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Global steel market outlookPrepared for:

CUSteel ConferenceShanghai, September 23rdth, 2005

Prepared by:

John JohnsonChief Representative, CRU Beijing

1821 Tower 2, Bright China Chang An Building, 7 Jianguomennei Avenue, Beijing 100005, China

Tel: 0086 10 65102206, email john.johnson@crugroup.com

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Presentation plan

Recent global steel price trends

– CRUspi

– Regional Prices

– Flats versus Longs

Discussion of latest market developments

– Focusing firstly on the global slowdown in the rate of growth in consumption, reduced production levels and the current global rebound in prices

Discussion of CRU’s outlook

– Outlining the reasons why prices should trend downwards again from 2006

Points to watch

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In the last few month CRUspi has recovered some of losses after losing 60% of the gains made in 2004-2005. Is this the start of a global recovery in steel prices?

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J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S

CRUspi (for sheet products)

Global CRU steel price index (CRUspi), April 1994 = 100

Data: www.cruspi.com

2003 2004 2005

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Regional prices do broadly move in similar directions, with a few exceptions, due to trade acting as a great leveller between markets

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100110120130140150160170180

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S

N.America

Europe

Asia

CRU regional steel price index (CRUspi) for main steel products, April 1994 = 100

Data: www.cruspi.com

2003 2004 2005

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But flat products and long products can diverge, as they did in 2004, though even these markets seem to converge eventually

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J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A

Flat products

Long products

CRU steel price index (CRUspi) for sheet products, April 1994 = 100

Data: www.cruspi.com

2003 2004 2005

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During the first and second quarters of 2005, year-on-year growth in world sheet consumption fell below 3% - the last time growth was this slow was three years ago…

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Q1e Q2e Q3e Q4e Q1e Q2e Q3e Q4e Q1e Q2e Q3e Q4e Q1e Q2e

Year-on-year changes in world apparent sheet consumption, %

Data: CRU Analysis. Note: e estimate.

2002 2003 2004 2005

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The slowdown in the rate of growth in consumption has been most keenly felt in North America, followed by Europe (in Asia it has actually risen)…

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Americas Non-China Asia Europe China

H2 2004 v H2 2003 H1 2005 v H1 2004

Year-on-year changes in apparent sheet consumption by country/region, %

Data: CRU Analysis.

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Mills have responded to the slowdown in their orders by reducing operating rates, bringing forward planned maintenance and/or idling production facilities…

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Americas Non-China Asia Europe China

H2 2004 v H2 2003 H1 2005 v H1 2004

Year-on-year changes in sheet production by country/region, %

Data: CRU Analysis.

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However, the final quarter of this year is likely to see an acceleration in the rate of growth in demand, primarily owing to renewed buying from stockists and service centres…

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Q1e Q2e Q3e Q4e Q1e Q2e Q3f Q4f Q1f Q2f Q3f Q4f

Year-on-year changes in world apparent sheet consumption, %

Data: CRU Analysis. Note: e estimate, f forecast.

2004 2005 2006

Growth is expected to accelerate from Q4 2005, as buyers return to the market

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7.5

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5.5Inventories Months shipments-on-hand

North American sheet inventories have been drawn down sharply in recent months, and have now bottomed-out…Service centre inventories of carbon flat-rolled products*, m s.tons

Data: MSCI, CRU Analysis Note: * held at US & Canadian service centres.

2003 2004 2005

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-1.5

-1.0

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Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1e Q2e Q3e

Apparent sheet consumption

Demand has rebounded on a quarter-on-quarter basis for the first time in over a year (by over 1m s.tons from Q2)…North American apparent sheet consumption, qtr-on-qtr changes, m s.tons

Data: CRU Analysis.

2003 2004 2005

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HR sheet CR sheet Coated sheet

With inventories and imports at low levels, andnumerous blast furnaces still off-line…Us imports of steel sheet (3-mth-avg), m s.tons

Data: AISI, CRU Analysis.

2003 2004 2005

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HR coil CR coil HDG coil

The demand/supply balance has tightened significantly,and a price spike has occurred US Midwest sheet prices, fob mill, US$/s.ton

Data: CRU Analysis.

2003 2004 2005

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US domestic vs German domestic

US domestic vs Far East import

As as result, the price premium that the US marketattracts over others is likely to rise in the near term…Difference between average sheet price in the USA and elsewhere, US$/tonne

Data: CRU Analysis.

