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Steel Industry Overview Régulo Salinas Cancún, México October 2007
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2 Global Steel Industry Resumed its Growth After Decades of Stagnation and Low Profitability World Crude Steel Production Sources: IISI, World Steel in Figures 2007; Geographic Information Systems Production Volume (Million tons) 0 200 400 600 800 1000 1200 1400 50556065707580859095000506 1,244 60 80 100 120 140 160 180 200 50556065707580859095000506 Production per Capita (Kg / Capita) 191 -2 0 2 4 6 8 10 12 505560657075808590950005 Compound Annual Growth Rate (Average % for 5 year periods) 06* * 2006/2005
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3 China has Been the Main Driver Behind Growth, Changing the Industry Structure 11% 10% 9% 34% 13% 4% 3% 16% North America CIS Japan Other China EU 25 Central & South America India 1,244 Million Tonnes 19% 22% 16% 5% 11% 3% 23% 1% India North America USSR Western Europe China Other Japan Central & South America World Crude Steel Production 644 Million Tonnes Source: IISI, World Steel in Figures 1976, 2007 1975 2006
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4 The Other Driver Behind Growth & Profitability has been Industry Consolidation 53 71 73 20042005 24 28 68 20042005 2006 Source: Bloomberg, Completed Deals Number of Steel Industry M & A’sAmount (US$ Billions)
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5 Global Steel Price Cycle Shows Two Eras * Constant dollars (July 2007) ** 2006 cost plus iron-ore price increase (9.5% abril 07) Supply Driven Privatization Cost Based Demand Driven Consolidation Price Based Source: CRU / WSD 0 100 200 300 400 500 600 700 800 900 HRC US*HRC Europe*China HRC Estimated Costs (w/o General Expenses) 208 370 384 Asian Crisis Russian Crisis Steel Crisis China + Global GDP Sep ’07 = 573 (USA) 0 100 200 300 400 500 600 700 800 900 US$ / ton ** 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 HRC CIS*
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6 Growing Regional Steel Concentration Source: IISI Top 5 producer’s share in 2006 production * Million tonnes per year Total US / Canada110 * Total Latin America63 Total Others Asia105 Total Europe166 Total China349 Total Japan112 Total CIS 113
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7 Global Concentration Lagging Behind Other Metals, Suppliers and Key Customers 81% 66% 49% 40% 38% 28% 20% Iron OreNickelAluminaAluminumCopperZincSteel Sources:Morgan Stanley Research, 16 Feb 2007 IISI, World Steel in Figures 2006 JD Power Industry Concentration, Top 5 Producers (%) 72% Automotive Top 7
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8 Impact Of Industry Consolidation will Become More Apparent in Coming Years Scale economies and synergies Better balanced steel inventories Optimization of Cost / Production / Logistics Global production / Local customer service Optimal plant location Optimal use of resources — capital, physical, labor Faster response to market volatility and trends Better balance with suppliers and customers Increased competition among large, efficient producers Tactical Level Strategic Level
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9 Mexico’s Steel Demand 0 2 4 6 8 10 12 14 16 18 20 22 85868788899091929394959697989900010203040506 07e** * Compound Average Growth Rate Source: Canacero Imports / ASC 23% Production Imports Apparent Steel Consumption ** 2007: Jan-July annualized CAGR*: ’96-’07e: 6.4% Mexico’s Apparent Steel Consumtion (MM tons)
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10 Mexican Steel Imports 0.0 1.0 2.0 3.0 4.0 5.0 6.0 8586878889909192939495969798990001020304050607* * 2007: Jan-July annualized Source: Canacero Flat Products Long Products Total Steel Products Imports (Million tons)
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11 Mexican Market Structure 50% 37% 13% Steel Products Demand in Mexico 2007* (%) Flat Products Long Products * Seamless pipe, structural shapes, rails, Etc. ** January – July annualized Other **
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12 Raw Steel Production in Mexico 2006 Raw Steel Production 16.3 million tons Source: Canacero Ahmsa 21% Sicartsa (Mittal) 5% Other 24% Mittal Steel Lazaro Cardenas 24% Ternium Hylsa 20% Tamsa 6%
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13 Automotive Domestic appliances Motors Containers Metallic furniture Machinery & equipment Other Mexican Commercial Market Structure Steel Mills Imports Service Centers Traders / Retailers Construction Industrial Consumers Agriculture and others
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14 WSD 2006 World Cost Curve (Hot Rolled Band Operating Costs before overhead) Source: World Steel Dynamics Efficient, low cost operations
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15 U.S. Forecasted Price Upturn to be Reflected in Mexico US HRC Price Actual: CRU September 07 Projections: CRU Quarterly Oct 07 GFMS September 07 US$ / ton 200 300 400 500 600 700 800 900 E 03 AJOE 04 AJOE 05 AJOE 06 AJOE 07 AJOE 08 AJ Forecast CRU GFMS
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16 Positive Domestic Economic Perspectives (%)20072008 Mexico’s GDP3.23.8 Manufacturing GDP1.03.2 Construction2.04.1 Basic metals industry1.01.2 Metallic products, machinery & equipment 1.23.8 Inflation (Dec-Dec)3.53.6 Interest Rate (28 days)7.17.5 Exchange Rate (Dec, $/dollar)11.0011.30 Source: Harbor Intelligence, August 2007
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17 Total Economic Perspectives Source: Harbor Intelligence, August 2007
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18 Economic Perspectives by Sector Source: Harbor Intelligence, August 2007
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19 Economic Perspectives in Manufacturing Source: Harbor Intelligence, August 2007
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