3.  Business Lines

  Company’s Product Lines

1.  Company’s Products

  Major products of NSM are hot rolled coils and finishing products
  which are categorized into lines as follows.

a.  Hot Rolled Coil

b.  Tempered Hot Rolled Coil

c.  Hot Rolled Pickled & Oiled Product - during 2005

d.  Galvanised Hot Roll – during 2006

e.  Galvanised Cold Roll – during 2006

f.  Galvanneal Sheet – during 2007

  These products are utilised in the following downstream industries:

+----------------------------------+-----------------------------------+
|   Products                       |   End Applications                |
+----------------------------------+-----------------------------------+
|   Hot Rolled Coil                |   Engine tube, Electrical tube,   |
|                                  |   Water pipe, Construction, C     |
|                                  |   Channel, Platform scaffolding,  |
|                                  |   Power pole, Gas pipe            |
+----------------------------------+-----------------------------------+
|   Tempered Hot Rolled Coil       |   Agricultural tools, General     |
|                                  |   construction, Structural steel  |
|                                  |   sheet, Gas cylinder             |
+----------------------------------+-----------------------------------+
|   Hot Rolled Pickled & Oiled     |   Chassis, Car wheel, Compressor, |
|   Product                        |   Refrigerator structure ,        |
|                                  |   Microwave structure             |
+----------------------------------+-----------------------------------+
|   Galvanised Hot Roll*           |   Construction, Steel-structured  |
|                                  |   house, Rail barrier, Roof,      |
|                                  |   Fence, Wall                     |
+----------------------------------+-----------------------------------+
|   Galvanised Cold Roll           |   Roof, Wall, Furniture, Box,     |
|                                  |   Computer, Refrigerator body     |
+----------------------------------+-----------------------------------+
|   Galvanneal Sheet*              |   Car body, platform &            |
|                                  |   accessories                     |
+----------------------------------+-----------------------------------+

  * Currently there are no producers for these products

  BOI Privileges

The Board of Investment has approved the granting of promotional
privileges to the Company by issuing certificates for the manufacturing
of Hot Rolled Coils (BOI privilege for "CSP" project), Direct Reduced
Iron (BOI privilege for "DRI" project) and Cold Rolled/Coated products
(BOI privilege for "PGL" Project). The promotional privileges include
exemption for import duties of certain machinery permitted by the Board
of Investment and corporate income tax for the net income arising from
the promoted activities for eight years from the date when revenue is
first earned from the promoted business.

During 2004, the Company applied for the extension of BOI privileges
approved by the Board of Investment. The Board of Investment has granted
the extensions of the privileges as follows;

-   BOI privilege for "DRI" up to April 24, 2005

-   BOI privilege for "PGL" up to March 13, 2005

Currently, the extension of the BOI privilege for CSP is under
consideration of the Board of Investment.

1.  Marketing

  Product Strategy

  The steels used in Thailand are imported in great volume. The Company
  has therefore a great opportunity to propose its quality products to
  local customers as substitution for the imports. The local market is
  expected to show a huge demand in the foreseeable future, to support
  the growth of the Company. Moreover, demand in the overseas markets is
  also on the increase.

  Since resumption of production in early 2004, the Company has planned
  to add the production and sales of value added products to those
  commodity grade products. The product expansion not only brings more
  choices to the customers but it can enhance sales efficiency and
  profit margins.

  The overall product strategy for the Company is as follows.

a.  Concentrate on commercial grade products domestically

b.  Offer a range of light gauge products (1.2-3.0 mm)

c.  Capitalise on the skinpass services to increase volume

d.  Penetrate into pickled and oiled products for automotive and
    electrical appliance industry

e.  Produce hot rolled for cold rolled products market

f.  Move to higher value added products - high strength low alloy
    (HSLA), pickled and oiled steel sheet (P&O), cold rolled galvanized
    (CRG), cold rolled galvannealed (CGA) - during 2007

  Pricing Strategy

a)  Sell standard gauge products at competitive price, to compete with
    domestic and import markets.

b)  Focus on achieving the best return from advanced technology and as a
    low cost producer, with high value-added products.

c)  Offer thin gauges at 1.2-15 mm thickness, from 1.1-1.6 meter width
    (less thickness, more the value-added or higher price)

  Target Groups

  Target customers can be divided into three main groups.

1)  Steel Service Centre, purchases hot-rolled and cold-rolled steel and
    cut to various sizes or model in various forms for sale to users.
    Thailand has about 15 such centers with production of 1.26 million
    tons per year.

2)  Pipe Maker, is, among other things, the factory producing steel
    pipes of various sizes for piping work for export. Thailand has
    about 30 makers with capacity of 1.85 million tons per year.

3)  Other direct users are the manufacturers of auto parts and
    electrical appliances, with demand of about 455,000 tons per year.

  Note: The figures for the customers’ demand are based on the
  information from Iron & Steel Institute of Thailand (ISIT)

  Since the restart, the Company had a policy to distribute its products
  to cover the three target groups. Initially the Company relied mostly
  on major customers with their high volume orders to support growing,
  continuous production. Once the Company reaches steady production
  followed by expansion towards the finishing products, the customer
  base will be expanded. Dependence on any particular customers will
  then likewise be reduced.

  Selling Channels

  For domestic sales the Company has two selling channels as follows.

