Managing Director Mr. KAMEL DJOUDI Contents

Assistant Editor-in Chief Ola Aswad

Review’s Offices Editorial : Arab Iron and Steel Union continues its support activities Algeria Secretariat General P.O. Box: 04 4 Cheraga - Algeria Tel: +213 - 23 290727 / 290751 Arab and World iron and Fax: +213 - 23 290755 steel news E-mail: [email protected] Egypt unveils plans to build new Damascus Regional ffice 6 capital east of Cairo WHICH WILL P.O. Box: 6008 SUPPORT sTEEL DEMAND Damascus - Syria Tel: +963116131981 Fax: +963116123022 Reports E-mail: [email protected] http://www.aisusteel.org/ 8 Summaries of Working pepars Cairo Regional Office “Is There Light After Darkness For P.O. Box: 515 The Arab Steel Industry?” Dukki – Giza – Cairo – Egypt Tel: +20233356219 9 Mr. .George Matta -Marketing Director Fax: +20233374790 EZZ STEEL E-mail: [email protected] Arab Countries Steel Report Mr. Yigit Can KURTKAYA -Market Research Expert Correspondences: 12 Turkish Steel Exporters’ Correspondences Association - TURKEY regarding publications, subscription and advertisements to be directed to the Reshaping the Global Steel Industry magazine’s Editor in Chief working paper of Maghreb Steel Damascus - Syria 15 by Mr. Amar Drissi CEO

Outlook at the Arab Steel Industry 2020 25 Mr. Kamel Djoudi Secretary General Arab Iron & Steel Union Algeria

Sponsors of Arab Steel Summit 2017 31 4

Editorial

Arab Iron and Steel Union continues its support activities

The changes in the Arab and in- ternational steel industry have led to a state of tension and in- Summit working papers dis- stability. The challenges result- cussed all the issues with details ing from the large increase in , in addition to discuss other re- the flow of imported iron into the searches connected to the mod- Arab markets at prices which are ern technologies . lower than the cost of production We have to mention that this is in the local markets , the first time that we see all steel In addition to the clear gap be- producers (seniors and juniors ) tween global raw material prices agree on one goal which is fac- and the prices of finished steel ing Dumping . products in the Arab markets, Mr. KAMEL DJOUDI the Secre- local steel makers have been tary General of AISU talk about asked to take measures to pro- the promising future of Arabic tect the steel industry from col- steel industry depending on re- lapse through support, encour- alities : " Moreover there are agement and anti-dumping. several positive signs ,some In its long march of supporting Arabic companies announced steel industry AISU held its an- about positive results this year nual summit in October / Mo- ,in addition to the production of rocco ,through this summit AISU several new projects in Algeria, concentrated on several changes Egypt , Sultanate of Oman " he which are facing this industry . adds " arrangements which are AISU's Chairman Mr. AWWAD taken by some countries to con- AL-KHALIDI said " it is very im- front dumping through impos- portant to talk about the phase ing fees or limiting the imported of instability which confront steel quantities with limited qualities industry at the current time ,Arab ,helped in such case " and Global steel industry exam- Some researchers apply points ine consecutive changes which it of view about the future of Ara- didn't face before ". bic and Global steel industry , Mr. George Matta EZZ STEEL mar- keting manager sees that all the following countries " Saudi Ara- 5

Senior Vice President Commer- cial Sales/Marketing - SMS Group GmbH has mentioned the modern bia , Egypt ,UAE , ' are playing an and ready projects in the Middle important rule as they considered East era and North Africa for ex- major steel markets, as for the op- ample : The New Pipe Factory in erations that change the steel dy- Al Gharbia (UAE),Midrex Facto- namics especially at the areas that ries Algerian-Qatari Steel , Tosyali produce good steel such as North for fiber glass ( Algeria ) . Africa and Middle East . Mr. Yiğit Can KURTKAYA Market Mr. Amir Drissi CEO- Maghreb Research Expert -Turkish Steel Steel ,has talked about the effects Exporters’ Association has intro- of these dynamics on the region in duce information about the expec- general and especially on Maghreb tations in steel sector and its trad- Steel. ing in the Arabic country focusing On the other hand the summit dis- on the steel trading between Arabic cuss the level of Arabic steel indus- countries and the Majors countries try today and the ways which will in steel exporting such as ( China develop this industry . ,Russia ,EU and Turkey) . Mr. Yousef Al-Muhannadi Gen- Any ways Arab Steel Industry is eral Manager - Algerian – Qatari continuing and growing through its Steel has mentioned the a story adapting with the universal chang- of the successful strategic coop- es which push to motivate this in- eration between two Arabic coun- dustry to work harder to develop tries , both Algeria and Qatar has this industry and becoming more decided to invest by building a mill respondent to the local markets in Algeria which start producing in and consumers needs and re- October 2017 . quires . The General Manager of EPE FRAMEMETAL Mrs. Allal Naouel has discussed the Adopting of a new building system from US which is the first one in Algeria . Speakers have talked about the modern projects , Mr. Olaf Stalfort Arab Steel 6 NEWS

Steel futures fall amid un- Egypt unveils plans to build certain outlook, iron ore new capital east of Cairo inches up slightly WHICH WILL SUPPORT sTEEL DE- Chinese steel futures retreated on MAND Wednesday with investors concerned that curbs on iron ore production capac- The Egyptian government has an- ity in the top steelmaking city of Tang- nounced plans to build a new capital to shan could yet fall short of their expec- the east of the present one, Cairo. tations.

