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BlueScope - responding to structural change

Paul O’Malley, Managing Director and Chief Executive OfficerASI Convention - CanberraSeptember 2011

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BlueScope BlueScope –– restructuring our Australian operations to restructuring our Australian operations to deliver on our commitment to Australian domestic marketdeliver on our commitment to Australian domestic market

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BlueScope – Recent decisions to transform Australian business

Steadfast commitment to steel production for the Australian domestic market

Exit the business of exporting steel manufactured at Port Kembla:

Involves shut down of one of two blast furnaces (No.6) at PKSW, closure of Western Port Hot Strip Mill and closure of other assets at PKSW and WP

assessed by management to deliver approximately A$225 million EBIT improvement , based on pro-forma adjustments to FY2011 results

implementation to involve engagement with our employees, customers, suppliers, unions, communities, and government to ensure an effective outcome

Integrate Australia’s three businesses into one - BlueScope Australia and New Zealand

Led by Mark Vassella

Improved efficiency and cost competitiveness; focus investment on Australian markets -> improved products and customer service

Decisions driven by significant structural changes in the steel industry and Australian economy, which are fundamental and change our notion of ‘the steel cycle’

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$0

$100

$200

$300

$400

$500

$600

$700

$800

Jan-11Jan-10Jan-09Jan-08Jan-07Jan-06Jan-05Jan-04Jan-03Jan-02Jan-01Jan-00

Indicative Steelmaker HRC Spread (A$/t)SBB East Asia HRC price less cost of 1.5t iron ore fines and 0.71t hard coking coal

A$/t

Source: SBB, CRU, Platts, TSI, Reserve Bank of Australia, BlueScope Steel calculations

Note:• ‘Indicative steelmaker HRC spread’ representation based on simple input blend of 1.5t iron ore fines and 0.71t hard coking coal per output tonne of steel. Chart is not a

specific representation of BSL realised export HRC spread (eg does not account for iron ore blends, realised steel prices etc), but rather is shown primarily to demonstrate movements from period to period arising from the prices / currency involved.

• Re iron ore pricing used: 62% Fe iron ore fines price assumed. Industry annual benchmark prices up to March 2010. Quarterly index average prices from April 2010, lagged by one quarter; FOB estimate deducts appropriate freight cost from CFR China price.

• Re hard coking coal price used: industry annual benchmark prices up to March 2010; quarterly industry prices thereafter.

Decade of rising raw material costs and highly volatile steel prices - only two strong profit contributions from Australian export business

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Annualised Monthly World Crude Steel Production^(M Tonnes)

-Source: WSA ^ Based on the daily production rate for the month-Data to July 2011

Tonnes (M’s)

Monthly Crude Steel Capacity Utilisation*

Utilisation (%)

* Notes – Crude steel capacity utilisation is calculated based on the WSA 66 reporting countries, representing approx 96% of global crude steel capacity; At 85% pricing power shifts towards supplier; *Year to date annualised

1,501

698803

0100200300400500600700800900

1,0001,1001,2001,3001,4001,5001,600

Jan 11Jan 10Jan 09Jan 08Jan 07Jan 06Jan 05Jan 04Jan 03Jan 02Jan 01Jan 00 Jan 12

80

87

75

50%

55%60%

65%70%

75%

80%85%

90%

95%100%

105%110%

115%

Jan 01Jan 00

85%

Jan 12Jan 11Jan 10Jan 09Jan 08Jan 07Jan 06Jan 05Jan 04Jan 03Jan 02

World (Excl China)ChinaWorld World (Excl China)World China

Global steel market dynamics remain challenging in oversupply, steel utilisation outside China remains subdued…

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-

50

100

150

200

250

300

350

400

-

25

50

75

100

125

150

175

200

Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11

62% Fe iron ore f ines indicative contract price (LHS)Hard coking coal, indicative contract price (RHS)

US$/t US$/t

Note:• Iron ore pricing used: 62% Fe iron ore fines price assumed. Industry annual benchmark prices up to March 2010. Quarterly index average prices from April 2010,

lagged by one quarter; FOB estimate deducts appropriate freight cost from CFR China price.• Hard coking coal price used: industry annual benchmark prices up to March 2010; quarterly industry prices thereafter. FOB Australia

Source: CRU, Platts, TSI, BlueScope Steel

Iron Ore Coking coal

… with a quantum jump in iron ore and coal prices over the last three years when price setting also moved from annual to quarterly

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0.40

0.50

0.60

0.70

0.80

0.90

1.00

1.10

Jan-95Jan-94Jan-93Jan-92Jan-91

Avg, 0.88

1.10 (01-Aug)

Avg, 0.69

USD/AUD

Jan-90 Jan-12Jan-11Jan-10Jan-09Jan-08Jan-07Jan-06Jan-05Jan-04Jan-03Jan-02Jan-01Jan-00Jan-99Jan-98Jan-97Jan-96

Monthly Foreign Exchange Rate1st July 1990 – 1st August 2011

Start: $0.79End: $0.79High: $0.83Low: $0.49

Start: $0.79End: $1.10High: $1.10Low: $0.63

Increasing AUD/USD exchange rate affects Australian productivity and price competitiveness