1)  Direct Sale

  The Company plans to sell directly to the steel service centres, pipe
  makers, auto part manufacturers, and electrical appliance
  manufacturers. It is expected that such sales will be roughly 60% of
  total local sale volume.

2)  Wholesaler

  For minor customers, the Company will sell through wholesale dealers.
  This reduces the burden on hiring sales staff and marketing cost and
  will also help the Company to share the credit risk with the dealers.
  This will account for approximate 40% of total sale volume in the
  country.

  For export, the Company sells mainly through agents or wholesale
  dealers, amounting to 90% of export volume. The other 10% will be
  handled by the Company.

  Marketing Strategy

a.  Honour every customer, especially the ones with high purchase volume
    to help smooth and sustain the production.

b.  Introduce the new skin pass quality products to domestic as well as
    seeking cooperation from steel service centres from foreign
    countries.

c.  Penetrate into stamped parts markers in the automotive and air
    compressor industries.

d.  Concentrate on higher value added grades.

e.  Try to penetrate pickled and oiled products for the fast growing
    automotive industry.

f.  Penetrate hot rolled for cold rolled products market.

g.  Establish product quality through customer satisfaction, for
    instance, via ISO9000 or ISO 9001 : 2000

  Steel Industry in 2004

  World Steel Consumption

  CRU Monitor Report stated that world steel consumption through the
  third quarter of 2004, January to September which is the latest
  available information, was 683 million tons, increased from the same
  period of last year by 7.43%

  Steel consumption of Asian countries was 292 million tons, 43% of
  global consumption, with China at 187 million tons (64% of Asian’s).
  There was a 3% increase in China’s steel consumption rate to the third
  quarter of 2004 compared to the same period of previous year.

  During 2004 the Chinese government’s policy sought to slow the
  economic growth and infrastructure projects. Steel consumption was
  decreasing in each quarter. In the meantime, several mills speeded up
  production, leading to lowering of the steel price locally and edging
  China to enhance export.

  In the first 10 months of 2004, China had a decreasing growth at 14%
  whereas the US grew at 12% (from negative in same period last year).

+-----------+-------+-------+------------+--------+--------+---------+
| World     |       |       |            |        | Unit:  | 1,000   |
| Steel     |       |       |            |        |        | tons    |
| Co        |       |       |            |        |        |         |
| nsumption |       |       |            |        |        |         |
+-----------+-------+-------+------------+--------+--------+---------+
|           | Q3    | Q3    | %          | Total  | Total  | %       |
|           |       |       |            |        |        |         |
|           |       |       |            | J      | J      |         |
|           |       |       |            | an-Sep | an-Sep |         |
+-----------+-------+-------+------------+--------+--------+---------+
|           | 2003  | 2004  | Change     | 2003   | 2004   | Change  |
+-----------+-------+-------+------------+--------+--------+---------+
| USA       | 2     | 3     | 20.0%      | 76,350 | 85,810 | 12.39%  |
|           | 5,865 | 1,047 |            |        |        |         |
+-----------+-------+-------+------------+--------+--------+---------+
| Canada    | 3,718 | 3,837 | 3.0%       | 11,841 | 12,216 | 3.16%   |
+-----------+-------+-------+------------+--------+--------+---------+
| North     | 2     | 3     | 18.0%      | 88,192 | 98,027 | 11.15   |
| America   | 9,584 | 4,884 |            |        |        |         |
+-----------+-------+-------+------------+--------+--------+---------+
| Europe    | 3     | 3     | 9.0%       | 1      | 1      | 4.99%   |
|           | 2,153 | 5,167 |            | 06,486 | 11,803 |         |
+-----------+-------+-------+------------+--------+--------+---------+
| Japan     | 1     | 1     | 7.0%       | 51,848 | 52,962 | 2.15%   |
|           | 6,995 | 8,150 |            |        |        |         |
+-----------+-------+-------+------------+--------+--------+---------+
| China     | 5     | 6     | 3.0%       | 1      | 1      | 14.08%  |
|           | 9,865 | 1,573 |            | 63,862 | 86,937 |         |
+-----------+-------+-------+------------+--------+--------+---------+
| South     | 1     | 1     | 2.0%       | 33,166 | 34,140 | 2.94%   |
| Korea     | 1,186 | 1,464 |            |        |        |         |
+-----------+-------+-------+------------+--------+--------+---------+
| Taiwan    | 4,821 | 5,789 | 20.0%      | 15,315 | 17,685 | 15.48%  |
+-----------+-------+-------+------------+--------+--------+---------+
| Asia      | 9     | 9     | 4.0%       | 2      | 2      | 10.42%  |
|           | 2,867 | 6,977 |            | 64,191 | 91,725 |         |
+-----------+-------+-------+------------+--------+--------+---------+
| Russia    | 9,118 | 9,926 | 9.0%       | 27,422 | 29,763 | 8.54%   |
+-----------+-------+-------+------------+--------+--------+---------+
| Brazil    | 4,094 | 4,638 | 13.0%      | 12,071 | 13,385 | 10.88%  |
+-----------+-------+-------+------------+--------+--------+---------+
| Others    | 4     | 4     | -8.0%      | 1      | 1      | 0.65%   |
|           | 7,508 | 3,627 |            | 37,666 | 38,567 |         |
+-----------+-------+-------+------------+--------+--------+---------+
| Total     | 21    | 22    | 5.0%       | 6      | 6      | 7.43%   |
|           | 5,324 | 5,220 |            | 39,029 | 83,267 |         |
+-----------+-------+-------+------------+--------+--------+---------+

  Source: CRU Monitor Report

  China, a major importer in the past, has since become an exporter.
  Semi-finished and finished product import decreased from 31 million
  tons in Jan-Sep 2003 to 26 million tons in 2004. Export increase was
  169% for semi-finished steel and 77.8% for finished steel for Jan-Sep
  2004. However, iron ore import volume grew 38.5%.

