BarCap Latin America Metals Mining X-RAY Outcomes in Peru Could Be Better

8/6/2019 BarCap Latin America Metals Mining X-RAY Outcomes in Peru Could Be Better

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EQUITY RESEARCH 13 July 20

LATIN AMERICA METALS & MINING

X-RAY: Outcomes in Peru could be better Incrementally positive on SCC/GMEX

SCC: From a consensus buy to a consensus sell. Overshooting movements. Back

in 4Q10, SCC shares reached close to US$50/shr. Since the beginning of the year, the

shares have corrected significantly amidst macro concerns and the election of Ollanta

Humula, wiping out a large portion of previous gains. Analysts are now mostly cautious

and the stock seems under-owned. We, on the other hand, see reasons to become

incrementally positive on SCC with shares at US$35-36.

First, some relevant facts on the Peruvian mining industry: (i) Peru is the third-largest

copper producer in the world and is forecasted to deliver approximately 30-35% of the

copper growth in the industry through 2017; (ii) 30% of the countrys tax revenues and

60% of its exports come from the mining industry; (iii) the industry is in the 1 st quartile

of the cost curve in copper and; (iv) there is a US$42bn investment pipeline.

President-elect Humala to be inaugurated on July 28. We are still waiting for

appointments. We are not minimizing the risks of governmental interference in the

Peruvian mining industry, which to us seem a given. However, we argue that Humalas

incentives to reduce the competitiveness (and consequently investments) in the mining

industry are low, especially considering the funding needs for his social programs (1/3

of Perus population lives in poverty). Humala has recently suggested he will meet

mining companies to discuss taxation, which we consider a reassuring indication.

The math: What is being priced in SCCs shares? We calculate the market is pricing in:

(i) royalties increasing to around 5% in Peru (from c. 3%); (ii) effective tax rates rising

to 38-40% in Peru (from c. 33%) and; (iii) close to zero copper production growth from

Peru. We consider these assumptions aggressive. This analysis considers a copper

curve of: (i) 2012-14: Cu at US$4/lb and; (ii) Long-term Cu at: US$3/lb.

Positive on copper and expect better price performance in 2H11. While macro

headwinds should translate to continued volatility, we maintain our positive view on

copper. We expect weak mine supply growth and a pick-up in Chinese imports to

support prices. Inventory trends at LME/SHFE have recently turned positive.

SCC vs. GMEX: Given GMEXs 18% discount to NAV, we are broadly indifferent

between both vehicles.We are incrementally positive on the both names, and highlight

our forecasted dividend yield for SCC at 6%, which we consider attractive.

Barclays Capital does and seeks to do business with companies covered in its research reports. As aresult, investors should be aware that the firm may have a conflict of interest that could affect theobjectivity of this report.

Investors should consider this report as only a single factor in making their investment decision.

This research report has been prepared in whole or in part by research analysts based outside the USwho are not registered/qualified as research analysts with FINRA.

PLEASE SEE ANALYST(S) CERTIFICATION(S) AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 35.

INDUSTRY UPDATE

Latin America Metals & Mining

2-NEUTRALUnchanged

Latin America Metals & Mining

Leonardo Correa

+55 11 3757 7285

[email protected]

BBSA, So Paulo


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Barclays Capital | Latin America Metals & Mining

13 July 2011 2

CONTENTS

COMPS ................................................................................................................................................. 3STEEL AND MINERS EQUITY PERFORMANCE CHARTS WHO IS OUTPERFORMING?.........6SELECTIVE VALUATION CHARTS LATIN AMERICA .................................................................. 7DIGGING UP THE IRON ORE INDUSTRY - I .................................................................................... 8DIGGING UP THE IRON ORE INDUSTRY - II ................................................................................... 9WORLD STEEL INDUSTRY DATA - I .............................................................................................. 10WORLD STEEL INDUSTRY DATA - II ............................................................................................. 11GLOBAL FLAT STEEL PRICES.......................................................................................................... 12GLOBAL LONG STEEL PRICES ........................................................................................................ 13BRAZILIAN STEEL PRICE PREMIUM.............................................................................................. 14THE CHINA FACTOR - I ................................................................................................................... 15THE CHINA FACTOR - II .................................................................................................................. 16THE CHINA FACTOR - III ................................................................................................................. 17BRAZILIAN STEEL INDUSTRY DATA I........................................................................................... 18BRAZILIAN STEEL INDUSTRY DATA II.......................................................................................... 19SNAPSHOT OF BRAZILIAN STEEL INVENTORIES ....................................................................... 20BRAZILIAN AUTO INDUSTRY......................................................................................................... 21US DRIVERS - I .................................................................................................................................. 22US DRIVERS - II ................................................................................................................................. 2312-MONTH FORWARD MULTIPLES AND EVOLUTION OF STREET ESTIMATES...................24COMMODITIES VS. FX TRACKER.................................................................................................. 31HOLDING DISCOUNTS..................................................................................................................... 32


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13 July 2011 3

Summary of our Sector Ratings, Price Targets and Earning Estimates

Company Rating Price Price Target Potential +/- EPS Change y/y1

12-Jul-11 (%) FY1 (E) FY2 (E) FY1 (%) FY2 (%)

Latin America Metals & Mining 2-Neu

Bradespar SA (BRAP4 BS / BRAP4.SA) 1-OW 39.77 67.00 +68 7.05 6.64 40 -6

Companhia Siderurgica Nacional (CSNA3 BS / CSNA3.SA) 2-EW 17.90 24.00 +34 2.19 2.17 22 -1

Gerdau SA (GGBR4 BS / GGBR4.SA) 2-EW 15.38 21.00 +37 1.13 1.58 -20 40

Grupo Mexico SAB de CV (GMEXICOB MM / GMEXICOB.MX) 2-EW 40.79 48.00 +18 0.30 0.35 43 17

Magnesita Refratarios SA (MAGG3 BS / MAGG3.SA) 1-OW 7.25 13.00 +79 0.36 1.06 12 194

Metalrgica Gerdau SA (GOAU4 BS / GOAU4.SA) 1-OW 19.19 29.00 +51 1.51 2.28 -31 51

MMX Mineracao e Metalicos SA (MMXM3 BS / MMXM3.SA) 1-OW 8.50 14.50 +71 0.34 0.31 386 -9

Southern Copper Corp. (SCCO) 2-EW 34.17 41.00 +20 2.51 2.87 37 14

Ternium SA (TX) 1-OW 29.16 39.00 +34 3.55 4.07 15 15

Usiminas (USIM5 BS / USIM5.SA) 2-EW 12.36 15.00 +21 0.29 0.88 -82 203

Vale (VALE) 1-OW 32.48 46.00 +42 4.93 4.59 66 -7

Source: Barclays Capital Share prices and target prices are shown in the primary listing currency and EPS estimates are shown in the reporting currency.

FY1(E): Current fiscal year estimates by Barclays Capital. FY2(E): Next fiscal year estimates by Barclays Capital.

