New leader in Russian Steel World Steel Industry 2009-2010 - PowerPoint PPT Presentation

Magnitogorsk Steel (MMK) New leader in Russian Steel

World Steel Industry 2009-2010 Highlights World Steel Production ‘000 tons ‘000 tons 160 000 600 000 2009 Jan-Aug 2010 140 000 500 000 120 000 400 000 100 000 80 000 300 000 60 000 200 000 40 000 20 000 100 000 0 Russia Ukraine Kazakhstan Other CIS EU Other European North America South America India Japan 0 Countries ROW China 2009 Jan-Aug 2010 Source: WSA World Steel Consumption Slab Cash-cost 600 ‘m tons 1 400 500 1 340 5% 400 1 300 1 272 1 222 300 ММК 1 205 13% 1 200 200 1 125 1 100 100 0 1 000 2007 2008 2009 2010* 2011* Source: World Steel Dynamics, 2009 : * - 2010 - 2011 World steel Association forecast 2

Russian Steel Dynamics Russian Import Structure Monthly Apparent Steel Consumption in Russia '000 tonnes % change, yoy HVA products Long products 4 000 140% 6 000 H/r products Thick plate 5 000 C/r products 3 000 80% Coated products 4 000 2 000 20% 3 000 2 000 1 000 -40% 1 000 0 -100% Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 0 2004 2005 2006 2007 2008 2009 2010* Total Change, yoy Source: Metal Expert Source: Metal Courrier * - 2010 annualized figures based on 9 months results Flat and Long Steel Demand Performance in Russia Flat and Long Steel Price Performance in Russia 250% 80% Flat steel HRC, Black Sea export FOB Long steel Rebar, Black Sea export FOB 200% 60% 132% 22% 150% 40% 100% 20% 50% 0% Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 0% Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 -20% Source: Metal Expert 3 Source: Metal Expert

MMK – Russian Steel Leader Largest single-site steelmaker in Russia with current crude steel capacity of 14 mln tons Production growth of more than 60% by 2014 Share of HVA products to grow from current 35% to 50% by 2014 Import substitution strategy: favorable geographical location to meet solid demand from the most intensive steel consuming regions of Russia – the Urals and Volga regions Great play on Russian infrastructure: • 16% of the domestic steel market - domestic sales are priced with premium • Largest exposure to pipe-manufacturing, auto-building and heavy machinery • More than 50% of steel production for pipes output in Russia Disciplined investment strategy with “high-return projects” and “high-quality assets” investments approach The most modern asset base – above USD 5 bn of investments for the last 5 years 4

ММК Geography Interkos-IV Profit Metals service center and Covers 100% of MMK’s stamped-product factory. scrap needs. 59% Belon Prioskolsky GОК 630 mln tons coal reserves 5.9 mln tons mined in 2009. Largest iron-ore deposit, more than 2 bln tons of reserves. 5% 14% 18% ММК Metiz One of Russia’s largest metalware producers 2% MMK Atakas 2.3 mln tpy production. ENRC New, modern steel making complex and two service ММК Long-term agreement with centers. ММК (to 2017). 1st by steel output in Russia (2009) Currently MMK’s main iron- 1st by rolled products in Russia (2009) ore supplier. 9,6 mln tons of steel (2009) 8,8 mln tons of finished products (2009) Fortescue Metals Group ММК trading house ММК controls 5% Markets Profit’s scrap collecting yards оf Fortescue Metals Group, one of Australia's largest High-priority (domestic) CAGR (2010-15) = 6,7% iron-ore producers. Priority (export) CAGR (2010-15) = 5,5% % Share of sales, mln tons Major (export) CAGR (2010-15) = 2,3% Other (export) CAGR (2010-15) = 5,0% Source: MMK 5

MMK Growth Prospects Crude Steel Output Growth Plans Crude Steel Growth Drivers Thousand tons 18 617 MMK suggests highest growth potential > 60% growth 18 000 among its Russian peers 16 000 66% 70% 14 000 60% 12 000 50% 10 000 40% 34% 8 000 30% 6 000 20% 4 000 2 000 10% 0 0% 2010E 2011E 2012E 2013E 2014Е MMK ММК, currently run capacities MMK, operational upside on current capacities 2011 2012 2013 2014 Sourсe: MMK MMK, new capacities MMK-Atakas Finished Steel Products Structure Evolution EBITDA per ton of Finished Steel Products Thousand tons 18 000 HVA (Higher Value-Added products) 17 252 400 40% HVA share ≈ 50% starting from 2012 343 16 000 14 000 280 300 12 000 246 10 000 ≈ 50 % 8 831 46 % 190 182 44 % 200 20% 8 000 38 % 6 000 34 % 4 000 27 % 80 100 66 2 000 0 0 0% 2009 2010E 2011E 2012E 2013E 2014Е Long steel HR flat steel CR flat steel Mill 5000 plate Formed Galvanized Colour-coated sections steel steel MMK MMK-Atakas HVA products 6 EBITDA/t EBITDA margin Sourсe: ММК