  Price of Raw Material and Steel Products

  Scrap prices in 2004 fluctuated enormously, from the US$ 175-196 per
  ton lowest in June to US$ 250-265 in July. These rose to US$ 280-295
  in November.

  In late 2004, billet and slab prices were declining slightly. November
  price was US$ 375 per ton billet and US$ 515 per ton slab among the
  former Soviet countries. Cold rolled slab remained constant at US$ 585
  per ton, but with potential increase due to the lack of good quality
  hot rolled slab for cold rolling.

  Thai Steel Industry Overview in 2004.

  There was a positive trend in the steel industry in the first quarter
  of 2004 following the government’s drive from the previous year to
  boost domestic steel consumption. As China slowed its growth and
  infrastructure projects, local consumers anticipated a declining steel
  price. From the second quarter domestic inventory built up and price
  of all steel products dropped.

  By June 2004, steel prices and consumption had regained. Demand of raw
  materials and finished products also returned. Transportation cost
  crept up due to heavier demand on the vessels. By November raw
  material price declined in anticipation that finished products price
  was to decrease in response to the light year-end demand. The said
  volatility depressed long product prices, but less effect was felt on
  flat products. Cold rolled products, on the other hand, continued to
  show price increase due to lack of good quality hot rolled coil as raw
  material for other downstream industries.

+---------------+------+------+------+------+-------+-------+-------+
| Consumption   |      |      |      |      |       | Unit: |       |
| of long and   |      |      |      |      |       | 1,000 |       |
| flat products |      |      |      |      |       | tons  |       |
| in Thailand   |      |      |      |      |       |       |       |
+---------------+------+------+------+------+-------+-------+-------+
| Year          | 1998 | 1999 | 2000 | 2001 | 2002  | 2003  | 2004  |
+---------------+------+------+------+------+-------+-------+-------+
|   Production  | 2    | 3    | 4    | 4    | 6,747 | 7,497 | 9,009 |
|   Capacity    | ,780 | ,237 | ,451 | ,652 |       |       |       |
+---------------+------+------+------+------+-------+-------+-------+
|   Import      | 2    | 3    | 3    | 4    | 4,549 | 4,925 | 5,355 |
|               | ,512 | ,832 | ,885 | ,201 |       |       |       |
+---------------+------+------+------+------+-------+-------+-------+
|   Export      | 1    | 1    | 1    | 1    | 1,247 | 1,455 | 1,646 |
|               | ,455 | ,109 | ,574 | ,246 |       |       |       |
+---------------+------+------+------+------+-------+-------+-------+
|   Actual      | 3    | 5    | 6    | 7    | 1     | 1     | 1     |
|   Consumption | ,837 | ,960 | ,762 | ,607 | 0,049 | 0,967 | 2,718 |
+---------------+------+------+------+------+-------+-------+-------+

Source: Iron and Steel Institute of Thailand (ISIT)

  Long and flat products in Thailand has a 20% production increase as a
  result of the resumption of the NSM’s plant. Still, higher demand and
  price in both local and overseas market pushed many local steel mills
  to expand their production capacity. 9% of good quality steel was
  still imported as the locals are not capable of production. 13% or 1.6
  million tons of hot rolled coil and cold rolled coil was exported to
  USA and Canada while there was 16% increase of domestic consumption.

  Thai Flat Product Industry in 2004.

  Flat product consumption for Thailand in 2004 was 7.15 million tons,
  12% over last year’s. Domestic production increased enormously by 17%
  or 3.90 million tons. Export and Import rose year on year by 20% and
  9%, respectively. High quality product imported was mainly from Japan.

  ---------------- -------- ------- ------- ------- ------- ------- -------
  Consumption of                                            Unit :  
  flat product in                                           1,000   
  Thailand                                                  tons    

  Year             1998     1999    2000    2001    2002    2003    2004

  Production       896      1,560   2,241   1,887   2,972   3,327   3,905
  Capacity                                                          

  Import           2,046    3,272   3,285   3,645   3,773   4,153   4,544

  Export           793      682     1,145   697     908     1,077   1,292

  Actual           2,149    4,150   4,381   4,835   5,837   6,403   7,157
  Consumption                                                       
  ---------------- -------- ------- ------- ------- ------- ------- -------

  Source: Iron Source: Iron & Steel Institute of Thailand

  Hot Rolled Product

  Local consumption of slab in 2004 was 600,000 tons (or 11% of the 5.6
  million tons of hot rolled consumption). Production capacity increased
  37% over last year. Import of slab increased 33% while export, mainly
  to the USA and Italy, increased 56%.

  Production volume of hot rolled coil rose to 3.4 million tons or 17%,
  reflecting the higher local consumption and export volume. 2004 export
  was 585,065 tons, mostly to the USA.