Arab Steel - September October 2017 Tangshan, in northern China's Hebei Housing Minister Mostafa Madbouly province, plans to temporarily ban pro- said the project would cost $45bn duction from a total of 18.21 mln tons of (£30bn) and take five to seven years to ironmaking capacity from mid-November complete. until mid-March. Ironmaking by blast furnaces is a key He said the aim was to ease congestion procedure for making steel. and overpopulation in Cairo over the Steel supplies in the world's top pro- next 40 years. ducer will be hit by the temporary ban on the capacity use, and the government The announcement was made at an in- is expected to step up efforts to curb vestment conference that aims to revive steel production in more cities to clear the Egyptian economy. its skies in the winter heating season. However, some analysts are concerned The gathering, in the Red Sea resort of that the capacity ban will be relaxed if Sharm el-Sheikh, has attracted pledges smog weakens. worth $12bn (£8bn) in aid and invest- "The capacity curb is slightly lower ment from Kuwait, Saudi Arabia and the than market expectation. And what re- United Arab Emirates. ally matters is if the production cut can be implemented thoroughly, which will Mr Madbouly said the population of depend on the weather, so the outlook greater Cairo, estimated at about 18 mil- remains uncertain," said Zhao Chaoyue, lion, was expected to double within 40 an analyst with Merchant Futures in years. Shenzhen. The most active rebar on the Shanghai The Egyptian parliament and its govern- Futures Exchange closed down 0.95 ment departments and ministries, as percent at 3,563 yuan a ton. well as foreign embassies, would move Dalian iron ore futures inched up 0.8 to the new metropolis, he said. percent to 429.5 yuan a ton. Among other steelmaking raw materials, "We are talking about a world capital," Dalian coal future dropped 0.3 percent he added. to 1,079 yuan a ton and coke futures jumped 0.8 percent to 1,688.5 yuan a Developers say the new city - the name ton. of which has not been revealed - would include almost 2,000 schools and col- leges and more than 600 health care fa- cilities. They say the project will create Me Steel more than a million jobs.

It is planned to be built over 700 sq km (270 sq miles) and house about five mil- lion residents.

bbc News 7 NEWS

Imports of Japan-origin HR Speaking at the Arab Iron & Steel Un- plates to UAE to increase on ion (AISU) Steel Summit in Casablanca, Al Gharbia requirement Morocco, on Tuesday, October 25, Matta said steel demand in the Mena region Al Gharbia Pipe Company, a joint venture was down in 2017 due to budget cut- between the UAE’s Senaat, Japan’s JFE backs and inflationary prices. Steel Corporation and Marubeni-Itochu Steel Inc. (MISI), is planning to start its operations next year. For that reason, the Me Steel company has already received the first shipment of steel plates from Arab Steel -September - October 2017 Japan which will be used as a feedstock. Egypt’s Ashry Steel aims to Once fully operational in 2018, Al Ghar- bia’s production capacity is expected to start flats production reach 240,000 tpy of large diameter Ashry Steel, a producer of structural high-quality sour grade steel pipes that steel and ERW tubes in Egypt, seeks to cater to the construction and energy get a share in the flats market as well. sectors in the region. The total expected The company has recently agreed with investment is approximately $0.3 billion one of the global equipment suppliers to (AED 1.1 billion). The finished products establish a new facility in Egypt. will be mostly supplied locally, whereas Egypt’s longs and pipes producer Ashry 40% will be exported to countries in the Steel has recently agreed with Primetals MENA region, Metal Expert learnt. on establishment of the new facility for In October JFE Steel supplied HR plates, CRC and HDG production. The details the material for the company’s produc- are yet to be settled; preliminarily the tion process, according to Zawya. The capacity of the asset will be 350,000- imports of HR plates to the UAE are 500,000 tpy, according to Arab Iron and expected to go up in 2018 as, besides Al Steel Union. The new production lines Gharbia Pipe Company, one more Emirati are expected to become operational producer Embosal Tube Mill has started within 15 months after the official con- a 150,000 tpy LSAW mill requiring HR tract is signed. plates as a feedstock. The demand As a result, Ashry Steel is going to enter for import HR plates in the UAE has the new segment of flat steel, aiming to already gone up. According to customs meet demand in the country. With the statistics, Emirati buyers increased their new facility coming on stream, Ashry purchases of plates by 8% year-on-year Steel may source HRC for re-rolling lo- to 336,000 t in H1 2017, where the im- cally as well as from suppliers from the ports from Japan made up 10,000 t. CIS, Turkey and Asia, Metal Expert un- derstands. Today the company produces over 650,000 t of rebar and 150,000 t Metal Expert of light sections per year. The supplier also hosts a 150,000 tpy pipe welding Ezz Steel sees demand to line and is active as a steel stockist and improve in the MENA region in fabricator. 2018 George Matta, marketing director of Egypt’s biggest producer Ezz Steel ex- pects demand for steel to improve in the Middle East North Africa (Mena) region in 2018 after a downturn in 2016 and 2017.

