1. MENA Billet Market Development & Outlook 2 ND MENA Billet Import Conference April 13, 2016, Dubai, UAE Andrey Pupchenko, Deputy Managing Director, Metal Expert

2. Contents I. Billet remains the most attractive feedstock II. Consumption growth to continue III. CIS suppliers to restore market share © Metal Expert

3. I. Billet remains the most attractive feedstock © Metal Expert

4. Billet producers are main beneficiaries of rebar price hike in Q1 © Metal Expert Turkey's case, Q1

5. Scrap suppliers make long exporters profitable again © Metal Expert Turkey's case, Q1

6. Billet still remains much more attractive feedstock providing higher total margin © Metal Expert Turkey's case, Q1

7. Key factors influencing rebar/billet market in the Middle East  Iron ore and finished products price hike in Q1 was speculative and seems to be temporary as there was no increase of real consumption © Metal Expert  Traders were key buyers at that stage which made them exposed to any sudden price drop  Imbalance in long products market in MENA put producers into weak position in comparison with billet and scrap suppliers  As a result billet and scrap suppliers took bulk of profit from recent finished prices hike  Fall in long products prices will lead to a correspondent decrease in square billet prices  Scrap suppliers will reduce prices slowly, as they did in 2015, conceding market share

8. Everything is changing. Negotiations are underway Turkey's case: margins after recent price changes

9. II. Consumption growth to continue © Metal Expert

10. Longs consumption is growing, but rates are slowing down Note: in million t © Metal Expert

11. GCC and Turkey were MENA's major long products consumers in 2015 Total: 74.5 million t © Metal Expert

12. MENA consumption grows at a lower rate than expected before oil prices collapse +3.1 million t +4% 77.6 million t of total consumption Changes in long products consumption (2016/2015) © Metal Expert

13. Markets of consumption increase in 2015-2016 +1.8 million t +8% GCC Turkey +0.8 million t +4% Iran +0.4 million t +5% Egypt +0.3 million t +3%

14. Billet spot market expansion surpasses longs consumption growth rates Growth rates of long and billet consumption in MENA for 15/14 © Metal Expert

15. Billet purchases' share in longs production in MENA is growing © Metal Expert

16. Overvalued scrap provides huge potential for billet consumption Others: Algeria - 24%, Syrian Arab Republic - 21%, Morocco - 14% Long products capacity structure in MENA in 2015 © Metal Expert Note: in million t

17. Billet consumption in spot market will increase by 3 million t in 2016 Note: in million t © Metal Expert

18. III. CIS suppliers to restore market positions © Metal Expert

19. CIS suppliers hold a half of MENA's spot billet deliveries © Metal Expert Total: 16.7 million t in 2015

20. Billet supply to spot market by consuming countries in 2015 Total: 16.7 million t © Metal Expert

21. CIS will be the largest contributor into billet supply growth in MENA in 2016 Note: in million t

22. CIS suppliers still have huge potential in billet export Note: in million t © Metal Expert

23. China's billet export to MENA will increase, long product export will stay stable Note: in million t

24. Iran billet export will keep growing Note: in million t © Metal Expert

25. How do market players usually estimate profitability or competitiveness of mills' offers? They use a method of conversion cost by adding COST OF RAW MATERIALS to ROLLING COST (which is usually a fixed number) Such estimates may give an error of up to 10%, which might exceed real producers' margins in current market reality © Metal Expert

26. 1) Changes of capacity utilization, which affect fixed expenses in unit cost 2) Changes of local currencies against US dollar 3) Changes of energy policies, e.g. subsidies for local producers 4) Changes of delivery cost (both for raw materials and finished products) © Metal Expert We use cost models which include the following estimations:

27. GCC's case: square billet production costs of main suppliers © Metal Expert

28. Turkey's case: square billet production costs of main suppliers © Metal Expert

29. Conclusions © Metal Expert Competition in spot billet market will remain high, as the CIS and Iran will increase deliveries in the second part of 2016 Turkey and GCC will remain the main contributors in billet consumption in the Middle East MENA's consumption will expand by 3 million t in 2016. Billet remains highly attractive feedstock in the Middle East as ferrous scrap remains overpriced Chinese mills cannot follow cheap-export strategy any more

30. Metal Expert provides exclusive data in monthly report Turkey & Middle East Steel (formerly known as World Steel Markets) -Rebar output by producer in Turkey -Ferrous scrap inventory at Turkish mills (actual for the time of publishing – every mid-month) -Margin assessment (market price minus estimated costs) for main export destinations and domestic deliveries -Comparison of in-house billet production cost (using imported scrap) and prices for billet imports from CIS -The forecasts of ferrous scrap consumption and prices for the next three months Subscription department +38 056 239 88 50, +38 056 370 12 06, +38 056 370 12 07 subscriptions@metalexpert-group.com

31. Thank you for your attention Andrey Pupchenko Deputy Managing Director Metal Expert +38-056 370-12-07 (ext. 160) a.pupchenko@metalexpert-group.com