A Company and Industry Analysis- Latin America - Metal

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Industry Report - Metal Works - July 2009

A Company and Industry Analysis July 2009

CONTENTS

Current Environment

Sector Overview

Sector Performance

Leading Companies

Mergers, Acquisitions and

Alliances

Industry Profile

Industry Size and Value

Industry Focus- Aluminum

- Steel

- Copper

Sector Investment

Market Trends and Outlook

Economic Slump Dents

Investment

Steelmakers Cut Costs to Stay

Afloat

A Grim Outlook for the

Regions Steel Market

Market Outlook

Country Profiles

Brazil

Chile

Mexico

Peru

Venezuela

Currency Conversion Table

The Scope of this ReportKey References

Comparative Data

Reports Coverage

Current Environment Key Points

The economic slowdown hit the Latin American metal works industry hard over the last six months,

reaching its most critical point during the first quarter of 2009.

In the first quarter of 2009, Latin American metal works companies saw their earnings crumble, as

a result of a weak demand for steel products.

The majority of metals companies faced problems refinancing as the first half of 2009 progressed,rocked by unprecedented economic and market upheaval.

Merger and acquisition activity in most industries, particularly the metals industry, dropped sharply

in the first half of 2009, as world demand fell and prices plummeted.

Industry Profile Key Points

Prior to the global market meltdown, the regions metal industry enjoyed a sustained period of

strong demand growth for almost a decade.

The regions crude steel output dropped by 35.8% year-on-year to 18.4 million tons in the first five

months of 2009.

The worlds largest copper producer and exporter, Chile, saw year-on-year copper output tumble

by 9.8% in February to 383,057 tons, the eight successive monthly drop. Despite the deepening economic crisis, the metals industry is attracting more investment interest as

a number of key players see the recession as an opportunity.

Market Trends and Outlook Key Points

A reduction in steel demand, local and foreign credit restrictions and declining confidence levels

among consumers and investors continues to slow Latin American steel industrial activity.

Tightness in the regions steel industry and weak demand related to the downturn is forcing

steelmakers to cut costs.

Financial and environmental challenges is forcing domestic and international steelmakers to cut

their workforces, reduce production and even close excessive capacity.

Demand for steel and steel products is continuing to fall amid the global manufacturing slump,

with steel production in the first quarter of 2009 down 40% year-on-year to 10.1 million tons.

The outlook for the regions metal market for this year points to slowing or subdued demand and a

possible slow recovery later in the year.

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Latin America

Metal Works Sectors

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industry sector report is updated every six

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3

Current Environment

After the US financial crisis picked up pace in the second

half of 2008, most industries around the globe experienced

a downturn. The slowdown affected the Latin American

metal works industry, which reached its most critical

point in the first quarter of 2009. The bearish industry

performance was the consequence of the abrupt drop in

economic activity, both globally and locally.

In some cases, metal prices, which had seen an

unprecedented rapid rise in 2007 and the first half of 2008,went into freefall. By the end of 2008, hot band prices

around the world had dropped from over US$1,000 per

ton to just over US$500 per ton, according to the London

Metal Exchange. Prices for copper and aluminum faced

the most dramatic decline, shedding around 60% or more

of their July and August 2008 highs. At these lower price

levels, global aluminum production and a large number of

metal companies in Latin America were operating at a loss.

By the end of the first half of 2009, steel prices had not

experienced any real growth.

In the first quarter of the year, global steel production

contracted sharply, adjusting to the new level of demand.Crude steel production sank 50.4% to 2.5 million tons in

the first quarter, compared with 5.1 million tons a year

earlier. Production of finished steel tumbled 44.1% to 2.45

million tons, from 4.38 million tons in the first quarter of

2008.

In the first half of 2009, the decline in the Latin American

metal industry went from the steep to the deep. A sharp rise

in commodity prices in the first half of last year gave way to

a deep slump. As the full scale of the global depression and

the credit crisis intensified, the momentum for deal activity

slowed, affecting metal-consuming industries, such as the

automotive and construction sectors.

The downturn and the tightening of credit affected merger

and acquisition (M&A) activity dramatically. As world

demand fell and prices plummeted, Latin American metal

industry deal making fell away sharply in the first half of

2009. With few M&A deals in the pipeline, most Latin

American companies looked elsewhere to find opportunities

for growth. Latin American metal works companies saw

their earnings crumble in the first quarter, a direct reflection

of the weak demand for steel products, which is not likely

to begin rising strongly before the end of this year.

Sector Performance

The global metals industry was rocked by unprecedented

economic and market upheaval in the fourth quarter

of 2008 and, as the industry moved through the first

quarter of 2009, conditions remained just as challenging.

The majority of Latin American metal companies faced

problems in refinancing in the second half of 2008 and first

half of 2009.

However, over the six months from January 1 to June 22,

Brazilian steelmaker Companhia Siderurgica Nacional

(BVSPA: CSNA3) outperformed its competitors, with its

share price swelling by 49.2% in the first half of 2009.

Another leading Brazilian steelmaker Gerdau SA (BVSPA:

GGBR4) saw its share price increase by 33.1%, while the

share price of Grupo Simec SAB de CV (AMEX: SIM),

Mexicos largest steelmaker, rose 22.6% in the same

period. Gains in commodity materials prices in May

pushed Brazilian and Mexican markets higher, as continuedweakness in the US dollar made commodities and local

currencies more attractive.

At the beginning of June, stocks of most Latin American

metal companies rebounded, as oil prices hit year highs.

Sector Overview

Table 1: Stock Performances of Leading Latin American Metal WorksCompanies

Company

% Increase inShare Prices(January 1

June 22, 2009)

Companhia Siderurgica Nacional 49.2%

Gerdau SA 33.1%

Grupo Simec SAB de CV 22.6%

Empresa Siderurgica Del PeruSAA

19%

Madeco SA 7.4%

Source: Mergent analysis, 2009



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Current Environment

The regions stocks surged, with oil, copper, soy and othercommodity prices rebounding, as investors bet that a

global economic recovery would boost demand for Latin

Americas major exports, such as metals. The share price

of Peruvian steelmaker Empresa Siderurgica Del Peru

SAA (BVL: SIDERC1) and Chiles Madeco SA (BSAN:

MADECO) rose 19% and 7.4%, respectively, over the

six-month period, as investors saw steel as an attractive

alternative to other investments.

Leading Companies

Gerdau SA (BVSPA: GOAU4)

Gerdau SA, headquartered in Porto Alegre, Brazil, produces

and sells steel and related long rolled products, drawn

products and long specialty products. The companys net

income dropped to R$35 million (US$17.36 million) in

the first quarter of 2009, from R$1.09 billion (US$540.77

million) in the equivalent quarter of 2008, due to lower

operating income, which plummeted more than 80% to

R$189.55 million (US$94.04 million), from R$1.50 billion

(US$744.18 million) in the first quarter of 2008. The drop

in international steel prices and lower sales volume caused

revenue to slip 22% to R$6.97 billion (US$3.46 billion),

compared with R$8.94 billion (US$4.43 billion) in the

same period of the previous year. The company plans to

invest US$3.6 billion in fixed assets over the next fiveyears, including US$550 in 2009.

Madeco SA (BSAN: MADECO)

Madeco SA, headquartered in Santiago, Chile, manufactures

finished and semi-finished non-ferrous products based on

copper, aluminum, and related alloys. In the first quarter

of 2009, the companys net income shrank 62.2% to

US$6.36 million, compared with US$16.83 million in

the corresponding quarter of 2008, due to the sale of its

cable operations at the end of September 2008. Revenue

decreased by 28.9% to US$84.20 million, compared with

US$118.36 million in the same period of 2008. The dropwas due to lower sales volumes and reduced prices of the

companys raw materials, mainly copper and aluminum.