  In 2004, import growth for hot rolled coil was constant at around 2.2
  million tons. Imported high quality hot rolled coil for cold rolling
  decreased 3.5% to be 1.46 million tons. Imported pickled & oiled hot
  rolled increased by 496,012 tons or 12% with the growing local
  automotive and electrical appliance industries.

+-------------------------------+---------+--------------+------------+
| Overall hot rolled coil       |         |              |            |
| industry in 2004              |         |              |            |
+-------------------------------+---------+--------------+------------+
|                               | Market  | Source       |            |
|                               | Size    |              |            |
|                               |         | (unit: 1,000 |            |
|                               |         | tons)        |            |
+-------------------------------+---------+--------------+------------+
|                               |         | Domestic     | Import     |
|                               |         | Producers    |            |
+-------------------------------+---------+--------------+------------+
| Hot rolled coil               | 2,791   | 2,393        | 398        |
+-------------------------------+---------+--------------+------------+
| Hot rolled coil for cold      | 2,260   | 800          | 1,460      |
| rolling                       |         |              |            |
+-------------------------------+---------+--------------+------------+
| Pickled & oiled hot rolled    | 596     | 100          | 496        |
| coil                          |         |              |            |
+-------------------------------+---------+--------------+------------+
| Total – Domestic market       | 5,647   | 3,300        |            |
+-------------------------------+---------+--------------+------------+
| Export                        |         | 613          |            |
+-------------------------------+---------+--------------+------------+
| Total – Domestic market and   |         | 3,905        | 2,354      |
| Import                        |         |              |            |
+-------------------------------+---------+--------------+------------+
| Note: Estimated Company       |         |              |            |
| figures                       |         |              |            |
+-------------------------------+---------+--------------+------------+

  Coated Products

  11% increase in galvanized products consumption compared to 2003
  derived from growth in construction, automotive and electrical
  appliance industries. Only 1% increase was made in production volume
  owing to insufficient raw material and nearly full production capacity
  experienced by most of the mills.

  Import of galvanized products increased by 686,554 tons or 16%. This
  consisted of 20% or 551,212 tons of hot dipped galvanized products and
  1% of electro-galvanized products. 2004 export of hot dipped
  galvanized and electro-galvanized products mainly to Hong Kong and
  Myanmar declined 2% and 9%, respectively, comparing to 2003, or 96,851
  tons.

  Consumption over 2003 of tin plate and other coated products improved
  by 21% and 59%, respectively.

  Steel Industry Outlook

  China is expected to produce 320 million tons of crude steel and 345
  million tons of finished products in 2005, 17.5% increase from 2004.
  272.4 million tons of crude steel were produced, 23.2% increase from
  2003. Low and medium quality slab and hot rolled coil become over
  supply as several new production lines in China had commenced it
  production since the end of 2003.

  With the strong EURO the Europeans made huge order at the end of 2004.
  It is expected that purchasing will fall at the beginning of 2005 and
  resume by midyear.

  Import of steel into USA will begin to decline since large amount was
  imported during 2004. Price of steel produced in USA might become
  cheaper than import’s, although it is likely that the US government
  would decrease its import tax.

  Competitive Situation

  Domestic Competition

  a) Hot-rolled coil producers:

  (i) Sahaviriya Steel Industry (SSI)

  (ii) NSM

  (iii) G-Steel (formerly Siam Strip Mill, SSM)

  Hot-rolled sheet producers:

  (i) LPN Plated Mill (LPN)

  (ii) Sahaviriya Plate Mill (SPM)

  In 2004, total production capacity was 6.4 million tons. SSI, with 2.4
  million tons capacity, expected to produce 2 million tons or 83% of
  capacity. G-Steel, at 1.5 million tons capacity, expected to produce
  0.9 million tons or 60% of capacity. NSM, at 1.5 million tons
  capacity, produced 0.5 million tons or 33% of capacity.

  2004 sales for NSM were 464,000 tons. 66% were domestic sales mainly
  to pipe makers and steel service centres. 34% were export to Italy,
  Spain, USA, Vietnam, Indonesia and Korea.

  Since late 2003 hot rolled coil price and demand of domestic and
  overseas market remained high until the first quarter of 2004. It was
  weakened in the second quarter when China launched a policy to slow
  down import of steel to sustain economic growth and infrastructure
  projects.

  In the second quarter, decreasing purchasing volume for the local
  consumers pushed local producers to turn to other markets. Export
  proportion increased. Export orders were mostly forward sales,
  especially to the European countries and USA. When China started
  importing again prices of good quality hot roll for cold roll produced
  locally rose to US$600-700 per ton.

  The economy slowed again in November 2004. Local producers held export
  orders in hand, expecting that demand from domestic market to be
  increasing again after the general election scheduled in February
  2005.

  b) Coated Product Producers

  (i) Bluescope

  (ii) Thailand Iron Works (TIW)*

  (iii) Sangkasi Thai (STC)

  (iv) Sangkasi Far-East (FEIW)*

  (v) Bangkok Steel Industry (BSI)

  (vi) Thai Coated Steel Sheet (TCSSC)*

  (vii) Thai Tinplate MFG (TTMFG)*

  (viii) Siam Tinplate (STPC)*

  *These producers are joint ventures with Japanese producers or
  traders.

