PREVIEW SAMPLE OF MBR’s NEW STRATEGIC STUDY

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NEW and Exclusive for 2012

A Strategic Five Year Outlook for the Global Grain Orientated Electrical Steel Market - FREE

Whitepaper

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NEW Strategic Study from Metal Bulletin Research

(Publishing date - November 2012)

z Answers how GOES producers can tackle the key issues of positioning their company strategically along the value chain

z Answers what the major influences that will shape the OCTG industry will be over the next decade

z Details by-country production capacities being built by-major country and company

z Offers a complete GO demand, supply and price market database by region out to 2020 including:

{ Regional consumption splits between electricity transformers, transmission transformers and distribution transformers

{ HiB v’s regular grade consumption

z Discusses the issue of amorphous steel and how regulatory changes may result in Hib experiencing significant market penetration in the distribution transformer market in mature markets of Europe, Japan and North America

z Special focus on key growth markets of India and China

“Overall, we expect GO demand to grow by a CAGR of 3.7% per annum from 2011 to 2020 compared to 6.0% over 1996 to 2011.”

As part of promoting our new strategic study MBR is pleased to present below a preview of some of our key findings and conclusions in this white paper ahead of publication.

MBRestimatesthatGrainOriented(GO)consumptionwas2.5mtonnesin2011.Ofthattotal,around22%was

HiBhighpermeabilityGOES.HiBGOelectricalsteelsisahigher-qualityproductthatreduceselectricitylosses

intransformers.HiBisproducedbythemajority(butnotall)GOESsteelproducers.

Thefull90+pagereport“AStrategicOutlookfortheGlobalGrainOrientatedElectricalSteelMarketoutto

2020”offersuniquedata,insights,analysisandforecaststoformulateyourbusinessobjectives.Thestudy

examinesthestrategicgrowthopportunitiesfortheGOESindustryanddetailscurrentandfutureprospects

intermsofdemand,supplyandpricesoutto2020.Thestudy:

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Key Findings of MBR’s New GOES Study – Historic Market

Thedecadepriorto2008wasagoldenonefortheGrainorientedelectricsteel(GOES)industry.Aswellasstrongglobalgrowth,therewereanumberoffactorsunderpinningasurgeindemand:

z Major blackout in the US Northeast triggered a re-assessment of the need for additional transmission infrastructure and modernisation of existing. Moreover until 2007, the massive expansion in US housing triggered significant new transmission capacity

z In Europe, the liberalisation of the EU energy distribution sector triggered investment in transmission capacity – a trend that was enhanced by privatisation of previously state-owned assets across much of the region. Meanwhile rapid growth in an expanding European periphery triggered new generation and distribution capacity. Underpinning this was the growing realisation of rising carbon emissions and attempts to find cleaner generation i.e. gas and the need for reduced transmission losses encouraged additional investment. Finally, new generating capacity (often replacing existing capacity) such as solar or wind was in new locations – requiring new transmission

z This regulatory environment also drove the replacement of generation capacity from coal or oil towards gas, nuclear or renewables energy across many mature economies that signed onto the Kyoto Protocol where carbon had a price

z In the CIS, decades of limited investment finally caught up with the distribution system and partial privatisation encouraged some investment

z Chinese demand grew by a CAGR of more than 10% per annum as breakneck economic growth required massive new generation along with rapid urbanisation of its population

z India started later than China, but it is following a similar path with rapid acceleration. Other emerging markets are in a similar position

z The only laggard was SE Asia where transformer manufacturing moved to China and relative maturity and a modern electricity distribution resulted in flat demand

ThecombinationofthesefactorsledtoGOdemandgrowthoutstrippingelectricityconsumptionandelectricitygenerationcapacityastherenewalofnetworksandtheincreasedmanufacturingcapacitydramaticallyoutweighedunderlyinggenerationcapacityandconsumption,whichstillroseahealthy50%overtheperiod.

Blobal electricity consumption, generation capacity and GO demand index (1996=100)

ThereplacementofexistingcapacitywithrenewablesorgasdroveGOconsumption,butdidnotincreaseoverallcapacity,whilethelocationofnewgenerationrequiredadditionaltransmission.Alsocrucialwasthereplacementoftransmissionandgeneratinginfrastructure.

Global GO consumption (000 tonnes)

Thissurgeindemandcameupagainstalimitedsupplyenvironment.Asaresult,pricessoaredover2004-08.ThisdidtriggerasupplyresponsewithnewsupplyinChinacoupledwithbrownfieldexpansionsatexistingsuppliers.

Thedeclineinglobaldemandinthesecondhalfof2008triggeredarapiddeclineinpricesandsawover-supplyinto2009thatwasonlyworkedthroughover2010/11.Thisover-supplywascompoundedbythenewsupplyarrivals.

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Despitethenewsupplyarrivals,themajorgrowthregionsremainnetimportersofthismaterialwithsupplycomingfrommaturemarkets–theCIS,SouthKorea,JapanandtoalesserextentEurope.ThoseemergingmarketsofChina,India, Latin America, the Middle East and others nowaccountforoverhalfofglobalmarketdemand.

Net trade flows for GOES in 2011

Global GO consumption by region in 2011

MBRestimatesthatGOconsumptionwas2.5mtonnesin2011.Ofthattotal,around22%wasHiBhighpermeabilityGOES.HiBGOESisahigher-qualityproductthatreduceselectricitylossesintransformers.HiBisproducedbythemajority(butnotall)GOESsteelproducers.

