European economic & steel demand outlook Metal Expert Conference, Stresa, Italy Terrence Busuttil, April 2013

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 Global macroeconomic outlook  Medium term steel demand drivers  Short term macro outlook  Steel using sectors  Steel demand outlook 3 Item 1

Moderate recovery expected in 2013  Advanced economies to remain weak with similar growth as 2012  Developing economies to grow 4.9% in 2013 from 4.7% in 2012 Source: Global Insight, March Global GDP developments (%, real 2005 USD billions) EU Germany France Italy Spain Turkey MENA NAFTA Global

 Global macroeconomic outlook  Medium term steel demand drivers  Short term macro outlook  Steel using sectors  Steel demand outlook 5 Item 2

Consumer deleveraging progressing in USA but only starting in Europe  Deleveraging in Germany & USA to support consumption in 2013  Disposable incomes under pressure in Italy, Portugal and Spain making deleveraging difficult and contributing to falling consumption in 2013 Consumer debt (% of disposable income) Note: Germany, USA & Japan peaked in 2007 Source: Haver Analytics 6 ItalyGreecePortugalSpainFranceGermanyUSAJapan NA Change in consumer debt ratio (% of disposable income) NA

Public sector deleveraging in S.Europe to continue  Contracting GDP in S.Europe implies greater expenditures cuts and/or increasing taxes Fiscal balance (% of GDP ) Change in fiscal balance to GDP (points) Source: Global insight March 2013 Note: positive change in fiscal tightening signals improving fiscal balance Germany France Italy Spain MENA Turkey USA

Contracting output makes deleveraging challenging in Europe  EU27 unemployment rate has risen by 3.9 points from the lowest point in 2008Q1 and average real GDP declined -0.35% per quarter Eurozone: Annualized real GDP vs. unemployment rate (%, SA) USA: Annualized real GDP vs. unemployment rate (%, SA) Source: Haver Analytics 8

But reforms supporting cost competitiveness in S.Europe  Cyclical fall in demand and structural reforms support falling unit labour costs in Greece, Portugal and Spain but weak reforms in Italy undermine productivity growth Unit labour costs* (4-quarter average, SA, 2000 = 100) Note: *Defined as nominal compensation of employees per unit of real GDP Source: Haver Analytics 9 Current account balance (4-qtr moving average, billions of euro)

Consumption

Sharp contraction in S.Europe retail sales volume but N.Europe sales generally elevated  Deleveraging underpins fall in S.Europe retail sales Europe (3 month average, SA, 2005=100) Note: N.Europe: Austria+Belgium+France+Germany; S.Europe: Portugal+Greece+Spain+Italy Source: Haver Analytics USA (2007=100, SA) 11

Investment

Falling capacity utilization in S.Europe postpones need for machinery & equipment investment; negative sentiment spills over into N.Europe Europe (%, SA) Source: Haver Analytics Note: European capacity utilization weighted by real GDP  Contracting domestic demand reduces the need for additional investment USA (%, SA) 13

Falling business credit in S.Europe reflects falling supply and demand but credit generally supportive in N.Europe  The European Central Bank has ensured the provision of liquidity to solvent banks but uncertainty curtails credit supply while contracting domestic output reduces loan demand Europe: Corporate credit (billions of euro, NSA) Source: Haver Analytics US: Commercial & industrial loans (%, y-o-y) 14

 Global macroeconomic outlook  Medium term steel demand drivers  Short term macro outlook  Steel using sectors  Steel demand outlook 15 Item 3

Indicators point towards an easing of the recession  Eurozone PMI still contacting but rate of decline easing; German IFO averages in Q1’2013 from in Q4’2012 Manufacturing output (2005=100, SA, 3 month average) Eurozone: manufacturing output vs. Purchasing Managers Index (>50=expansion) 16 Source: Haver Analytics

 Global macroeconomic outlook  Medium term steel demand drivers  Short term macro outlook  Steel using sectors  Steel demand outlook 17 Agenda item 4

Steel using sectors in Europe still contracting Car sales (3 month average, SA, annualised)  Southern European auto sales down 2 mn units from 2006; modest fall in in Northern Europe. In 2012 sales were down 8.5%; further decline in 2013 Source: Haver Analytics 18 Construction output (2005=100, SA)

 Global macroeconomic outlook  Medium term steel demand drivers  Short term macro outlook  Steel using sectors  Steel demand outlook 19 Item 5

EU27 demand to remain below peak levels 20 Apparent steel use (finished, 2007=100) Source: worldsteel Short Range Outlook April 2013 *EU27 less Italy & Spain

And declining as a share of global apparent steel use 21 Apparent steel use (finished, 2007=100) Source: worldsteel Short Range Outlook April 2013  EU27 share of global ASU falls to under 10% from under 30% in 1975

22 Regional trade flows (net-exports, Mt) Encouraging EU27 producers to seek export markets Source: worldsteel; MENA includes intra-trade flows  EU27 remained a net-exporter of steel for the fourth straight year in 2012  EU27 steel exports increased to 26% of apparent steel use in 2012 from 15% in EU MENA CIS Turkey NAFTA

With exports also supported by weaker euro 23 Trade weighted value of the euro (2005=100)  Falling value of the euro also supports exports Source: Haver Analytics

And apparent steel use growth in emerging markets 24 Apparent steel use (% year-on-year, finished)  North Africa sees increased share of EU27 steel exports  Continued emerging market growth will incentivize EU producers to search for new markets in the presence of weak domestic demand. Source: worldsteel (f) Average ( ) % of 2007 EU NAFTA Turkey MENA ASIA

Conclusions  Global apparent steel use to reach a new record in 2013 as developing markets remain key growth drivers at the margin  Domestic demand in Europe to remain weak as deleveraging to weigh negatively on apparent steel use  European steel demand expected to continue contracting in 2013 against the backdrop of declining steel using sectors. Pickup expected in 2014  Against the backdrop of contacting domestic demand, European producers will continue seeking growing export markets 25

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