  During 2004, NSM had not produced any coated products.

  Direct competitors of the Company on coated products are only BSI and
  Bluescope since other producers produced for other end applications,
  such as galvanized roofing sheet.

  International Competition

  Most of the steel imported into Thailand is from high-cost integrated
  steel producers with lengthy delivery schedules. The Company believes
  that thin-slab/flat-rolled steel “mini-mills” can compete favourably
  against integrated steel producers in terms of cost, quality and
  timeliness of delivery while producing superior financial results.

  NSM’s commercial quality steel products are thus expected to be an
  important import substitution product. Competition against imports is
  not a significant issue. At present, the Thai government had issued
  anti-dumping measures effective until 22 May 2008. Nonetheless,
  importers still look for hot rolled products to import from other
  countries, such as China, who are not included in 14 countries under
  anti-dumping.

  Over the last 10-20 years, mini-mills have been developed in many
  countries. Most are believed to sell the majority of their output to
  their respective domestic market. There is no guarantee that
  competition might not accelerate as a result of excess capacity
  created by other mini-mills or improving traditional steel makers.

  Government Regulations

  To protect local producers, the Thai government introduced
  anti-dumping measures on hot rolled coils, cold rolled coils and
  stainless steel products.

  The table below illustrates the existing import duties and
  anti-dumping measures issued by Ministry of Commerce for the Thai
  steel market, effective from 23 May 2003 to 22 May 2008.

Existing Thai Government Import Duty and Antidumping Measures

+---------------------------+---------+--------------+----------------+
| Product                   |   Duty  |              |                |
|                           |         | Anti-Dumping |                |
|                           |         |   ⁽¹⁾        |                |
+---------------------------+---------+--------------+----------------+
|   Scrap                   |   1%    |              |                |
+---------------------------+---------+--------------+----------------+
|   Pig Iron                |   1%    |              |                |
+---------------------------+---------+--------------+----------------+
|   Slab                    |   1%    |              |                |
+---------------------------+---------+--------------+----------------+
|   Hot-rolled products     |   10%   |   Japan      | 36.25%         |
|   (coils/plate)           |         |              |                |
+---------------------------+---------+--------------+----------------+
|                           |         |   South      | 128.11%        |
|                           |         |   Africa     |                |
+---------------------------+---------+--------------+----------------+
|                           |         |   Russia     |   24.20-35.17% |
+---------------------------+---------+--------------+----------------+
|                           |         |   Kazakhstan | 109.25%        |
+---------------------------+---------+--------------+----------------+
|                           |         |   India      | 26.81-31.92%   |
+---------------------------+---------+--------------+----------------+
|                           |         |   Korea      | 13.96%         |
+---------------------------+---------+--------------+----------------+
|                           |         |   Taiwan     | 3.45-25.15%    |
+---------------------------+---------+--------------+----------------+
|                           |         |   Venezuela  | 78.44%         |
+---------------------------+---------+--------------+----------------+
|                           |         |   Argentina  | 37.94-53.09%   |
+---------------------------+---------+--------------+----------------+
|                           |         |   Ukraine    | 30.45-67.69%   |
+---------------------------+---------+--------------+----------------+
|                           |         |   Algeria    | 33.26%         |
+---------------------------+---------+--------------+----------------+
|                           |         |   Indonesia  | 24.48%         |
+---------------------------+---------+--------------+----------------+
|                           |         |   Slovakia   | 51.95%         |
+---------------------------+---------+--------------+----------------+
|                           |         |   Romania    | 27.95%         |
+---------------------------+---------+--------------+----------------+
|   Cold-rolled products    |   12%   |   Russia     | 35.80-64.70%   |
+---------------------------+---------+--------------+----------------+
|                           |         |   Kazakhstan | 26.36%         |
+---------------------------+---------+--------------+----------------+
|   Coated products         |   15%   |              |                |
+---------------------------+---------+--------------+----------------+
|   Stainless               |   12%   |   Japan      | 0-50.92%       |
+---------------------------+---------+--------------+----------------+
|                           |         |   Europe     | 10.02-32.98%   |
+---------------------------+---------+--------------+----------------+
|                           |         |   Taiwan     | 4.84-33.99%    |
+---------------------------+---------+--------------+----------------+
|                           |         |   Korea      | 50.99%         |
+---------------------------+---------+--------------+----------------+

  Sources: Iron & Steel Institute of Thailand, BOI, and the Ministry of
  Commerce

  Notes: (1) Preliminary anti-dumping (“AD”) measures for hot rolled
  coil imposed by the Ministry of Commerce issued on 23 May 2003 for a
  period of five years and will expire on 22 May 2008.

  Local producers are protected by the anti-dumping measures. Since the
  measures were introduced there has been a reduction in imports of hot
  rolled products and localized shortages. Local producers worked to
  satisfy domestic demand. Imports of high quality steel products, those
  required for the automotive and electrical appliance including cold
  rolled and coated products, are unaffected as producers are producing
  at full capacity.

  Non-Tariff Measures

  Non-tariff measures are also expected to be introduced to create “an
  equitable steel market” and to protect Thai steel producers. These
  measures include the implementation of mandatory Thai industrial
  standards for steel products. This is to prevent any secondary
  products of these grades being sold into the market. Importers need to
  apply for a license to import specific products. Products that are
  covered in this scheme include galvanized sheets, hot rolled coils and
  cold rolled coil.

