Metal Expert Europe Steel Trade Conference 2013 – Stresa, Italy / April 8-9, 2013 Adalet Kazımlı, International Trade Director, ERDEMİR Group, TURKEY FUTURE

Metal Expert Europe Steel Trade Conference 2013 – Stresa, Italy / April 8-9 , 2013

Adalet Kazımlı, International Trade Director, ERDEMİR Group, TURKEY

METAL EXPERT EUROPE STEEL TRADE CONFERENCE @ Stresa,Italy 2013

FUTURE MADE OF STEEL

“OUTLOOK OF TURKISH STEEL MARKET AND PROSPECTS OF EXPORT TO EUROPE"


CONTENT

GENERAL OUTLOOK OF TURKISH STEEL MARKET

ERDEMİR GROUP

EXPORT TO EUROPE



ERDEMİR GROUP

EXPORT TO EUROPE


GDP Growth Rates (%)

Source: Oxford Economics – TRG (Turkish Republic Government)

Turkish GDP is expected to grow at above 4% per annum over the medium term

2010 2011 2012 2013 2014 2015

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

1.62.1

2.22.5

-0.20.2

2.2

4.3

World USA EU-25 Turkey


Top Steel Producing Countries – Crude Steel (Mt)

Rank Countries 2011 2012 Change %

1. China 683 717 3,12. Japon 108 107 -0,43. USA 86 89 2,54. India 72 77 4,25. Rusia 69 71 2,56. South Korea 68 69 1,27. Germany 44 43 -3,68. Turkey 35 36 5,39. Brazil 35 35 -1,410. Ukraine 34 33 -6,811. Italy 29 27 -5,2

Turkey was ranked 8th position among Top Steel Producing Countries in 2012

Source: ISPA


Crude steel production capacity in Turkey

Source :DCUD

Turkish crude steel production is heavily dependent on imported scrap

Turkish crude steel capacity increased 2,5 times in the last 10 years Only 3 integrated steel makers among 31 producers Turkey is the biggest scrap importer in the world (ca. 23 mtpy), local scrap supply is around 10 mtpy Crude steel production reached 35,9 mtpy, indicationg a capacity utilization rate of 72%

Turkish CapacitySnapshot

2000 2005 2009 2010 2011 20120.0

10.0

20.0

30.0

40.0

50.0

60.0

38.5

11.6

19.8

50.1

Turkish Crude Steel Capacity [mtpy]

EAF BOF TOTAL

EAF77%

BOF23%

Slab29%

Billet71%


2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

0

10,000

20,000

30,000

40,000

50,000

60,000

0

40

80

120

160

200

240

13,0708,70811,28713,65515,22218,44021,22223,77121,45418,04823,60426,9312930,14432,81335,51838,22241,05744,04247,18650,488

80

117

197

Finished Steel Consumption (Mt) GDP Index (2005=100)

2000-2010 2010-2020GDP Index – CAGR (%) 3.9 5.3Finished Steel Cons. – CAGR (%) 6.1 7.9

Finished Steel Consumption and GDP of Turkey

Source: ISPA (Turkish Iron & Steel Producers Association),Oxford Economics


Turkish flat steel production capacity

Source :DCUD

Flat steel production capacity has developed quickly since 2006 and Turkey became a net exporter of flat products as well as long products

Turkish flat steel production capacity increased 5 fold since 2006 Flat steel production capacity is enough to meet local demand Apparent flat steel use is estimated to be 13,6 mt, whereas flat steel production remains at 9,0 mt in 2012 In 2012 Turkey imported about 6,5 mt flat rolled products

2005 06 07 08 09 10 11 12 13 14 20150.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

15.9

18.4

13.6

9.0

Turkey Flat Steel Capacity, Consumption & Production

Flat Capacity Flat Consumption Flat Production

[mto

n]