Its quarterly operating income grew 22.6% to US$5.28

million, compared with US$4.30 million in the first

quarter of 2008. The increase was due to higher gains

from it brass mills and packaging units, offset by lower

gains from the profiles unit. Operating income for the

brass mills and packaging units increased by US$2.04

million and US$1.77 million, respectively, from the firstquarter of 2008. However, operating income from the

profiles unit saw a loss of US$1 million, compared with a

gain of US$1.51 million in the same period of 2008, due

to reduced gross margins and higher selling, general and

administrative expenses.

Grupo Simec SAB de CV

Grupo Simec SAB de CV, based in Guadalajara, Mexico,

produces, processes, and distributes special bar quality

steel products. The companys net profit dropped 26% to

MEX$440 million (US$32.49 million) in the first quarter

of 2009, from MEX$592 million (US$43.71 million) in

the corresponding quarter of 2008. Net sales dipped 30%

to MEX$5.08 million (US$375,107.20), compared with

MEX$7.29 million (US$538,293.60) in the first quarter of

the previous year, driven by lower shipments. Shipments

of finished steel products sank 32% to 506,000 tons,

compared with 745,000 tons in the same period of 2008.

Its operating profit fell 56% to MEX$385 million (US$28.43

million), compared with MEX$878 million (US$64.83

million) in the first quarter of 2008, due to a 32% reduction

in shipments. Total sales outside Mexico dropped 59% to

MEX$2.22 billion (US$163.92 million), compared with

MEX$5.42 billion (US$400.21 million) in the equivalent

quarter of 2008. Conversely, total Mexican sales surged53% from MEX$1.87 billion (US$138.08 million) in the

first quarter of 2008 to MEX$2.86 billion (US$211.18

million) in the corresponding quarter of 2009.

Mergers, Acquisitions and Alliances

The pace of consolidation in the global metals industry

slowed significantly in most regions. The number of M&As

in the Latin American metal industry was significantly

less, and deals were smaller, in the first half of 2009. Due

of the economic crisis, major metal players postponed

acquisitions. However, they also closely monitored

industry developments, waiting to capitalize on majordrops in the market values of companies. Some may even

take the opportunity to position their business for growth

by acquiring weaker competitors at lower valuations.

In 2008, the level of M&A activity in most industries,

particularly the Latin American metal industry, dropped

sharply, as world demand fell and prices plummeted.

The collapse of Lehman Brothers in the fall of 2008 was

the catalyst for the global credit crisis, leading to a deep



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Current Environment

recession, and resulting in a steep fall in commodity pricesand stalling deals. Even before this, metal deal sizes had

retreated from the high values seen in 2006 and 2007. The

severity of the recession led most Latin American metal

companies to switch their focus away from M&A deals and

make cash conservation their main priority.

In recent months, small, privately owned steel distributors

in Brazil merged to survive the economic turmoil. The

Sao Paulo steel distributor Grupo Goncalves Dias (GGD)

is the product of a three-way merger in December last

year between specialty steel vendors RCC, AcoMetal and

Domave. Merging was the only way the companies could

compete against large producers such as ArcelorMittal

(NYSE: MT) and Usiminas (BVSPA: USIM5), which do

their own distribution. GGD is keen on making acquisitions

in Brazil to expand its market further.

In April, Mexican steelmaker Grupo Villacero acquired

29.2% of the outstanding shares of local steel services and

distribution firm Grupo Collado (AMEX: COLLADO),

for an undisclosed amount. The deal strengthened Grupo

Villaceros market share in Mexico, and is expected to help

boost the companys steel production for the local market

and for distribution to the southern US.



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Current Environment

of state-run giant Codelco, which produces more than aquarter of Chiles copper, dent output. The output of copper

in concentrates dropped in February by 23.9% from a year

earlier to 153,900 tons.

Industry Focus

Aluminum

Global aluminum production climbed 5.1% to a four-

month high in May, as the worlds largest producer, China,

produced more metal, according to the International

Aluminum Institute (IAI). World aluminum output was 2.96

million tons in May, the highest since January, compared

with 2.81 million tons in April. However, in Latin America,

aluminum production slipped 4% to 1.05 million tons from

January to May this year, compared with 1.10 million tons

in the same period of 2008, as global demand faltered.

Steel

The progress of the US financial crisis into a global

economic crisis in late 2008 brought a global decline of

steel demand in late 2008. The metal industry responded

quickly by cutting production to ensure that supply matchesdemand. In 2008, the global steel industry produced 1.33

billion tons of steel, compared with 1.35 billion tons in

2007, according to the World Steel Association. Steel is

essential to economic growth as it provides energy delivery,

infrastructure, transport, housing and construction, and key

consumer goods.

ILAFA data shows Latin Americas steel production totaled

67.2 million tons in 2008, remaining flat since 2007. The

regions steel exports dropped by more than 15% to about

8.6 million tons in 2008, from 10.3 million tons in 2007,

due to higher demand in the region.

China is the worlds leading steel producer and an important

influence on the global steel market. The World Steel

Association estimates China produced 500.5 million tons

of steel in 2008, a slight increase of 1.1%, compared with

494.9 million tons in 2007. The countrys share of world

steel production continued to grow in 2008, accounting for

38% of world total crude steel. Concurrently, Brazil, the

largest steel producer in Latin America, saw production

slip by 0.3% to 33.7 million tons in 2008, from 33.8 million

tons the previous year.

Table 4: Latin American Steel Output

Country 2007 (million tons) 2008 (million tons) % Change

Venezuela 5.0 4.2 (16%)

Brazil 33.8 34.4 1.8%

Mexico 17.6 17.8 1.1%

Argentina 5.4 5.7 5.6%

Chile 1.7 1.5 (11.8)

Colombia 1.2 1.1 (8.3)

Peru 0.9 1.1 22.2%

Source: Latin American Iron and Steel Institute

Table 5: Top Steel Producers in Latin America

Country World Ranking 2008 (million tons) 2007 (million tons)

Brazil 9 33.7 33.8

Mexico 15 17.2 17.6

Argentina 28 5.5 5.4

Venezuela 36 4.2 5.0

World 1,326.5 1,351.3

Source: World Steel Association



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Industry Profile

Copper

The World Bureau of Metal Statistics estimates there

was 133,000 tons of excess copper in the global market

from January to April 2009, compared with a shortage of

161,000 tons a year earlier. Like those in other parts of the

world, the Latin American copper industry experienced the

effects of the economic downturn, and this was reflected

in the regions demand for copper, especially in Chile, the

worlds largest producer and exporter of copper.

Chile saw its copper exports fall by 4.7% to 5.4 million

tons in 2008, compared with 5.67 million tons in the

previous year, due to a fall in production in the second half

of the year. The countrys copper production also slipped,

by 4.1% to 5.33 million tons in 2008, from a year earlier, as

demand lagged due to the slowdown in the global economy,

according to the state copper commission Cochilco. The

figures show the copper industry was struggling to stay

afloat amid the economic downturn, since Chile generates

as much as 35% of the worlds copper.

However, the region will continue its role as the worlds

dominant supplier of copper, and as the most significant

location for new projects. Chiles state-run Codelco, the

worlds largest copper producer, plans to invest US$2

billion in its mines this year to reverse four years of

declining production. Moreover, the Chilean Governmentannounced at the beginning of the year that it would invest

US$1 billion in Codelco as part of an economic stimulus

package. The Governments move will provide a large

number of exploitation opportunities that, in turn, will

generate additional employment in the country. It is hoped

that the move will reverse the decline in the countrys

exports, which dropped 29% to US$1.89 billion in May,

compared with US$2.67 billion a year earlier, severely

affecting the metal industry, according to the Chilean

central bank.