3.  Procurement of Products

  The Company’s Plants Present Status

  The Company houses three production plants, namely, the Hot Strip
  Mill, Direct Reduced Iron (DRI) Facility and Finishing Facility.

  The Hot Strip Mill is a flat product mini-mill, consisting of a
  completed Compact Strip Mill and installed machinery. The design
  incorporates a single-strand thin-slab caster and a six-stand
  continuous hot strip mill with coilers. This Compact Strip Mill is in
  turn fed by an Electric Arc Furnace (EAF) equipped with a continuous
  scrap preheating (ConSteel^(®)) feeder.

  For the DRI Facility, upon successfully rampering up the hot rolled
  production facility, the Company is going to reduce its dependence on
  imported iron scrap and pig iron and to improve the product quality
  for higher value added application products, for which the Company
  will need input of DRI material. The Company is currently considering
  and negotiating with the suppliers and involved parties to assess the
  investment value for completion of the suspended DRI project, in which
  the Company already invested Baht 2,038.77 million or US$ 50 million.

  In the Finishing Facility, the construction of a Recoil Temper Mill
  (RTM) has been completed and the mill put into operation during 2004.
  The Company plans to complete construction of the balance of the
  Finishing Facility, the Pickled and Oiled and the Galvanising lines,
  within two years.

  When the Finishing Facility is complete, the Company plans to produce
  various value added products from hot strips. These will include
  temper rolled products, edge trimmed or sub-slit coils, pickled and
  oiled and galvanized coils.

  The independent asset appraisal undertaken by American Appraisal
  (Thailand) Limited summarized the completion status of three
  facilities as of 15 December 2003 as follows.

  Note: The independent asset appraisal will be conducted for three
  facilities during 2005.

  Update status for each of the Finishing Facility lines is as follows.

1)  Recoil Temper Mill

  Installation, test run, and commissioning is in process with
  satisfactory results. The test run has commenced since July 2004 with
  the capacity of more than 600,000 tons per year.

2)  Push-Pull Pickling Line

  Upon finalization of contract with the equipment supplier,
  construction and erection contractor during 2004, currently the supply
  of machinery and construction process is under way. The project is
  expected to be completed by middle of 2005 and start the commissioning
  test run during the second half of 2005.

3)  Galvanising/Galvannealing Line

  Contract with machine supplier has already been signed since April
  2004 for the remaining parts and equipments necessary to complete the
  entire line. However, the Company is currently in the process of
  amending the CGL contract to ensure its applicability to current
  customer requirement which will help the Company to expand its market
  base further. The project is expected to be completed during 2006.

  []

  []

  NSM Production Process

  NSM hot rolled coil line utilises the mini-mill production method
  rather than a blast furnace based integrated production system. It
  further incorporates a number of other unique competitive advantages.
  Unlike most other mini-mills, NSM’s melting plant incorporates a
  continuous scrap preheating and charging system, the ‘ConSteel^(®)
  Process’, developed by Intersteel Technology Inc, and a thin slab
  caster developed by SMS-Demag.

  The caster directly, via a tunnel furnace, feeds a six-stand hot strip
  mill equipped with laminar flow cooling bed and coilers. The
  combination of the caster and hot mill is referred to as the Compact
  Strip Process (CSP) line.

  The ConSteel^(®) Process has been installed in various plants in the
  USA, Japan and Italy, and likewise the CSP line. Advantages of such
  technologies are as follows.

  1. The ConSteel^(®) technology reduces time and energy losses relative
  to conventional EAF’s (Electric Arc Furnaces’). The furnace roof
  remains closed so power does not have to be taken off to charge scrap
  via overhead baskets.

  The scrap, which has been preheated by counter-current flow of
  off-gases from the EAF, is continuously fed into the molten raw liquid
  steel heel in the EAF. Thus, NSM can maintain much more of a
  continuous power-on state and a large heel of low phosphorus raw
  liquid steel.

  This continuous operation keeps NSM’s steel making costs, especially
  energy costs, below those typically incurred in traditional
  mini-mills.

  2. Development of thin-slab casting, with its lower capital investment
  requirement, has allowed the entry of the mini-mills into the
  flat-rolled segment of the steel market.

  3. Ability to produce flat-rolled steel from a thinner slab greatly
  reduces costs. Firstly, the energy in the slab is completely conserved
  by charging direct to a tunnel furnace whilst the slab is still over
  1000 °C. Secondly, far less reduction is necessary in the rolling mill
  because the coil is rolled to gauge from 50- to 60-mm thick slab
  compared to a normal slab of 200- to 250-mm thickness. These measures
  save greatly on energy, roll costs and maintenance.

  4. The continuous nature of the process means one can go from raw
  material to finished hot rolled coil in less than three hours. There
  is almost no work-in-process.

  ConSteel^(®) and thin slab casting are amongst the most significant
  advances in steel production in the last 40 years.

  Hot roll coils will be independently further processed to produce
  value added Finishing Facility products from,

  1. Recoil Temper Mill,

  2. Push-Pull Pickle Line, and

  3. Galvanising Line.

NSM Position after Re-start

  Raw Material

  The NSM steel making process is dependent on imported scrap and pig
  iron which are raw materials representing approximately 54% (2005
  budget basis) of the fully loaded cost per tonne of hot-rolled coil.
  While there are many grades of scrap, the two principal
  classifications are Obsolete scrap and Prompt industrial scrap.

