1. Risk Factors

1.  Risk Associated with Dependency on Major Customers

Following the restart, the Company had planned to depend on a number of
major customers, with purchasing volume of over 30% of total sales in
each quarter, to support a drive towards high production volume. With
the 8 current major customers, there may be a considerable risk if the
orders from these customers have been substantially reduced or
terminated.

With this in mind the Company planned for flexibility to reduce the
dependency. We expanded our target customer groups to include, for
instance, steel service centres, pipe makers, cold roll producers. The
Company has a future plan to extend the customer base towards electrical
appliances and automotive sectors as we reach more developed production
and sales. Further to this, the Company expected to export market to
expand customer base.

2.  Risk Associated with Economic Cycles and Seasonality

Hot rolled steel and coated steel are basic products used in various
downstream industries such as steel forming, piping, engineering,
electrical appliance, automotive and motorcycle. Demand is known to
fluctuate with correlation to economic cycles. Moreover, the Company is
sensitive to steel price cycle. Price of hot rolled coils has
experienced a major shift, between US$ 165 per ton in 1999 to as much as
US$ 320 per ton in March 2002. Current average price is at US$ 520-580
per ton.

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Source: Iron & Steel Institute of Thailand

The Company is well aware of the risk related to business cycles
especially for commodity product such as hot rolled coils. Integral to
the restart is the plan for the risk reduction based on producing and
selling value-added products and services in the future.

3.  Risks Associated with the Currency Exchange Fluctuations

The Company realizes risks from currency exchange fluctuations in 2
areas

(a) Currency Liabilities under Restructuring Plan

  As at December 31, 2004, the Company has currency liabilities under
  restructuring plan from Loan, Past accrued interest and Accrued
  interest amounting US$ 129 million.

  (b) Import Materials and Export Products

  When operating, the Company is heavily dependent on imported raw
  materials which amount to 75% of the manufacturing cost. While the
  export value was approximately 4,069 million Baht, causing an inherent
  risk that the Company will continue to be exposed to foreign exchange
  risk and have to recognize any unrealized exchange losses or gains.
  However, the Company employs appropriate financial measures to
  mitigate the foreign exchange risk, for example, entering into a
  forward contract to protect such risk.

4.  Risk Associate with Cash Flow Fluctuation

  The Company has commenced normal operations during the year and
  achieved continuous improvement in production volumes. This has
  enabled the Company to generate income from product sales and generate
  net profit for the year ended December 31, 2004. However, such
  operations and improvement in production volumes required sufficient
  working capital. In addition, the Company is still operating under the
  terms of debt restructuring agreements and needs to generate
  sufficient operating cash flows to meet both its working capital
  requirement and obligations under those agreements. To mitigate the
  risk, the Company has obtained working capital facilities with
  financial institutions and the Company’s cash flow forecasts indicate
  that sufficient funds are available to meet the Company’s working
  capital requirements and to meet its obligations under the debt
  restructuring agreements.

5.  Dumping Effects and the Government’s Anti-Dumping Policy

  The dumping by the overseas manufacturers in the CIS (formerly known
  as the Soviet Union) and other foreign countries could cause
  substantial fluctuation in the steel pricing in the local market,
  thereby affecting the price-competitiveness of local manufacturers.
  Therefore, the Department of Foreign Trade issued various anti-dumping
  measures and policies to protect the local market causing the steel
  price to rise, for instance, imposition of anti-dumping duties.

  The present anti-dumping policies emphasise on hot-rolled coil. The
  period of these policies is five years and will expire on 22 May 2008.

  The government’s policy against unfair competition would protect the
  local steel manufacturers and would significantly prevent the
  volatility of steel pricing from external factors. If such protective
  policy is cancelled or expired in the future, the local manufacturers
  may face the risk arising from the dumping activities.

  Nevertheless, before the expiration of the 5 years anti-dumping
  measure, the Sunset Review will be conducted by the government to
  determine whether the anti-dumping should be terminated, suspended or
  continue. At that time the local producers will be invited to
  participate the hearing and be able to urge for maintaining or
  continuing the safeguard if it is needed.

6.  Contingent Liabilities in Connection with Unsettled Liabilities

  At present, there are some unsettled item claims from certain
  creditors which were claimed totaling Baht 434.99 million. In a
  situation where the Court or the official receiver holds or orders the
  Company to be responsible for such claims in all aspects, the maximum
  liabilities may be occurred to the Company are Baht 362.75 million or
  approximately 1.10 percent of total assets as of 31 December 2004.

7.  Risk Associated with Production and Sales of Pickled & Oiled
    Products and Galvanneal Products

  During the first year of the restart, the product mix was primarily
  hot rolled products (partly to replace imports). The mix will expand
  towards pickled and oiled products by 2005 and to galvanneal products
  in 2007.

  There is risk associated with the present lack of experience in
  producing and selling of the planned coated products. The Company will
  also face competition in the local market and even trade barrier
  placed by local firms that are controlled by or dominated by the
  various Japanese steel producers.

  NSM is aware of the high competition in steel prices in the local and
  global markets. The Company has a plan to conduct a study, where
  possible with experts in the field, to set course to be an even more
  competitive producer for both local and overseas market, for basic as
  well as coated products.