Polish Electrical Steel Sector [Silicon Steels]

Polish Electrical Steel Sector [Silicon Steels] October 2004

POLISH ELECTRICAL STEEL SECTOR AGENDA

Definitions

Trade classification

Consumption

Trade perspectives

Routes to market

Demand side information

Opportunities …

DEFINITIONS

Oriented (transformer) steels, produced from low carbon steel of approx. 3% silicon content. These steels are principally used for the production of high power transformer cores or for distribution transformers

Non-oriented (dynamo) steels:

Either high alloy steels containing up to 3% Si and 1% Al, characterised by low transmission loss

Low alloy, lower Si/Al regular core loss steels

Both are the basic building blocks for magnetic circuits in rotating machinery and for small transformers (low power transformer cores)

Electrical steels consist of two main product groups which differ according to their metallic structure, magnetic properties and thus applications:

TRADE CLASSIFICATION *: Classification is the Polish ‘Kod Materialowo Handlowy’ 722611100 722611900 722619100 722619300 722619900

Width <600mm

Transformer steels (grain-oriented)

Width >500mm

Width <=500mm

Dynamo steels (non grain-oriented)

- Hot rolled

Cold rolled, width >500mm

Cold rolled, width <=500mm

722511000 722519100 722519900 Width >= 600mm Transformer steels (grain-oriented) Dynamo steels (non grain-oriented) - Hot rolled - Cold rolled Classification* Description

000’s tonnes* 2001 2002 2003 2004e

Production Transformer 27.6 26.2 24.5 26.0

Dynamo 34.5 32.1 31.4 30.6

Total 62.1 58.3 55.9 56.6

Export Transformer 20.8 17.5 14.5 3.4

Dynamo 14.3 9.4 4.5 4.4

Total 35.2 26.9 19.0 7.8

Import Transformer 5.6 4.0 5.0 4.2

Dynamo 13.0 19.3 6.4 15.4

Total 18.7 23.3 11.4 19.6

Consumption Transformer 12.4 12.7 15.0 26.9

Dynamo 33.2 42.0 33.3 41.6 Total 45.6 54.7 48.3 68.5

: Data is from GUS, for trade to 2003 from discussions with the Centrum Informatyki Handlu

Zagranicznego and for 2004 from the Ministry of Finance. Latter assessments may be subject to

change.

** : Significant hot rolled dynamo steel supply ~2001 thought to have been from Sendzimira prior to CC

installation.

CONSUMPTION - Cold Roll Electrical Steel HRC from Sendzimira HRC from imports** Prodn is by Stalprodukt alone

CONSUMPTION – Some characteristics † Note that electrical steel consumption for the production of transformers, dynamos etc is of cold rolled steel only. Consumption of hot rolled electrical steels is for the production of cold rolled electrical steel alone

Cold rolled electrical steel market ~55 kt/yr

2/3rds of demand is for dynamo steel, 1/3rd for transformer steels

Exports showing a strong declining trend

Demand supply is monopolised by Stalprodukt

Hot rolled sourcing:

- For transformer steels is from Sendzimira

- For dynamo steels is from imports (Slovakia)

† : Demand appraisals courtesy of http://www.steelonthenet.com consulting team

TRADE PERSPECTIVES - Exports 000’s tonnes 2001 2002 2003 2004e Hot rolled Transformer 0.0 6.0 6.0 0.0 Dynamo 0.1 0.0 0.0 0.1 Total 0.1 6.0 6.0 0.1 Cold rolled Transformer 20.8 17.5 14.5 3.4 Dynamo 14.3 9.4 4.5 4.4 Total 35.1 26.9 19.0 7.8 Total Transformer 20.8 23.5 20.5 3.4 Dynamo 14.4 9.4 4.5 4.6 Total 35.2 33.0 25.0 7.9 Polish Electrical Steel Exports, 2001-2004

Cold rolled steel dominate export volumes

Relatively low hot rolled exports evident in recent years

Both transformer and dynamo export volumes in decline

000’s tonnes 2001 2002 2003 2004e

Hot rolled Transformer 0.0 0.0 0.0 0.0

Dynamo 21.1 30.8 37.0 29.0

Total 21.1 30.8 37.0 29.0

Cold rolled Transformer 5.6 4.0 5.0 4.2

Dynamo 13.0 19.3 6.4 15.4

Total 18.7 23.3 11.4 19.6

Total Transformer 5.6 4.0 5.0 4.2

Dynamo 34.1 50.1 43.5 44.4

Total 39.8 54.1 48.5 48.6

TRADE PERSPECTIVES – Imports The dominant trade item Polish Electrical Steel Imports, 2001-2004

Import volumes constant at ~50 kt/yr since 2001

Dynamo steels dominate imports: mostly hot, some cold

Transformer steel import volumes negligible

ROUTES TO MARKET Polish electrical steel market Stalprodukt Imports Exports 38% 62% 0% 99% 1% *: Indirect refer to independent traders. Figures are based on 2001-2004 ‘typical year’flow As with alloy steels in general, specificity of composition, of heat treatment, of metallurgical properties and of size means that the product does not lend itself to bulk sales through intermediaries 66% of supply 34% of supply Direct Indirect Direct Indirect

DEMAND SIDE INFORMATION - Buyers