Sector Investment

Despite the deepening economic crisis and deteriorating

global market, the Latin American metal industry is

attracting more investment interest. The board of Brazilian

steelmaker Gerdau has approved US$140 million in

investments to expand Peruvian subsidiary Siderperu. Last

year, the Brazilian steelmaker aimed to increase Siderperus

steel output to three million tons a year by 2013. The

company is in the midst of an expansion to 700,000 tons

per year from 400,000 per year, and aims to complete the

program in 2010. A number of key metal players see therecession as an opportunity, and are taking advantage of

the crisis to find ways to expand in areas outside Brazil.

Another Brazilian steelmaker, Usiminas, signed a

memorandum of understanding with the Minas Gerais State

Government in April, committing to invest R$19.1 billion

(US$9.47 billion) in the state over the next five years.

The companys main undertaking is a five-million-tons-a-

year slab plant in Santana do Paraiso City, near Ipatinga,

where the company has its headquarters. Regardless of

the slumping economy, the company plans to expand

production at its Ipatinga plant. With the expansion, the

plant will be producing an additional 500,000 tons a year

of heavy plate, 150,000 tons of hot rolled coil, 220,000

tons of cold rolled coil and 550,000 tons of galvanized coil

within five years.

Argentine aluminum producer Aluar Aluminio Argentino

(BUE: ALUA) announced that investment in expansion

would continue despite the global crisis. In February 2009,

the company asked shareholders for permission to issue

bonds worth US$300 million. The company will use some

of the proceeds to move ahead with expansion plans at its

plant in Chubut province, and expects to keep employees

on its payroll. It will complete the US$500 million second

expansion stage in Chubut that will add 96 electrolytic

cells. Aluar has already invested US$315 million to add72 cells. The expansion will increase aluminum production

for the domestic market to 105,000 tons a year. After the

next expansion phase, the companys capacity will total

515,000 tons a year.



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Market Trends & Outlook

The impact of the global financial crisis on the Latin

American economy is becoming increasingly apparent, with

a reduction in demand, local and foreign credit restrictions,

and the declining confidence levels of consumers and

investors. All these factors have slowed industrial activity,

in particular in the production chain, where Latin American

steel has a major share. The International Iron and Steel

Institute (IISI) estimates global steel production was 262.8

million tons in the first quarter of 2009, down 23% from

the same period of 2008.

The Latin American metal industry has felt the effects of the

financial crisis intensively since the fourth quarter of 2008,

particularly among its steelmakers. They have continued

to show restraint in industrial manufacturing investments,

hampered by a lack of available credit and a slowing influx

of capital. Chilean steel and iron ore producer CAP SA

(BSAN: CAP) announced in May it had postponed plans to

invest around US$2.2 billion to double its steel output, on

concerns that a slowing economy would dampen demand.

As the global credit crunch and economic slowdown

reduces demand, global investment in the industry islikely to fall, possibly by 55% to US$50 billion in 2009.

In Brazil, Companhia Vale do Rio Doce (BVSPA: VALE),

the worlds biggest iron ore producer, has already cut its

US$14.2 billion 2009 investment plan by 37%, as costs

decline and the dollar strengthens. Apart from the weak

economy, the cut in investment also reflects the price of

the companys cost-denominated currencies, a review of

equipment and implementation costs, delays in granting of

environmental licenses, and simplifications and changes in

some projects.

Steelmakers Cut Costs to Stay Afloat

Tightness in the Latin American steel industry and weak

domestic and international demand related to the global

economic slowdown is forcing steelmakers to cut costs.

After the weakness of the first half of 2009, measures by

steelmakers to cut their workforces, reduce production and

even close excessive capacity, is also ongoing. Leading

Brazilian steelmaker Usiminas (BVSPA: USIM3) is

considering postponing part of the first phase of construction

for its new five million tons a year Santana do Paraiso steel

plant, reducing capacity to 2.5 million tons a year. In April,

the company said it was investing US$9 billion in Minas

Gerais state over the next five years, including US$2.4

billion in 2009. As there is an over supply of steel and iron

ore on global markets, the company may scale back its

five-year expansion plans.

At the end of May, the Brazilian steelmaker dismissed

810 employees, or 6% of its workforce, shutting three of

its five blast furnaces because of the slump in demand. In

early May, the company, which operated at 50% capacity

during the first quarter, announced a voluntary layoff plan.

However, only 516 workers from the companys Ipatinga

plant in Minas Gerais state and the Cubatao plant in Sao

Paulo state chose to take part in the voluntary program,

which provides compensation approved by local unions.

The new job cuts will raise total layoffs since December

last year to more than 2,000. Among the companys main

shareholders, Nippon Steel (TSE: 5401) cut 700 jobs from

December to the end of February. The aim of the layoffs

was to reduce personnel costs to an all-time low of 10%

of total costs. The more than 300 cost-cutting programsin place at the plants have an annual savings potential of

R$1.2 billion (US$595.34 million), as the Latin American

steel industry tries to recover, albeit slowly.

Financial and environmental challenges are also forcing

foreign steel companies to reduce their expenses.

Luxembourg-based steel giant ArcelorMittal (NYSE: MT)

confirmed in July it had postponed the construction of a

US$600 million steel mill in Mexico. The company had

intended the steel plant to serve mainly the construction and

automotive sectors, using electrical steelmaking equipment

with a capacity of one million tons of billets year, and a

500,000-tons-a-year rolling mill.

In early June, US company Doe Run completely shut

down its La Oroya smelter in Peru. The company said it

was unable to continue operating because of the present

financial and environmental obstacles. The company

was on the brink of halting La Oroya in April, due to the

cancellation of the companys credit, which it needed to

continue purchasing mineral concentrates from mines in

central Peru for processing at La Oroya.

Economic Slump Dents Investment



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Market Trends & Outlook

A Grim Outlook for the Regions Steel Market

The tumultuous conditions of 2008 are continuing into

2009, as a challenging global macroeconomic environment

and tightened credit markets contribute to plummeting

demand for industrial manufacturing assets. The World

Steel Association estimates that steel demand worldwide

will fall to 1.019 billion tons in 2009, down 14.9%

from 2008. The US recession and slowdowns in other

economies have drastically reduced metal demand in Latin

America. Manufacturing and construction sectors, the

major consumers of metals in the region, have suffered

particularly severe declines.

In Latin America, demand for steel and steel products has

fallen sharply in tandem with the global manufacturing

slump. After years of growth, Latin Americas steel

production in the first quarter sank 40% year-on-year to

10.1 million tons, according to the ILAFA. In light of

the weak and uncertain economy, the IISI expects Latin

American steel production to slip by 8.3% to 45.5 million

tons in 2009, compared with 50.6 million tons in 2008.

The regions largest economy, Brazil, went into recession

in the first quarter, as the crisis slashed exports and local

demand for steel. In the first four months of 2009, Brazils

steel production dropped 41.7% from the same period of

the previous year to 6.73 million tons, according to theBrazilian Steel Institute. Domestic sales plummeted 42.5%

to 4.32 million tons, compared with 7.51 million tons over

the same period of 2008.

The negative growth of the metals market in the past

months indicates that the decline in Latin American metal

activity will most likely continue. In the final quarter of

2008, metal production dropped markedly due to the

global recession. Most Latin American metal companies

have announced significant production cuts in an effort to

align supply with reduced demand. The situation did not

change in the first half of 2009, and is unlikely to do so

until 2010, with most Latin American countries forecastinga fall in GDP this year.

Market Outlook

The intensification of the global financial crisis was the

trigger for a rapid deterioration in the world metal market

outlook. Over the next few years, Mergent expects a mixed

and volatile market for the Latin American metal industry.

The deepening downturn has already resulted in poor

financial earnings in the first half of 2009, with companies

losing much of their market value due to the worldwide

recession. Metal companies are expected to continue to

report lackluster financial performances this year, with

the overall outlook pointing to slowing or subdued metals

demand and a possible slow recovery later in the year.

