São Paulo São Paulo –– July 24, 2008July 24, 2008
Usiminas Usiminas SSpeedingpeeding up its Investment Programup its Investment Program
2
AgendaAgenda
•Steel Outlook
•Usiminas speeding up its Investment Program
•Financial Highlights
•Market trends – 2008
4
2.2
2.8
3.6
4.94.4
5.0 4.9
3.7
0.0
1.0
2.0
3.0
4.0
5.0
6.0
'01 '02 '03 '04 '05 '06 '07 '08(e)
Inflation (%)Global GDP (Growth %)
EconomyEconomy
4.2
3.5 3.7 3.6 3.7 3.63.9
4.7
0.0
1.0
2.0
3.0
4.0
5.0
6.0
'01 '02 '03 '04 '05 '06 '07 '08(e)
Global Steel IndustryGlobal Steel Industry
• The world is undergoing a new phase with sustainable growth and inflation under control
Source: IMF - July 2008
Average 2.9
Average 4.8
Average 3.7
5
0%
2%
4%
6%
8%
10%
12%
'03 '04 '05 '06 '07 '08(e)
'09(e)
'10(e)
'11(e)
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Global Production Chinese ProductionGlobal Variation
Global Steel IndustryGlobal Steel Industry
• With positive effects for the steel industry
15% 19%31%
48%58%
85% 81%69%
52%42%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
'70 '80 '90 '00 '10(e)
Emerging Markets OECD
Source: CRU International; World Steel Dynamics
Obs: 2005: ~ 50%/ 50%
Global Production x ChinaMillion tons
Transfer of ProductionDeveloped x Emerging (Countries)
Consolidation% of production of the 15 largest
Steel IndustrySteel Industry
Source: IISI
Source : IISI
26%29%
34%
0%
5%
10%
15%
20%
25%
30%
35%
40%
94 '00 '07
6
Global Steel IndustryGlobal Steel Industry
• A recent phenomenon is once again changing the outlook
Coal Iron Ore Scrap (Japan)
Raw Materials Raw Materials –– Price ChangesPrice Changes
US$/tUS$/t US$/tUS$/t US$/tUS$/t
Souce : Tex ReportSouce : Tex ReportSouce: Metal Bulletin
3238
6577
85
141
0
20
40
60
80
100
120
140
160
'03 '04 '05 '06 '07 '08
217269
210
287
395
734
0
100
200
300
400
500
600
700
800
'03 '04 '05 '06 '07 Jul '08
47 57
125 11598
300
0
50
100
150
200
250
300
350
'03 '04 '05 '06 '07 '08
7
Brazilian Steel IndustryBrazilian Steel Industry
• The country outlook is similar
Source: IBGE , Bacen
Inflation (%) - IPCABrazilian GDP (Growth %)
EconomyEconomy
1.3
2.7
1.1
5.7
3.2
3.8
5.4
4.8
0.0
1.0
2.0
3.0
4.0
5.0
6.0
'01 '02 '03 '04 '05 '06 '07 '08(e)
6.8
8.5
14.7
6.6 6.9
4.23.6
4.8
0.0
5.0
10.0
15.0
'01 '02 '03 '04 '05 '06 '07 '08(e)
Average 7.3
Average 4.5
Average 1.7
8
Usiminas26%
Gerdau22%
CSN16%
Others6%
ArcelorMittal30%
Brazilian Steel IndustryBrazilian Steel Industry
• The country outlook is similar
(33.8 million tons. = Brazilian crude steel production)
Source: IBS - 2008 e Metal Bulletin - 2008
ConsolidationLargest steel producers - 2007
Flat Steel Demand (million tons)
Steel IndustrySteel Industry
9.29.9
11.7
12.9
0
2
4
6
8
10
12
14
2005 2006 2007 2008(e)
+17.8%+10.7%
9
350 375 336 342402 430
342 375 342287
358256 259
331
443
722
606562
689
1,174
0
250
500
750
1,000
1,250
´90 ´91 ´92 ´93 ´94 ´95 ´96 ´97 ´98 ´99 ´00 ´01 ´02 ´03 ´04 ´05 ´06 ´07 ´08 Jun08
Steel IndustrySteel Industry
• Steel prices follow raw materials prices
Prices in US$/ton in the US (spot market) - HRC
Source: CRU Monitor - Steel
10
UsiminasUsiminas within this contextwithin this context
• In order to face this scenario of transformation, Usiminas sought its integration
Source: Usiminas
MiningSerra Azul MinesLimestone Mine
EnergyIpatinga Power PlantsCubatão Power Plants
SteelmakingInt. Câmara PlantJ. Bonifácio PlantSantana do ParaísoTernium
Capital GoodsUMSA
LogisticsMRSUsifastPraia Mole PortCubatão PortIngá Terminal
Distribuition/ ServicesFasalDuferRio NegroUsiparts
11
UsiminasUsiminas within this contextwithin this context
• Today, its HRC production cost is among the 7% most competitive in the world
Hot Rolled Coil (US$/ton.)
