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Structure of Presentation

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

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Structure of Presentation

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  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. Scrap Commodity steels Iron ore, coke, coal Quality steels Sentiment Linked Price Cycles SBB Presentation 19-11-05 at MEsteel-SBB Dubai Dinner

  4. Today’s 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. Strong growth Raw materials availability Growth in infrastructure Low kg/head consumption CIBERT Russia Brazil India SBB Presentation 19-11-05 at MEsteel-SBB Dubai Dinner Cons kg/head Source: IISI, SBB Estimates

  10. 2004 2005e 2006e Middle East 5.5 5.4 5.0 China 9.5 9.0 8.5 India 7.3 7.1 6.3 U.A.E. 8.5 5.6 4.2 Turkey 8.9 5.0 5.0 Major Advanced Economies1 3.2 2.5 2.6 ASEAN 42 5.8 4.9 5.4 Newly Industrialised Asian Economies3 5.6 4.0 4.7 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. Forecast $/t 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. Sentiment 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 US imports to rise Russian exports may decline China: exports to rise? EU exports stable Ukrainian exports to rise 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 Forecast Price Outlook 2006: HRC $/t Source: Steel Business Briefing

  20. SBB Presentation 19-11-05 at MEsteel-SBB Dubai Dinner Forecast Price Outlook 2006: Rebar $/t Source: Steel Business Briefing

  21. SBB Presentation 19-11-05 at MEsteel-SBB Dubai Dinner N. American Forecast European Forecast Global Forecast Price Outlook 2006: HRC $/t Source: Steel Business Briefing

  22. SBB Presentation 19-11-05 at MEsteel-SBB Dubai Dinner 790 740 690 640 Eu $/t Forecast 590 540 490 440 390 340 290 Eu Euro/t Forecast 240 190 1998 Nov 2005 Dec 2006 Price Outlook 2006: HRC $/t & Euro/t European Average Source: Steel Business Briefing

  23. SBB Presentation 19-11-05 at MEsteel-SBB Dubai Dinner N. American Forecast European Forecast Global Forecast 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. N. American Forecast European Forecast 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 Eu $/t Forecast Eu Euro/t Forecast 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

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