Metal Expert A Reports

Arab Steel - September October 2017

Summaries of Working pepars

Outlook at the Arab Steel Industry Reshaping the Global Steel Industry 2020 Mr. Amar Drissi Mr. Kamel Djoudi CEO Secretary General Maghreb Steel Arab Iron & Steel Union Morocco Algeria

•The iron and steel industry is the mainstay of all industries and During the last decade, Steel plays a key role in the industrial and market have seen in depth trans- economic development of society, formation due several mergers Statistical data show a positive & acquisitions operations. These correlation between the amount operations changed the market of consumption of steel products dynamics especially for regions and the economic growth of each which are well industrialized as country. for North Africa or Middle East •In the industrialized countries, and for small and mid-sized com- the capita of steel share is higher panies. This paper will address than 350 kg/year, while in develop- the impact of these dynamics on ing countries it is much lower than the region and for small player 10 kg / year. In 2015 The average like Maghreb Steel. capita consumption of steel in the Arab countries is about 207 Kg / year. 9 Reports

“Is There Light After Darkness For Solutions for long product production in The Arab Steel Industry?” challenging markets

Mr. .George Matta Dr. Thomas Maßmann Marketing Director Head of Sales, Bar & Wire Rod EZZ STEEL Mills SMS Group GmbH – GERMANY

This presentation provides an SMS group strives to be the lead- overview of Arab steel market and ing partner in the world of metals its position in the global steel in- and is committed to the success of dustry. It discusses the strategic its customers. As a global leader issues faced by the Arab steel in- in metallurgical plant technology, dustry and assesses the impact of SMS group supplies integrated so- protectionist measures on imports. lutions for the entire process chain The role of KSA, Egypt and UAE in - whether it´s the design of a new the overall regional steel consump- plant, modernizations, turnkey tion as key steel markets are also concepts or life cycle services. covered in this presentation. In Based on its strong setup in MENA, particular, it attempts to answer SMS group has successfully real- the following questions: ized a large number of new plants in the region and also modernized -What is the size of Arab steel mar- existing plants to increase the ket vis-à-vis global demand? competitiveness of these installa- -What has been the trend for steel tions. The presentation will focus demand (long vs. flat)? on latest long products references - What is the contribution of imports in the MENA region and technolo- in the overall consumption? gies which can be implemented. -How have crude utilization rates Special attention will be given to developed through the years? the CMT® high efficient minimal -Is steel demand likely to grow concept, as well as to low CAPEX above historical levels through solutions for small capacity rebar 2020 and what are the demand mills based on CEE technology. drivers? -Has protectionism helped the Arab steel industry? -What are some of the strategic is- sues faced by the Arab steel indus- try? 10 Reports

FLAT STEEL IN MENA Story of a Successful Cooperation Between Algeria & Qatar Mr. B.S. Shetty General Manager Commercial Mr. Yousef Al-Muhannadi AL- GHURAIR COMPANY General Manager U.A.E Algerian – Qatari Steel ALGERIA

The presentation provides an overview of the Flat Steel market in the MENA re- gion focusing on the demand, produc- The aim of this presentation is to tion and imports of steel in the region. present a successful strategic co- Despite growing steel capacities, the operation story between two Arab region continues to be a net importer countries in the steel business. Al- of steel. Stronger domestic demand geria & Qatar decided to invest in in India and China in recent times has building a plant in Algeria, utilizing benefited local steel producers. Fin- Qatar Steel’s 40 years’ experience ished steel demand is forecast to grow in the steel business. Algerian over 2.5% year on year till 2018. Qatari Steel (AQS) is a fully inte- While the rebuilding of Iraq and Syria, grated steel plant which can pro- Expo2020 in UAE and Metros in Riyadh duce reinforced bars and wire rod and Doha are expected to boost steel from iron ore pellets. The plant will demand in the region, cuts in oil pro- meet the country’s steel require- duction and fiscal consolidation pro- ments, thereby reducing Algeria’s grammes may be the spoilsports for dependence on imported steel. the steel industry. Privatization of oil The intended steel complex will companies by some of the world’s have a total production of 4 mil- largest oil producers will have a great lion tonnes per year, in 2 phases, impact on the market dynamics. The and is spread over an area of 216 Gulf project index is down 2.6% over hectares. In any mega project be- last year mainly due to the slowdown ing established, there exist some in Saudi Arabia, Qatar and Oman. vital considerations which ought to be given priority. AQS Manage- ment coming into terms of coming up with a huge project destined to benefit the country and put for- ward strategies of actualizing the proposed project. Having these into play, Algerian-Qatari Govern- ments have already streamlined some of the key strategies leading to the construction of Bellara Steel Complex. 11 Reports

Challenges and opportunities of Content: Libyan steel manufacturing 1.Long products consumption and profitability Mr. Issa Ali Zewam Research & Development 2.Spot billet market & opportuni- Expert. ties LIBAYN IRON & STEEL Co. 3.Billet supply & GCC case LIBYA