Productions costs ( w/ COGS) Productions costs ( w/ COGS) -- 160 producers in the world160 producers in the world
Source: WSD – World Steel Dynamics - May 2008
72
100
147
-10
10
30
50
70
90
110
130
150
170
Usiminas Average (basis = 100)
Maximum
Average global production cost
is 38% above Usiminas’
12
0
200
400
600
800
2000 2001 2002 2003 2004 2005 2010E 2015E
USA, Japan & EU-15
China
Rest of world
Steel DemandSteel Demand
• The outlook is for continued growth
Source: IBS – April 2008Source: WSD
Global Apparent Steel Consumption Brazilian Demand (Flat Steel)
Consumption and DemandConsumption and Demand
Million Tons
8.4 8.6 8.6 8.910.1
9.2 9.9
11.713.0
15.216.1
17.118.2
19.220.3
21.5
0
5
10
15
20
25
´00 ´01 ´02 ´03 ´04 ´05 ´06 ´07 ´08 ´09 ´10 ´11 ´12 ´13 ´14 ´15
Million Tons
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ValueValue creationcreation for for shareholdersshareholders, , customerscustomers andand communitycommunity
Usiminas Usiminas AcceleratingAccelerating
• Goals
Consolidate its leadership in the domesticflat steel market
Create solid basis for future internationalsteps
15
Increase steelmaking and rolling capacity
Increase iron ore extraction and processingcapacity
Technology updating, cost savings andenvironmental control
Usiminas Usiminas AcceleratingAccelerating
• The investment program has strategic focus:
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US$ 14.1 billion
Usiminas Usiminas AcceleratingAccelerating
• Investments will target:
New slab plant (Santana do Paraíso)
Intendente Câmara Plant (Ipatinga)
José Bonifácio Plant (Cubatão)
Mining assets
Logistics assets
17
US$ 14.1 billion
Usiminas Usiminas AcceleratingAccelerating
• Investments will target:
New slab plant (Santana do Paraíso)
Intendente Câmara Plant (Ipatinga)
José Bonifácio Plant (Cubatão)
Mining assets
Logistics assets
18
Usiminas Usiminas AcceleratingAcceleratingNew New SlabSlab PlantPlant (Santana do Para(Santana do Paraííso)so)
Usiminas airportarea = 4.2 km2
(flat)
Industrial areaoccupied by
Usiminas today= 4.0 km2
Outstanding location Synergy with existing structure
Flat land / Abundant water Labor with a vocation
19
Usiminas Usiminas AcceleratingAcceleratingNew New SlabSlab PlantPlant (Santana do Para(Santana do Paraííso)so)
Production capacity5 million tons/yr
Start of works1st Half 2009
Start up2.5 million t/yr in 20112.5 million t/yr in 2012
Coke plant2.0 million t/yr
Power plant250 MW
TOTAL TOTAL InvestmentsInvestments: US$ 5.7 : US$ 5.7 billionbillion *** Does not include investment in thermoelectric powerplant of approximately US$ 400 million
20
Usiminas Usiminas AcceleratingAcceleratingNew New SlabSlab PlantPlant (Santana do Para(Santana do Paraííso)so)
• Location in Santana do Paraíso proves to be more adequate whencompared to the previous plan
Potential for higher Potential for higher returnreturn
Lower Lower implementation risksimplementation risks
