1

Global Outlook for Pipes from a Steel Maker’s Perspective

National Association of Steel Pipe Distributors

New YorkSeptember 15, 2006

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Sanjiv Goel General Manager Pipes & Tubes

Mittal Steel Holdings B.V.

Hofplein 20

3032 AC Rotterdam

The Netherlands

T: + 31 10 217 96 37

E: sanjiv.goel@mittalsteel.com

www.mittalsteel.com

Introduction

More than 20 yrs in the industry, in several countries

I am based in Holland

How you can reach me

3

Agenda

• Arcelor Mittal

• Mittal Steel Pipes & Tubes

• Global outlook for Pipes & Tubes

• Challenges ahead for steel makers

4

Arcelor Mittal

5

Mittal Steel and Arcelor together have created the global leader in steel

#1 steel producerOver 20 acquisitions

during the past 5 years

#2 steel producerNumerous acquisitions over the past 5 years

Creating a sustainable future for the steel industry through consolidation

6

The merger creates the undisputed leader…

0

25

50

75

100

125

Combined entity production vs. competitors(2004 pro forma - Mt)

Arc

elor

Mit

tal

Stee

l

106

31 31 3121 21

0

3

5

8

10

13

Combined entity EBIT vs. competitors(2004 pro forma - $B)

Arc

elor

Mit

tal

Stee

l

10.9

4.7

3.42.8 2.5

1.5

Combined Entity Production vs.

Competitors (2004 pro forma –

mt)

Combined Entity EBIT vs.

Competitors (2004 pro forma –

US$bn)

7

The merger creates a powerful combination…

• Leadership position in high-end segments in North America, with strong R&D capabilities

• Operations in high-growth economies with low-cost, profitable assets and local operating expertise in numerous emerging markets

• Access to raw materials and upstream integration • Entrepreneurial culture• Leadership position in high-end segments in Western Europe, with strong

R&D capabilities• Low-cost slab manufacturing in Brazil which can be expanded for export to

Europe and North America• Successful distribution business in Europe

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• Reduce earnings volatility• Better capacity

management• Improved returns on capital

• Slow growth in mature markets

• Growth driven by emerging markets

Forces driving consolidation in the steel industry

Increasing need for

Sustainability

Steel

Industry

Consolidati

on

Economies of Scale

Increasing

Concentration

Among Suppliers

Capture Growth

Opportunities in

New Markets

• Disproportionate negotiating power due to raw materials supplier consolidation

• Plant specialisation, manufacturing excellence, and greater ability to sustain R&D investments

Globalisation &

Consolidation of

Customers

• Service global customer base increasingly seeking global procurement

• Critical mass in R&D • New product development

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Consolidation process is moving to the next phase

• Industry remains fragmented and largely regional– Medium-scale producers

• Large transformational combinations will be faster, more capital efficient and carry less risk than a series of acquisitions– Good quality assets becoming increasingly scarce– Fierce competitive bidding – Continuous need for integration

• First mover advantage will be critical in global steel industry consolidation

• Industry leaders of the future will be global producers with annual capacity of 150-200m tonnes

2002-2004

Regional Consolidation

2004-2005

Increasing Cross-Border Consolidation

2006-

Formation of Global Steel Companies

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Mittal Steel Pipes & Tubes

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• Over 2,000,000 MT/yr of production capacity

• 50/50 seamless-welded (excl. Valin JV in China)

• On four continents

• And growing ….

Our profile…

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Our production capacity…

0

500

1000

1500

2000

2500

MT (000)

Welded Seamless

KrakowIasi

RomanVereenigi

ng

???Aktau (Greenfield Project)

OstravaKarvina

AnnabaGalati

Temirtau

Contrecoeur

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• Early 2005 Mittal’s tube plants were still a conglomerate of independent units.

• Late last year a comprehensive Pipe & Tube strategy became operational.

• Today Mittal Steel owns a highly profitable tube producing “division” – ranking # 6 in the world.

• Focus on sales & marketing: new offices in Houston and Dubai

September 2006 : Formation of a separate strategic division

Our recent history…

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Our sales offices and production units…

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Mittal Steel’s Pipe & Tube activities are approaching customers by application-segment:

• Energy

• Construction

• Engineering & Automotive

Thus combining seamless and welded products, services and projects as required by our customers

Our segmentation…

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Global Outlook for Pipes & Tubes

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Market environment: consumption of 85 million tons, dominated by China

Source: IISI; ISSB; JFK; McKinsey 2006

4,24,2

8,2

10,3

11,0

17,2

57,0

23.8

China Europe North America

Developed

Asia

CIS Emerging Asia

Latin America

3.2

Middle East

1.8

Africa

1.0

Australia

27.9

Total

84.9

28% 20% 13% 12% 10% 5% 5% 4% 2% 1% Percentage of

total

Absolute growth

2000-2005146% 12% 3% -6% 31% 30% 17% 49% 21% 69%

Absolute growth ’05-’10 (projected)