After the flurry of big deals in the past two years, M&A

activity in the Latin American metal sector is likely to be

relatively quiet in 2009. In the face of continuing economic

uncertainty, credit from banks and sub-debt sources will

remain tight in the second half of this year. If the current

economic situation worsens in the coming months, the

metal industry will more than likely consolidate to weather

the present financial turmoil through corporate synergies.

The regions leading steel players may seek to leverage

their relative financial strengths to further their competitive

advantages. It is likely that steel will continue to contribute

a large proportion of deal value to the overall M&A total,

given the relatively lower level of consolidation compared

with the aluminum industry.



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Country ProfileBrazil

Bulk low price imported steel products and cheap foreign

imports have affected the Brazilian steel industry since

the Government removed the 16% import tariff in 2005.

The Brazilian Steel Institute has urged the Government to

reinstate import tariffs on steel products to reduce the entry

of lower-priced products. Major Brazilian steelmakers

Metalurgica Gerdau SA (BVSPA: GOAU3) and Companhia

Siderurgica Nacional (BVSPA: CSNA3) have also called

for tariffs against cheap steel imports. It is important for

Brazil to protect the metal sector from imports to safeguard

the domestic market and to guarantee employment.

The Government is contemplating reintroducing 12%

import tariffs on hot and cold rolled coil products in an effort

to protect the local steel industry. However, the volumes of

Brazilian steel imports should drop substantially because

of the high value of the US dollar against the Brazilian

real and because of tight credit. This will benefit Brazilian

distributors, as it will reduce the amount of steel on the

market.

Continuing financial market uncertainty, the economic

slowdown and a collapse in world metal demand have

created a challenging environment for the Brazilian metal

industry. According to the IBS, Brazil manufactured

five million tons of crude steel and 3.5 million tons of

rolled steel in the first quarter of 2009, drops of 42.1%

and 46.6%, respectively on the first three months of the

previous year.

Sector Performance

Industry performance this year will depend mostly on the

behavior of the local economy. Steel production in Brazil

continued to fall steadily amid the current international

financial crisis that has shaken the steel market. The IBS

estimates production of crude steel plummeted 42% in the

first quarter of 2009, compared with the equivalent period

of 2008, to five million tons. Production continued to

tumble in March, sinking 41.5% from the same month of

2008, in line with the decline in international demand.

Sector Overview

Table 6: Brazilian Steel Output and Sales

Source: Brazilian Steel Institute

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan/09

Production 2792 2494 2771 2783 2770 2715 2909 2366 2685 2790 2021 1800 1337

Domestic Sales 1840 1814 1922 1930 2004 1977 2074 2016 1964 1904 1413 934 950

International Sales 551 925 879 720 716 821 859 714 781 520 400 364 371

3000

000 tons

2000

500

2500

1000

1500

0



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12

Country Profile - Brazil

From October 2008, the three main consuming sectors of

the Brazilian steel industry automotive, civil construction

and capital goods have sharply reduced their orders due

to falling consumption and the unpredictable outlook for

2009. In December 2008, domestic sales of steel products

were down by 33% to 52% from the average levels

observed by IBS in January/October of the same year. The

results for January last year were practically the same as

those of December, and reflect the strong slowdown in the

activities of large steel-consuming sectors.

Leading Companies

Companhia Vale do Rio Doce (BVSPA: VALE)

Companhia Vale do Rio Doce (Vale), headquartered in

Rio de Janeiro, Brazil, operates as a diversified metals

and mining company worldwide. Its iron ore production

dropped 37% to 46.9 million metric tons in the first quarter

of 2009, compared with 74.5 million tons in the same period

of 2008. Production dropped as the company shut down

mines because of lower demand. Global demand for iron

ore is unlikely to pick up until the end of the third quarter

or beginning of the fourth quarter of 2009. However, the

company has adapted its production to current demand

levels and it is unlikely to make further output cuts in thenext few months.

During the quarter, the production of iron pellets registered

an even worse decrease, down 73.4% from the same period

last year to 2.885 million metric tons. To reduce costs and

adjust production, the company shut down its higher cost,

and lower quality mines, while maintaining operational

flexibility at other mines. Vale kept only three of its nine

pellet production units in operation in the first quarter

of 2009. Two other units restarted operation in March

following stronger demand from China for iron pellets.

Usinas Siderurgicas de Minas Gerais SA (BVSPA:USIM3)

Brazilian-based steel company Usinas Siderurgicas de

Minas Gerais SA (Usiminas) produces heavy plates, cold

strips, hot strips and coated products. The company reported

a net loss of R$112 million (US$55.56 million) in the first

quarter of 2009, compared with a net income of R$712

million (US$353.24 million) in the corresponding quarter

of the previous year. Revenue dived 25% to R$2,670

million (US$1,325 million) in the quarter, compared withR$3,553 million (US$1,763 million) in the first quarter of

2008. The current economic crisis that negatively affected

the Brazilian metal industry has caused a plunge in the

companys production.

A drastic reduction in domestic and international demand

has forced Usiminas to cut output to 50% of capacity and

renegotiate all raw material supply contracts to reduce costs

and stockpiles. Starting March 9, the Brazilian steelmaker

halted blast furnace production at its Cubatao mill in Sao

Paulo state for 90 days to cut costs. The stoppage reduced

pig-iron output by 270,000 metric tons, equal to 6% of the

plants annual capacity.

Market Outlook

The pressure to restructure the metal industry will intensify

the longer the financial crisis continues. The outlook for

metal demand is uncertain, despite the incentives that the

Brazilian Government has adopted to rekindle sectors

that have a strong impact on the economy, such as the

automotive and civil construction industries. The demand

for flat-rolled steel in the global market is likely to pick up

in the second half of 2009, and this should benefit Brazil,

where the steel industry is facing a challenging year.



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13

Country ProfileChile

Chile has been a leading copper producer since the

middle of the 19th century, and is now the worlds largest

producer and exporter of the metal. Copper consistently

accounts for more than half of the countrys total exports,

while copper revenues have made a vital contribution to

government revenues. However, the challenging condition

of the economy, resulting in low prices for the red metal,

hammered the Chilean metal industry in the first half of

2009.

The global crisis affected Chilean metal companies,

with a sharp decline in local and international demand.

The Federation of Chilean Industry estimates industrial

production dropping 9.6% year-on-year during February

2009, with the construction distribution industries

registered a drop of 23.5% from the equivalent month

of 2008. The products most affected were iron and steel,

production of which dropped by 50.5%, while production

of non-metallic minerals including ceramics, cement and

concrete decreased by 28.5%.

Sector Performance

In March 2009, Chiles industrial production slipped 7.1%

compared with the same month of 2008, while industrial

sales fell 8.3%, according to state-run INE. Chiles main

exports totaled 429,620 tons in March, down 5.9% from

the same month of the previous year. Central Bank of Chile

figures show copper exports totaled US$1.449 billion in

March, down 66% from the year earlier. The value of

Chiles copper exports slumped 52% to US$1.754 billion

in April 2009, compared with US$3.649 billion in the same

month a year earlier.

In 2008, copper export revenue was US$32.808 billion,

down 13%, compared with US$37.583 billion in 2007,according to Chiles Central Bank. Copper export revenues

have tumbled in tandem with prices for the red metal,

pummeled in recent months as demand fell due to the

global economic depression.

The Chilean Copper Commission (COCHILCO) estimates

Chile produced 5.33 million tons of the red metal in 2008,

down 4.1% compared with 2007. Chile exported 5.405

million tons of copper last year, or 4.7% less than in the

previous year. Copper output has fallen in recent years amid

falling ore grades at the largest mines and after production

interruptions at the massive Escondida mine, owned by

global diversified miner BHP Billiton (LSE: BLT). Output

also suffered at the worlds number one producer, Codelco,

after strikes by subcontract workers.