Opening up of future Opening up of future optionsoptions
21
Greater steel expansion without significant capexincrease
Maintenance of existing synergies
Cost minimization for elimination of physicalinterferences with current operations
Usiminas Usiminas AcceleratingAcceleratingNew New SlabSlab PlantPlant (Santana do Para(Santana do Paraííso)so)
• Location in Santana do Paraíso proves to be more adequate whencompared to the previous plan
Potential for higher Potential for higher returnreturn
22
Expectation of lower environmental restriction
Lower risk of delay due to reduced interferenceswith current operations
Usiminas Usiminas AcceleratingAcceleratingNew New SlabSlab PlantPlant (Santana do Para(Santana do Paraííso)so)
• Location in Santana do Paraíso proves to be more adequate whencompared to the previous plan
Lower Lower implementation risksimplementation risks
23
Usiminas Usiminas AcceleratingAcceleratingNew New SlabSlab PlantPlant (Santana do Para(Santana do Paraííso)so)
• Location in Santana do Paraíso proves to be more adequate whencompared to the previous plan
New site supports additional slabs and rollingmills expansions, according to future demand
Opening of future Opening of future optionsoptions
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Usiminas Usiminas AcceleratingAcceleratingNew New SlabSlab PlantPlant (Santana do Para(Santana do Paraííso)so)
• The slabs will be absorbed by Usiminas rolling mills andremainder will be exported
“Premium” slabs to serve selected, highvalue-added markets
40% 40%
60% 60% ExportsExports
25
US$ 14.1 billion
Usiminas Usiminas AcceleratingAccelerating
• Investments will target:
New slab plant (Santana do Paraíso)
Intendente Câmara Plant (Ipatinga)
José Bonifácio Plant (Cubatão)
Mining assets
Logistics assets
26
Usiminas Usiminas AcceleratingAcceleratingIntendenteIntendente CâmaraCâmara Plant (Plant (IpatingaIpatinga))
LINE VOLUMEthsd tons
START UPFORECAST
PROJECT AMOUNT
UNIGAL II(Galvanized) 550 1st Half 2011 US$ 460 million
Heavy Plates 500 2nd Half 2010 US$ 500 million
Hot Rolled Coils 150 1st Half 2011 US$ 130 million
Other US$ 1.0 billion
Total Investments
Technology updating, cost savings and environmental control, with highlight for Coke
Plant 3 (+750kt/yr) and thermolectric powerplant (60 MW) in 2008
US$ 2.1 billion
Investments
Investments to serve “high value-added markets”
27
Usiminas AcelerandoUsiminas AcelerandoGalvanizedGalvanized Steel Steel -- Unigal IIUnigal II
• Greater capacity in Brazil to supply sophisticated steel with advanced technology
Quality & Excellence
28
Usiminas Usiminas AcceleratingAcceleratingIntendenteIntendente CâmaraCâmara Plant (Plant (IpatingaIpatinga))
• Usiminas will be qualified to supply heavy plates with even more stringent specifications
Sole Latin American company to detain “accelerated cooling” technology, enabling Usiminas to meet new market demands for sophisticated
products.