  Obsolete scrap is derived from discarded goods. It can be processed
  by, for example, shredding or shearing but none is free of residual
  “tramp” element contamination. Such scrap is the bulk of material
  available internationally so is a necessary ingredient for
  flexibility. The Company, however, needs to exercise care and close
  control when utilising this type of scrap.

Prompt industrial scrap is produced as a by-product of various metal
working operations. Steel fabricators, machine shops, stamping plants
and auto production operations, such as those being built and operated
in close proximity to NSM, all generate this type of scrap material.
Prompt industrial scrap is the most desirable for EAF steel making due
to the traceability of its origin.

Prompt industrial scrap utilised as scrap is further classified into
three categories as follows.

1. Approximately 15% of prompt industrial scrap is in the form of
turnings. Unfortunately, most turnings are contaminated with high levels
of sulphur containing oils and are high in alloy content. As such they
do not represent a good source of low-residual material. NSM avoids
purchasing such material.

2. Plate and Structural (P&S) scrap generated from fabrication
operations amounts to approximately 10% of prompt industrial scrap. P&S
prompt industrial scrap is primarily from products originally made from
obsolete scrap and, as such, does not normally represent a good source
of low-residual material.

3. The remaining 75% of prompt industrial scrap is in the form of
bundles, clips and bushelling, all of which are usually from products
originally made from cold rolled steels which are normally low in
residuals.

[]

  NSM 2004 Feed Mix

In the first year of operation, NSM utilized 26.6% of its charge from
imported processed and unprocessed scrap from obsolete material. A
further 25.3% came from imported pig iron which is very clean material
and has the added advantage of providing energy in the form of dissolved
carbon in its chemical make-up.

45.5% of input was domestically sourced scrap, some prompt industrial
and some obsolete. The small balance of 2.6% was made up by returns
arising from the process, such as tundish residues, ladle skulls, caster
crops and sample remnants.

Much has been learned in our first year of operation about blending the
materials to achieve a balanced combination of quality and performance
at minimum cost. This know-how will be carried forward into procurement
policy and manufacturing capability in 2005.

  Other raw materials

  Other than scrap steel, the major consumables include fluxes and
  alloys for the production of basic hot rolled coils. CCL’s feasibility
  study recognised that NSM’s estimates were broadly in line with
  international references but pointed out that the NSM estimate for the
  cost of locally supplied burnt lime and dolomite was around 50% lower
  than typical western prices. Alloy costs for the year varied between
  US$11 and US$19 per tonne of coil with an overall average of US$15.6
  or 3.6% of total costs.

  Procurement of Raw Materials

  Scrap and Pig Iron

  Some of our ferrous scrap materials are obtained from the domestic
  market. Thailand, however, does not generate sufficient scrap for her
  production capacity. “Top-up” raw materials of scrap and pig iron are
  thus obtained from abroad.

  The Company used to buy from major suppliers, such as, Commercial
  Metal Company (CMC) and New Ferrous Trading AG during 1998. For our
  first year after restart, we have purchased from the above plus US
  Ferrous, Sims, Hugo Neu and others.

  Fluctuation of Raw Material Price

  Price of the major raw materials, scrap and pig iron, during our first
  year after restart has been at an unprecedented high and has also been
  subject to enormous and rapid swings. This has been driven by the high
  growth rates in China who has been importing large amounts of raw
  materials leading to supply shortages in the rest of the world.

  The growth in China seems set to continue and the future pricing of
  these steelmaking raw materials is likely to remain volatile. The same
  trends as the C&F prices for materials imported into South Korea and
  Japan have been seen in pricing indicators all over the world – Metal
  Bulletin - Rotterdam and US East coast prices; US Composite; Japan
  Domestic and Export indicators, etc, and our own domestic pricing in
  Thailand.

  Production Development

  Throughput has developed well over expectation through the first year
  of operation. The following chart tracks the monthly production of hot
  rolled coil tonnage.

  []

  NSM 2004 Production Tons

  During the first half of the year the Company was constrained by the
  number of trained operating staff available. The plant thus operated
  only in off-peak power hours only. The original plan was to move into
  24 hours per day, 7 days per week during June. In the event, this was
  held back until August. This was for three reasons:

-   Recruiting of sufficient suitable staff for continuous cover took
    longer than anticipated.

-   Sales were slow to develop and finished goods inventory became
    excessive.

-   Maximum demand cost incurred by operating on-peak is substantial.
    This also affects power charges for the following 12 months.

  The Company therefore needed to be sure the production levels could be
  sustained to adequately dilute this cost going forwards.

  The plan was modified accordingly and the Company went into 24 hour 7
  day for the first time in August. Following this, machine availability
  and efficiencies have been consistently improved such that plant
  utilization of 84% was achieved in December with a hot rolled coil
  production tonnage of 86,057.

  Gauges Rolled

  The following chart shows the development of gauges rolled on the Hot
  Strip Mill.

  []

  2004 NSM Product Gauge Ratio

  Because of the fact that the NSM steel making process incorporates an
  Electric Arc Furnace as its principal melt facility, energy supply and
  costs play an important role in the overall production. At an
  international level, CCL pointed out in their technical report that it
  considers Thailand to be at a disadvantage compared with other steel
  producing countries in that the cost of energy is considered high.