Stock Rating: 1-OW: 1-Overweight 2-EW: 2-Equal Weight 3-UW: 3-Underweight RS: RS-Rating SuspendedSector View: 1-Pos: 1-Positive 2-Neu: 2-Neutral 3-Neg: 3-NegativePotential +/-: Potential Upside/Downside1 Percentage change in EPS relative to previous year.
http://my.barcapint.com/ERG/displayCompany.jsp?ticker=BRAP4.SAhttp://my.barcapint.com/ERG/displayCompany.jsp?ticker=CSNA3.SAhttp://my.barcapint.com/ERG/displayCompany.jsp?ticker=GGBR4.SAhttp://my.barcapint.com/ERG/displayCompany.jsp?ticker=GMEXICOB.MXhttp://my.barcapint.com/ERG/displayCompany.jsp?ticker=MAGG3.SAhttp://my.barcapint.com/ERG/displayCompany.jsp?ticker=GOAU4.SAhttp://my.barcapint.com/ERG/displayCompany.jsp?ticker=MMXM3.SAhttp://my.barcapint.com/ERG/displayCompany.jsp?ticker=SCCOhttp://my.barcapint.com/ERG/displayCompany.jsp?ticker=TXhttp://my.barcapint.com/ERG/displayCompany.jsp?ticker=USIM5.SAhttp://my.barcapint.com/ERG/displayCompany.jsp?ticker=VALEhttp://my.barcapint.com/ERG/displayCompany.jsp?ticker=VALEhttp://my.barcapint.com/ERG/displayCompany.jsp?ticker=USIM5.SAhttp://my.barcapint.com/ERG/displayCompany.jsp?ticker=TXhttp://my.barcapint.com/ERG/displayCompany.jsp?ticker=SCCOhttp://my.barcapint.com/ERG/displayCompany.jsp?ticker=MMXM3.SAhttp://my.barcapint.com/ERG/displayCompany.jsp?ticker=GOAU4.SAhttp://my.barcapint.com/ERG/displayCompany.jsp?ticker=MAGG3.SAhttp://my.barcapint.com/ERG/displayCompany.jsp?ticker=GMEXICOB.MXhttp://my.barcapint.com/ERG/displayCompany.jsp?ticker=GGBR4.SAhttp://my.barcapint.com/ERG/displayCompany.jsp?ticker=CSNA3.SAhttp://my.barcapint.com/ERG/displayCompany.jsp?ticker=BRAP4.SA


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13 July 2011 5

Figure 2: Global Relative Valuation Table (Mining)

2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2

Diversified Mining

Rio Tinto RIO LN 143,158 4.3x 4.0x 3.9x 7.3x 7.4x 7.7x 8% 9%

BHP BLT LN 232,406 6.3x 5.1x 5.0x 10.4x 8.9x 9.1x 6% 8%

Xstrata XTA LN 65,117 5.2x 4.3x 3.9x 9.0x 7.8x 7.6x 2% 5%

Anglo American AAL LN 63,846 5.2x 4.4x 4.0x 8.6x 7.3x 7.1x 6% 9%Lonmin LMI LN 4,414 4.3x 2.6x 1.7x 13.6x 8.6x 7.2x 12% 7%

Vedanta VED LN 8,178 6.2x 4.3x 3.3x 5.6x 4.0x 3.4x 14% 22%

Vale ON VALE US 171,624 4.5x 4.7x 5.0x 6.6x 7.1x 7.6x 6% 3%

Vale PN VALE/P US 155,032 4.2x 4.3x 4.5x 6.0x 6.4x 6.9x 7% 3%

Weighted Average 5.0x 4.5x 4.5x 8.0x 7.5x 7.8x 6% 6%

Copper

SCC SCCO US 29,045 8.0x 7.1x 7.3x 13.6x 11.9x 12.2x 4% 5%

Antofagasta ANTO LN 22,510 7.9x 6.8x 6.9x 12.9x 11.7x 12.6x 6% 9%

Kazakhmys KAZ LN 11,539 3.8x 3.3x 3.3x 7.2x 6.4x 7.0x 2% 5%

Freeport McMoran FCX US 51,231 4.3x 3.8x 3.8x 8.9x 8.8x 9.3x 11% 10%

Boliden BOL SS 4,808 4.6x 4.2x 4.1x 7.6x 7.0x 7.4x 4% 8%

Weighted Average 5.8x 5.2x 5.2x 10.6x 9.8x 10.3x 7% 8%

FCF YieldCompany Ticker

Mkt Cap

(Mn USD)

EV Ebitda P/E

Source: Bloomberg, Company data, Barclays Capital Equity Research estimates / Price as of 12 July, 2011


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13 July 2011 6

STEEL AND MINERS EQUITY PERFORMANCE CHARTS WHO IS OUTPERFORMING?

Prices as of 12 July 2011

Figure 3: Steels Equity Performance (7d US$) (%) Figure 4: Miners Equity Performance (7d US$) (%)

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

Evraz

DaidoSteel

TokyoSteel

Sumitomo

Novolipetsky

NipponSteel

ChinaSteel

Hitachi

Wuhan

Posco

Hyundai

KobeSteel

Baoshan

SteelDymcs

Angang

Severstall

JFE

Arcelor-

Nucor

Tata

Acerinox

SSAB

TerniumRHI

Voestalpine

USSteel

Thyssen

CSN

Gerdau

Magnesita

Usiminas

Ibovespa S&P500

-8%

-6%

-4%

-2%

0%

2%

4%

6%

SouthernCopper

GrupoMexico

FreeportMcMoran

Antofagasta

FMG

Kazakhymys

Xstrata

RioTinto

BHP

SesaGoa

Vale-ON

Vale-PN

MMX

Vedanta

Bradespar

Alcoa

Anglo

Lonmin

Ibovespa S&P500

Source: Bloomberg, Barclays Capital. Source: Bloomberg, Barclays Capital.

Figure 5: Steels Equity Performance (30d US$) (%) Figure 6: Miners Equity Performance (30d US$) (%)

-15%

-10%

-5%

0%

5%

10%

15%

20%

NipponSteel

HyundaiJFE

Sumitomo

KobeSteel

DaidoSteel

Posco

T

okyoSteel

Novolipetsky

C

hinaSteel

Tata

V

oestalpine

Arcelor-

USSteel

SteelDymcs

Nucor

Baoshan

Ternium

Angang

Evraz

Hitachi

Wuhan

Magnesita

Gerdau

Severstall

AcerinoxRHI

SSAB

CSN

Thyssen

Usiminas

Ibovespa S&P500

-15%

-10%

-5%

0%

5%

10%

15%

20%

Antofagasta

Freeport

McMoran

Southern

Copper

Grupo

Mexico

Kazakhymys

Vale-ON

Vale-PN

BHP

RioTinto

Alcoa

Bradespar

SesaGoa

Vedanta

FMG

Xstrata

MMX

Lonmin

Anglo

Ibovespa S&P500


Figure 7: Steels Equity Performance (YTD US$) (%) Figure 8: Miners Equity Performance (YTD US$) (%)

-40%

-30%

-20%

-10%

0%

10%

20%

DaidoSteel

Hyunda

i

HitachiMetals

Thyssen

Voestalpin

e

ChinaSteel

Seversta

ll

Wuhan

Posco

TokyoSteel

Acerino

x

Baoshan

Sumitomo

Evra

z

NipponSteel

Arcelor-Mittal

Nuco

r

KobeSteel

Angang

SteelDymc

s

Tata

Novolipetsk

y

SSABJFE

Magnesit

a

USSteel

GerdauRH

I

CSN

Ternium

Usiminas

Ibovespa S&P500

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

Alcoa

FMG

BHP

Va

le-PN

RioTinto

Vale-ON

Bra

despar

Antofagasta

X

strata

Vedanta

FreeportMc

Moran

SesaGoa

Kazakhymys

GrupoMexico

MMX

L

onmin

Anglo

SouthernCopper

Ibovespa S&P500



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13 July 2011 7

SELECTIVE VALUATION CHARTS LATIN AMERICA

Prices as of 12 July 2011

Figure 9: EV/ Steel Capacity vs. EBITDA margin Figure 10: EV/Sales vs. EBITDA margin

Usiminas

Gerdau

Ternium

CSN - Steel

-

200

400

600

800

1,000

1,200

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

2011E EBITDA margin

2011EEV/capacity(US$/ton)

CSN - SteelTernium

Usiminas

Gerdau

-

0.2

0.4

0.6

0.8

1.0

1.2

1.4

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

2011E EBITDA margin

2011EEV/sales

Source: Bloomberg, Barclays Capital / CSN: Considering steel segment only. Source: Bloomberg, Barclays Capital / CSN: Considering steel segment only.