North AmericaNorth AmericaOregonOregon SteelSteel
CISCISSeverstalSeverstal
AsiaAsiaNipponNippon SteelSteel
JFEJFEPoscoPosco
BaosteelBaosteelChina China SteelSteel
EuropeEuropeAcelorMittalAcelorMittal
DillingerDillingerRaultaruukiRaultaruuki
MannesmannMannesmann
RivaRivaSSABSSAB
ThyssenThyssenVAIVAI
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US$ 14.1 billion
Usiminas Usiminas AcceleratingAccelerating
• Investments will target:
New slab plant (Santana do Paraíso)
Intendente Câmara Plant (Ipatinga)
José Bonifácio Plant (Cubatão)
Mining assets
Logistics assets
30
LINE VOLUMEthsd tons
START UPFORECAST
PROJECT VALUE
Hot Strip Mill 2,300 / 4,800 1st Half 2011 US$ 1.0 billion
BF1 Revamping 3.5 thsd/day => 4.5 thsd/day Concluded US$ 170 million
Continuous Casting Machine +350 / ano Concluded US$ 140 million
Other US$ 1.1 billion
Total Investments
Technology updating, cost savings and environmental control
US$ 2.4 billion
Usiminas Usiminas AcceleratingAcceleratingJosJoséé BonifBonifááciocio Plant (Plant (CubatãoCubatão))
Investments
31
Usiminas 2013Usiminas 2013TechnicalTechnical configurationconfiguration ofof thethe plantsplants afterafter thethe investmentinvestment programprogram
TheThe secondsecond expansionexpansion phasephase in in slabsslabs (3 (3 millionmillion t/t/yryr) to ) to bebe executedexecuted, , withwith Cubatão as 1Cubatão as 1stst optionoption, , willwill dependdepend onon marketmarket demanddemand
Current After Current After
Slabs 5.00 5.00 4.50 4.80
Hvy Plate 1.00 1.50 1.00 1.00
Hot Strip 3.60 3.80 2.10 4.40 / 6.10
Cold Strip 2.50 2.50 1.20 1.20
EG 0.36 0.36 - -
HDG 0.48 1.03 - -
Intendente Câmara Plant
million tons
José Bonifácio Plant Santana do Paraíso
New Plant
-
-
5.00
-
-
-
Source: Usiminas
32
US$ 14.1 billion
Usiminas Usiminas AcceleratingAccelerating
• Investments will target:
New slab plant (Santana do Paraíso)
Intendente Câmara Plant (Ipatinga)
José Bonifácio Plant (Cubatão)
Mining assets
Logistics assets
33
Usiminas Usiminas AcceleratingAcceleratingMiningMining AssetsAssets
• With the goal of eliminating risks / dependency, Usiminas acquired iron ore assets in February 2008
J.MendesJ.Mendes GlobalGlobal SomisaSomisa PauPau de de VinhoVinho
Current production capacity5 million tons/yr
Future production capacity29 million tons/yr (2013)*
Reserves1.1 to 1.8 billion tons
DownpaymentDownpayment ofof US$ 925 US$ 925 millionmillion. T. Totalotal disbursement limited to disbursement limited to US$ 1.9 billionUS$ 1.9 billion, , dependingdepending onon reserves and reserves and qualityquality underunder drillingdrillingprocessprocess. . MaximumMaximum reserves reserves consideredconsidered : 1.4 : 1.4 billionbillion tons.tons.