  By comparison, a cost of US$0.054/kWh was given as the estimated rate
  for NSM against a typical cost of US$0.030/kWh for a mini-mill based
  in the US and up to US$0.042/kWh for a mini-mill in Europe. The tariff
  includes differential prices for on- and off-peak consumption, a fuel
  cost adjustment and a maximum demand charge. NSM experience in the
  first year has been in line with that of the CCL estimates.

  During the first half, our price was at US$0.044/kWh when the plant
  was operated entirely on off-peak power with very low maximum demand
  charge. This was useful for a period when we were recruiting and
  training to achieve full complement. Tonnage was, however, severely
  restricted.

  June and July saw a rise to US$0.045/kWh as NSM started penetrating
  on-peak periods at intermediate power levels. In August, NSM went onto
  24-hour operation which with the on-peak premium and maximum demand
  charge pushed the costs to US$0.056/kWh.

  The offset to this is, of course, the higher volume generating more
  contribution and also improving the efficiency of the process,
  improving the yield and reducing consumption rates.

  []

  2004 NSM Power Development

  As already stated, the ConSteel^(®) process typically allows for much
  lower electrical energy input than conventional EAF technologies. This
  efficiency gain has been seen in other ConSteel^(®) applications to
  represent as much as a 40% improvement in electrical energy
  requirement.

  The CSP line is similarly more electrically efficient than
  conventional hot strip mills. Dependent upon the specific
  configuration and age, a traditional plant will consume 850 to 1,300
  kWh/ton. The high energy unit cost in Thailand is hence largely offset
  by the improved efficiencies of our process.

  Environmental and Safety Issues

  The Company has evaluated its environmental targets as required by
  law. Plans have been prepared for the annual measurement and
  monitoring of environmental impacts in terms of air quality, noise
  level, water quality, shock, heat and environmental planning downtime.

  Certain corrective and preventive actions have been undertaken for the
  benefit of the environment, including the extraction of direct off-gas
  from the EAF by two “hot” fans and collection of all shop emissions
  via canopies above the EAF, LHF’s and VOD’s. Filtration of process
  dust from the emissions is achieved through a bag-house equipped with
  reverse air cleaning capability. CCL observed that the capacities of
  the bag plant, extraction fans and cooling ducts are consistent with
  those on EAF steel plants of similar size.

  The Company did experience some problems with the de-dusting system
  when the Company pushed the plant into 24-hour operation from August
  2004. These were related to the plant cleaning cycle and have now been
  largely overcome. Up until December 2004, the Company had been
  accumulating wastes on site – slag; bag-filter dust; mill scale;
  refractory debris and others. During December, the Company started
  moving slag off site using a sub-contractor with a fully licensed
  disposal site. Negotiations are under way with various interested
  parties to start moving other wastes off site. Bt 40 million has been
  provided in the 2005 budget to deal with this. A large part of this is
  to handle the back-log built up in 2004. The ongoing disposal costs
  will drop significantly thereafter.

  Quality Management

  On recommencing operations in the middle of December 2003 with a very
  small production focused crew, it quickly became evident that the
  Company needed support from a quality control perspective. A Quality
  Management section was formed covering the disciplines of:

  Quality Control – measurement and control of steel chemistry,
  mechanical properties, dimension and surface appearance.

  Development – using the information acquired from production and
  quality control together with support from external information
  sources and targeted specialists to improve the product and processing
  further. The Company received active support from Corus, SMS-Demag and
  others.

  Quality Assurance - setting up of standards and procedures.
  Documenting the systems and subjecting these to audit and feedback in
  order to ensure the customer is satisfied by what the Company delivers
  to him.

  A substantial improvement in quality of product and stability of
  operation was also achieved from the switch from a 50-mm thick mould
  to 60-mm on our caster. The Company now casts exclusively at 60-mm.
  For rolling thinner gauges the Company recommissioned the Liquid Core
  Reduction capability in our caster. This allows us to squeeze the
  60-mm slab down to 50-mm when needed to avoid excessive stress on the
  Hot mill. It also allows us to roll a better quality thicker gauge
  material.

  Going Forwards into 2005

  The Company plan for the production of one million tons of hot rolled
  coil during the year 2005. This will require over one million tons of
  liquid steel from our EAF. This will represent 100% growth of
  production over 2004.

  During 2005, the Company plas to commission the Vacuum Oxygen
  Decarburisation units. This will open the way for production of ultra
  low carbon and nitrogen steels to penetrate niche markets.

  The Company will continue our programme to roll thinner gauges.
  Already in the final quarter of 2004, the Company rolled over 20% of
  our production at or below 2-mm thickness. Less than 1% was taken
  below 1.5 mm and the immediate challenge is to increase this fraction
  without undue sacrifice to costs and throughput. This should allow us
  to exploit the gauge extras available at this end of the market.

  The Company will seek continuous improvement in equipment
  availabilities and efficiencies. To this end, a Planned Maintenance
  section has been started. The Company will also be seeking continuous
  improvement in material yields, product quality standards and
  operating costs. The Company has already embarked on a programme to
  achieve accreditation to ISO 9001:2000 during this year.