FRAMEMETAL A Combination Between Iron ore is one of the basic materials Technology and Experience in steel industry, and LISCO depends on importing its need from this mate- Mrs. Allal Naouel General Manager rial from Brazil and Sweden in form of EPE FRAMMETAL pellets and lump from South Africa ,al- ALGERIA though there is a huge reserve of iron ore in Wadi Alshati in the south of Libya ,but it is not suitable for direct reduc- No doubt that our world is evolving at tion operation due to low iron content a dizzying speed, and this is favored (45-55%) and high phosphorous (0.85- by the scientific and technologic ad- 0.97% and alkalinity . vancement which is always done at a The technical research centre with the meteoric pace. In this context, FRAM- mining body had made many studies EMETAL was established, and the idea to increase iron content and reduce of creating a multidisciplinary entity in phosphorous . the field of innovating construction be- They got as high percentage as 60%fe came a reality. and as low phosphorus as 0.5%,and For FRAMEMETAL, innovation is now a this type of material is suitable as a major concern, where measures and feed mix for blast furnace and not for strategies are adopted to set a system direct reduction plant . of innovation at an international scale. In this paper will discuss Wade Alshati As a constitutive component within ore and the opportunity to refine and the national economy, the company purify it to be of use . is deemed a main vector and an ideal medium for innovation, looking also MENA Billet Market: Major Trends & to expand its technological capacities Opportunities to international scale, knowing that FRAMEMETAL has adopted and adapt- ed a new constructive system from United States of America, and such Mrs. Yuliya Filali Ansary system was never used in Algeria. EDITOR – METAL EXPERT UKRAINE 12 Reports

NALCO Water’s Best Practices at DRI Arab Countries Steel Report Facility have Improved Productivity & Reduced Total Cost of Operations Mr. Yigit Can KURTKAYA Market Research Expert Turkish Steel Exporters’ Mr. Ran Chandrashekhar Association - TURKEY Industry Tech Consultant – PMI NALCO - U.A.E The presentation mainly focus on A comprehensive understanding of steel trade between Arab Countries the water systems in the Direct Re- and Turkey. The presentation begin duced Iron (DRI) manufacturing plants with several graphics and informa- circuits, coupled with in-depth knowl- tion about Turkish Steel Industry edge of the DRI process enables Nalco and Turkish Steel Sector. In this to improve DRI Production & Optimize part information show that steel in- Total Cost of Operation . Our initiatives dustry in Turkey has witnessed con- within the process have positively im- sistent growth, expanding exponen- pacted: tially in response to strong global • Productivity demand for high quality steel prod- • Total cost of Operations. ucts. In 2016 Turkey’s crude steel • Energy Efficiency. production has reached to 33.2 • Product Quality. million tons. With these figures, in This has resulted in the Nalco leader- 2016 Turkey was Europe’s second ship position in Global DRI produc- (2nd) largest crude steel producer, tion. and ninth (8th) in the world rank- Presently Nalco is the Primary Water ing of steel-producing countries. Treatment Company in over the 50% of In second part of the presentation the operational DRI plants across all consist of several graphics and in- DRI technologies, and works closely formation about steel trade in Arab with the Utility, Production & Mainte- Countries. Mainly focus on steel nance teams in our client companies trade between Arab Countries and to understand the specific site needs leading steel exporter countries. to help optimize their process. Work- (such as China, Russia, EU Coun- ing closely with our Research Teams, tries and Turkey) In last part of the the local Sales Engineers are working presentation shows information to bring the next generation of solu- about expectations on Arab Coun- tions to DRI Production today. tries’ Steel Sector and Arab Coun- This paper will serve to review a few tries Steel Trade examples where Nalco has implement- ed water circuit best practices to en- hanced DRI Productivity and Energy efficiency in the Middle East & Africa (MENA) region. 13 Reports

SMS group - Leading Partner in the the minimill concept as key factor in World of Metals steel industry evolution

Mr. Olaf Stalfort Senior vice president sales Dr. Carlo P. Piemonte marketing Vice President, Key Account Manager at Danieli SMS Group GmbH GERMANY

SMS group strives to be the lead- The minimal concept, originally con- ing partner in the world of metals ceived as integration of EAF based and is committed to the success of meltshop and long products rolling its customers. As a global leader in mills for commercial grades production metallurgical plant technology, SMS of limited size, experienced a tremen- group supplies integrated solutions dous evolution during the last 50 years for the entire process chain from , progressively expanding its applica- iron and steelmaking to processing tions in both productivity and product of flat and long products. quality becoming in direct competition Based on its strong setup in MENA, with the conventional plants based on SMS group has successfully real- integrated cycle. ized a large number of new plants Thanks to dramatic increase of EAF in the region and also modernized based meltshop productivities and existing plants to increase the com- casting technologies, this concept is petitiveness of these installations. at present applicable not only to long The presentation will focus on lat- products but also to flats, adopting est references in the MENA region both thin slab casting & rolling process and technologies which will be im- but also conventional thick slab route. plemented. Special attention will From the environmental point of view, be given to recent turnkey projects operating as a perfect scrap recycling in MENA, e.g. the new pipe mill for tool, is the natural application of the “ Al Gharbia in United Arab Emirates urban mining” concept to steel indus- or the Midrex® plants for Algerian try, with dramatic cuts in greenhouse Qatari Steel and Tosyali Algerie Fer gas generation compared to conven- et Acier which are both under con- tional process, BF/BOF based. struction. This paper explores cutting edge ap- plications of minimill as evolved in re- cent Danieli reference plants including the possibility to upstream integration with DRI facility for direct hot charging in EAF, the application of direct cast- ing/rolling solutions in endless mode, as well as micro and nano mill configu- rations, specifically developed for re- gional/local markets, custom-sized to local scrap availability. 14 Reports