34
Usiminas AcelerandoUsiminas AcelerandoMiningMining AssetsAssets
Low level of P (phosphorus – 0.05%)
Low level of Al203 (alumina – 1.0%)
Sinter feed generation of 4.5% to 5.0% of SiO2 (silica)
Pellet feed generation for pellets for BF and DRI
Favorable logistics (close to MRS & FCA railroads) and future Ingá Maritime Terminal
• Iron ore mines highlights:
35
0
10
20
30
2008 2009 2010 2011 2012 2013 2014
Pellet Feed
Sinter Feed
Lump
Usiminas Usiminas AcceleratingAcceleratingMiningMining AssetsAssets
• Production - million tons
Source: Usiminas
5.2 5.88.8 9.0
10.5
27.729.2
13.0
2.2
14.0
36
Usiminas Usiminas AcceleratingAcceleratingMiningMining AssetsAssets
• Although Ipatinga and Santana do Paraíso do not have logisticsaccess to be supplied by its mines on “Serra Azul”, Usiminas willhave the benefit of full “hedge” against iron ore price fluctuations
Mining29.2 MM t/yr
J. Bonifácio Plant10.3 MM t/yr
Dom. Mkt. Sales2.2 MM t/yr
Exports16.7 MM t/yr
Supply
IntendIntend. Câmara . Câmara PlantPlant8.0 MM t/8.0 MM t/yryr
Santana do ParaSantana do Paraíísoso8.0 MM t/8.0 MM t/yryr
JosJoséé BonfBonfááciocio PlantPlant2.0 MM t/2.0 MM t/yryr
HedgeHedge
37
Capacity7 million tons
InvestmentUS$ 750 million
Start up of operations2013
Usiminas Usiminas AcceleratingAcceleratingMiningMining AssetsAssets
• Aiming to add value to iron ore, Usiminas will build a PELLET PLANT
TOTAL TOTAL investmentsinvestments in in miningmining: : US$ 3.5 US$ 3.5 billionbillion
38
US$ 14.1 billion
Usiminas Usiminas AcceleratingAccelerating
• Investments will target:
New slab plant (Santana do Paraíso)
Intendente Câmara Plant (Ipatinga)
José Bonifácio Plant (Cubatão)
Mining assets
Logistics assets
39
Start of operations2012
Usiminas Usiminas AcceleratingAcceleratingLogisticsLogistics AssetsAssets
• Usiminas acquired land in Sepetiba Bay where it will build a maritime terminal
• Area will be a benchmark from the environmental point of view
• Amount estimated for environmental recovery - up to R$ 40 million
PriceR$ 72 million
Land850 thousand m²
Shipping capacity25 million tons of Iron Ore, in addition to other products
40
Usiminas Usiminas AcceleratingAcceleratingLogisticsLogistics AssetsAssets
• With the new terminal, the iron ore export corridor will beimproved for Usiminas mines at competitive costs
BrazilBrazil
(Minas Gerais)
(São Paulo) (Rio de Janeiro)
(Espírito Santo)
Praia MoleTerminal
IngáTerminal
CubatãoTerminal
São Paulo
Belo Horizonte
MRSJ. BonifJ. Bonifáácio cio
PlantPlant
Int. Câmara Int. Câmara PlantPlant
IronIron Ore Ore MinesMines
43
530734 657 831 999
1,9222,269
2,010
2,581
721
31%35%
32%35% 35%
46%42%
35% 36% 35%
0
1,000
2,000
3,000
4,000
5,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 1Q08
Ebitda Ebitda Margin
UsiminasUsiminasFinancial Financial HighlightsHighlights
• Over the last few years, Usiminas has prepared itself for this new phase
US$ Million
March, 2008
44
UsiminasUsiminasFinancial Financial HighlightsHighlights
• Over the last few years, Usiminas has prepared itself for this new phase
US$ Million
March, 2008
2,491 2,334
1,317860
355 387(537)
3.12.3
0.7 0.4 0.2 -0.2 0.1
0
1,000
2,000
3,000
4,000
5,000
2002 2003 2004 2005 2006 2007 1Q08
Net Debt Net Debt / Ebitda
45
UsiminasUsiminasFinancial Financial HighlightsHighlights
• The Investment Program foresees the following funding:
Capital Markets
Commerc'l Banks
ECAs
Own Funds~ 50%
Type AmountUS$ million
AmountR$ million