Figure 11: EV/EBITDA vs. ROIC Figure 12: EV/EBITDA vs. EBITDA margin

CSNGerdau

Ternium

Usiminas

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

0% 5% 10% 15% 20% 25% 30% 35%2011E ROIC

2011EV/EBITDA

CSNGerdau

Ternium

Usiminas

-

2.0

4.0

6.0

8.0

10.0

12.0

0% 10% 20% 30% 40% 50%

2011E EBITDA margin

2011EEV/EBITDA

Source: Bloomberg, Barclays Capital Source: Bloomberg, Barclays Capital

Figure 13: P/OCF vs. EBITDA margin Figure 14: P/BV vs. ROE

Gerdau

Usiminas

TerniumCSN

-

5.0

10.0

15.0

20.0

25.0

0% 10% 20% 30% 40% 50%

2010E EBITDA margin

2010EP/OCF

CSN

Gerdau

TerniumUsiminas

-

0.5

1.0

1.5

2.0

2.5

3.0

0% 10% 20% 30% 40% 50%

2011E ROE

2011EP/BV

Source: Bloomberg, Barclays Capital Source: Bloomberg, Barclays Capital


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13 July 2011 8

DIGGING UP THE IRON ORE INDUSTRY - I

Figure 15: Spot Prices (US$ / ton) Figure 16: Freight Rates (US$ / ton)

0

50

100

150

200

250

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

IODEX CFR CHINA 62% Fe US$/dmt

0

20

40

60

80

100

120

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

Tubarao-Beilun Dampier- Qingdao

Source: Platts, Bloomberg, Barclays Capital. Source: Bloomberg, Barclays Capital.

Figure 17: Iron Ore Forward Prices (US$ / ton) Figure 18: Chinese Iron Ore Imports (kt)

90

100

110

120

130

140

150

160

170

180

Jul-11

Au

g-11

Se

p-11

Oct-11

No

v-11

De

c-11

Ja

n-12

Fe

b-12

Ma

r-12

Ap

r-12

Ma

y-12

Ju

n-12

Jul-12

Au

g-12

Se

p-12

Oct-12

No

v-12

De

c-12

Ja

n-13

Fe

b-13

Ma

r-13

Ap

r-13

Ma

y-13

Ju

n-13

Current 1 day ago 1 week ago 1 month ago

-

10,000

20,000

30,000

40,000

50,000

60,000

D

ec-02

Jun-03

D

ec-03

Jun-04

D

ec-04

Jun-05

D

ec-05

Jun-06

D

ec-06

Jun-07

D

ec-07

Jun-08

D

ec-08

Jun-09

D

ec-09

Jun-10

D

ec-10

Jun-11

Total Imports

Source: SGX, Barclays Capital. Source: Bloomberg, Customs General Administration, Barclays Capital.

Figure 19: Chinese Iron Ore Inventory (Mt) vs. Inventory toImports Ratio (months)

Figure 20: Chinese Run of Mine (ROM Mt) vs. ImpliedGrades

0

10

20

3040

50

60

70

80

90

100

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

Jul-11

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

Inventory (Mt) Invent ./Imports (Months) Average Invent . / Imports

0

20

40

60

80

100

120

Nov-07

Feb-08

May-08

Aug-08

Nov-08

Feb-09

May-09

Aug-09

Nov-09

Feb-10

May-10

Aug-10

Nov-10

Feb-11

May-11

0%

5%

10%15%

20%

25%

30%

35%

40%

Chinese Domestic ROM (Mt) Implied Grade (%)

Source: Antaike, Bloomberg, Barclays Capital. Source: Antaike, Bloomberg, Barclays Capital.


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13 July 2011 9

DIGGING UP THE IRON ORE INDUSTRY - II

Figure 21: Share of Chinese Iron Ore Requirements

(Imported vs. Domestic) (%)Figure 22: Share of Chinese Imports (Brazil vs. Australia) (%)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Nov-07

Feb-08

May-08

Aug-08

Nov-08

Feb-09

May-09

Aug-09

Nov-09

Feb-10

May-10

Aug-10

Nov-10

Feb-11

May-11

Imported Domestic

0%

10%

20%

30%

40%

50%

60%

May-02

Nov-02

May-03

Nov-03

May-04

Nov-04

May-05

Nov-05

May-06

Nov-06

May-07

Nov-07

May-08

Nov-08

May-09

Nov-09

May-10

Nov-10

May-11

Brazil Average Brazil Australia Average Australia

Source: Bloomberg, Barclays Capital Source: Bloomberg, Barclays Capital.

Figure 23: Brazilian Iron Ore Exports (Mt) and Average Price Figure 24: Vales 30d Shipping Schedule DWT and # ofships

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Dec-04

Mar-05

Jun-05

Sep-05

Dec-05

Mar-06

Jun-06

Sep-06

Dec-06

Mar-07

Jun-07

Sep-07

Dec-07

Mar-08

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-110.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

Volumes (Mt) - LHS Avg. Price (US$/ton) - RHS

0

20

40

60

80

100

120

140

160

08-Sep-10

23-Sep-10

08-Oct-10

23-Oct-10

07-Nov-10

22-Nov-10

07-Dec-10

22-Dec-10

06-Jan-11

21-Jan-11

05-Feb-11

20-Feb-11

07-Mar-11

22-Mar-11

06-Apr-11

21-Apr-11

06-May-11

21-May-11

05-Jun-11

20-Jun-11

05-Jul-11

10

12

14

16

18

20

22

24

26

# of ships (LHS) Dead Weight Tonnage (Combined - Mt) - RHS

Source: SECEX, Barclays Capital. Source: Bloomberg, Barclays Capital.

Figure 25: Breakdown of Brazilian Exports per Region (Mt) Figure 26: Market Share of Brazilian Iron Ore Exports (%)

0.0

2.0

4.0

6.0

8.010.0

12.0

14.0

16.0

18.0

20.0

Dec-07

Mar-08

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

China EX (Mt) Europe EX (Mt) Japan EX (Mt)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Dec-07

Mar-08

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

China Europe Japan OTHER

Source: SECEX, Alice Web, Barclays Capital. Source: SECEX, Alice Web, Barclays Capital.


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13 July 2011 10

WORLD STEEL INDUSTRY DATA - I

Figure 27: Global Excess Capacity (Mt) and Utilization Rates

(%)Figure 28: World Crude Steel Production (Mt) vs. y/y %

30

130

230

330

430

530

630

730

830

Jan-06

May-06

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Excess ca pa ci ty 2006-2008 Avera ge C apa ci ty Ut il iz at ion

0

20

40

60

80

100

120

140

May-01

Jan-02

Sep-02

May-03

Jan-04

Sep-04

May-05

Jan-06

Sep-06

May-07

Jan-08

Sep-08

May-09

Jan-10

Sep-10

May-11

-30%

-20%

-10%

0%

10%

20%

30%

40%

World total YoY %

Source: World Steel Association, Barclays Capital. Source: World Steel Association, Barclays Capital.

Figure 29: World (ex-China) Crude Steel Prod. (Mt) vs. y/y %

Figure 30: Asia (ex-China) Crude Steel Production (Mt) vs.y/y %

0

10

20

30

40

50

60

70

80

May-01

Nov-01

May-02

Nov-02

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May-06

Nov-06

May-07

Nov-07

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Nov-10

May-11

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

World Ex-China YoY %

0

5

10

15

20

25

Jan-01

May-01

Sep-01

Jan-02

May-02

Sep-02

Jan-03

May-03

Sep-03

Jan-04

May-04

Sep-04

Jan-05

May-05

Sep-05

Jan-06

May-06

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

Asia Ex-China (Mt) YoY %

.


Figure 31: Chinas Share of World Total Production (Mt) Figure 32: Europe Crude Steel Production (Mt) vs. y/y %

0

20

4060

80

100

120

140

Nov-00

May-01

Nov-01

May-02

Nov-02

May-03

Nov-03

May-04

Nov-04

May-05

Nov-05

May-06

Nov-06

May-07

Nov-07

May-08

Nov-08

May-09

Nov-09

May-10

Nov-10

May-11

0%

10%

20%

30%

40%

50%

60%

World total China's Share

0

2

4

68

10

12

14

16

18

20

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

-60%

-40%

-20%

0%

20%

40%

60%

80%

EC 27 YoY %



11/39


13 July 2011 11

WORLD STEEL INDUSTRY DATA - II

Figure 33: China Crude Steel Production (Mt) vs. y/y % Figure 34: Europe Crude Steel Production By Country (y/y

%)

0

10

20

30

40

50

60

70

Jun-01

Apr-02

Feb-03

Dec-03

Oct-04

Aug-05

Jun-06

Apr-07

Feb-08

Dec-08

Oct-09

Aug-10

Jun-11

-20%

-10%

0%

10%

20%

30%

40%

50%

China (Mt) YoY %

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

France Germany Spain

Source: World Steel Association, CISA, Barclays Capital. Source: World Steel Association, Barclays Capital.