Leading Companies

CAP SA (BSAN: CAP)

CAP SA operates in the steel and mining sectors in

Chile, making steel products ranging from semi-finished,

bars and flat steel, tubes to by-products. The company

experienced a 75.4% year-on-year plunge in first quarter

of 2009 net profits to US$15.1 million, compared with

the corresponding quarter of 2008. Its revenue shrank to

US$305 million in the quarter, from US$489 million a year

earlier. The tumble in profits was due to low demand and

the consequence of the abrupt drop in economic activity,

both globally and locally. It was also due to the financial

crisis in the US that started at the end of September last

year.

The slowdown affected all CAPs businesses, reaching its

most critical point in the first quarter of 2009. Steel sales

dropped 48% to 183,340 tons in the first quarter, of which

368 tons were exported, 71% less than a year earlier. Iron

ore sales slipped 5% year-on-year to 1.28 million tons,

of which 1.36 million tons was exported, 11% less than a

year earlier. After the company shut down one of its blast

furnaces on November 5 last year due to low demand, its

Huachipato steel plant in region VIII ran at slightly more

than 50% capacity.

Molibdenos y Metales SA (BSAN: MOL)

Molibdenos y Metales SA, a shareholder-owned Chilean

corporation, processes molybdenum concentrates. It has

two plants one in San Bernardo, South of the capital

Santiago, and one in Cumpas in northern Mexicos Sonora

state, known as Molymex. The companys net profits

dropped 36% to US$22.5 million in the first quarter of

2009, from US$35.1 million in the corresponding quarter

of 2008, due to low metal prices.

Sector Overview



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Country Profile - Chile

In October last year, molybdenum was trading at over

US$30 per pound, but the price has sunk sharply in tandem

with that of copper and other commodities on demand fears

amid the financial crisis. The company expects the price of

the metal used to harden steel will remain around US$10

per pound in 2009 and estimates that demand will fall 20%

this year. At the end of April, the company announced

plans to construct a plant for molybdenum processing at

Hohhot City, the capital of Inner Mongolia Autonomous

Region in China. Upon receipt of an environmental permit

from the authorities, the company is scheduled to invest

US$80 million in the plant.

Market Outlook

The outlook is bleak for the Chilean metal works industry

for the rest of the year. Demand for steel is likely to remain

weak in 2009 because of the continued reduction of steel

inventories. Steel prices will remain weak due to the steel

industrys low capacity utilization and costs being reduced

by lower prices of input materials. Nevertheless, a majority

of Chilean metal producers could still achieve a lower net

debt position at the close of the second quarter of 2009

on an anticipated decline in working capital needs and a

low level of capital expenditure amid the present market

conditions.

Despite the economic crisis, Cochilco expects copper

output to reach 5.5 million tons in 2009, 3.7% higher

than in the previous year. The increase would be due to

a jump in capacity at the Collahuasi mine, the ramp-up of

state copper company Codelcos Gaby mine and higher

output at BHP Billitons Spence mine and 57.5%-owned

Escondida mines. In 2010, copper output is likely to grow

by 6.3% to 5.75 million tons, thanks to expected increases

by Codelcos Andina and El Teniente mines, Escondida,

Los Pelambres and Freeport-McMoRan Copper and Golds

(NYSE: FCX) 80%-owned Candelaria operation, and the

start of sulfide mining at Tecks 90%-owned (TSX: TCK)

Andacollo mine.



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Country ProfileMexico

As the global economic slump worsened and strained the

Mexican economy further, Mexico saw its metal industry

weaken significantly. The industry was also hit by the H1N1

influenza (swine flu) epidemic that affected all sectors of

the economy. This is set to affect GDP growth, which is

likely to be lower than the earlier National Confederation

of Industrial Chambers of Mexico (CONCAMIN) estimate

of around 6%.

Also affecting the industry was the countrys crime wave,with gangs becoming more daring and sophisticated,

hijacking trucks and trains, and stealing massive loads of

steel. With significant government and police resources

tied up fighting the drug cartels, thieves ramped up their

efforts to steal freight. The Mexican Steel Chamber

reports robberies skyrocketed by 250% in 2008, with

12,500 tons of steel carted off by thieves. In 2008, losses

totaled MEX$150 million (US$11.08 million) and the pace

accelerated in 2009.

Mexicos third largest steel producer, Altos Hornos de

Mexico SAB de CV (MXN: AHMSA), or AHMSA, was

the victim of nearly 40 robberies after the beginning of2008. The hijackings happened mostly along one stretch

of deserted road between the cities of Monterrey and

Monclova in northern Mexico. Rising unemployment due

to the economic downturn has left legions of young men

out of work, and this has aggravated the crime problem.

Sector Performance

The Mexican national statistics bureau INEGI estimates

the countrys GDP in the first quarter of 2009 slipped by

8.2% year-on-year compared with the same period of

2008. GDP of secondary activities fell 9.9%, with that

of the manufacturing sector sinking by 13.8%, whileconstruction industry GDP shrank by 7.7%. The Mexican

economy is driven by resources and manufacturing, and

the global downturn has slashed demand for steel, pushing

the countrys economy into reverse.

In the first three months of 2009, Mexican steel production

fell 35% to 3.103 million tons, compared with 4.757

million tons in the equivalent period the previous year,

according to the Mexican steel association CANACERO.

National steel consumption totaled 3.779 million tons, a

plunge of 41% from 6.444 million tons in the first quarter

of 2008. This was due to the global financial crisis reducing

demand, and the swine flu pandemic affecting the metal

industrys performance as steel firms suspended production

from May 1 to May 5 due to the flu outbreak.

Leading Companies

Altos Hornos de Mexico SAB de CV (MXN: AHMSA)

AHMSA, a Mexican-based steel company, specializes

in the production of basic raw materials and finished

products. It has corporate offices in Monclova, in the center

of the state of Coahuila, 155 miles from the US border. The

companys net income sank 84.6% to MEX$136 million

(US$10.04 million) in the first quarter of 2009, compared

with MEX$885 million (US$65.35 million) in the same

quarter of 2008. Sales for the quarter fell 37.5% to US$436

million, compared with US$698 million in the first quarter

of 2008. The results reflected the worldwide recession,

which caused a drop of at least 50% in operation levels and

placed the whole steel industry in a serious situation.

Grupo Simec SAB de CV (AMEX: SIM)

Grupo Simec SAB de CV, incorporated in August 1990,

is a diversified manufacturer, processor and distributor of

special bar quality (SBQ) steel and structural steel products.

The companys net profit dropped 26% to MEX$440

million (US$32.49 million) in the first quarter of 2009,

compared with MEX$592 million (US$43.71 million)

in the equivalent quarter of the previous year. Net sales

dropped 30% to MEX$5.081 billion (US$375.18 million),

compared with MEX$7.288 billion (US$538.14 million)

in the first quarter of 2008, due to lower shipments. Totalsales outside of Mexico in the first quarter shrank 59% to

MEX$2.222 billion (US$164.07 million), compared with

MEX$5.423 billion (US$400.43 million) in the same

period of 2008. However, total Mexican sales grew 53%,

from MEX$1.865 billion (US$137.71 million) in the first

quarter of 2008 to MEX$2.859 billion (US$211.11 million)

in the equivalent quarter of 2009. Shipments of finished

steel products dropped by 239,000 tons to 506,000 tons

compared with 745,000 tons in the first quarter of 2008.

Sector Overview



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Country Profile - Mexico

Overall quarterly gross profit totaled MEX$970 million(US$71.62 million), compared with MEX$1.237 billion

(US$91.34 million) in the first quarter of 2008. Gross

profit as a percentage of net sales was 19%, compared

with 17% in the same period 2008. Operating profit fell

by 56% to MEX$385 million (US$28.43 million) from

MEX$878 million (US$64.83 million). Operating profit

as a percentage of net sales was 8% in the first quarter,

compared with 12% in the same period 2008. A 32%

decline in shipments compared with the same period of the

previous year affected the results.

