Metals Consulting International LimitedPage 1/11 Polish Electrical Steel Sector [Silicon Steels] October 2004

Metals Consulting International LimitedPage 2/11 POLISH ELECTRICAL STEEL SECTOR AGENDA Definitions Trade classification Consumption Trade perspectives Routes to market Demand side information Opportunities …

Metals Consulting International LimitedPage 3/11 DEFINITIONS Electrical steels consist of two main product groups which differ according to their metallic structure, magnetic properties and thus applications: Oriented (transformer) steels, produced from low carbon steel of approx. 3% silicon content. These steels are principally used for the production of high power transformer cores or for distribution transformers Non-oriented (dynamo) steels: –Either high alloy steels containing up to 3% Si and 1% Al, characterised by low transmission loss –Low alloy, lower Si/Al regular core loss steels –Both are the basic building blocks for magnetic circuits in rotating machinery and for small transformers (low power transformer cores)

Metals Consulting International LimitedPage 4/11 TRADE CLASSIFICATION DescriptionClassification* Width >= 600mm Transformer steels (grain-oriented) Dynamo steels (non grain-oriented) - Hot rolled - Cold rolled Width <600mm Transformer steels (grain-oriented) - Width >500mm - Width <=500mm Dynamo steels (non grain-oriented) - Hot rolled - Cold rolled, width >500mm - Cold rolled, width <=500mm *: Classification is the Polish ‘Kod Materialowo Handlowy’

Metals Consulting International LimitedPage 5/11 000’s tonnes* e ProductionTransformer Dynamo Total ExportTransformer Dynamo Total ImportTransformer Dynamo Total ConsumptionTransformer Dynamo Total : Data is from GUS, for trade to 2003 from discussions with the Centrum Informatyki Handlu Zagranicznego and for 2004 from the Ministry of Finance. Latter assessments may be subject to change. ** : Significant hot rolled dynamo steel supply ~2001 thought to have been from Sendzimira prior to CC installation. CONSUMPTION - Cold Roll Electrical Steel HRC from Sendzimira HRC from imports** Prodn is by Stalprodukt alone

Metals Consulting International LimitedPage 6/11 CONSUMPTION – Some characteristics † Note that electrical steel consumption for the production of transformers, dynamos etc is of cold rolled steel only. Consumption of hot rolled electrical steels is for the production of cold rolled electrical steel alone Cold rolled electrical steel market ~55 kt/yr 2/3rds of demand is for dynamo steel, 1/3rd for transformer steels Exports showing a strong declining trend Demand supply is monopolised by Stalprodukt Hot rolled sourcing: - For transformer steels is from Sendzimira - For dynamo steels is from imports (Slovakia) †: Demand appraisals courtesy of consulting teamhttp://

Metals Consulting International LimitedPage 7/11 TRADE PERSPECTIVES - Exports 000’s tonnes e Hot rolledTransformer Dynamo Total Cold rolledTransformer Dynamo Total TotalTransformer Dynamo Total Polish Electrical Steel Exports, Cold rolled steel dominate export volumes Relatively low hot rolled exports evident in recent years Both transformer and dynamo export volumes in decline

Metals Consulting International LimitedPage 8/11 000’s tonnes e Hot rolledTransformer Dynamo Total Cold rolledTransformer Dynamo Total TotalTransformer Dynamo Total The dominant trade item TRADE PERSPECTIVES – Imports Polish Electrical Steel Imports, Import volumes constant at ~50 kt/yr since 2001 Dynamo steels dominate imports: mostly hot, some cold Transformer steel import volumes negligible

Metals Consulting International LimitedPage 9/11 ROUTES TO MARKET Polish electrical steel market 66% of supply34% of supply StalproduktImports Exports 38% 62%0% DirectIndirectDirectIndirect 99%1% *: Indirect refer to independent traders. Figures are based on ‘typical year’flow As with alloy steels in general, specificity of composition, of heat treatment, of metallurgical properties and of size means that the product does not lend itself to bulk sales through intermediaries

Metals Consulting International LimitedPage 10/11 DEMAND SIDE INFORMATION - Buyers Customer Name & Address Approx annual purchase (tonnes) Zaklady Spretu Oswietleniowego ‘Elgo’, Gostynin, Kutnowska Spoldzielnia Inwalidow ‘Elektra’, Ul Marynarska 14, Warszawa 635 ‘Alstom Power Generators’ Spolka z.o.o., Wroclaw, Ul. Fabryczna Zaklady Remontowe Energetyki Warszawa, Warszawa, Ul. Elektryczna 2a Zaklady Maszyn Elektrycznych ‘Wamel’, Warszawa, Ul. Krakowiakow EDA S.A. Poniatowa, Poniatowa, Ul. Fabryczna EV Zychlinskie Transformatory Sp z.o.o., Zychlin, Ul. Narutowicza Philips Lighting-Farel Mazury Spolka z.o.o., Ketrzyn, Ul. B Chrobrego Etc … Etc... MCI can identify the main buyers / locations We can help you shape your market entry strategy for any finished steel product

Metals Consulting International LimitedPage 11/11 OPPORTUNITIES … Can MCI help you develop your presence in the Polish silicon steel sector, or in other East European special steel markets? Can we help you with a European market entry study? If so please call us for a no obligation discussion … Please contact: Andrzej Kotas, Managing Director, MCI Website: Mobile: +44 (0)