Unique Cost Position Slab Cash-cost and Raw-material Price Changes Key Raw-material Suppliers Structure USD/t Iron ore Scrap 500 454 40% 30% 450 100% 400 20% 70% 350 320 0% 280 300 1H2010 250 243 240 -20% 250 223 MMK MMK 10-year contract till 2017 with ENRC 200 -40% Coal Electricity 6% 150 25% 11% -60% ~ $0,07* 35% 100 (kWHrs) -80% 75% 50 48% 0 -100% ~ $0,03** (kWHrs) 2008 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 MMK Siberian Businness Union (f iv e-y ear contracts) ММК Others Slab cash cost, $/ton Iron ore, % Coal, % Scrap, % Raspadskay a Others * - cost of purchased electricity **- cost of electricity production for MMK Material and Resource Self-sufficiency Slab Cash-cost Structure, 2Q10 100% Other Wages 7% 3% Fuel & energy Iron ore 29% 75% purchases 10% Other 50% resources 7% 25% Scrap purchased Coal 17% 24% 0% Iron ore* Coal** Scrap Electricity Cash cost: 320 USD/t Own Purchased 7 * 70% comes under contract with ENRC till 2017 ** including sales to third parties

Leading Positions in the Industry Various Product Types Leading Position on Domestic Market Share in MMK’s share MMK’s total Place in in Russia production Russia Picture Hot-rolled sheet 5.51 mln tons (63%) Hot-rolled sheet 1 63% 37% Picture Cold-rolled sheet 12% 24% 3 Cold-rolled sheet 1.09 mln tons (12%) Galvanized flat products 30% 6% 1 Picture Long products 65% 1% 1 Cold-rolled narrow strip 1.00 mln tons (11%) 100% 2% Tin plate 1 Picture Downstream 1.15 mln tons (13%) Special sections 1% 47% 2 26% 3 Color-coated rolled products Billets and slabs 2% 0 mln tons (0%) Source: ММК, Metal Courier Source: ММК, 2009 The Leader in Finished Steel Production MMK’s Share of Russian Steel Market, 2009 th. tons 13% 16% ММК 12,000 Severstal NLMK Urals Steel 10,000 15% ZSMK 28% NTMK 8,000 Chelyabinsk MK 7% Others 4% 6% 5% Imports 5% 6,000 1999 2001 2003 2005 2007 2009 ММК Severstal NLMK 8 Source: ММК, Metal Courier Source: Company

MMK’s Strong Positions on the Domestic Market Domestic Sales Structure Dynamics of Domestic and Export Sales, ‘000 tons 8000 9M2010 7327 7155 7000 11% 6071 6000 5112 5482 H/r steel (Thick plate incl.) 5312 5146 5133 5275 14% 5000 4164 4876 5088 4813 5003 4870 4761 4903 4198 Downstream products 3755 3837 4000 3722 4185 3861 3532 3000 Long steel products 2678 2813 57% 2599 2000 2141 C/r steel 19% 1000 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Total: 5,112 kt Domestic market (Russia + CIS) Export Source: MMK Source: MMK Domestic Price Premium Russian Sales by Sector USD/t Food industry Fuel and energy 250 9M2010 Automobile companies 1% sector 0,4% Bridge building 225 223 5% 0,3% 200 Metalware and semi-integrated factories Pipe production 162 32% 158 9% 156 150 150 Construction sector 11% 100 78 50 Machine building 18% Spot sales 0 15% Spot sales in CIS 2004 2005 2006 2007 2008 2009 9M2010 9% Source: MMK 9 Source: MMK

Strong Presence on Export Markets Export Development Strategy Export Sales Structure 9M2010 8% • Company successfully managing export sales 1% Hot-rolled steel 2% • Key export markets – rapidly-growing markets of Cold-rolled steel 12% Middle-East, Asia and Far-East. Downstream products • MMK expanding presence on most promising markets Long products such as Turkey by building new steel making operations and expanding service center network. Slabs and billets 77% Total: 2,625 kt Source: ММК Share of Export Sales in Revenues Regional Sales Structure America 9M2010 Africa 100% 4% 1% Europe 7% 28% 29% 34% 36% 39% 41% Far East & Asia 46% 7% 50% Middle East 72% 71% 66% 64% 15% 61% 59% 54% Domestic 66% 0% 2004 2005 2006 2007 2008 2009 1H2010 Total: 7,737 kt Domestic Exports Source: ММК 10 Source: ММК