Market Outlook

In the first half of 2008, most Mexican steel companies

enjoyed steady demand and record earnings, despite

tightening credit markets. However, in the fourth quarter

of 2009 the industry encountered falls in steel prices,

demand and volumes. Battered by the growing global

financial crisis, construction activity began to decline,

accompanied by a collapse in demand for durable goods

such as automobiles, which affected the metals industry.

This decline is likely to continue throughout 2009.

With the world economy remaining in recession, Mexican

steel consumption is set to remain subdued in 2009, with

key consuming industries cutting production further.

CANCERO estimates steel consumption slid 5% in 2008to 18.5 million tons, and expects it to drop by up to 8%

in 2009 to 17 million tons. Reduced demand and falling

steel prices will put pressure on Mexican steel companies

further, threatening their profits, margins and liquidity in

the coming months.



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Country ProfilePeru

The Peruvian metal works industry suffered greatly in

the first six months of 2009, after grappling with a weak

economy and falling demand for its products. The Ministry

of Economy and Finance of Peru estimates the economy

grew by more than 9% in 2008, but may grow only by

about 5% in 2009, as prices for metal and mineral exports,

the Governments biggest source of revenue, fall further.

In late 2008, Peru announced a US$3 billion stimulus

package to boost construction and create jobs to combat

the downturn. The stimulus package, designed to offsetthe fallout from the global economic crisis, should ensure

growth of at least 5% in 2009.

The global economic downturn was the cause of a major

decline in industrial and manufacturing activities, which

led to a reduction in the demand for steel in Peru and a

slump in prices. Several companies have already postponed

projects in the Andean country, including Madrid-based

Repsol YPF (BM: REP) and Mexican-controlled Southern

Copper Corp (BVL: PCU), which was forced to scale back

work at its Tia Maria project. The Ministry of Economy and

Finance expects that this year exports from Peru, one of the

worlds leading metal producers, will slide 21% from therecord US$31 billion posted in 2008, while imports will

contract by 3.6%.

In the first half of 2009, metal volumes were down

significantly, as market conditions remained weak. Several

companies laid off employees because of declining demand

for steel worldwide, with thousands of workers in the

countrys steel and mining sector losing their jobs as steel

prices sank and companies delayed investment because

of economic uncertainties. The Peruvian labor federation,

Confederacion Unitaria de Trabajadores, estimates 5,460

mining and steel workers lost their jobs after the start of

November last year as sinking global steel prices hammered

the metal industry. About 600 workers were laid off atEmpresa Siderurgica Del Peru SAA (BVL: SIDERC1).

According to the federation, Corporacion Aceros Arequipa

SA (BVL: CORAREC1), Perus largest steelmaker, told

1,500 people to stop working.

Sector Performance

Perus Ministry of Energy and Mining (MEM) estimates

the countrys copper output slipped 1.33% in March 2009,

compared with the same month of 2008, to 104,462 tons,

largely due to weak copper prices. The drop in production

and prices of metal exports was also the result of the global

economic slowdown. Perus metal shipments account for

more than half of total exports and are the Governments

largest source of revenue.

Since 2008, copper prices have dropped more than 60%

as contracting economies slowed global demand for the

metal. World copper spot and future prices also slid and inMay London Metal Exchange transaction prices averaged

US$2.06 a pound, taking the year-to-date average to

US$1.74, down from US$3.15 in 2008. Copper prices are

likely to stay weak in the first half of 2010, but could see a

slight recovery in the second half, as copper supply tends to

be relatively tighter than that of other base metals.

Leading Companies

Empresa Siderurgica Del Peru SAA (BVL: SIDERC1)

Empresa Siderurgica Del Peru SA (Siderperu), based in

Santa Anita, is an iron and steel company that manufacturessteel products. It is a subsidiary of Gerdau SA (BVSPA:

GOAU3), and serves the construction, mining, and

industrial sectors. The company posted a loss of S/.190

million (US$61.66 million) in the first quarter of 2009,

compared with a net profit of more than S/.67.5 million

(US$21.91 million) in the equivalent quarter of 2008. The

loss was mainly due to low prices and demand for steel.

Sales slipped to S/.318 million (US$103.20 million),

compared with S/.362 million (US$117.48 million) in the

year earlier period.

In May, the board of Brazilian steelmaker Gerdau approved

US$140 million in investments to expand Peruvian

subsidiary Siderperu. Before the global financial crisis, thecompany aimed to increase steel output to 1.5 million tons

a year in 2011, and three million tons a year by 2013. The

Peruvian steelmaker is in the midst of an expansion from

400,000 tons per year to 700,000 tons per year in 2010.

Corporacion Aceros Arequipa SA (BVL: CORAREC1)

Corporacion Aceros Arequipa SA, produces corrugated

steel, steel sections and bars for the metal mechanics, civil

Sector Overview



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Country Profile - Peru

engineering and metal industries. The company saw a netloss of S/.197 million (US$63.93 million) in the fourth

quarter of 2008, compared with a net loss of S/.9.88 million

(US$3.21 million) in the same period of 2007. Sales in the

quarter climbed 8% to S/.391 million (US$126.89 million),

compared with S/.362 million (US$117.48 million) in the

fourth quarter of the previous year, but costs also picked up

by 29% to S/.365 million (US$118.45 million), compared

with S/.282 million (US$91.51 million) in the equivalent

quarter of 2007.

The Peruvian steelmaker halted production at its Pisco

and Arequipa regional plants from November 24, 2008,

and throughout all of December to carry out maintenance.

It had sufficient stocks to continue supplying the marketduring the maintenance period. The company has resumed

work at the Arequipa and Pisco plants and is operating at

90% capacity.

As of June this year, the steelmaker had boosted output by

nearly 300,000 tons a year, thanks to the newly installed

transformer at its Pisco plant. The additional production

will boost output from the current 550,000 to 580,000

tons to roughly 850,000 tons a year. Although the furnace

at the Pisco plant is considered large, the previous small

transformer limited production. The company thinks that the

steel market outlook is more positive because of statements

made by the countrys president urging Peruvians to investin housing and infrastructure.

Market Outlook

The Peruvian economy is likely to continue to slow this

year, with the economic pain extending into next year if the

global slowdown intensifies. The International Monetary

Fund (IMF) last year estimated that Perus economic growth

would likely slow to 6% this year. Economic growth in

2010 and beyond should average 6% or more a year. The

outlook reflects the slowdown in the global economy and

tighter financial conditions, which will affect the Peruvian

metal market. Like those in other countries, the Peruvian

economy is expected to be hit hard by declining metal prices and demand, since the metal industry contributes

more than half of the countrys total exports and is one of

the Governments biggest revenue earners.



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Country ProfileVenezuela

In the past two years, Venezuelan President Hugo

Chavez has nationalized major steel, cement, electricity,

telecommunications and oil projects in a bid to expand state

control of the economy. Towards the end of May this year,

the Government took over several iron and other metal

companies as part of its drive to exercise control over the

nations mineral wealth industries. The companies include

Venezuelan steelmaker Siderurgica Venezolana SA (CAR:

SVS), Tubos de Acero de Venezuela SA, also known as

Tavsa, and Complejo Siderurgico de Guayana CA, orComsigua. Also affected was iron producer Materiales

Siderurgicos SA, or Matesi. Matesi is controlled by

Venezuelas Materiales Siderurgicos, a company 50.2%

owned by Tenaris (NYSE: TS) and 49.8% by Sidor. The

Government argues the move will help the country reduce

its reliance on imports and will boost local industry.