2004 2005

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Q1 Q2 Q3e Q4e Q1e Q2e Q3e Q4f Q1f

SA sheet production

High prices will also encourage local mills to bringblast furnaces back on-line and to increase output…North American steel sheet production (seasonally adjusted), m s.tons

Data: CRU Analysis.

2004 2005 2006

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Q1 Q2 Q3 Q4f Q1f Q2f Q3f Q4f Q1f Q2f Q3f Q4f

HR coil CR coil HDG coil

As such, we forecast a fairly sharp downward pricecorrection to commence at the end of the year US Midwest sheet prices, fob mill, US$/s.ton

Data: CRU Analysis.

2005 2006 2007

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Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2e Q3e

Germany Italy UK

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There has been little change to the modestperformance of the West European economy… Year-on-year changes in industrial production

Data: CRU Analysis, OEF.

2003 2004 2005

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J F M A M J J A S O ND J F M A M J J A S O N D J F MA M J

2.0

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4.0Inventories Months shipments-on-hand

An overhang of sheet inventories accumulatedin the first half of 2005…German stockholder inventories of sheet, ‘000 tonnes

Data: BDS, CRU Analysis.

2003 2004 2005

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Q1 Q2 Q3 Q4 Q1 Q2 Q3f Q4f Q1f Q2f Q3f Q4f

HR coil CR coil HDG coil

After a moderate rebound in late 2005, European sheet prices are expected to trend downwards German domestic sheet prices, parity point, €/tonne

Data: CRU Analysis.

2005 2006 2007

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In 2006 and 2007, the rate of growth in world industrial production is expected to slow slightly…

2%

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6%

2004e 2005f 2006f 2007f

World IP growth

Year-on-year changes in world industrial production, %

Data: CRU Analysis. Note: e estimate, f forecast.

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Meanwhile, cost pressures - which were a major factor behind the surge in prices last year - are expected to progressively ease…

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2001 2002 2003 2004 2005f 2006f 2007f

Iron ore (Hamersley fines) Hard coking coal Coke (12% ash)

Key raw materials prices, indexed, 2001 = 100

Data: CRU’s Steelmaking Raw Materials Team. Note: f forecast.

The easing of raw materials markets is reflected in our forecasts of lower prices

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And with global sheet making capacity set to increase significantly during the coming years…

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2005f 2006f 2007f

Hot-strip rolling Cold-rolling Galvanising

Expansions to effective world sheet making capacity, m tpy

Data: CRU Analysis. Note: f forecast.

Total: 36.7m tpy

Total: 48.5m tpy

Total: 36.1m tpy

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But Chinese capacity is set to increase significantly during the coming years…

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2004 2005 2006 2007 2008 2009

Hot-strip rolling Cold-rolling Galvanising

Expansions to effective world sheet making capacity, m tpy

Data: CRU Analysis. Note: f forecast.

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Chinese net trade has been transformedChina, net imports of steel products

Data: Trade Data

‘000 tonnes

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And this is likely to mean that output growth will continue to outstrip demand

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Production App. Consumption

Chinese apparent sheet consumption and production, year-on-year changes

Data: CRU’s Steel Sheet Quarterly Service. Note: f forecast.

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We believe that the ability to satisfy demand will increase faster than demand itself, and that sheet prices will - from the first quarter of 2006 - come under downward pressure…

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Q1 Q2 Q3 Q4 Q1 Q2 Q3f Q4f Q1f Q2f Q3f Q4f

US Midwest, fob mill Germany, parity point China, import c&f

HR coil base prices, US$/tonne

Data: CRU Analysis.

2004 2005 2006

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Which is likely to bottom out in 2007, when the expected low point in the demand cycle coincides with significant capacity expansions and reduced cost-push pressures

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US Midwest, fob mill Germany, parity point China, import c&f

HR coil base prices, US$/tonne

Data: CRU Analysis. Note: f forecast.

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Points to watch

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We provide a CRUcial presence around the globe…

London, Beijing, Singapore, Washington, Seattle, Philadelphia, Raleigh, Sydney, Rio de Janeiro

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Please address questions or comments relating to this presentation to:

John Johnson, Chief Representative

CRU International Ltd Beijing Representative Office1821, Tower 2, Bright China Chang An Building7, Jianguomennei Avenue, Beijing 100005, China

Tel.: 10 65102206Fax.: 10 65102207Email: john.johnson@crugroup.com