MadridSeptember 2007

Russian Russian MetallicsMetallics MarketMarket

Consumption of steel products in Consumption of steel products in RussiaRussia

0

5

10

15

20

25

30

2003 2004 2005 2006 2015

Consumption flat products in Russia, mmt

Source: Metallcourier, Minpromenergo RF

0

5

10

15

20

25

30

2003 2004 2005 2006 2015

Consumption long products in Russia, mmt

Source: Metallcourier, Minpromenergo RF

According to the Program of strategic development of metallurgicAccording to the Program of strategic development of metallurgical industry of the Russian al industry of the Russian Federation till 2015 (approved by the Government in May 2007) coFederation till 2015 (approved by the Government in May 2007) consumption of steel nsumption of steel products in Russia is expected to increase in 2015 by 53%.products in Russia is expected to increase in 2015 by 53%.

Russia steel productionRussia steel production

Crude steel production in Russia in Crude steel production in Russia in 2006 2006 was over was over 70 70 mlnmln mtmt.. Since 2002 average growth Since 2002 average growth rate of Russian steel production is 3.7%.rate of Russian steel production is 3.7%.

EAF production in 2007 will reach EAF production in 2007 will reach 19 19 mlnmln. Mt. According to the forecast of the Russian . Mt. According to the forecast of the Russian Government EAF steel production is expected to increase to 25 Government EAF steel production is expected to increase to 25 mlnmln. Mt. by 2015.. Mt. by 2015.

0,00

10,00

20,00

30,00

40,00

50,00

60,00

70,00

80,00

90,00

2000 2001 2002 2003 2004 2005 2006 2007 2015

BOF EAF OH

Steel making by process in Russia, mmt

Source: IISI, Rosstat

Structure of rolled steel production and sales

16,8

4,0

5,8

14,2

9,6

8,2

0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

Long Flat

Slab exportSquares exportRolled steel exportDomestic sales

Structure of rolled steel production and sales 2006, M tons

Source: Metall-Courier, GTK RF

The main items of Russian steel export are slabs and billets. ShThe main items of Russian steel export are slabs and billets. Share of are of semifinishedsemifinishedproducts is about 50%. products is about 50%.

Russian steel product shipmentsRussian steel product shipments

In In 2006 2006 Russia produced 58 Russia produced 58 mlnmln. . mtmt. of finished steel products. of finished steel products. . 49% were exported. 49% were exported. According to optimistic scenario of the Government forecast In 2According to optimistic scenario of the Government forecast In 2015 production of finished 015 production of finished steel products is expected to reach 76 steel products is expected to reach 76 mlnmln. Mt. Export tonnage will drop by 2 M t. but its . Mt. Export tonnage will drop by 2 M t. but its share in total output will change from 50% to 35%. The share of share in total output will change from 50% to 35%. The share of semis in export will also semis in export will also decrease.decrease.

25,2 29,9 31,7 35,1 40,1 43,6 49,6

29,528,3 28,9 29,0

27,9 27,827,0

0

10

20

30

40

50

60

70

80

90

2005 2006 2007 2008 2009 2010 2015

ExportDomestic market

Russian steel products shipments, mmt

Source: Minpromenergo RF

Continuous casting in RussiaContinuous casting in Russia

In 2006 the share of continuous casting was In 2006 the share of continuous casting was 67%67%. By. By 2015 2015 it will exceed 90%it will exceed 90%.. Home scrap Home scrap amount shall drop.amount shall drop.

0

10

20

30

40

50

60

70

80

90

2003 2004 2005 2006 2015

Continuous casting in Russia, mmt

Source: Metallcourier, Metalloinvest

Steelmaking raw materials Steelmaking raw materials structurestructure

Due to increase of steel production and changes in steel productDue to increase of steel production and changes in steel production technology structure ion technology structure ((BOF, EAF, OH) the demand for steel making raw materials in RussiBOF, EAF, OH) the demand for steel making raw materials in Russia will raise. It should be a will raise. It should be mentioned that scrap collection in Russia during the last 15 yeamentioned that scrap collection in Russia during the last 15 years was higher than rs was higher than consumption of steel products. consumption of steel products.

2 8

3239

44

46

0

10

20

30

40

50

60

70

80

90

100

2006 2015DRI/HBI Scrap Iron

Russian charge metallics structure, mmt

Source: Minpromenergo RF, Metalloinvest

Russian scrap exportRussian scrap export

Within the next 3 years export of scrap from Russia will continuWithin the next 3 years export of scrap from Russia will continue to decrease and it will e to decrease and it will drop to 1drop to 1--1.5 1.5 mlnmln mtpymtpy..