Figure 35: Japan Crude Steel Production (Mt) vs. y/y % Figure 36: South Korea Crude Steel Prod. (Mt) vs. y/y %

0

2

4

6

8

10

12

Jan-0

1

May-0

1

Sep-0

1

Jan-0

2

May-0

2

Sep-0

2

Jan-0

3

May-0

3

Sep-0

3

Jan-0

4

May-0

4

Sep-0

4

Jan-0

5

May-0

5

Sep-0

5

Jan-0

6

May-0

6

Sep-0

6

Jan-0

7

May-0

7

Sep-0

7

Jan-0

8

May-0

8

Sep-0

8

Jan-0

9

May-0

9

Sep-0

9

Jan-1

0

May-1

0

Sep-1

0

Jan-1

1

May-1

1-60%

-40%

-20%

0%

20%

40%

60%

80%

Japan (Mt) YoY %

0

1

2

3

4

5

6

7

Jan-01

May-01

Sep-01

Jan-02

May-02

Sep-02

Jan-03

May-03

Sep-03

Jan-04

May-04

Sep-04

Jan-05

May-05

Sep-05

Jan-06

May-06

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

-30%

-20%

-10%

0%

10%

20%

30%

40%

Korea YoY %

.


Figure 37: USA Crude Steel Production (Mt) vs. y/y % Figure 38: CIS Crude Steel Production (Mt) vs. y/y %

0

1

23

4

5

6

7

8

9

10

Jan-01

May-01

Sep-01

Jan-02

May-02

Sep-02

Jan-03

May-03

Sep-03

Jan-04

May-04

Sep-04

Jan-05

May-05

Sep-05

Jan-06

May-06

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

-80%

-60%

-40%-20%

0%

20%

40%

60%

80%

100%

USA (Mt) YoY %

0

2

4

6

8

10

12

14

Jan-01

May-01

Sep-01

Jan-02

May-02

Sep-02

Jan-03

May-03

Sep-03

Jan-04

May-04

Sep-04

Jan-05

May-05

Sep-05

Jan-06

May-06

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

-60%

-40%

-20%

0%

20%

40%

60%

CIS YoY %



12/39


13 July 2011 12

GLOBAL FLAT STEEL PRICES

Figure 39: USA HRC Prices (US$ / ton) Figure 40: China HRC Prices (US$ / ton)

0

200

400

600

800

1000

1200

1400

May-07

Jul-07

Sep-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

Jul-11

US domestic FOB US Midwest mill $/t

300

400

500

600

700

800

9001000

1100

Jul-06

Nov-06

Mar-07

Jul-07

Nov-07

Mar-08

Jul-08

Nov-08

Mar-09

Jul-09

Nov-09

Mar-10

Jul-10

Nov-10

Mar-11

Jul-11

Domestic Shanghai (incl. 17% vat) $/t Export FOB Shanghai $/t

Source: Steel Business Briefing, Barclays Capital. Source: Steel Business Briefing, Barclays Capital.

Figure 41: Europe HRC Prices (US$ / ton) Figure 42: CIS HRC Prices (US$ / ton)

300

400

500

600

700

800

900

1000

1100

1200

1300

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

N.Europe domestic Ex-Works $/t S.Europe domestic Ex-Works $/t

300

400

500

600

700

800

900

1000

1100

1200

1300

Jul-06

N

ov-06

M

ar-07

Jul-07

N

ov-07

M

ar-08

Jul-08

N

ov-08

M

ar-09

Jul-09

N

ov-09

M

ar-10

Jul-10

N

ov-10

M

ar-11

Jul-11

Flat Products / HRC / Russia Black Sea export FOB $/tUkraine Black Sea ex ort FOB $/t


Figure 43: LatAm HRC Prices (US$ / ton) Figure 44: Brazilian Exports HRC Prices (US$ / ton)

300

500

700

900

1100

1300

1500

1700

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

Jul-11

Mexico Domestic delivered $/t Brazil Domestic US$/t

0

100

200

300

400

500

600

700

800

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

Nov-10

Dec-10

Jan-11

Feb-11

Mar-11

Apr-11

May-11

Jun-11

Jul-11

Brazil



13/39


13 July 2011 13

GLOBAL LONG STEEL PRICES

Figure 45: Europe Rebar Prices (US$ / ton) Figure 46: USA Rebar Prices (US$ / ton)

0

200

400

600

800

1000

1200

1400

1600

Sep-98

Apr-99

Nov-99

Jun-00

Jan-01

Aug-01

Mar-02

Oct-02

May-03

Dec-03

Jul-04

Feb-05

Sep-05

Apr-06

Nov-06

Jun-07

Jan-08

Aug-08

Mar-09

Oct-09

May-10

Dec-10

Jul-11

Europe Dom est ic Europe Import

200

300

400

500

600

700

800

9001000

1100

1200

Jul-05

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

USA


Figure 47: China Rebar Prices (US$ / ton) Figure 48: Black Sea Rebar Prices (US$ / ton)

400

450

500

550

600

650

700

750

800

May-09

Jun-09

Jul-09

Aug-09

Sep-09

O

ct-09

Nov-09

D

ec-09

Jan-10

Feb-10

M

ar-10

A

pr-10

May-10

Jun-10

Jul-10

Aug-10

Sep-10

O

ct-10

Nov-10

D

ec-10

Jan-11

Feb-11

M

ar-11

A

pr-11

May-11

Jun-11

Jul-11

China

300

400

500

600

700

800

900

1000

1100

1200

1300

Jan-08

M

ar-08

M

ay-08

Jul-08

S

ep-08

N

ov-08

Jan-09

M

ar-09

M

ay-09

Jul-09

S

ep-09

N

ov-09

Jan-10

M

ar-10

M

ay-10

Jul-10

S

ep-10

N

ov-10

Jan-11

M

ar-11

M

ay-11

Jul-11

Black Sea


Figure 49: Rebar Prices (US$ / ton) Brazil and Mexico Figure 50: Scrap prices

300

500

700

900

1100

1300

1500

1700

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

Jul-11

Braz il Mexi co

0

100

200

300

400

500

600

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

shredded scrap (US$/lt)#1 busheling scrap (US$/lt)Turkey imported heavy melt scrap (US$/t - C&F turkey)

Source: Steel Business Briefing, Barclays Capital. Source: Bloomberg, Barclays Capital.


14/39


13 July 2011 14

BRAZILIAN STEEL PRICE PREMIUM

Figure 53: Import Parity Check Using Hot Rolled Coil (US$ / ton)

(1) FOB Price - Black Sea HRC (US$ / ton) 680

Freight (shipping costs to Brazil) 50

Insurance (0.5% C&F price) 4

(2) C&F Price - Delivered in Brazil 734

Import tariff (@ 12% rate) 88

Working capital 29

Port Expenses 20

Letter of credit 6

Other expenses 13Domestic Freight 20

(3) Cost of imported steel delivered 909

Net domestic HRC price (R$/ton) 1580

FX - BRL/USD 1.56

(4) Domestic steel price (US$/ton) 1013

Premium [(4)/(3)] 11% Source: Barclays Capital.

Figure 54: Import Parity Sensitivity Analysis (maintaining import tariffs)

580 630 680 730 780

1.46 37% 27% 19% 12% 5%

1.51 32% 23% 15% 8% 2%

1.56 28% 19% 11% 5% -1%

1.61 24% 15% 8% 1% -4%

1.66 20% 12% 5% -2% -7%

BRL/USD

FOB Price - HRC (US$/ton)

Source: Barclays Capital.