48% 12% 10% -4% 21% 25% 11% 27% 17% 9%

Seamless

Welded

Apparent consumption 2005, mln tons

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Market environment: expected growth of 4.1% per annum to 104 million tons

Source: Global Insight; McKinsey analysis

Total 2005 Projection 2010

8.2%

CAGR’05-’10

4.9

3.2

Europe

1.1

0.6

1.6

1.3

North America

1.0

Latin America 4.2

Emerging Asia 4.2

CIS 8.2

Developed Asia 10.3

Africa

3.4

11.0

Australia

1.8

Middle East 3.2

17.2

China 23.8

0.1

0.5

11.2

2.3%

2.0%

-0.7%

3.8%

4.5%

2.2%

4.9%

3.2%

1.7%

84.9 103.6Total

35.2

19.3

12.1

9.9

9.8

5.3

4.7

4.1

2.1

1.1

7.7%

2.3%

3.0%

2.4%

5.5%

5.6%

3.9%

4.8%

5.3%

2.6%

Real GDP CAGR

4.1%

Seamless Welded Total 2005

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Market environment: capacity concentrated in seamless, fragmented in welded

21%

21%58%

Global players*

Local

champions**

Other

4% 9%

• 89%

Global players*Local

champions**

Other

Seamless capacity, 2005100% = 39 mln tons

Welded capacity, 2005100% = 109 mln tons

– Large share of capacity controlled by few players

• Global players: Tenaris (10%), Vallourec (7%), and Sumitomo (5%)

• Local champions: TMK (9%), Interpipe (5%), Tianjin (4%), Bao Steel (3%)

– Very fragmented market• Over 1,000 companies

Characteristics differs by products• Small diameter pipes (<6.3’’)

– 67% of welded market– Highly fragmented

local/regional market driven by efficiency

• Medium pipes (6.3’’< D < 16’’) – 16% of welded market– Regional/global market

driven by efficiency• Large diameter pipes (>16’)

– 17% of welded market– Global market driven by

investments and know-how

Seamless capacity concentrated to small set of:

– Global players– Local champions in

CIS and China– In the next 5 years time

we expect new capacity of 2.5 mi tons

•Welded capacity is very fragmented

– Small and medium diameter dominated by local players

– Large diameters is a global market driven by investment and know-how

– In the next 5 years time we expect new capacity of nearly 1.5 mi tons

•Still further options for consolidation out

Source: JFK; China steel yearbook; Company publications; Analyst reports; company websites; McKinsey

* Tenaris, Vallourec Mannesmann, Sumitomo** TMK, OMK, Interpipe, Tianjin, Bao Steel

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Market environment: summary of global perspective

• The overall tube market shows attractive growth from 85 million tons in 2005 to104 million tons in 2010

– Some selected segments are of major interest due to high share of growth, financial attractivity, or stable (less cyclical) demand, e.g. OCTG, line transportation, automotive or specific parts of industrial.

– Regions to focus upon include:» China, » OCTG in North America, » line transportation in CIS and Middle East.

• In the tube market polarization is occurring around “solutions in specialties” and “standard products” with different success factors for customer value creation and supplier value capture, with the specialty market being more protected against competition.

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Challenges Ahead for Steel Makers

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World energy demand.. ever growing …

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Oil prices continue going up…

2007 -2010

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Landscape…

• High oil prices are there to stay: > US$ 70 per barrel and expected to rise further during the next 10 years

• Allowing for economic exploration for deep reservoir both land and marine under difficult climatologically conditions and for energy source of lower quality (for example high sulfur)

Lead to following challenges…

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Challenges…

• More higher steel grades required => X70 – X120;

Q125; specialty grades and beyond

• Gas discoveries lead to large diameter pipes => plates

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Challenges…

• Sour service requirements everywhere

• Drilling in difficult areas leads to the need for alloyed / high strength material

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What producers need to do to face the challenges...

• Embrace growth geographies – these are a major driver of the future

• Market better – to open up latent demand

• Manage better – for value, rather than volume

• Price better – microeconomics based; minimize volatility

• Continue consolidation trendWill lead to an attractive and

sustainable industry in the 21st century

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• The upstream steel industry is consolidating

• The pipe & tube industry will also consolidate- Has already partially taken place in seamless

- Mittal Steel will grow its participation in tubes:

• Direct producer of pipes & tubes

• Key supplier of inputs for pipe & tube-making

• Access to inputs and raw materials will be paramount

Which trends will influence the pipes industry?

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• Within 5 years the growth rate for natural gas will be twice as high as for crude oil (fueling demand for large diameter pipes…)

• Within 7 years premium connections will have some sort of universal standard rather than the multiple proprietary types (is API strong enough to drive this process?)

Some less obvious medium term trends …

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Summary…

• Further consolidation in Pipe Industry as already seen in Steel. Recent mergers Tenaris/Maverik & Ipsco/NS group.

• Pipe industry shall need dedicated steel sources.

• Steel and Pipe Industry to work together in R&D efforts to meet new challenges.

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THANK YOU!

Any questions?