Venezuela expressed interest late last year in buying a

minority stake in the Venalum aluminum smelter that six

Japanese companies, which together hold a 20% stake

in Venalum, announced in June that they would sell.

The decision to sell came after a long dispute with the

Government over prices, delays in shipments, and lowprices for the metal. Venalum is 80% owned by Venezuela

with the other shares distributed among Showa Denko

KK (TSE: 4004), Kobe Steel Ltd (TSE: 5406), Sumitomo

Chemical Co Ltd (TSE: 4005), Mitsubishi Materials Corp

(TSE: 5711), Mitsubishi Aluminum and Marubeni (TSE:

8002). The Government assessed the value of the Japanese

companies 20% stake and was expected to offer a price.

Sector Investment

Brazilian construction company Andrade Gutierrez

proposed to invest US$120 million in a new steel plant

in Venezuelas eastern Bolivar state. Brazils presidentand his Venezuelan counterpart Hugo Chavez signed

an agreement in October 2008 to build and operate a

US$1.8 billion plant that will produce 1.5 million tons of

steel a year. The plant will complement production from

local steelmaker Sidor, making steel micro alloys for the

military and construction sectors that Sidor currently does

not manufacture. When it begins operating in the fourth

quarter of 2011, it will increase Venezuelas annual liquid

steel output by six million tons. The country will also be in

a position to manufacture a whole series of products to spur

the development of the domestic steel industry.

In the second half of 2008, Venezuela and Cuba signed an

agreement to create a joint steelmaking company, Aceros

del Alba CA, located in the eastern state of Monagas,

to make stainless steel products. Venezuela will invest

US$1.5 billion in the plant, which is intended to produce

500,000 tons of stainless steel per year. Venezuela will

own 51%, while Cubas Acinox Steel Industrial Group will

own 49%. The two countries will also build a ferronickel

plant in Cuba to provide the raw material for the steel plant.

The Cuban plant will be 51% owned by Cuba and 49% by

Venezuela. Construction of the steelmaking plant began in

2008, and is expected to be completed in 2011.

Leading Company

Siderurgica de Orinoco (Sidor)

Sidor manufactures and distributes steel products and is

the largest flat and long steel producer in Venezuela, with

an annual capacity of about 4.5 million tons of finishedsteel products. On May 7, 2009, the company became a

subsidiary of Corporacion Venezolana de Guayana (CVG),

after Argentine-controlled steel company Ternium SA

(NYSE: TX) agreed to compensation of US$1.97 billion

for its Sidor shares and transferred its 59.7% share of one

of Latin Americas largest steel plants. The Venezuelan

Government, through its heavy industries state holding

group CVG, has already paid US$400 million in cash for

the shares and will pay for the rest in two tranches. The

Government will pay the first tranche, US$945 million, in

six equal quarterly installments, and the balance in October

2010.

Before President Chavez ordered the takeover, Ternium

controlled 60% of Sidor, the countrys top steel producer,

while the Government owned 20%, and workers controlled

the remaining 20%. After Sidor was nationalized, there was

labor unrest, with the Government reprimanding some of the

workers for making what it called unreasonable demands.

In the first two months of the year, output plummeted 25%

against the same period in 2008, as the company struggled

to introduce new management.

Sector Overview



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Country Profile - Venezuela

Market Outlook

In the first quarter of 2009, the Venezuelan economy rose

at its slowest pace, 0.3%, since 2003, as factory output

contracted and export revenue declined, following a plunge

in oil prices. Banco Federal CA expects the economy to

contract 2% this year, as the fastest inflation rate in Latin

America erodes purchasing power and diminishes the impact

of government spending. Government expropriations in the

cement, oil, banking and steel industries are discouraging

private investment, which does not help the economy.

President Chavez cut the federal budget by 6.7% and, to

cover a budget deficit, raised sales tax and announced plans

to sell US$15.8 billion worth of domestic bonds this year.

The 2009 outlook for the Venezuelan steel industry is grim,

with the country affected by the world economic crisis and

compounded by an exodus by foreign investors following

nationalization of many of the countrys industries. As steel

prices remain unfavorable, demand is unlikely to improve

this year while the global manufacturing slump continues.

The presidents decision to nationalize Venezuelas steel

companies has dealt another blow to the steel industry and

to foreign companies, some of which have lost a great deal

of assets.



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Currency Conversion Table

Source: Federal Reserve Bank of New York

Note: Base currency is United States Dollar (USD)

Currency exchange rates as of July 10, 2009

Currency Unit Units per US$ US$ per unit

United States Dollars (US$) 1 1

Argentina Pesos (ARS$) 3.80686 0.26268

Brazilian Reals (R$) 2.01566 0.49612

Chile (CLP) 554.118 0.001805

Colombia (COL$) 2,135.59 0.0004683

Mexico Pesos (MEX$) 13.54324 0.07384

Peru (S/.) 3.08151 0.32452

Venezuela (Bs) 2,152.30 0.0004646



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The Scope Of This Report

This report looks at the metal works industry in Latin America, with a focus on Brazil, Chile, Mexico, Peru and Venezuela.

This report aims to paint a picture of the current environment and industry developments in a number of industry segments

using available data and examination of key public companies in each segment whose core services fall into the above

categories. Some reported key financial results are presented in the comparative data tables on proceeding pages.

Research analysts draw on a range of credible industry and company data sources as well as news and information

services to research and analyze the current trading environment, industry landscape and market trends and outlook for

a particular sector. Primary sources are used, unless otherwise indicated, and include company data, e.g. annual reports

and company financial results; macroeconomic and trade data; data and information from global and country regulatory,

industry and trade bodies; government data; and reports from industry organizations and private research organizations.

Industries covered by the industry reports are defined by standard industry classification systems and leading companies

are identified on this basis. The following SIC codes are relevant to the industry: 3312 (Steel Works, Blast Furnaces

(Including Coke Ovens) and Rolling Mills); 3316 (Cold-Rolled Steel Sheet, Strip and Bars); 3317 (Steel Pipes and

Tubes); 3331 (Primary Smelting and Refining of Copper); 3334 (Primary Production of Aluminum); 3339 (Primary

Smelting and Refining of Non-ferrous Metals, except Copper and Aluminum); 3341 (Secondary Smelting and Refining

of Non-ferrous Metals); 3353 (Aluminum Sheet, Plate and Foil).



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Key References

Global and Regional

Asia-Pacific Economic Cooperation (APEC)

APEC is a forum to facilitate economic growth, cooperation, trade and investment in the Asia-Pacific.

http://www.apec.org/

Council on Hemispheric Affairs(COHA)

Founded in 1975, COHA, a non-profit, tax-exempt independent research and information organization, was established

to promote the common interests of the hemisphere, raise the visibility of regional affairs and increase the importance of

the inter-American relationship, as well as encourage the formulation of rational and constructive US policies towards

Latin America.

http://www.coha.org/

International Federation of Chemical, Energy, Mine and General Workers Unions (ICEM)ICEM is a global trade union that monitors and negotiates global agreements with multinational companies, mainly on

workers rights, equality at work, standards of health, safety and environmental issues worldwide.

http://www.icem.org/

International Iron and Steel Institute (IISI)

IISI is an international organization of 190 steel producers established to provide a forum to address the major strategic

issues and challenges it faces on a global basis.

http://www.worldsteel.org/

International Aluminum Institute (IAI)

IAI is the Global Forum of the worlds Aluminum Producers and produce timely publications and reports, compile key

industry statistics, host events and provide a global meeting point for its members.

http://www.world-aluminium.org/

International Labor Organization (ILO)

Founded in 1919, the ILO is a non-profit organization that aims to promote human rights at work, encourage decent

employment opportunities, enhance social protection and strengthen dialogue in handling work-related issues.

http://www.ilo.org/

International Monetary Fund (IMF)