Figure 51: Global HRC Prices (US$) Figure 52: Historical Premium (Brazilian Domestic vs. USA)

200

400

600

800

1000

1200

1400

1600

Jul-03

Nov-03

Mar-04

Jul-04

Nov-04

Mar-05

Jul-05

Nov-05

Mar-06

Jul-06

Nov-06

Mar-07

Jul-07

Nov-07

Mar-08

Jul-08

Nov-08

Mar-09

Jul-09

Nov-09

Mar-10

Jul-10

Nov-10

Mar-11

Jul-11

Braz il ian Domestic HRC Pr ice US HRC prices

-100%

-50%

0%

50%

100%

150%

Jul-03

Nov-03

Mar-04

Jul-04

Nov-04

Mar-05

Jul-05

Nov-05

Mar-06

Jul-06

Nov-06

Mar-07

Jul-07

Nov-07

Mar-08

Jul-08

Nov-08

Mar-09

Jul-09

Nov-09

Mar-10

Jul-10

Nov-10

Mar-11

Jul-11

PREMIUM (D ISCOUNT) AVERAGE



15/39


13 July 2011 15

THE CHINA FACTOR - I

Figure 55: Steel Capacity Utilization % Figure 56: China Steel Apparent Demand (Mt) vs. y/y (%)

50%

55%

60%

65%

70%

75%

80%

85%

90%

95%

100%

Dec-06

Mar-07

Jun-07

Sep-07

Dec-07

Mar-08

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Proxy for Capacity Utilization

0

10

20

30

40

50

60

70

Mar-06

Jun-06

Sep-06

Dec-06

Mar-07

Jun-07

Sep-07

Dec-07

Mar-08

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

Apparent Consumption (Mt) YoY%

Source: Steel Business Briefing, CISA, World Steel Association, Barclays Capital. Source: World Steel Association, Barclays Capital.

Figure 57: Chinese Pig Iron Production (Mt) vs. YoY % Figure 58: Annualized Net Exports (Mt) Steel Products

0

10

20

30

40

50

60

Feb-06

Jun-06

Oct-06

Feb-07

Jun-07

Oct-07

Feb-08

Jun-08

Oct-08

Feb-09

Jun-09

Oct-09

Feb-10

Jun-10

Oct-10

Feb-11

Jun-11

-20%

-10%

0%

10%

20%

30%

40%

50%

CHINA YoY %

(20)

(10)

-

10

20

30

40

50

60

70

80

90

D

ec-04

M

ar-05

Jun-05

Sep-05

D

ec-05

M

ar-06

Jun-06

Sep-06

D

ec-06

M

ar-07

Jun-07

Sep-07

D

ec-07

M

ar-08

Jun-08

Sep-08

D

ec-08

M

ar-09

Jun-09

Sep-09

D

ec-09

M

ar-10

Jun-10

Sep-10

D

ec-10

M

ar-11

Jun-11

Annualized Net Exports (Mt)

Source: National Bureau of Statistics, World Steel Association, Barclays Capital. Source: Bloomberg, Barclays Capital.

Figure 59: Steel Pricing Spreads Chinese Exports vs.

US/Europe Domestic Prices (US$ / ton)

Figure 60: Traders Inventories Breakdown (Flats vs. Longs)

(kt)

-150

-100

-500

50

100

150

200

250

300

350

400

Jun-07

Sep-07

Dec-07

Mar-08

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

South Europe - China Export US Domestic - China Export

-

2,000

4,0006,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

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

Nov-10

Dec-10

Jan-11

Feb-11

Mar-11

Apr-11

May-11

Jun-11

Jul-11

Longs (kt) Flats (kt)

Source: Steel Business Briefing, Barclays Capital. Source: MySteel, Barclays Capital.


16/39


13 July 2011 16

THE CHINA FACTOR - II

Figure 61: Chinese Urban Population Figure 62: Urban Fixed Asset Investment (y/y %)

1.000

1.050

1.100

1.150

1.200

1.250

1.300

1.350

1.400

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Total Population (million) Urban Pop. as % of total

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Apr-06

Aug-06

Dec-06

Apr-07

Aug-07

Dec-07

Apr-08

Aug-08

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Apr-11

YoY %

Source: National Bureau of Statistics, Barclays Capital. Source: Bloomberg, Barclays Capital.

Figure 63: Industrial Production (y/y %) Figure 64: Increase in Total Loans Outstanding (CNY billion)

0

5

10

15

20

25

Dec-00

Jun-01

Dec-01

Jun-02

Dec-02

Jun-03

Dec-03

Jun-04

Dec-04

Jun-05

Dec-05

Jun-06

Dec-06

Jun-07

Dec-07

Jun-08

Dec-08

Jun-09

Dec-09

Jun-10

Dec-10

Jun-11

IP y/y %

(500)

-

500

1,000

1,500

2,000

Jun-02

D

ec-02

Jun-03

D

ec-03

Jun-04

D

ec-04

Jun-05

D

ec-05

Jun-06

D

ec-06

Jun-07

D

ec-07

Jun-08

D

ec-08

Jun-09

D

ec-09

Jun-10

D

ec-10

Jun-11

Increase in Loans Outstanding (CNY billion)

Source: National Bureau of Statistics, Barclays Capital. Source: The People`s Bank of China, Barclays Capital.

Figure 65: Chinese PMIs - Seasonally Adjusted Figure 66: Chinese Electricity Production (billion kwh)

25

30

35

40

45

50

55

60

65

70

Dec-06

Feb-07

Apr-07

Jun-07

Aug-07

Oct-07

Dec-07

Feb-08

Apr-08

Jun-08

Aug-08

Oct-08

Dec-08

Feb-09

Apr-09

Jun-09

Aug-09

Oct-09

Dec-09

Feb-10

Apr-10

Jun-10

Aug-10

Oct-10

Dec-10

Feb-11

Apr-11

Jun-11

Manufacturing PMI Inventories PMINew Export Orders PMI New Orders PMI

0

50

100

150

200

250

300

350

400

450

Jun-01

Nov-01

Apr-02

Sep-02

Feb-03

Jul-03

Dec-03

May-04

Oct-04

Mar-05

Aug-05

Jan-06

Jun-06

Nov-06

Apr-07

Sep-07

Feb-08

Jul-08

Dec-08

May-09

Oct-09

Mar-10

Aug-10

Jan-11

Jun-11

-20%

-10%

0%

10%

20%

30%

40%

50%

Electricity Production (billion kwh) YoY %

Source: China Federation of Logistics & Purchases, National Bureau of Statistics,Barclays Capital.

Source: China Economic Information Net, Barclays Capital.


17/39


13 July 2011 17

THE CHINA FACTOR - III

Figure 67: Total Fixed Asset Invest. (CNY billion) vs. y/y % Figure 68: Government Expenditures (CNY billion) vs. y/y %

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

1Q03

2Q03

3Q03

4Q03

1Q04

2Q04

3Q04

4Q04

1Q05

2Q05

3Q05

4Q05

1Q06

2Q06

3Q06

4Q06

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Total (CNY bn) YoY %

0

100

200

300

400

500

600

700

800

900

Sep-02

Jan-03

May-03

Sep-03

Jan-04

May-04

Sep-04

Jan-05

May-05

Sep-05

Jan-06

May-06

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

-40%

-20%

0%

20%

40%

60%

80%

100%

Government Expenditure (CNY billion) y/y%

Source: National Bureau of Statistics, Barclays Capital. Source: National Bureau of Statistics, Barclays Capital.

Figure 69: Real Estate Fixed Asset Investment (CNY billion)vs. y/y %

Figure 70: China Auto Sales (units)

0

100

200

300

400

500

600

700

800

900

1000

Jun-05

Sep-05

Dec-05

Mar-06

Jun-06

Sep-06

Dec-06

Mar-07

Jun-07

Sep-07

Dec-07

Mar-08

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

0%

10%

20%

30%

40%

50%

60%

Real Estate (CNY bn) YoY %

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

Jun

-07

Oct

-07

Feb

-08

Jun

-08

Oct

-08

Feb

-09

Jun

-09

Oct

-09

Feb

-10

Jun

-10

Oct

-10

Feb

-11

Jun

-11

-20%

0%

20%

40%

60%

80%

100%

120%

140%

China Car Sales YoY %

Source: National Bureau of Statistics, Barclays Capital. Source: Bloomberg, Barclays Capital.

