Polish Electrical Steel Sector [Silicon Steels]

1. Polish Electrical Steel Sector [Silicon Steels] October 2004

2. POLISH ELECTRICAL STEEL SECTORAGENDA • Definitions • Trade classification • Consumption • Trade perspectives • Routes to market • Demand side information • Opportunities …

3. DEFINITIONS Electrical steels consist of two main product groups which differ according to their metallic structure, magnetic properties and thus applications: • Oriented (transformer) steels, produced from low carbon steel of approx. 3% silicon content. These steels are principally used for the production of high power transformer cores or for distribution transformers • Non-oriented (dynamo) steels: • Either high alloy steels containing up to 3% Si and 1% Al, characterised by low transmission loss • Low alloy, lower Si/Al regular core loss steels • Both are the basic building blocks for magnetic circuits in rotating machinery and for small transformers (low power transformer cores)

4. TRADE CLASSIFICATION *: Classification is the Polish ‘Kod Materialowo Handlowy’

5. CONSUMPTION - Cold Roll Electrical Steel HRC from Sendzimira 000’s tonnes* 2001 2002 2003 2004e Production Transformer 27.6 26.2 24.5 26.0 Dynamo 34.5 32.1 31.4 30.6 Total 62.1 58.3 55.9 56.6 Export Transformer 20.8 17.5 14.5 3.4 Dynamo 14.3 9.4 4.5 4.4 Total 35.2 26.9 19.0 7.8 Import Transformer 5.6 4.0 5.0 4.2 Dynamo 13.0 19.3 6.4 15.4 Total 18.7 23.3 11.4 19.6 Consumption Transformer 12.4 12.7 15.0 26.9 Dynamo 33.2 42.0 33.3 41.6 Total 45.6 54.7 48.3 68.5 • : Data is from GUS, for trade to 2003 from discussions with the Centrum Informatyki Handlu Zagranicznego and for 2004 from the Ministry of Finance. Latter assessments may be subject to change. ** : Significant hot rolled dynamo steel supply ~2001 thought to have been from Sendzimira prior to CC installation. HRC from imports** Prodn is by Stalprodukt alone

6. CONSUMPTION – Some characteristics† Note that electrical steel consumption for the production of transformers, dynamos etc is of cold rolled steel only. Consumption of hot rolled electrical steels is for the production of cold rolled electrical steel alone • Cold rolled electrical steel market ~55 kt/yr • 2/3rds of demand is for dynamo steel, 1/3rd for transformer steels • Exports showing a strong declining trend • Demand supply is monopolised by Stalprodukt • Hot rolled sourcing: • - For transformer steels is from Sendzimira • - For dynamo steels is from imports (Slovakia) †: Demand appraisals courtesy of http://www.steelonthenet.com consulting team

7. TRADE PERSPECTIVES - Exports Polish Electrical Steel Exports, 2001-2004 000’s tonnes 2001 2002 2003 2004e Hot rolled Transformer 0.0 6.0 6.0 0.0 Dynamo 0.1 0.0 0.0 0.1 Total 0.1 6.0 6.0 0.1 Cold rolled Transformer 20.8 17.5 14.5 3.4 Dynamo 14.3 9.4 4.5 4.4 Total 35.1 26.9 19.0 7.8 Total Transformer 20.8 23.5 20.5 3.4 Dynamo 14.4 9.4 4.5 4.6 Total 35.2 33.0 25.0 7.9 • Cold rolled steel dominate export volumes • Relatively low hot rolled exports evident in recent years • Both transformer and dynamo export volumes in decline

8. TRADE PERSPECTIVES – Imports Polish Electrical Steel Imports, 2001-2004 000’s tonnes 2001 2002 2003 2004e Hot rolled Transformer 0.0 0.0 0.0 0.0 Dynamo 21.1 30.8 37.0 29.0 Total 21.1 30.8 37.0 29.0 Cold rolled Transformer 5.6 4.0 5.0 4.2 Dynamo 13.0 19.3 6.4 15.4 Total 18.7 23.3 11.4 19.6 Total Transformer 5.6 4.0 5.0 4.2 Dynamo 34.1 50.1 43.5 44.4 Total 39.8 54.1 48.5 48.6 The dominant trade item • Import volumes constant at ~50 kt/yr since 2001 • Dynamo steels dominate imports: mostly hot, some cold • Transformer steel import volumes negligible

9. Direct Direct Indirect Indirect 66% of supply 34% of supply ROUTES TO MARKET Stalprodukt Imports 38% 62% 0% 99% 1% Exports As with alloy steels in general, specificity of composition, of heat treatment, of metallurgical properties and of size means that the product does not lend itself to bulk sales through intermediaries Polish electrical steel market *: Indirect refer to independent traders. Figures are based on 2001-2004 ‘typical year’flow

10. DEMAND SIDE INFORMATION - Buyers • Customer Name & Address Approx annual purchase (tonnes) • ------------------------------------------------------------------------------------------------------------------------------------ • Zaklady Spretu Oswietleniowego ‘Elgo’, 09-500 Gostynin, Kutnowska 98 1100-1700 • Spoldzielnia Inwalidow ‘Elektra’, Ul Marynarska 14, 02-674 Warszawa 635 • ‘Alstom Power Generators’ Spolka z.o.o., 53-609 Wroclaw, Ul. Fabryczna 10 2250-2500 • Zaklady Remontowe Energetyki Warszawa, 00-346 Warszawa, Ul. Elektryczna 2a 35-65 • Zaklady Maszyn Elektrycznych ‘Wamel’, 02-255 Warszawa, Ul. Krakowiakow 12 15-20 • EDA S.A. Poniatowa, 24-320 Poniatowa, Ul. Fabryczna 16 200 • EV Zychlinskie Transformatory Sp z.o.o., 99-320 Zychlin, Ul. Narutowicza 72 155 • Philips Lighting-Farel Mazury Spolka z.o.o., 11-400 Ketrzyn, Ul. B Chrobrego 8 2000-4600 • Etc … • Etc ... • MCI can identify the main buyers / locations • We can help you shape your market entry strategy for any finished steel product

11. OPPORTUNITIES … • Can MCI help you develop your presence in the Polish silicon steel sector, or in other East European special steel markets? • Can we help you with a European market entry study? • If so please call us for a no obligation discussion … Please contact: Andrzej Kotas, Managing Director, MCI Website: http://www.steelonthenet.com Email: mci@steelonthenet.com Mobile: +44 (0) 775 149 0885