Prospects for the development of Direct Reduction according to ENER- the Arab Iron and steel industry GIRON:

Abdelouahed Rachdi / Geologist By: Mr. Alberto Piccoli Mineral Resources department Vice president sales, Arab Industrial Development and DANIELI – ITALY Mining Organization (AIDMO)

The results of the last operating This paper will broach over the pros- year of the Emirates Steel DRP pects for the development of the Arab #2 demonstrates once more the Iron and Steel industry thanks its com- potential of Energiron Technol- petitive advantages and natural, tech- ogy. The Direct Reduction plant in nical and financial capabilities that Abu Dhabi surpassed the 2 Mtpy fulfill all Arab countries’needs. They of high quality DRI production, op- should take legal measures to imple- erating for more than 8400 hr and ment the rules and legislations issued for 315 days continuously without by the World Trade Organization (WTO) interruption. This record is added regarding the problem of dumping to to the results already obtained in ensure the stability, protection and all the Energiron plants recently development of this industry, and to installed, as e.g. the world's short- maintain its share in the impredictable est start-up of Ezz Rolling Mills 1.9 global iron and steel industry market Mtpy plant, the lowest-in-the-world , in terms of its raw materials inputs, Natural Gas consumption of Suez and global demand for steel products. Steel and the 312.5 t/h achieved in This paper includes the following Nucor (LA), which puts the Direct axes: Reduction technology at the same - The contribution of manufacturing In- level of the Blast Furnace in terms dustries to the Arab GDP. of productivity opening the door - The Competitive advantages of the to the possibility to produce even Arab Iron and Steel industry within the the more demanding steel grades global steel industry. in EAF-based mini mills, which can - Challenges facing the Arab steel in- be more flexible than a big inte- dustry. grated plant and follow the present - Prospects for the development of the market evolutions maximizing the Arab Iron and steel industry. profit for the entrepreneur. - Recommendations 15

Res hap ing the gl lo ba l s tee l in dus try Presentation October 2017

By Mr. Amar Drissi CEO Maghreb Steel Arab Steel - September October 2017

During the last decade, we have contemplated in depth reshaping of steel industry

Context ƒ There has been significant consolidation in the global steel industry, within the past few years: - In the US steel industry: primarily led by ArcelorMittal, U. S. Steel Corporation, Nucor Corporation and Steel Dynamics Inc. - In Central and Eastern Europe as well as in China and other parts of Asia ƒ Cross-border consolidation occurred with the aim of achieving greater efficiency and economies of scale, particularly in response to the consolidation undertaken by raw material suppliers and consumers of steel products

2006 Top steelmakers (mT crude steel production) 2016 Top steelmakers (mT crude steel production)

1. 118.0 1. 95.5

2. 33.7 2. 63.8

3. 31.8 3. 46.2

4. 31.2 4. 46.2

5. 22.5 5. 41.6

6. 24.0 6. 33.3

7. 14. 6 7. 33. 2

8. 19.1 8. 30.3

9. 21.3 9. 26.8

10. 13.8 10. 24.5

Source: Worldsteel Association Page 2 16

...... And the M&A trend is still ongoing

Recent M&A trends in the steel sector

Arab Steel - September October 2017 ƒ Global Metals M&A activity in Q2 2017 brought in 15 deals with a disclosed value greater than $50m, for a total deal value o f $3.9bn - Average deal size of $259m - (43%) 2017 YTD vs. 2016 YTD (in value) - (45%) Q2 2017 vs. Q1 2017 (in va lue) ƒ The steel category continues to drive M&A value in the metals sector, accounting for 60% of transaction value ƒ Regional dynamics: - The Asi a & Ocean ia regi ion con tinues to dr ive M&A ac tiv itity, accoun ting for 93% of vol ume byb target regiion - The UK & Eurozone region accounted for 54% of deal value by acquirer region as a result of the one megadeal posted this quarter - There were no deals in the metals industry in Africa this quarter ƒ Outlook for 2017: - Metals industry deal making in the second half of 2017 is expected to continue to be centred around the Chinese market, with the potential for private equity driven deals given the recovery of commodity pricing and broader demand for industrial metals - In Sep-17, ThyssenKrupp and Tata Steel signed a memorandum of understanding to combine their European steel activities in a 50/50 joint venture, aiming to create a leading European flat steel player to be positioned as quality and technology leader - The new entity is set to have pro-forma sales of about €15bn, with €400-600m in annual synergies expected

Source: PWC Global Metals sector in Q2 2017, Press Page 3 17

...... And the M&A trend is still ongoing

Main deals in the steel space since 2015

Target Acquirer Arab Steel - September October 2017 Date : Feb-17 Feb-17 Sep-16 Apr-16 Dec-16 Aug-15 Sep-15

Jiangsu Ultimate Nanjing Beijing Yulong Century Nangang shougang Steel Pipe Invest.