7

8

9

10

11

12

13

14

15

16

17

18

19

20

2004 2005 2006 2007

Scrap exportEAF steel production

Russian EAF steel production and scrap export from Russia, mln. ton

Source: Rosstat, CRU

8

10

12

14

16

18

2004 2005 2006 2007

Scrap export from CIS, mln. ton

Source: CRU

Russian scrap resourcesRussian scrap resources

Due to changes in Russian steel industry the structure of scrap Due to changes in Russian steel industry the structure of scrap origin by source will origin by source will change. Certain increase in industrial scrap will not compensatechange. Certain increase in industrial scrap will not compensate decrease of home scrap decrease of home scrap generation and obsolete scrap collection. generation and obsolete scrap collection.

21 19

9 12

12 7

0

5

10

15

20

25

30

35

40

45

2006 2015Old scrap New scrap Home

Russian scrap resources, mmt

Source: MAIR, Metalloinvest

Net steel scrap trade on the Net steel scrap trade on the world marketworld market

There is no reason to expect that the volume of the global scrapThere is no reason to expect that the volume of the global scrap market will increase in the market will increase in the nearest few years. Unless China turns into exporter of scrap.nearest few years. Unless China turns into exporter of scrap.

0

10

20

30

40

50

60

70

2002 2003 2004 2005 2006

Scrap international market, mmt

Source: UN

Pig iron international marketPig iron international market

According to the UN statistics international pig iron trade has According to the UN statistics international pig iron trade has been growing been growing during the last during the last 5 years. According Russian official forecast pig iron production5 years. According Russian official forecast pig iron production in Russia is not going to in Russia is not going to increase. By 2015 pig iron output in Russia is expected to drop increase. By 2015 pig iron output in Russia is expected to drop by 2by 2--3%3%. .

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

16,0

18,0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Pig iron international market, mmt

World DRI/HBI productionWorld DRI/HBI production

After a relatively long period of stagnation DRI/HBI production After a relatively long period of stagnation DRI/HBI production now is booming. During the now is booming. During the next 4 years global HBI/DRI production will grow by 60%. Only renext 4 years global HBI/DRI production will grow by 60%. Only relatively small amount of latively small amount of additional material will be supplied to the market. The most paradditional material will be supplied to the market. The most part will be used for t will be used for steelmaking on the spot.steelmaking on the spot.

0

1

2

3

4

5

6

7

8

9

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

DRI/HBI international market, mmt

Source: ISSB, UN

0

10

20

30

40

50

60

70

80

90

100

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2010*

World DRI/HBI production, mmt

Source: Midrex * forecast

Russia on the World SRM Russia on the World SRM marketmarket

After 2010 Russia will stop massive export of steel scrapAfter 2010 Russia will stop massive export of steel scrap

39%

17% 17%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Pig iron Steel scrap DRI/HBI

Russia on international metallics markets, 2006

Source: UN

30%

44%

0%0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Pig iron Steel scrap DRI/HBI

Russia on international metallics markets, 2015

Source: Metalloinvest

MetalloinvestMetalloinvest DRI/HBI shipmentsDRI/HBI shipments

By 2015 By 2015 MetalloivestMetalloivest will supply to the world market 5 will supply to the world market 5 mlnmln.. TpyTpy of HBI.of HBI.

0

1

2

3

4

5

6

2006 2007 2008 2009 2010 2011 2015

M etalloinvest merchant DRI/HBI shipments, mmt

Source: Metalloinvest

Structure of MetalloinvestHolding, 2006

Metalloinvest

Iron Ore Products Steel Products

Lebedinsky GOKMikhailovsky GOK

Ural SteelOEMK

SaleableSaleable MaterialMaterialPellets 18,2 m tConcentrate 16,2 m tOre 2,5 m tHBI 1,0 m t

ProductionProduction VolumesVolumesPig Iron 2,5 m tSteel 6,3 m tRolled Products 5,2 m t

16

To increase the share of higher value added products To increase the share of higher value added products (HBI) in the sales mix (HBI) in the sales mix

To save production costsTo save production costsTo improve product qualityTo improve product qualityTo unify management technologies and processesTo unify management technologies and processesTo introduce advanced technical and solutionsTo introduce advanced technical and solutionsTo realize efficient energy saving program To realize efficient energy saving program

The principal strategic target of the Iron Ore Divisionis to increase the production of

HBI by 2015 to 8 mtpa

Main Targets of Metalloinvest mining

17

Technical Development of Metalloinvest Iron Ore Division

Iron Ore Division Development Strategy

20120155

8 8 m tonsm tons

of of briquettesbriquettes

5.2 m tons of briquettes

2.8 m tons of briquettes

8 8 m tonsm tons20120155

MGOKMGOK –– 35%35% LGOKLGOK –– 65%65%

1.1.0 0 m tonsm tons20062006

LGOKLGOK –– 100%100%

Estimated HBI production

2.52.5 m tonsm tons20020088

LGOKLGOK –– 100%100%