TermYears
BNDES - 400 6
BNDES - 500 6
Eurobond 400 - 10
Debentures - 500 4 / 5
Pre Payment 600 - 5 / 7
Type AmountUS$ million
AmountR$ million
TermYears
BNDES - 400 6
BNDES - 500 6
Eurobond 400 - 10
Debentures - 500 4 / 5
Pre Payment 600 - 5 / 7
EstimatedEstimated ffundingunding in in thethe amountamount ofof~ US$ 6.0 ~ US$ 6.0 billionbillion upup to 2012to 2012
Main Financial Transactions
46
STEELMAKING MINING TOTAL
2008 1,480 960 2,440
2009 2,550 1,060 3,610
2010 4,410 480 4,890
2011 1,830 770 2,600
2012 360 200 560
TOTAL 10,630 3,470 14,100
UsiminasUsiminasFinancial Financial HighlightsHighlights
• Estimated Capex for the Investment Program fits into the capital structure considered adequate for the company
US$ million
48
DomesticDomestic MarketMarket 20082008DemandDemand growthgrowth
9,2299,902
11,66912,922
2005 2006 2007 2008
(thousand tons)
+17.8%+17.8%+10.7%+10.7%
Source: IBS / Usiminas
49
DomesticDomestic MarketMarket 20082008DemandDemand growthgrowth byby segmentsegment
1 – OEMs = Original Equipment Manufacturer2 - Industry: Shipbuilding/Tractors/agriculture/Highway/Industrial/Bottles/Containers/Large-diameter Tubes/Other
Appliances: Eletro-electronics/Domestic Appliances / Safes and Furniture3 - Distribuition : Rerolling/Small-diameter tubes/Distribution
Civil Construction: Civil construction/ Shapes
CONSUMER 08 / 07SEGMENTS ∆ %
1 - AUTOMOTIVE 2,677 3,198 3,636 13.7
OEMs 1,150 1,384 1,578 14.0
Autoparts 1,527 1,814 2,058 13.5
2 - INDUSTRIAL 2,337 2,706 2,918 7.8
Industry 1,541 1,842 2,049 11.2
Appliances 796 864 869 0.6
3 - SERVICE CENTERS 4,888 5,765 6,367 10.4
Distribuition 3,934 4,586 5,035 9.8
Civil Construction 954 1,179 1,332 13.0
General Total 9,902 11,669 12,922 10.7
20072006 2008
51
International Market 2008International Market 2008OverviewOverview
- Low inventory levels- Imports decreasing - 10%- Exports increasing - 17%- Stable prices
USA
- Significant demand growth- Exports decreasing- Higher imports- Prices increasing slightly
Latin America
- Demand increasing slightly - Eastern Europe growing 15%- From net exporter in 2005 to net importer- Main exporters reducing exports- Prices increasing slightly
Europe
- Strong demand growth pushed by energy and civil construction sectors- High level of imports
Middle East
- Growth in demand- Prices increasing slighttly- Regional transactions- Exports barriers threats
- Growth in demand - 12%- Production increase - 10%- Reduction of 23% in net exports (accum. 2008)- Stable prices- Threat of higher export taxes
Ásia
China
52
www.usiminas.com.br/ri
ADRLevel I
Declarations contained in this presentation in relation to the busines outlook of theComapany, operational and financial projections and references to the growth potential ofthe Comapany constitute mere forecasts and were based on the expectations of theManagement in relation to future performance. These expectations are highly dependent on market behavior, of the economic situation in Brazil, on industry and international markets, and are, therefore, subject to changes.
Investor Relations:
Bruno Seno Fusaro (Head of IR) Gilson Rodrigues Bentes Matheus Perdigão Rosa [email protected] [email protected] [email protected].: +55-31-3499-8772 Tel.: +55-31-3499-8617 Tel.: +55-31-3499-8056 Fax: +55-31-3499-9357 +55-11-5070-8980
Luciana Valadares dos Santos Diogo Dias Gonç[email protected] [email protected].: +55-31-3499-8619 Tel.: +55-31-3499-8710