Figure 71: China House Selling Price Index by City (y/y %) Figure 72: Real Estate Climate Index

(5)

-

5

10

15

20

25

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

Nov-10

Dec-10

Jan-11

Feb-11

Mar-11

Apr-11

May-11

Beijing Shanghai

88

90

9294

96

98

100

102

104

106

108

Jun-99

Dec-99

Jun-00

Dec-00

Jun-01

Dec-01

Jun-02

Dec-02

Jun-03

Dec-03

Jun-04

Dec-04

Jun-05

Dec-05

Jun-06

Dec-06

Jun-07

Dec-07

Jun-08

Dec-08

Jun-09

Dec-09

Jun-10

Dec-10

Jun-11

Real Estate Climate Index (base 100 = march 1997)

Source: National Development and Reform Commission, Bloomberg. BarclaysCapital.

Source: National Bureau of Statistics, Barclays Capital.


18/39


13 July 2011 18

BRAZILIAN STEEL INDUSTRY DATA I

Figure 73: Brazilian Crude Steel Production (kt) and

Utilization Rate (%)Figure 74: Excess Capacity (kt) and Utilization Rates (%)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Nov-06

Jan-07

Mar-07

May-07

Jul-07

Sep-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CSP Brazil (LHS) Util izat ion rate (%) (RHS)

0

5,000

10,000

15,000

20,000

25,000

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Excess capacity - Annualized Average 3-years Util ization rate (%) (RHS)

Source: Instituto Ao Brasil, Barclays Capital. Source: Instituto Ao Brasil, Barclays Capital.

Figure 75: Brazilian Crude Production and Total Sales (kt) Figure 76: Domestic Total Apparent Demand (kt) and y/y %

1000

1500

2000

2500

3000

3500

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

PRODUCTION Total Sales (Domestic + Exports)

0

500

1000

1500

2000

2500

3000

Sep

-06

Jan

-07

May

-07

Sep

-07

Jan

-08

May

-08

Sep

-08

Jan

-09

May

-09

Sep

-09

Jan

-10

May

-10

Sep

-10

Jan

-11

May

-11

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

APPARENT DEMAND y/y


Figure 77: Total Steel Exports (kt) Figure 78: Total Steel Imports (kt)

0

200

400

600

800

1000

1200

1400

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

EXPORTS

0

100

200

300

400

500

600

700

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

IMPORTS



19/39


13 July 2011 19

BRAZILIAN STEEL INDUSTRY DATA II

Figure 79: Semi Finished Steel Production (kt) and y/y % Figure 80: Rolled Steel Production (kt) and y/y %

0

100

200

300

400

500

600

700

800

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

-100%

-50%

0%

50%

100%

150%

200%

250%

Semi-finished y/y

0

500

1000

1500

2000

2500

3000

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%100%

120%

140%

Rolled Products y/y


Figure 81: Flat Steel Imports (kt) Figure 82: Long Steel Imports (kt)

0

50

100

150

200

250

300

350

400

450

500

Apr-08

Jun-08

Aug-08

Oct-08

Dec-08

Feb-09

Apr-09

Jun-09

Aug-09

Oct-09

Dec-09

Feb-10

Apr-10

Jun-10

Aug-10

Oct-10

Dec-10

Feb-11

Apr-11

Jun-11

Flats Imports (kt)

0

20

40

60

80

100

120

140

160

180

Apr-08

Jun-08

Aug-08

Oct-08

Dec-08

Feb-09

Apr-09

Jun-09

Aug-09

Oct-09

Dec-09

Feb-10

Apr-10

Jun-10

Aug-10

Oct-10

Dec-10

Feb-11

Apr-11

Jun-11

Longs Imports (kt) - Railway components/tubesLongs Imports (kt) - Other

Source: SECEX, Alice Web, Barclays Capital. Source: SECEX, Alice Web, Barclays Capital.

Figure 83: Total Imports as % of Apparent Demand (%) Figure 84: Imports as % of Apparent Demand Flats vs.

Longs

0%

5%

10%

15%

20%

25%

30%

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

Total Imports as % of app. Dem.

0%

5%

10%

15%

20%

25%

30%

35%

40%

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

flats % of app. Dem. longs % of app. Dem.



20/39


13 July 2011 20

SNAPSHOT OF BRAZILIAN STEEL INVENTORIES

Figure 85: Distribution: Inventories (kt) vs. I/S Ratio (months)

Figure 86: Distribution: Shipments (kt)

0

200

400

600

800

1000

1200

1400

Nov-06

Feb-07

May-07

Aug-07

Nov-07

Feb-08

May-08

Aug-08

Nov-08

Feb-09

May-09

Aug-09

Nov-09

Feb-10

May-10

Aug-10

Nov-10

Feb-11

May-11

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

Invent. (kt) (LHS) I/ S (Months) (R HS) Average From Jan/ 06

0

50

100

150

200

250

300

350

400

450

Nov-06

Feb-07

May-07

Aug-07

Nov-07

Feb-08

May-08

Aug-08

Nov-08

Feb-09

May-09

Aug-09

Nov-09

Feb-10

May-10

Aug-10

Nov-10

Feb-11

May-11

Sales (kt)

Source: Instituto Nacional dos Distribuidores de Ao, Barclays Capital Source: Instituto Nacional dos Distribuidores de Ao, Barclays Capital

Figure 87: Distribution: Purchases (kt) Figure 88: HRC Inventory (kt) vs. I/S Ratio (months)

0

50

100

150

200

250

300

350

400

450

500

N

ov-06

Feb-07

M

ay-07

A

ug-07

N

ov-07

Feb-08

M

ay-08

A

ug-08

N

ov-08

Feb-09

M

ay-09

A

ug-09

N

ov-09

Feb-10

M

ay-10

A

ug-10

N

ov-10

Feb-11

M

ay-11

Purch. (kt )

`

0

100

200

300

400

500

600

700

800

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

Invent. (kt) I/S (Months) Average - Jul07/Dec08

Source: Instituto Nacional dos Distribuidores de Ao, Barclays Capital Source: Instituto Nacional dos Distribuidores de Ao, Barclays Capital.

Figure 89: Heavy Plates Shipments (kt) Figure 90: Heavy Plates Inventory (kt) vs. I/S Ratio (months)

0

10

20

30

40

50

60

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

Sales (kt)

0

50

100

150

200

250

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

0.0x1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

Invent. (kt) I/S (Months) Average - Jul07/ Aug08

Source: Instituto Nacional dos Distribuidores de Ao, Barclays Capital. Source: Instituto Nacional dos Distribuidores de Ao, Barclays Capital.


21/39


13 July 2011 21

BRAZILIAN AUTO INDUSTRY

Figure 91: Annualized Total (Domestic + Exports) Sales (k

units) vs. y/y %Figure 92: Annualized Production (k units) vs. y/y %

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Jun-06

Dec-06

Jun-07

Dec-07

Jun-08

Dec-08

Jun-09

Dec-09

Jun-10

Dec-10

Jun-11

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

Auto sales (domestic + exports - k units - annualized) y/y (%)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Jun-06

Nov-06

Apr-07

Sep-07

Feb-08

Jul-08

Dec-08

May-09

Oct-09

Mar-10

Aug-10

Jan-11

Jun-11

-100%

-50%

0%

50%

100%

150%

200%

Auto production (k units - annualized) y/y (%)

Source: Anfavea, Barclays Capital. Source: Anfavea, Barclays Capital.