Lhasa Zihe Shougang Shandong Investor Beijing Investor Technology Holding Iron & Steel Group shougang Group Dev. Bonds Group

Date : Jun-17 $546m $237m $4,157m $2,456m $2,313m $1,652m $1,163m

Date : Apr-15

Date : Nov-16 $2,031m Date : Feb-17 Date : Nov-16 $1,148m

National Slab TF Ho ldings Serv ice Projects Organization

$1,135m

$1,656m $1,187m

Source: PWC Global Metals sector in Q2 2017, Press Page 4 18

Industrial efficiency and cost competitiveness are key rationals for M&A operations steel industry Consolidation dynamics China M&A : Consolidation for a better market EU M&A: More consolidation was inevitable balance Arab Steel - September October 2017 ƒ Ownership structure of steel industry players: 50% ƒ ArcelorMittal-Ilva: state-owned enterprises; 50% private - AM Investco Italy consortium (85% ArcelorMittal; 15% Marcegaglia, with Banca Intesa taking a minority stake) is the winner of the bid race for Ilva - Baosteel-WUSCO merged in 2016, originating BaoWU Group (63.8Mt output in 2016) with target of - According to ArcelorMittal, the potential EU market share of ArcelorMittal- 9.6Mt steel capacity reduction in 2017 Ilva would not exceed 27% for HRC and 30% for CRC - €1.8bn consideration for Ilva, plus €2.3bn investment (€1.1bn environmental; - Angang (33Mt output in 2016) – Bengang (6-8Mt)/ €1.2bn industrial capex) Benxi Steel Group (14.4Mt output in 2016) - Liaoning region - M&A talks failed on lack of synergies. Talks - Ilva output capped at 6Mtpa, with a potential of up to 9.5Mtpa of finished steel have resumed but different ownership structure is output. No material impact on capacity expected still an issue - Synergies up to a maximum of $1.3bn - He Stee l Group an d Shougang Corp would form - AM Investco Italy consortium ownership structure might see a 75/15/10 split nation’s top producer among ArcelorMittal/Marcegaglia/Banca Intesa ƒ Thyssenkrupp Steel Europe-Tata Steel Europe: - Tata Steel has recently agreed a settlement in principle to save the British Steel ƒ Local governments, owners of state owned enterprises Pension Fund (BSPF). If approved by the Pension Regulator and the Pension (SOE), have different interests than central Protection Fund, this will pave the way for a joint venture between the two government in terms of M&A companies’ European assets - The companies should create a 50/50 JV based in Amsterdam, with an annual turnover of about €15bn, 48,000 employees, and annual shipments of c. 21mT ƒ M&A approach prevails on cross-regional mergers of flat steel - An IPO could follow in the 12-18 months

¾ ¾ A long standing Chinese government drive to Europe’s steel industry seeking strength through M&A consolidate the market and obtain an advantageous - Since the beginning of the 2007 economic downturn, steel producers in the scale effect European Union have struggled with weakened demand in the region and - China has been driving a major campaign to Chinese imports rationalize its sprawling state sector from steel to - As a response, Arce lor Mitta l, ThThyssen Krupp an d Ta ta have been eye ing ways energy as it looks to reduce overcapacity and increase to counter overcapacity and cut costs through consolidation state control of key markets

Source: Press Page 5 19

Industrial efficiency and cost competitiveness are key rationals for M&A operations steel industry Scenarios for M&A deals in the global steel space

Aperam - spin-off ƒ The division represented only 6% of the Groups’ 2016 EBITDA and trades significantly below of Alloys & Arab Steel - September October 2017 Specialty division those of its peers ( mostl y US based) ƒ A logical step would be a JV agreement with VDM (the speciality stainless steel asset sold by Thyssenkrupp to Lindsay Goldberg in April 2015)

Thyssenkrupp ƒ AST was bought back by Thyssenkrupp from Outokumpu in 2013, after it failed to sell the assets exit form Acciai Speciali Terni to third party buyers in order to comply with the remedy set by the EU antitrust ƒ The EU antitrust should no longer have any significant objection if AST was bought by one of Thyssenkrupp’s EU stainless steel peers (Acerinox, Aperam)

Acerinox - M&A ƒ Nippon Steel and Sumitomo Metal Corp. recently took control of Nisshin Steel with a 51% stake potential from its Asian ties ƒ Nisshin Steel owns 15% of Acerinox and 30% of Acerinox’s Bahru Stainless steel plant in Malaysia ƒ If NSSMC no longer has an interest in stainless steel, Acerinox might have the chance to: a) buy back the 15% stake owned by Nisshin Steel; or b) consider some form of merger with Nisshin Steel’s stainless steel assets (c. 1mT/year melting capacity)

SSAB – Nucor. A ƒ The rational for an industrial/commercial agreement would make sense as synergies and pricing potential J V in the US plate market power may be expected from both the regional overlap (Alabama) and diversification (Iowa)

Source: Press Page 6 20

Industrial efficiency and cost competitiveness are key rationals for M&A operations steel industry Medium size players consolidation (after 2014) Arab Steel - September October 2017

