Korean Steel Industry

1. Korean Steel Industry - 71st OECD Steel Committee - 6 December 2011 Kim, Sung-Woo/Korea Iron & Steel Association

2. Ⅰ. General Economy & Steel Consuming Industry Ⅱ. Iron & Steel Industry 1. Crude Steel Production 2. Steel Products Supply and Demand 3. Raw Materials Ⅲ. Conclusion Content

3. I. General Economy & Steel Consuming Industry • Economy: GDP growth remains strong but likely slows next year • The Korean economy continues growth, estimating 3.8% range in 2011 • However, in 2012 a slowdown is expected to around 3.5% amid uncertainty of the global economy • Steel consuming industry: Keeps a solid activity in 2011 except construction sector, but weakness is forecast in 2012 • Construction: Expected to bottom out in 2012 but very slightly • Automobile: Continues strong so far, but likely to slow in 2012 • Shipbuilding: Estimated growth in 2011, but turndown is expected • Machinery/Domestic Appliance: Continue a satisfactory performance < Steel Consuming Industry> < General Economy in Korea>

4. II. Iron & Steel Industry 1. Crude Steel Production • Korea’s crude steel production is estimated 67.4 million tons in 2011, up 14.4% y-o-y, and in 2012 it is expected 69.2 million tons up 2.7% thanks to BOF modernization and EAF well-operation • BOF: 41.7(2011) → 42.0million tons(2012, 0.7%↑) • EAF: 25.7(2011) → 27.2million tons(2012, 5.8%↑)* EAF share(%) : 46.5(’07) → 43.0(’09) → 42.1(’10) → 38.1(’11) → 39.3(’12) (Thousand tons, %)

5. 2. Steel Products Demand and Supply • Korea’s total steel demand continues growth but it is expected to slow in 2012 because steel consuming industry and export are forecast to weaken in accordance with uncertain global economy • Domestic Demand: Estimated 56 million tons in 2011 and expected to increase 1.4%(56.8 million tons) in 2012 • ExportDemand: Major markets consist of China, Japan and South East Asia. In 2012 the export circumstances are very likely to be weaker < Export> < Demand>

6. Production: Estimated 71.6 million tons in 2011 and expected 73.9 million tons(up 3.1%) in 2012 • Import: Estimated to decrease (8.5%↓) in 2011 because of domestic output increase. Expected to decrease 4.6%(21.9 million tons) in 2012 < Import> < Production>

7. 3. Raw Materials 3-1. Iron Ore and Coking Coal • Domestic consumption for iron ore and coking coal is estimated to increase in 2011 due to Hyundai Steel’s blast furnaces operation • Iron Ore: 54,205(2010) → 66,400 Thousand tons(2011), 22.5%↑ • Coking Coal: 24,477(2010) → 30,570 Thousand tons(2011), 24.9%↑ • Almost dependent upon imports from Australia/Brazil/Canada • In 2012 consumption will be same as used in 2011 < Iron Ore/Coking Coal Demand> < Import Sources Share(Jan~Oct ’11)>

8. 3-2. Steel Scrap • Domestic demand for steel scrap in 2011 is estimated to grow 7.9% because of EAF operation increase • 30,497(2010) → 32,911 thousand tons(2011), 7.9%↑ • Import dependency is about 26% from U.S. and Japan • In 2012 demand is expected to rise because of further needs from construction recovery and POSCO’s mini-mill upgrading < Steel Scrap Import/Demand> < Import Sources Share(Jan~Oct ’11)>

9. Korean economy has continued growth but is expected to slow in 2012 because of impact by the global economic uncertainty - Private consumption and facility investment weaken, the manufacturing is fragile to lose momentum in accordance with the global financial market instability Domestic steel production and demand are expected to slow in spite of a continuing increase in 2012 - Domestic steel consuming industries have done well so far but are expected to suffer from the continuing threat of the economic recession and appreciation of Korean currency against the U.S. dollar Meanwhile, steel-making raw materials consumption is expected to increase in 2012 - It is necessary to keep a stabilization of raw materials prices in the long term for a healthy prosperity of the global steel industry Ⅲ. Conclusion

10. Thank You