Figure 93: Total Exports as % of Total Production Figure 94: Inventory vs. Inventory to Shipments Ratio(months)

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Jun-03

Dec-03

Jun-04

Dec-04

Jun-05

Dec-05

Jun-06

Dec-06

Jun-07

Dec-07

Jun-08

Dec-08

Jun-09

Dec-09

Jun-10

Dec-10

Jun-11

Exports/Production (%)

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

Jun-02

Dec-02

Jun-03

Dec-03

Jun-04

Dec-04

Jun-05

Dec-05

Jun-06

Dec-06

Jun-07

Dec-07

Jun-08

Dec-08

Jun-09

Dec-09

Jun-10

Dec-10

Jun-110.0x

0.2x

0.4x

0.6x

0.8x

1.0x

1.2x

1.4x

1.6x

1.8x

2.0x

Total Ratio: I/S 5-Year average


Figure 95: Monthly Production vs. Sales (units) Figure 96: Exports (units) vs. y/y %

0

50,000

100,000

150,000200,000

250,000

300,000

350,000

400,000

450,000

Jul-03

Dec-03

May-04

Oct-04

Mar-05

Aug-05

Jan-06

Jun-06

Nov-06

Apr-07

Sep-07

Feb-08

Jul-08

Dec-08

May-09

Oct-09

Mar-10

Aug-10

Jan-11

Jun-11

Vehicle sales Vehicle product ion

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Jul-03

Dec-03

May-04

Oct-04

Mar-05

Aug-05

Jan-06

Jun-06

Nov-06

Apr-07

Sep-07

Feb-08

Jul-08

Dec-08

May-09

Oct-09

Mar-10

Aug-10

Jan-11

Jun-11

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

Total Exports y/y(%)



22/39


13 July 2011 22

US DRIVERS - I

Figure 97: Steel Capacity Utilization % Figure 98: Total Industry Capacity Utilization %

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

Nov-01

Mar-02

Jul-02

Nov-02

Mar-03

Jul-03

Nov-03

Mar-04

Jul-04

Nov-04

Mar-05

Jul-05

Nov-05

Mar-06

Jul-06

Nov-06

Mar-07

Jul-07

Nov-07

Mar-08

Jul-08

Nov-08

Mar-09

Jul-09

Nov-09

Mar-10

Jul-10

Nov-10

Mar-11

Jul-11

US Steel capacity utiliz ation 5-year Avg

60.0

65.0

70.0

75.0

80.0

85.0

Jan-02

Aug-02

Mar-03

Oct-03

May-04

Dec-04

Jul-05

Feb-06

Sep-06

Apr-07

Nov-07

Jun-08

Jan-09

Aug-09

Mar-10

Oct-10

May-11

Industrial Capacity Util in US

Source: America Iron & Steel Utilization, Barclays Capital. Source: Bloomberg, Barclays Capital.

Figure 99: US Service Centers Steel Inventory (Mt) and I/Sratio (months) %

Figure 100: US Service Centers Steel Shipments (Mt) vs. y/y%

0

2

4

6

8

10

12

14

16

Apr-07

Jun-07

Aug-07

Oct-07

Dec-07

Feb-08

Apr-08

Jun-08

Aug-08

Oct-08

Dec-08

Feb-09

Apr-09

Jun-09

Aug-09

Oct-09

Dec-09

Feb-10

Apr-10

Jun-10

Aug-10

Oct-10

Dec-10

Feb-11

Apr-11

0,0x

0,5x

1,0x

1,5x

2,0x

2,5x

3,0x

3,5x

4,0xInventory (Mt) I/S Average

0

1

2

3

4

5

6

Apr-0

7

Jun-0

7

Aug-0

7

Oct-0

7

Dec-0

7

Feb-0

8

Apr-0

8

Jun-0

8

Aug-0

8

Oct-0

8

Dec-0

8

Feb-0

9

Apr-0

9

Jun-0

9

Aug-0

9

Oct-0

9

Dec-0

9

Feb-1

0

Apr-1

0

Jun-1

0

Aug-1

0

Oct-1

0

Dec-1

0

Feb-1

1

Apr-1

1-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%Shipments (Mt) % y/y

Source: MSCI, Barclays Capital. Source: MSCI, Barclays Capital.

Figure 101: US Flat Steel Inventory (Mt) and I/S ratio

(months) %

Figure 102: US Long Steel Inventory (Mt) and I/S ratio

(months) %

0

1000

2000

3000

4000

5000

6000

7000

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

3.5x

4.0xInventory (kt) I/S Average

0

500

1000

1500

2000

2500

3000

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

3.5x

4.0xInventory (kt) I/S Average

Source: CRU, Barclays Capital. Source: CRU, Barclays Capital.


23/39


13 July 2011 23

US DRIVERS - II

Figure 103: Non Residential Construction Spending (US$

bn)

Figure 104: US Industrial Production y/y% and ISM

Manufacturing PMI SA

0

10

20

30

40

50

60

70

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

-30%

-20%

-10%

0%

10%

20%

30%

Non Resid. YoY %

-20%

-15%

-10%

-5%

0%

5%

10%

May-01

Oct-01

Mar-02

Aug-02

Jan-03

Jun-03

Nov-03

Apr-04

Sep-04

Feb-05

Jul-05

Dec-05

May-06

Oct-06

Mar-07

Aug-07

Jan-08

Jun-08

Nov-08

Apr-09

Sep-09

Feb-10

Jul-10

Dec-10

May-11

-

10

20

30

40

50

60

70

U S IP y/ y (L HS) ISM M anufa ctur ing PM I SA (R HS)


Figure 105: Architecture Billings Index and Dodge Index(100 = average 2000)

Figure 106: Metals Spreads (US$)

20

30

40

50

60

70

80

May-00

Nov-00

May-01

Nov-01

May-02

Nov-02

May-03

Nov-03

May-04

Nov-04

May-05

Nov-05

May-06

Nov-06

May-07

Nov-07

May-08

Nov-08

May-09

Nov-09

May-10

Nov-10

May-11 60.0

80.0

100.0

120.0

140.0

160.0

Architecture Bil l ings Index (LHS) Dodge Index (RHS)

0

100

200

300

400

500

600

700

800

900

1.000

May-06

Aug-06

Nov-06

Feb-07

May-07

Aug-07

Nov-07

Feb-08

May-08

Aug-08

Nov-08

Feb-09

May-09

Aug-09

Nov-09

Feb-10

May-10

Aug-10

Nov-10

Feb-11

May-11

Metal Spread (Rebar - Shredded Scrap)


Figure 107: US Steel Imports (kt) vs. y/y % Figure 108: US Auto Sales (units) vs. y/y %

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

Jun-07

Aug-07

Oct-07

Dec-07

Feb-08

Apr-08

Jun-08

Aug-08

Oct-08

Dec-08

Feb-09

Apr-09

Jun-09

Aug-09

Oct-09

Dec-09

Feb-10

Apr-10

Jun-10

Aug-10

Oct-10

Dec-10

Feb-11

Apr-11

Jun-11

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

US car sales YoY %

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

-20%

0%

20%

40%

60%

80%

100%

120%

140%

China Car Sales YoY %

Source: US Census Bureau, Barclays Capital. Source: Bloomberg, Barclays Capital.


24/39


13 July 2011 24

12-MONTH FORWARD MULTIPLES AND EVOLUTION OF STREET ESTIMATES

Vale

Figure 109: EV/EBITDA (actual) - Vale Figure 110: EV/EBITDA (moving consensus) - Vale

-

2

4

6

8

10

12

14

16

Jan-04

Apr-04

Jul-04

Oct-04

Jan-05

Apr-05

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

EV/Ebitda Vale 1y fwd EV/Ebitda 1y + 1.5stdev

EV/Ebitda 1y - 1.5stdev Hist average - 5 year

-

2

4

6

8

10

12

Nov-06

Jan-07

Mar-07

May-07

Jul-07

Sep-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

Jul-11

E V/ Ebi tda Va le 1y fw d H is t. Avg. S ince E V/ Ebi tda 1y - 1. 5s tdev E V/ Ebi td a 1y + 1. 5s tdev

Source: Bloomberg, Company Reports, Barclays Capital. Source: Bloomberg Consensus Estimates, Barclays Capital.