Finished Steel Production/Consumption (Mt) Turkey

Source: ISPA

2005 2006 2007 2008 2009 2010 2011 2012

9 11 12 10 10 12 14 15

911

1211

8

1213

14

Consumption

Flat Products

Long Products

2005 2006 2007 2008 2009 2010 2011 2012

1619 22 22 21 20 23 25

44

4 5 4 7

99

Production

Flat Products

Long Products


Steel Export of Turkey (Mt)

Source: TSI

2009 2010 2011 2012

11.8

9.210.5

11.7

2.4

3.72.5

3.0

1.7

1.52.3

1.9

Flat ProductsSemi ProductsLong Products


Regional Distribution of Steel Export (Mt) – Turkey

*Other: Brazil, Peru, Ethiopia, Turkmenistan, Nigeria etc.Source: TSI

Turkey exports mainly to MENA and EU countries

7%

48%

34%

15%

36%

38%

EU (27)MENANAFTAFAR EASTCISOTHER

2011 2012


ERDEMİR GROUP


EXPORT TO EUROPE


ERENCO

ERDEMİR Romania

ERMADENERSEM

Group Companies


Group Companies

2001 2002 2004 2006 2008 2013

Establishment

Establishment of ERSEM and

ERENCO

Acquisition ofİSDEMİR and ERD.Romania

Acquisition ofERDEMİR Maden

Privatization

Flat steel production in

İSDEMİR

1965


TOP STEEL PRODUCERS

Specialized on domestic markets

Having good relations with key

customers

Having proactive culture

Authorized management

structure

Having control over its costs

Quick and effective reaction

ERDEMİRWas ranked to the category of the world's top steel producers by WSD in 2012

Source: WSD

ERDEMİR – «World-Class Steel Producer»


Liquid Steel Capacity (Mt) – ERDEMİR Group

Since 2005, liquid steel capacity of the group increased by 70% to 9.1 Mt

2005 2006 2007 2008 2009 2010 2011 2012

3.2 3.2 3.2 3.5 3.5 3.9 3.85 3.85

2.2 2.2 2.2

3.5 3.54

5.25 5.255.4 5.4 5.4

7 7

7.9

9.1 9.1

İSDEMİRERDEMİRTOTAL


Finished Steel Capacity (Mt) – ERDEMİR Group

The finished steel capacity of the group increased by 82% to 11.1 Mt

2005 2006 2007 2008 2009 2010 2011 2012

3.6

5.1 5.1 5.1 5.1 5.1 5.1 5.1

2.5

2.5 2.5

2.5 2.5 2.5 2.5 2.5

3.5 3.5 3.5 3.5 3.56.1

7.6 7.6

11.1 11.1 11.1 11.1 11.1

İSDEMİR Long İSDEMİR Flat ERDEMİR Flat TOTAL


Production Volume (Mt) – ERDEMİR Group

2006 2007 2008 2009 2010 2011 2012

3.9 4.2 4.24.8

5.46.1 6.0

2.0 1.7 2.01.9

1.40.8 1.5

5.2 5.4 6.06.5

7.17.5

7.9Long Product Flat Product Crude Steel

«Erdemir Group is continously increasing its production volume» Long product portion decreased over time in line with İSDEMİR’s conversion to Flat production



2011 & 2012 Total Export Sales on Region Basis

49%

36%

9%7%

MENAEU (27)CIS + OTHERAMERICA & CANADA

70%

21%

6%

3%

EU (27)MENACIS & OTHERAMERICA & CANADA

2011 2012

EXPORT TO EU DECREASED DUE TO LOW DEMAND


2012 Export Distribution on Region Basis

• MENA 49%• EU 36%• CIS + OTHER 9%• AMERICA & CANADA 7%


Products & Markets

ERDEMİR is a regional steel hub between European and MENA markets with a diversified product portfolio

• Flat Products

HRC

Plate

CRC

HDG

Tinplate

Silicon Steel

• Long Products

Wire rod

Billet

• Domestic Markets

Turkey

Romania

• Export Markets

EUOther Europe & CIS

MENA

USA


ERDEMİR Group Ports

16 million mt/year, loading/unloading capacityJetty : 1670 m (8 Jetties)Draft : 20 m Max.Vessel Size : 200,000 (DWT).