GOES market (tonnage) split by type in 2012

Key Findings of MBR’s New GOES Study – Current Market

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Key Findings of MBR’s New GOES Study – Future Market

“Some of the key trends out to 2020 are somewhat different.”

z Regulatory environment – we consider this a significant factor over the forecast period. Led by the DoE in the USA, but complemented by EU and other mature markets, we expect utility regulators to increasingly focus on reducing losses at transformers. The rationale is energy conservation, full life-cycle costing and CO2 reduction emissions. This will impact generation, but particularly transmission and distribution transformers. In our opinion, it will benefit amorphous steel, but also HiB permeability grades.

z Chinese energy growth rates will slow, but remain positive. Indian growth rates will continue to remain elevated. CIS replacement of infrastructure will remain in place.

z Mature market growth will slow in terms of energy generation and transmission, but replacement demand will continue and will focus on higher-end, more-efficient transformers. Nevertheless, the big drivers in the EU and USA will fade compared to 2002-08. Overall, we expect far flatter growth here and some losses of market share to amorphous.

z Other emerging growth rates will also be high and we expect to see continued outperformance in GO demand here as transformer manufacturing moves here as local markets become large enough to support this kind of activity. We particularly view the Middle East, North Africa and Latin America here.

Overall,weexpectGOdemandtogrowbyaCAGRof3.7%perannumfrom2011to2020comparedto6.0%over1996to2011.

However, given existing capacity of 2.95m tpy and confirmednew capacity of 0.3m tpy by 2013, we consider it necessarythatnewcapacitywill bebuilt over 2015-20.While there area number of projects in India and China, we consider thatseveral lack technology partners, which is a major barrier toentry. Nevertheless, either through technology agreementsor brownfield expansions at existing assets, we expect newcapacity to come on-stream in those markets. As such, wewould expect that emerging market demand will account fornearly70%ofGOESdemandby2020.

TheothermajortrendthatweidentifywillbetheincreaseinHiBdemand.By2020,weconsideritlikelythatthiswillaccounta large proportion of the market. This will require existingproducerstoundertakefurther investment inthis technology.However,webelievethatasdemandforthisproductoutpacessupply,themarginoverbaseGOmaterialwillincrease.

AStrategicFiveYearOutlookfortheGlobalGrainOrientatedElectricalSteelMarketcontainsvaluableanalysis,recommendations,pricesandmarketforecastsinover90+pages.

ThefullreportwillbereadyinNovember2012.

Call+44(0)2077798000toorderyourcopynowwhilestockslast.

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Metal Bulletin Research (MBR) is the independent research division of Metal Bulletin Ltd, otherwise known as American Metal Market Research (AMMR) in the North American market. MBR was established in 1991, and specializes in market research and consulting services for the ferrous and non-ferrous markets.

MBRprovidesregularanalysisandforecastsofglobalmarkets,andbusinessconditionswithintheglobalmetalsmarkets.Thecompanymakesitsresearchavailabletoclientsthroughvariouspublications,services,andconsultingarrangements.

z MBRisaleadingcommoditymarketresearchfirmknownforitsreliability,editorialindependenceandintegrity

z Itprovidesregular,in-depthanalysesofglobalmarkets,businessconditionsandconsultancyforarangeofclients

z Coverageofallmajordevelopedandemergingeconomiesthroughpublications,services,andconsultingarrangements

z Proventrackrecordofaccuracy,andinnovativeandprovocativeresearchestablishedovermorethanadecadeofcontinuouspublication

z Clientsinmorethan70countriesincludeproducers,banks,fundmanagers,metal-drivenconsumers,brokerages,leadingmanagementconsultants,economists,strategists,corporateofficersandotherprofessionalsattheworld’sleadingfinancialinstitutionsandmetals-relatedcorporations

z Itsresearchembracesfundamentalvaluationandmarketanalysesandforecastingthroughgloballyintegratedmodels,extensivedatabasesandissupplementedbyateamofspecialistconsultants

z MBRbelievesthatthevolumeofrepeatbusinessitreceiveshighlightsthatitregularlymeetsitsprimaryobjectiveofdeliveringtotalcustomersatisfaction.

z Inaddition,MBRproducesnumerousrelevantmulti-clientstudieseachyearcoveringthesteelsectorindetail.

z MBRbenefitsfrombeingpartofalargeglobalspecialistmetalsandeconomicspublishinggroupwhichencompassesthemarketleadersinitsfields.Onthemetalsside,theMetalBulletinGroupistheparenttotheleadingmetalsnewsjournal,theonce-weeklyMetalBulletinmagazine,aswellasNorthAmerica’sleadingdailymetalsnewspaperAmericanMetalMarket.TheGroup’smetalbusinessesprovidesMBRwithaninvaluablenetworkofinternationalcontactswithinthemetalsindustriesthatenhanceourabilitytoprovideresearchonalmostanyaspectofthemetalsbusiness.SinceOctober2006,theMetalBulletinGrouphasbeenpartofEuromoneyplcwhichisaFTSE-250company.Thelatestfinancialreportscanbeobtainedfromwww.euromoneyplc.com

z Nevertheless,MBRstressestheabilityofitsconsultingbusinesstooperateindependentlyoftherestoftheGroup,andtheexistenceofformalrulesofconfidentialitythatexistbetweenthenewsproviderswithinthegroupandtheresearchandconsultingdivision.BCAResearch,aleadingCanadian-basedeconomicsconsultingcompany,isalsoafullyownedsubsidiaryoftheMetalBulletinGroup,andworkscloselywithMBRonitslong-termeconomic-basedmodelling.

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