Structure of Presentation

1
Structure of Presentation
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner

• Where are we Now?
• Influences in 2006
• Forecasts for 2006
• Managing Volatility/Risk

2
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner
An Industry in Transition
Long Term Changes

• Companies Consolidate
• Consumption Growth Shifts
• Capital markets
• Costs and Prices cycles to continue

3
Linked Price Cycles
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner

• Scrap
• Commodity steels
• Iron ore, coke, coal
• Quality steels
• Sentiment

4
Todays Market
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner
Binge Buying and Hangover
November 2005 US and EU stocks returning to
normal prices rising in US Asia stocks
rising prices sliding
Price collapse from March
5
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner
Near Term Influences on the Steel Price in 2006
6
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner
Long Term Influences on the Steel Price in 2006
7
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner
Chinese Production
Mill t
8
China
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner

• Engine of Global Steel Economy?
• Growing Consumption gap?
• exports plant closures ?
• Fragmented industry
• Inefficient
• Capital intensive

9
Russia Brazil India
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner

• Strong growth
• Raw materials availability
• Growth in infrastructure
• Low kg/head consumption
• CIBERT

Cons kg/head
Source IISI, SBB Estimates
10
Real GDP Growth ( change)
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner
11
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner
Global Capacity Utilization
Mill t
87.1
89.2
79
12
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner
More Global Companies
Nascent Global Companies Posco
Shougang Bluescope Mechel JFE Nippon Tata
Global Essar CMC Baosteel Evraz ThyssenKrupp
Arcelor
Mittal
Ternium
Duferco
Gerdau
US Steel
Severstal
13
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner
Higher Iron Ore Prices
Winners
Losers
14
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner
Volatile Scrap (/t)
Source SBB
15
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner
More Reactive to Sentiment
US sets the tune Changeable Spot Prices -
Expectations - Inventories - International
trade
16
Trade Flows in 2006
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner
Japan to export more globally
17
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner
Turnaround in Imports
18
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner
4th Quarter of 2005

• US and EU
• Stocks back to normal
• Prices rising in US Europe?
• Asia
• Stocks rising
• Prices weakening

19
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner
Price Outlook 2006 HRC /t
Source Steel Business Briefing
20
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner
Price Outlook 2006 Rebar /t
Source Steel Business Briefing
21
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner
Price Outlook 2006 HRC /t
Source Steel Business Briefing
22
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner
Price Outlook 2006 HRC /t Euro/t
European Average
Source Steel Business Briefing
23
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner
Price Outlook 2006 Rebar /t
Source Steel Business Briefing
24
Price Outlook 2006 Beams /t
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner
World Average
Source Steel Business Briefing
25
Price Outlook 2006 Beams /t
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner
Global Forecast
Source Steel Business Briefing
26
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner
Price Outlook 2006 Beams /t EUR/t
European Average
Source Steel Business Briefing
27
Contract prices 2006
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner

• Fewer multi-year deals
• Up to 5-15 rise in 2006 (if Q4 stabilises)
• Impacts on financial results
• Linkage to raw materials

28
SBB Presentation 19-11-05 at MEsteel-SBB Dubai
Dinner
Managing Volatility/Risk

• Risks in 2006
• China volatile scrap, excessive stocks,
  sentiment, lack of transparency
• Managing risk
• Hedging OTC, surcharges, indexation, LME?,
  active exchanges
• More Annual Contracts
• Managing Capacity