ƒ Hesteel Group acquired Serbia Iron & Steel in ƒ Liberty Steel (GFG Alliance) buying and restarting assets in 2016 as a consequence of Hebei province program UK, in the last 3 years: based on providing more credit and policy supp ort - Restart of Dalzell Plate Mill and Tredegar hollow sections mill to steel enterprises looking to build or acquire plants overseas - Acquisition of the Caparo Engineering businesses

ƒ Hes tee l is curren tltly loo king to furth er increase its - Acquisition of the Rio Tinto Aluminium smelter presence in the European market through - Acquisition of the Speciality Steel Business from Tata negotiation for the acquisition of US Steel Kosice

- Acquisition of a Tier 1 automotive body pressing company

¾ Chinese investors have been looking to invest in ¾ Liberty Steel M&A appetite is driven by an opportunistic European countries over the last years to benefit approach (acquiring mainly distressed assets) and its from the local government support to companies « Greensteel » strategy (using local supplies of scrap and investing overseas (shut down capacity at home renewable energy to make the alloy instead of importing and replace it with projects overseas) expensive raw materials such as iron ore and coking coal)

Source: Press Page 7 21

..... Capacity utilization and expected growth will contribute to accelerate M&A operations Key insight on of steel market – Overview (1/2)

Global steel demand evolution by region (Mt) Market dynamics over 2010-2016 Arab Steel - September October 2017 CAGR '11-'13 '13-'16 ƒ After a fast growth period between 1,580 1,636 +4.2% (0.4%) 1,536 1,546 1,506 1,518 1,444 (1.0%) +0.7% 1,416 145 145 2009-2013 (+7% CAGR), the global 142 150 144 145 Other developed 143 122 135 +3.8% (0.6%) (1) 145 111 123 109 109 steel demand stabilized at c.1,500Mt countries 112 174 (4.7%) +2.6% North America 103 149 156 161 161 167 Europe 164 147 in 2015-2016 following the Chinese Other developing. 264 271 280 283 327 384 +6.0% +2.3% countries (2) 235 250 59 (3) 56 50 50 53 slowdown compensated by the EAC 55 57 74 76 57 +3.6% (5.4%) India 70 72 80 84 107 135 +2.5% +4.7% strong dynamism in other countries

(4) 738 714 (notably India, Europe and other China 644 663 683 685 659 606 +7.0% (2.4%) developing countries)

2011 2012 2013 2014 2015 2016 2020E 2025E ƒ The decreasing demand in 2015 has Capacity utilization Evolution of world steel capacity utilisation ratio ratio by region worsened the issues of worldwide overcapacities 90 85% healthy Regions 2010 2015 utilisation rate North America 76% 70% 80 South America 70% 65% ƒ The global overcapacities led to a North Africa 63% 36% Sub -Sah aran Afr. 51% 45% massive increase of Chinese exports 70 Southern Europe 67% 63% Europe (Others) 77% 84% with an increase of 90 Mt over the 60 China 84% 77% 2009-15 period (+50 Mt on 2013- India 88% 80% 15), Asia (c.40%) and MENA/Africa 50 Developed Asia 81% 80% janv.-14 juin-14 nov.-14 avr.-15 sept.-15 févr.-16 juil.-16 déc.-16 Asia (Others) 60% 50% (c.20%) Average 72% 65% (1) Japan, South Korea, Taiwan, Australia, New Zealand; (2) LatAm, Sub-Saharan Africa, rest of Asia; (3) East African Community (Burundi, Kenya, Rwanda, South Sudan, Tanzania, and Uganda); (4) Incl. Hong Kong Source: Word Steel Association, McKinsey Page 8 22

.... Antidumping measure could influence and accelerate M&A trend

Key insight on of steel market – Overview (2/2)

Anti-dumping and anti-subsidy measures in the steel sector (worldwide scope) Comments

Arab Steel - September October 2017 # safeguard measures ƒ In response to this accel era tdted # antisubsidy measures growth of Chinese # antidumping measures exports, significant increase in the X Increase in the number of anti-dumping and anti-subsidy measures over one year (underestimated as 2016 data only available for the United States, Russia and the EU) number of trade defence measures

ƒ Since the adoption of the European +21 +30 +37 +34 +36 Commission's Steel communication of

424 16 March 2016, the EU has put 12 388 21 anti-dumping measures in 354 21 51 place, most of which cover products 317 20 40 from China 287 36 266 33 ƒ In September 2016, The U.S. 27 24 International Trade Commission imposed anti-dumping and anti- 352 subsidy duties on hot-rolled flat steel 327 298 268 imports from 246 230 Australia, Brazil, Britain, Japan, the Netherlands, South Korea and Turkey and on certain Chinese-made stainless steel sheet and strip products

Source: World Bank Page 9 23

Despite tremendous growth in production capacities, Arab steel makers still not on the map of g lobal play ers Key insight on of steel market – Steel production & consumption Top 20 Steel-producing countries in 2016 (in mT of crude steel) Steel production by continent in 2016 Total: 1,630 mT of crude steel produced Arab Steel - September October 2017

Others CIS 8% 6% Japan Steel 6% Production NAFTA China 7% 50% EU (28) 10% Other Asia 13%

Use of steel per capita by country in 2016 (in kg of finished steel products) Steel consumption by continent in 2016 Total: 1,515 mT of finished steel products

Others CIS 12% 3% Japan 4% China Steel 45% Use NAFTA 9% EU (28) 10% Other Asia 17%

Source: Worldsteel Association Page 10 24

Arab steel players are mid size or small players

Main steel market players in Middle East and Africa

Arab Steel - September October 2017 Main pla yers b y hot ca pacit y (in m.T p.a.)

