lack of causal link Community interest : the competition in the EU is already very limited with only three dominant producers • EU producers push for higher prices on the detriment of transforming industry AGORIA demands that Belgian votes against the AD/AS proposal 26