International Steel & Minerals Conference - Umetal Freight Investor Services Michael Gaylard Volatility and Risk Management in the Dry Freight and Iron Ore Market March 2009

Who We Are FIS was founded as an independent boutique broking house and risk management consultant in October 2002 and offers: Impartial and accurate risk management guidance and advice on the dry freight, iron ore, physical shipbroking and fertilizer derivative markets Full brokerage services Daily market reports and continuous market updates The company is fully registered and regulated by the Financial Services Authority (FSA) in UK and the Monetary Authority of Singapore (MAS) in Singapore. With our global office network in London, Singapore, Tokyo, Germany, New York and Athens, we are perfectly positioned to offer a full 24 hour market coverage.

FINDING APPROPRIATE SOLUTIONS TO MANAGE PRICE RISK Agenda Current Market View FFA Outlook & Volatility Counterparty Risk Iron Ore Spot Looking from the outside in IOS Swaps Outline Iron Ore Future Developments Market Entry Conclusions FINDING APPROPRIATE SOLUTIONS TO MANAGE PRICE RISK Freight Iron ore Steel

Current Market view: Credit Selected CDS Spreads Financial markets crippled by worst crisis since Great Depression Toughest credit environment corporate world has faced in decades Credit spreads remain very wide and lending is extremely restrictive

What do the Fundamentals Say? GDP Growth (Percent Change) Projections 2007 2008 2009 2010 Germany 2.5 1.3 -2.5 0.1 France 2.2 0.8 -1.9 0.7 Italy 1.5 -0.6 -2.1 -0.1 Spain 3.7 1.2 -1.7 United Kingdom 3.0 -2.8 0.2 United States 2.7 1.0 -2.0 1.1 China 13.0 9.0 6.7 8.0 India 9.3 7.3 5.1 6.5 * Data produced by International Monetary Fund as of January 2009

Seaborne Trades (mil tns) Cargo Demand Seaborne Trades (mil tns) 2007 2008 2009 2010 Iron Ore (Percentage Range) 796.0 (12-15%) 886.0 (18-22%) 870.0 (20-24%) 895.0 ?? Coal - Coking 218.5 226.7 212.0 238.0 Coal - Steam 596.1 608.3 625.0 645.0 Grain 196.3 203.4 198.5 202.0 Others (Minor Bulk) 337.9 337.2 311.8 335.0 Total Percentage Change 4.0% -2.1% 4.4%

Current Market view: Dry Freight Spot versus Forward rates outlook

Baltic Dry Index Volatility Freight Market does not follow a normal distribution! Risk Management and Hedging more pertinent given recent volatility Momentum driven Vs Fundamental market

Freight Supply Fleet 393.67 421.94 462.26 Deliveries 24.55 23.82 49.93 Fleet Supply (mil DWT) 2007 2008 2009 Fleet 393.67 421.94 462.26 Deliveries 24.55 23.82 49.93 Conversions 0.14 6.53 4.47 Deletions 0.63 2.79 14.51 Net Change 24.06 27.56 39.89 Expectation is for deletions to continue its strong rise. Unless currently in progress, do not expect any further conversions. Tonnage delivered will be strongly dependent on time charter rates, as financing needs to be met.

Financial Effect Fleet Supply (mil DWT) 2009 YTD Slippages/Cancellations 45% Orderbook 47 Deliveries 19 2007 Jun 2009 Mar Panamax 75-77K Newbuilding $46 mil $38 mil TC Avg for the month $46,449 $14,948 Breakeven analysis 2 yrs 9 mth 7 yrs Handysize 25-30K Newbuilding $30.5 mil $26.5 mil £28,147 $10,685 3 yrs 6 yrs 10 mth

Major Seaborne Trade vs FFAs Oil: 7 to 10 times the nominal trade volume Power: 5 to 10 times the nominal trade volume Coal: 3 to 5 times the nominal trade volume The current multiple of physical freight to FFAs is 1:1.3 in metric tons

Clearing Houses Freight Future Developments: Move towards Clearing LCH NOS SGX

The Clearing Houses Clearing House’ Market Share

Current Market view: Iron Ore Spot versus Forward rates outlook

Comparison between benchmark system and spot pricing More stable prices which might not be reflective of current market conditions Highly inflexible in volatile market conditions Spot Pricing System Offers more flexibility Will result in prices that are more reflective of market conditions Does not change long term relationships with existing clients

Iron Ore Producers Equity Price Volatility: Vale, Rio Tinto & BHP Billiton Excess Volatility In recent Months!

Correlation between iron ore prices and iron ore producer stock prices Vale Rio Tinto BHP Billiton Iron Ore Fines cfr China 63.5% 88% 92% 85%

Correlation between iron ore prices and steel mill stock prices Baosteel Arcelor Mittal Nippon Steel Iron Ore Fines cfr China 63.5% 63% 86% 21%

Correlation between iron ore prices and freight and steel prices BDI Steel Rebar 25mm Iron Ore Fines cfr China 63.5% 85% 81%

FIS Swaps: The Appeal “Natural sellers” (iron ore producers) can “lock in” margin progressively for a proportion of their length Traders can “lock in” margin in a rising or falling market End users can secure a forward price and manage exposure to physical market volatility Price discovery – swaps provide an opportunity to test the strength of forward prices and the depth of the market without committing product or capital Margin management – building a swaps position in tandem with a physical book allows margins to be secured and management of exposure to extreme price changes in the physical market OTC turnover estimated to be approximately 9,000,000 tonnes

Index Specifications The Steel Index TSI Metal Bulletin MBIO Platts IODEX Content 62% Fe Origin Non Origin Specific Non Origins Specific Delivery CFR China Tianjin CFR China CFR Qingdao Price Available Subscription only Frequency Weekly Daily Publication Time Every Friday evening Price Derivation Actual Physical Trade Price Discovery Basis

Iron Ore Future Developments: New index performance New indices all based on robust 62% methodologies Maximum deviation from average has been 5%

Market Entry Any new client seeking to enter the market needs simply to register with FIS Ltd and provide a bid or an offer It should be noted: The FIS Ltd standard contract is used to conclude an FIS cash- settled swap FIS swap contracts are “principal-to-principal agreements” – counterparties contract directly with one another, FIS is purely a broker The FIS contract has been designed in accordance with industry standards to be mutually acceptable to counter parties No capital investment or raw materials: Cash settlement is made against invoice at the end of the contract period, on the specified settlement date credit terms must be established before any contract can be concluded 23

Sample of Daily Iron Ore Report

Thank you for your attention! 24 Hours Service + 40 Brokers Dry FFA’s & Options Iron Ore Swaps & Options Cargo Sourcing / Advice Shipbroking / Research Risk Management Strategy