The IMF is an international organization of 184 member countries established to promote international monetary

cooperation, exchange stability, orderly exchange arrangements, foster economic growth and high levels of employment,

and promote temporary financial assistance to countries to help ease balance of payments adjustment.

http://www.imf.org/

International Copper Study Group (ICSG)

ICSG, established in 1992, in an intergovernmental organization that serves to increase copper market transparency and

promote international discussions and cooperation on issues related to copper.

http://www.icsg.org/

Latin American Iron and Steel Institute (ILAFA)

ILAFA is a civil non-profit non-governmental international organization that gathers and looks after the interests of Latin

American iron and steel industry and companies.

http://www.ilafa.org/



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London Metal Exchange (LME)

The London Metal Exchange provides a global forum on managing the risk of future price movements in non-ferrous

metals. Prices published on LME are seen as a true reflection of demand and supply by trade and industry.

http://www.lme.co.uk/

Metals Economics Group (MEG)

Founded in 1981, MEG provides research data and analytical tool on global minerals exploration, development, andproduction, as well as strategic planning issues and acquisitions activity.

http://www.metalseconomics.com/

The Economic Commission for Latin America and the Caribbean (ECLAC)

Established in 1948, the ECLAC aims to contribute to the economic development of Latin America, coordinate efforts,

and reinforce economic relationships among countries. Headquartered in Santiago, Chile, it is one of five regional

commissions of the United Nations.

http://www.eclac.org/

US Geological Survey (USGS)

An independent fact-finding government agency of the United States Government that collects, monitors, analyzes and

provides scientific understanding about natural resource conditions, issues and problems in the US.

http://www.usgs.gov/

World Steel Association

The association is an international trade body for the iron and steel industry, representing about 180 steel producers

(including 18 of the worlds 20 largest steel companies), national and regional steel industry associations, and steel

research institutes.

http://www.worldsteel.org/

Brazil

Associacao Brasileira do Aluminio (ABAL)

Founded in 1970, ABAL is the Brazilian Aluminum Association to assist development in the aluminum industry together

with public authorities and plans that cover the industry in the country.

http://www.abal.org.br/

Associacao Nacional dos Fabricantes de Veiculos Automotores (Anfavea)

Anfavea, founded in 1956, brings together manufacturers of autoveiculos (cars, light commercial, trucks, buses) and

agricultural machines (tractors with wheels and mats, harvesters and backhoe) with industrial plants in Brazil.

http://www.anfavea.com.br/

Departamento Nacional de Producao Mineral (DNPM)

The National Department of Mineral Production was established as a self-governing body in Brazil to provide information

and data on mining or mineral production in the country.

http://www.dnpm.gov.br/

Instituto Brasileiro de Siderurgia (IBS)

IBS, the Brazilian Steel Institute, founded in 1963, undertakes the goal of bringing together and representing Brazilian

steel companies, supporting their interests and promoting their development.

http://www.ibs.org.br/



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Chile

Comision Chilena del Cobre (COCHILCO)

COCHILCO is a national organization that provides reliable information to sustain and reinforce the Chilean mining

industry, except for coal, oil and gas.

http://www.cochilco.cl/

Federation of Chilean Industry (SOFOFA)

SOFOFA, founded in 1883, is a private, non-profit trade association representing the views and interests of Chilean

industry.

http://www.sofofa.cl/

Instituto Nacional de Estadsticas (INE)

The National Statistics Institute is one of Chiles more prominent institutes, and has carried out several censuses, surveys

and studies about the national reality since 1843.

http://www.ine.cl/

Mexico

National Confederation of Industrial Chambers of Mexico (CONCAMIN)

CONCAMIN is an umbrella organization that represents industrial chambers of commerce throughout Mexico.

http://www.concamin.org.mx/

Camara Nacional de la Industria del Hierro y el Acero (CANACERO)

The Mexican Steel Producers Association is a self-governing institution that brings together steel producers and

transformers in Mexico and consists of 63 associated companies.

http://www.canacero.org.mx/

Instituto Nacional de Estadstica Geografa e Informatica (INEGI)

The National Institute of Statistics, Geography and Information is a subsidiary of the Secretariat of Property and Public

Credit, which provides statistical and geographic information on the territory, the pollution and the economy of Mexico.

http://www.inegi.gob.mx/

Peru

Commission of Promotion of Peru for the Export and the Tourism (PROMPERU)

PROMPERU develops and promotes exports and tourism activity in the country.

http://www.promperu.gob.pe/

Instituto Nacional de Estadstica e Informatica (INEI)

The Peruvian National Institute of Statistics reports on the state of the Peruvian economy, and social environment and

helps monitor changes in Canadian society and industry.

http://www.inei.gob.pe/

Ministry of Energy and Mining (MEM)

The Ministry of Energy and Mines of Peru is a ministry of the Peruvian Government responsible for managing the energy

and mining sectors of Peru.

http://www.minem.gob.pe/



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Ministry of Economy and Finance of Peru

The ministry in charge of the planning and execution of the economic policies of the Peruvian Government with the

goal of optimizing the economic and financial activities of the state, managing macroeconomic activity, and achieving

sustainable growth of the nations economy.

http://www.mef.gob.pe/

Venezuela

Association of Metallurgical Industrialists and Mining of Venezuela (AIMM)

AIMM is a civil association that represents the industrial companies of the metallurgical and mining sector in

Venezuela.

http://aimm-ven.org/



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Industry Report - Metal Works - July 2009Comparative Company Data | LATIN AMERICA

Notes to Comparative Data

- All figures are in United States dollars.

- All figures are as r eported by the company.

- N/A = Data Not Available.

- Companies ranked by total revenue for the full year most r ecently reported.

Definitions

- Total Revenue = All revenues, including net sales, operating revenues, interest income, royalties, excise taxes etc.

- EBITDA = Earnings before interest, taxes, depreciation and amortization.

- EPS Cont Operations = Earnings Per Share as reported by company excluding extraordinary items.

- Total Current Assets = All assets expected to be realized within the next year, includes cash, accounts receivable and inventories.

- Long Term Debt = Debt due to be paid at a date more than one year in the future.

- Return on Equity = The companys earnings divided by its equity (book value).

- Profit Margin = The companys net income as a percent of revenues.

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Company Country Ticker Exchange Primary SIC Other SICs

Metalurgica Gerdau SA Brazil GOAU3 BVSPA 3312 3315 5051 7374 2421 212

Usinas Siderurgicas de Minas Brazil USIM3 BVSPA 3312 3441 2813 2819

Companhia Siderurgica Nacional Brazil CSNA3 BVSPA 3312 1411 4911 4011

Navarino SA Chile NAVARINO BSAN 3339 3398 7922 4449 6719

Grupo IMSA SA de CV Mexico IMSA MEX 3399 3316 3325 3711 3714 5039

Siderar SAIC Argentina ERAR BUE 3312 3316

Molibdenos Y Metales SA Chile MOLYMET BSAN 3313

Caraiba Metais SA Brazil CRBM3 BVSPA 3331 3351 2819

ArcelorMittal Inox Brasil SA Brazil ACES3 BVSPA 3312

Madeco SA Chile MADECO BSAN 3351 3354 3085 3086 3081

Company Total Revenue - FYE - 1 Total Revenue - FYE - 2 Total Revenue - FYE - 3 EBITDA - FYE - 1 EBITDA - FYE - 2 EBITDA - FYE - 3

Metalurgica Gerdau SA $17,174,489,762 $11,026,819,948 $9,161,057,178 $2,903,990,463 $2,519,499,883 $2,229,180,601

Usinas Siderurgicas de Minas $7,755,872,651 $5,813,775,697 $5,577,011,504 $2,902,288,920 $1,925,620,698 $2,418,608,391

Companhia Siderurgica Nacional $6,418,503,226 $4,233,373,449

A Company and Industry Analysis- Latin America - Metal

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