16,3 million mt/year, loading/unloading capacityJetty: 1530 m (5 Jetties)Draft: 19 m Max.Vessel Size : 200,000 (DWT)

ERDEMIR Port

ISDEMIR Port

Eregli and Iskenderun ports are two of the biggest ports in Turkey and the Region in terms of location

and capacity.


EXPORT TO EUROPE


ERDEMİR GROUP


Annual GDP Forecast for EU Markets

Source: European Commission

• Italy & Spain negative

• France, Germany & UK slightly positive


EU (27) Apparent Steel Use, finished steel

Source:worldsteel

Mt %2012 2013 2014 12/11 13/12 14/13

2014 match point

2014 as % of 2007

WORLD 1 414.4 1 452.3 1 498.2 1.4 2.7 3.2 2014 123.0

European Union /27) 140.2 139.5 144.0 -9.2 -0.5 3.2 1997 72.4

France 12.6 12.2 12.6 -8.1 -2.8 2.8 1993 75.6

Germany 37.7 38.2 39.6 -7.6 1.4 3.7 2006 92.8

Italy 21.7 21.2 21.7 -18.3 -2.0 2.3 1996 60.5

Poland 10.4 10.2 10.6 -5.7 -2.1 4.7 2006 88.3

Spain 10.7 10.3 10.9 -18.5 -3.5 5.3 1994 44.3

United Kingdom 9.0 9.2 9.2 -0.2 -0.1 1.8 N.F. 71.6

Recovery of the demand in main European markets is slow


Outlook of European Union

Economy• Weak demand• Imbalance due to country differentials • Political & financial uncertainties• Recovery of GDP expected in 2014

Steel Market • Slowing down in demand• Short term restocking in early 2013 • Downtrend in EUR/USD parity• Major steel mills reported losses in 2012• Mergers and acquisitions expected• Pressure over the margins• Doubt on positioning


2013 Erdemir Export Targets to Europe

2012 Export Tonnage : 386.000

2013 Export Forecast :

Advantages1. Euro pricing via hedging2. Alternative payment solutions3. R&D studies with the clients4. Improvement in logistics

?


Logistics Advantages of Erdemir & Turkey

Mainly by bulk vessels Short lead time to neighbour markets No inland handling in Turkey due to our own ports Combination possibilities for cost efficiency Container & barge delivery possibilities JIT – Just in time deliveries


DISCLAIMER

Ereğli Demir Çelik Fabrikaları T.A.Ş. (Erdemir) may, when necessary, make written or verbal announcements about forward-looking information, expectations, estimates, targets, assessments and opinions. Erdemir has made the necessary arrangements about the amounts and results of such information through its Disclosure Policy and has shared such policy with the public through the Erdemir website, in accordance with the Capital Markets Board regulations. As stated in related policy, information contained in forward-looking statements, whether verbal or written, should not include unrealistic assumptions or forecasts. It should be noted that, actual results could materially differ from estimates taking into account the fact that they are not based on historical facts but are driven from expectations, beliefs, plans, targets and other factors which are beyond the control of our Company. As a result, forward-looking statements should not be fully trusted or taken as granted. Forward-looking statements should be considered valid only considering the conditions prevailing at the time of the announcement. In cases where it is understood that forward-looking statements are no longer achievable, such matter will be announced to the public and the statements will be revised. However, the decision to make a revision is a result of a subjective evaluation. Therefore, it should be noted that, when a party is coming to a judgement based on estimates and forward-looking statements, our Company may not have made a revision at that particular time. Our Company makes no commitment to make regular revisions which would fully cover changes in every parameter. New factors may arise in the future which may not be possible to foresee at this moment in time.


Thank you for your attention…

Documents

Metal Expert Europe Steel Trade Conference 2013 – Stresa, Italy / April 8-9, 2013 Adalet Kazımlı, International Trade Director, ERDEMİR Group, TURKEY FUTURE