Figure 111: P/E (actual) Vale Figure 112: P/E (moving consensus) - Vale

-

5

10

15

20

25

Jan-04

Apr-04

Jul-04

Oct-04

Jan-05

Apr-05

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

P/ E Va le 1y fw d P/ E 1y + 1. 5s tdev P /E 1y - 1. 5s tdev H ist . a ver age - 5 yea r

-

2

4

6

8

10

12

14

16

18

20

Jul-06

Sep-06

Nov-06

Jan-07

Mar-07

May-07

Jul-07

Sep-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

Jul-11

P/ E Va le 1y fwd H ist . Avg. Si nce P/ E 1y + 1. 5st dev P/ E 1y - 1. 5st dev


Figure 113: P/BV (actual) - Vale Figure 114: 12-Month Forward EBITDA Consensus

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Jan-04

Apr-04

Jul-04

Oct-04

Jan-05

Apr-05

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

P/B Vale 1y fwd P/B 1y + 1.5stdev P/B 1y - 1.5stdev Hist average - 5 year

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Jul-06

Sep-06

Nov-06

Jan-07

Mar-07

May-07

Jul-07

Sep-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

Jul-11

Consensus EBITDA 1y Foward



25/39


13 July 2011 25

Figure 115: Global Steels Forward Price Earnings Ratio (moving consensus)

0.0

2.5

5.0

7.5

10.0

12.5

15.0

17.5

20.0

22.5

25.0

May-07

Jun-07

Jul-07

Aug-07

Sep-07

Oct-07

Nov-07

Dec-07

Jan-08

Feb-08

Mar-08

Apr-08

May-08

Jun-08

Jul-08

Aug-08

Sep-08

Oct-08

Nov-08

Dec-08

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

Nov-10

Dec-10

Jan-11

Feb-11

Mar-11

Apr-11

May-11

Jun-11

Jul-11

Global Steels PE +1.5 stdev -1.5stdev average

Source: Bloomberg Consensus Estimates, Barclays Capital.Sample includes all companies of Barclays Steels Relative Valuation Table, except for LatAm Steels, Refractory andTokyo Steel; P/E was calculated as the division of total market capitalization (in US$ terms) of sample by 12-monthforward earnings consensus from Bloomberg (in USD terms).

Figure 116: Global Steels Earnings Moving Consensus (100 = October 2006)

30

50

70

90

110

130

150

170

190

210

Jul-07

Sep-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

Jul-11

Earnings Consensus (100 = Oct 2006) USD

Source: Bloomberg Consensus Estimates, Barclays Capital.Sample includes all companies of Barclays Steels Relative Valuation Table, except for LatAm Steels, Refractory and

Tokyo Steel; Earnings consensus was calculated as the time weighted sum of current and next years earningsconsensus from Bloomberg.


26/39


13 July 2011 26

Companhia Siderrgica Nacional (CSN)

Figure 117: EV/EBITDA (actual) - CSN Figure 118: EV/EBITDA (moving consensus) - CSN

-

2

4

6

8

10

12

14

Jul-03

Nov-03

Mar-04

Jul-04

Nov-04

Mar-05

Jul-05

Nov-05

Mar-06

Jul-06

Nov-06

Mar-07

Jul-07

Nov-07

Mar-08

Jul-08

Nov-08

Mar-09

Jul-09

Nov-09

Mar-10

Jul-10

Nov-10

Mar-11

Jul-11

EV/Ebitda SID 1y fwd Hist. Avg. since 2005

EV/Ebitda 1y - 1stdev EV/Ebitda 1y + 1stdev

-

1

2

3

4

5

6

7

8

9

10

Mar-07

May-07

Jul-07

Sep-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

Jul-11

E V/ Ebi tda SI D 1y fw d H is t. Avg. Si nce E V/ Ebi tda 1y - 1. 5s tdev E V/ Ebi td a 1y + 1. 5s tdev


Figure 119: P/E (actual) CSN Figure 120: P/E (moving consensus) - CSN

-

5

10

15

20

25

30

35

Jul-03

Nov-03

Mar-04

Jul-04

Nov-04

Mar-05

Jul-05

Nov-05

Mar-06

Jul-06

Nov-06

Mar-07

Jul-07

Nov-07

Mar-08

Jul-08

Nov-08

Mar-09

Jul-09

Nov-09

Mar-10

Jul-10

Nov-10

Mar-11

Jul-11

P/ E SI D 1y fwd Hi st. Avg. si nce 2005 P/ E 1y + 1. 5st dev P/ E 1y - 1. 5stdev

-

2

4

6

8

10

12

14

16

18

Sep-06

Nov-06

Jan-07

Mar-07

May-07

Jul-07

Sep-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

Jul-11

P/ E SI D 1y fw d H ist . Avg. Si nce P/ E 1y + 1. 5st dev P/ E 1y - 1. 5st dev


Figure 121: P/BV (actual) - CSN Figure 122: 12-Month Forward EBITDA Consensus

-

2.0

4.0

6.0

8.0

10.0

12.0

Jul-03

Nov-03

Mar-04

Jul-04

Nov-04

Mar-05

Jul-05

Nov-05

Mar-06

Jul-06

Nov-06

Mar-07

Jul-07

Nov-07

Mar-08

Jul-08

Nov-08

Mar-09

Jul-09

Nov-09

Mar-10

Jul-10

Nov-10

Mar-11

Jul-11

P/ B SID 1y fwd H ist . Avg. si nce 2005 P/ B 1y - 1. 5stdev P/ B 1y + 1. 5st dev

-

2,000

4,000

6,000

8,000

10,000

12,000

Sep-06

Nov-06

Jan-07

Mar-07

May-07

Jul-07

Sep-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

Jul-11

Consensus EBITDA 1y Fowa rd



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13 July 2011 27

Usiminas

Figure 123: EV/EBITDA (actual) - Usiminas Figure 124: EV/EBITDA (moving consensus) - Usiminas

-

2

4

6

8

10

12

14

16

18

20

Jul-03

Oct-03

Jan-04

Apr-04

Jul-04

Oct-04

Jan-05

Apr-05

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

EV/Ebitda USIM 1y fwd Hist. Avg. since 2005EV/Ebitda 1y - 1stdev EV/Ebitda 1y + 1stdev

-

2

4

6

8

10

12

May-06

Jul-06

Sep-06

Nov-06

Jan-07

Mar-07

May-07

Jul-07

Sep-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

Jul-11

EV/Ebitda USIM 1y fwd Hist. Avg. since 2005

EV/Ebitda 1y - 1.5stdev EV/Ebitda 1y + 1.5stdev


Figure 125: P/E (actual) Usiminas Figure 126: P/E (moving consensus) - Usiminas

-

10

20

30

40

50

60

70

Jul-03

Oct-03

Jan-04

Apr-04

Jul-04

Oct-04

Jan-05

Apr-05

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

P/ E USIM1y fwd Hi st. Avg. si nce 2005 P/ E 1y + 1. 5st dev P/ E 1y - 1. 5stdev

-

2

4

6

8

10

12

14

16

18

20

May-06

Jul-06

Sep-06

Nov-06

Jan-07

Mar-07

May-07

Jul-07

Sep-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

Jul-11

P/ E U SI M1y fw d H is t. Avg. s ince 2005 P/ E 1y + 1. 5s tdev P/ E 1y - 1. 5s tdev


Figure 127: P/BV (actual) - Usiminas Figure 128: 12-Month Forward EBITDA Consensus

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Jul-03

Oct-03

Jan-04

Apr-04

Jul-04

Oct-04

Jan-05

Apr-05

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

P/ B US IM 1y fw d H is t. Avg. si nce 2005 P/ B 1y - 1. 5st dev P/ B 1y + 1. 5s td ev

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

May-06

Jul-06

Sep-06

Nov-06

Jan-07

Mar-07

May-07

Jul-07

Sep-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

Jul-11

Consensus EBITDA 1y Foward



28/39


13 July 2011 28

Gerdau

Figure 129: EV/EBITDA (actual) - Gerdau Figure 130: EV/EBITDA (moving consensus) - Gerdau

-

2

4

6

8

10

12

14

16

Jul-03

Nov-03

Mar-04

Jul-04

Nov-04

Mar-05

Jul-05

Nov-05

Mar-06

Jul-06

Nov-06

Mar-07

Jul-07

Nov-07

Mar-08

Jul-08

Nov-08

Mar-09

Jul-09

Nov-09

Mar-10

Jul-10

Nov-10

Mar-11

Jul-11

EV/ Ebit da GGB R 1y f wd H is t. A vg. sinc e 2005 EV/ Ebit da 1y - 1s tdev EV/ Ebit da 1y + 1s tdev

-

2

4

6

8

10

12

Mar-07

May-07

Jul-07

Sep-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

Jul-11

EV/Ebitda GGBR 1y fwd Hist. Avg. sinc

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