7.2 6.6 5.8 5.8 5.5 4.9 3.1 1.0 3.5 3.5 3.8 2.4

4.5 1.7 1.5 1.4 3.5 1.1 1.0 1.0 2.5 0.8 2.3 2.0 0.5 0.4 0.4 0.4 0.3

(1)

(2)

¾ Middle East and Africa has traditionally been a substantial importer of steel products because it did not have much steelmaking capacity until the middle of the last decade ¾ Today, the Middle East and Africa is one of the fastest-growing steel-producing regions

Note 1: Mobarakeh Steel Company production capacity is expected to reach 10.3 mT by the end of 2017 Note 2: Habas 2.5mT p.a. capacity (hot strip mill opened in 2012) could be later extended to 4.5mT p.a. Source: Companies, Press Page 11 25

Selections of the Work ing Paper by Arab Iron & Steel Union Arab Steel Summit 2017 Mr. Kamel Djoudi Secretary General Arab Iron & Steel Union Algeria Outlook at the Arab Steel Industry 2020

The iron and steel industry is the mainstay of all industries and plays a key role in the industrial and economic development of society, Statistical data show a posi- tive correlation between the amount of consumption of steel products and the economic growth of each country. In the industrialized countries, the capita of steel share is higher than 350 kg/year, while in developing countries it is much lower than 10 kg / year. In 2015 The aver- age capita consumption of steel in the Arab countries is about 207 Kg / year. With these changes the unstable economic conditions in the world in general and the Arab countries in particular. The question is: Where is the Arab steel industry heading and what are the opportunities for its future development? To answer this question, we need to know what is the status of the Arab steel in- dustry and what are the most important challenges and what will be the situation of the Arab steel industry in the near future.

Distribution of Crude Steel Products to Regions of the world 2016

If we look at the volume of crude steel production in the world in 2016, we find that the world production volume is 1630 million tons and the production of Arab countries is 28.8 million tons only by 1.8% of the world's production and is a small percentage compared to the possibilities available to Arab countries 26

Percentage of Crude Steel Production of Arab Countries to World from 2010 to 2017 e

Despite the annual increase in the production of crude steel in Arab coun- tries during the period from 2010 to the present year, which is estimated at 5-7% in normal conditions. Although the rate of increase in global production during the same period estimated at an average of 1.9% per year, Arab countries still produce less than 2% of world production. 27

Production and Demand of Steel In Arab Countries

The volume of production and steel demand in the coming years will depend on several elements : • Economic • Development • Population growth rate • Projects established by each country • Preventive measures to protect local product • Financial surpluses available for investment • Growth rate of GDP

Crude Steel Production in Arab Countries Until 2020 Percentage of Crude Steel Production In Arab Countries to World Crude Steel Production from 2010 to 2020 e In million tons

The production of Arab countries in 2020 is expected to reach 38.7 million tons and exceeds 2% of world production for the first time. 28

Average Steel Use per Capita in Arab Countries (2005 – 2020e) in kg

The average steel use per capita in Arab countries will be 218 kg in 2020 is less than the average of industrial countries, estimated 350 kg per capita

Arab Steel Industry 2020 29

Challenges

1. Dump Arab markets with cheap products. 2. Competition between local and imported products 3. Low profit margin of different steel products. 4. Inflation and sharp decline in the value of the local currency such as (Egypt - Syria - Libya). 5. The sharp drop in foreign currency supply in some Arab countries (Egypt - Algeria). 6. Energy prices in some Arab countries are higher than global energy pric- es. 7. Low oil prices.

Opportunities

Steel Demand is expected to increase in 2020 in the Arab countries despite falling oil prices. Gulf Area • Infrastructure projects in the UAE from roads, bridges, tunnels, resi- dential areas and fast means to prepare for the important event related to organizing Expo 2020. • Infrastructure projects in Qatar to prepare for the World Cup 2022 . • Infrastructure projects in Saudi Arabia (New Jeddah). North Africa

• Industrial projects and infrastructure projects in Egypt, Algeria and Mo- rocco. • There are also many of industrial projects in Tunisia and Mauritania 30

Conclusion

1. Arab steel markets remain an open and attractive global mar- ket for international steel products. 2. Some Arab countries have not put in place laws and guaran- tees to protect domestic products. 3. some Arab countries, energy prices are still higher than glo- bal energy prices. 4. The huge investment in infrastructure projects being built by Arab countries is a strong indicator of the flourishing of the iron and steel industry in the Arab countries. 5. The construction sector in Arab countries is expected to grow from $ 215 billion in 2016 to $ 313 billion in 2020, reaching $ 467 billion in 2025. 6. The desire of Governments to diversify sources of income. 7. Attention to integrated plants achieves a local added value of 70%. Sponsors of Arab Steel Summit 2017 diamond

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