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1.9

2.0

2.1

2.2

2.3

2.4

2.5

2.6

2.7

2011

2.045

2010

2.294

2009

1.958

2008

2.663

2007

2.472

2006

2.236

2005

2.699

2004

2.597

2003

2.468

Fiscal Years

Historical Australian External Salesfrom both CIPA and Australian Distribution & Solutions

Mtpa

Note: External sales EXCLUDE long products sourced from OneSteel by Australian Distribution & Solutions reporting segment

Most important - at 2.6mtpa, BlueScope capacity sufficient to meet all Australian domestic demand

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Western Port• Hot Rolling 1.4mt• Cold Rolling 1.0mt• Metal Coating (3 lines) 830kt • Painting (2 lines) 330kt

Sydney• Painting (1 line) 120kt

New Zealand/Pacific Islands• Iron Sands Mining sites 2• Raw Steel 615kt• Hot Rolling 610kt• Cold Rolling 280kt• Metal Coating 220kt • Painting 60kt• Hollow Sections 45kt• Lysaght sites 4

China• Metal Coating 250kt• Painting 150kt• Lysaght sites 4• PEB sites 3

Brisbane• Painting 95kt

Notes: (1) Tata BlueScope Steel is a 50:50 JV between BlueScope Steel and Tata Steel – MC line & Paint line under

construction.(2) North Star is a 50:50 JV between BlueScope Steel and North Star Steel (subsidiary of Cargill Inc.); BSL equity

share 1.0mt.(3) Indonesia – the expansion (new metal coating line with inline painting) will allow another 120kt of painted capacity

North America• BlueScope Buildings

sites 10• ASC Profiles sites 9• Metl-Span sites 5• BlueScope Water sites 3

Port Kembla• Raw Steel 5.3mt• Hot Rolling 2.9mt • Plate 450kt• Cold Rolling 990kt• Metal Coating (3 lines) 825kt • Painting (1 line) 200kt

North Star (2)

• Raw Steel 2.3mt • Hot Rolling 2.1mt

Australia• Distribution sites 72• Lysaght sites 37• Service Centres 6• Design, Manufacture,

Construct (formerly Emerging Bus.) 12

Fairfield• Painting 110kt

Rancho Cucamonga• Metal Coating 220kt• Painting 100kt

Kalama• Cold Rolling 455kt• Metal Coating 235kt• Painting 110kt

India (1)

• Metal Coating (+250kt)• Painting (+150kt)• Lysaght / PEB Sites 4

Thailand• Cold Rolling 360kt• Metal Coating 324kt• Painting 75kt• Lysaght sites 4• PEB sites 1• Ranbuild outlets

Malaysia / Singapore• Metal Coating 168kt• Painting 75kt• Lysaght sites 5• PEB sites 2• Ranbuild outlet Indonesia

• Metal Coating 273kt• Painting 40kt (3)

• Lysaght sites 4 (+1)• PEB sites 1• Ranbuild outlets

Vietnam• Metal Coating 130kt• Painting 50kt• Lysaght sites 1• PEB sites 1• Ranbuild outlets

Australia’s restructure complements successful transformation programs across BlueScope’s footprint ...

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Removing barriers to Australian steel industry competitiveness Removing barriers to Australian steel industry competitiveness is critical in this permanently changed world landscapeis critical in this permanently changed world landscape

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Opportunity for Government – productivity improvement is key

• Carbon TaxSTP: an effective outcome for BlueScope and OneSteel for first 4 yearsCertainty beyond that – linked to international steel industry action

• Anti-dumping

Welcome system reforms announced – but must have teeth

Need to ensure implemented in a timely manner in accordance with stated intentions

• Major projects and local procurement

Local content requirements need to be more than tokenism – but not protectionism

Aust Industry Participation Plans (AIPP) need to be more robust and enforced by Government

Need mechanism to ensure Australian standards are met and that local steel is not unfairly specified out of major projects.

Government policy needs to support competitiveness and ensure Australian steel gets a “fair go”

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Restructuring is just one element of BlueScopeRestructuring is just one element of BlueScope’’s transformations transformation

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15%

15%

10%60% Building & construction

Ag & mining

ManufacturingAuto

40%

35%25%

Australia New Zealand

10%

35%30%

25%

North Star USA

1%

99%

China

10%

90%

ASEAN

100%

Coated & Building NA

On the international stage, BlueScope is a steel company focused primarily on building products and solutions (indicative FY2010)

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Globally

• Continue to grow our presence in B&C markets, in particular steel PEBs

Securing our future requires focusing on all our domestic markets

Asia region

• Restructured business now delivering strong returns

• With material upside as we grow sales from our existing investments

North America region

• Expansion opportunity at North Star

• Buildings business restructured - material earnings upside when US economy recovers

Australia & NZ region

•Continue to focus capability on our domestic markets, iron sands advantage and coated steel product development

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Delivering on our commitment to Australia - what else we’re doing to strengthen our business

• Investment in next generation technologyNext Generation ZINCALUME®Nippon JV

• Maximise steel content in the Australian domestic market. Promote:

Benefits of Australian steel over imports and competing materials

‘Green steel credentials – especially within building industry

Seeding new products supplied, wherever commercially viable, by local manufacturers

In all our domestic markets, our long-term aim is to maximise local content, quality and reliability of supply to channel

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Committed to the Australian domestic market and Australian steel manufacturing ... Transforming ... Building a sustainable future ...