Section 1

4. Business Description

4.1 Type of product and service

4.1.1 Products

(1) Rebars

  The products consist of the round bars and deformed bars whose size of
  diameter are 6-25 mm. and 10-40 mm., respectively. The round bars are
  produced in accordance with Thai Industrial Standards Institute (TISI)
  No. 20-2543, grade quality: SR 24 and deformed bars are produced in
  accordance with Thai Industrial Standards Institute (TISI) No.
  24-2536, grade quality: SD 30, SD 40 and SD 50. Deformed bars are
  served for various purposes for construction industry mostly for
  reinforcement of concrete such as road, bridge, footing, building,
  house and general use for construction industry, etc.

(2) Low Carbon Wire Rods (“LCWR”)

  LCWR is of grade quality: SWRM 6-22, SWRY11 and SWRCH6A-22A. The size
  of diameter is 5.5-16 mm. and it is produced in accordance with Thai
  Industrial Standards Institute (TISI) No. 348-2540, JIS G3503 (1980)
  and JIS G3507 (1991). They are used as raw materials for construction
  parts such as binding wire, nails, wire mesh, galvanized wire, barbed
  wire, welding wire, cold draw wire, screw and nuts, etc.

(3) High Carbon Wire Rods (“HCWR”)

  HCWR is of grade quality: SWRH 27-82BE. The size of diameter is 5.5-16
  mm. and it is produced in accordance with Thai Industrial Standards
  Institute (TISI) No. 349-2532. They are used as raw materials for
  manufacturer of pre-stressed concrete wires and strands (PC wires and
  PC strands), compression spring, extension spring, torsion spring,
  sling etc.

(4) Small Sections

  Small sections have various forms such as angles or channels. They are
  produced in accordance with Thai Industrial Standards Institute (TISI)
  No. 1227-2537, grade quality: SM400-570 and SS400-540. They are served
  for the various uses of construction industry i.e. roof structures,
  electricity poles and billboards etc.

(5) Special Bars

  The products are round shaped bars in standard of quality: JIS G3101
  (1995), JIS G4051 (1979) and JIS G4105 (1979) with grade quality:
  SS330-SS540, S10C-S50C and SCM415-SCM822. They are used for raw
  materials for manufacturer of the machineries and equipments including
  parts assembled in automotive industry such as vehicle parts for car
  and motorcycle etc.

4.1.2 Management Standard System

  TSTH’s subsidiaries consisting of SISC, SCSC and NTS determine to
  reinforce the management to be international standard certified with
  ISO 9001:2000 (International standard in the quality management). In
  addition, the Company realizes the importance of the environment
  control and competence of the laboratory. SCSC is certified with
  ISO14001 (International standard for the environmental control) and
  NTS is certified with ISO/IEC 17025:2005 (General requirements for the
  competence of testing and calibration laboratories). The Company also
  realizes the importance in the safety control for working environment
  to be in sanitary system for the employees. SISC is certified by
  TIS&OHSAS18001 and SCSC is certified by TIS/OHSAS18001 (International
  standard of sanitary system and safety control system).

4.1.3 Factors affecting business opportunities and Constraints

  1. Standard of Quality: With the ongoing concerns on the product
  quality, several laws and regulations were stringently strengthen to a
  higher degree of standard, thus, making it necessary for several
  manufacturers to tighten their products to the standard.

  2. Increasing demand of high quality products: With the endorsement
  from the government of making Thailand as the hub of automotive
  manufacturer industry amongst the Asian countries - as can be seen
  from many additional newcomers in this industry such as General Motor,
  Ford, Toyota, and Daimler Chrysler (Mercedes Benz). For this reason, a
  higher demand of quality wire rods is anticipated in the medium and
  long run, giving the Company a full advantage of locally produced
  products as opposed to importing from away countries.

  3. Tax Rates: According to the ASEAN Free Trade Area (“AFTA”), it is
  stipulated the 0% tax tariff for scrap and billets and 5% for
  semi-finished products and finished products, of which Thailand must
  gradually reduce its rates to 0% by 2010 which is the due time of
  member countries’ assessments.

  For those countries not binding by AFTA in 2008 - 2009, the tax rates
  for importing the scrap and billets would fall into the 1%, 5% for
  rebars and wire rods and 10% for steel section.

  Table summary indicating the tax tariff in the year 2008-2009

+--------------------+----------------------+--------------------------+
| Item               | AFTA Tax Rate        | Non – AFTA Tax Rate      |
+--------------------+----------------------+--------------------------+
| Scraps             | 0%                   | 1%                       |
+--------------------+----------------------+--------------------------+
| Billets            | 0%                   | 1%                       |
+--------------------+----------------------+--------------------------+
| Rebars             | 5%                   | 5%                       |
+--------------------+----------------------+--------------------------+
| Wire rods          | 5%                   | 5%                       |
+--------------------+----------------------+--------------------------+
| Steel Sections     | 5%                   | 10%                      |
+--------------------+----------------------+--------------------------+

Source: Association of South East Asian Nations (ASEAN)

4.  Free Trade Area (FTA): There has been an ongoing collaboration
    between Thailand and eight member countries namely; China, Japan,
    United States of America, Australia, New Zealand, India, Bahrain,
    and Peru as well as two other well organized groups of BIMST-EC
    (Bangladesh, India, Myanmar, Sri Lanka, Thailand, Nepal, and Bhutan)
    and EFTA (Switzerland, Norway, Iceland, and Lichtenstein) with an
    aim to strategically maintain certain level of competency within the
    member countries, to appeal capital investment, as well as to draw
    in opportunities for exports. Accordingly, the Company has made
    several preparations to fortify its operations in order to position
    itself more strongly.

5.  Speed & Saving: The emphasis of speedy and cost savings in
    construction business helps steer the use of better quality of
    deformed bar which, simultaneously, lessens the construction costs.
    These two factors also endorse the energy-savings program as well as
    production process, granting a great opportunity for the Company to
    yet again improve the quality of its products.

  4.1.4 Privileges through the BOI Program

The Company can enjoy certain privileges from the BOI and its
subsidiaries, NTS and SCSC as of March 31, 2009 as follows:

+--------+--------------+----------------------------------------------+
|        | Production   | Privileges Received                          |
|        | Volume       |                                              |
|        |              |                                              |
|        | (tons per    |                                              |
|        | annum)       |                                              |
+--------+--------------+----------------------------------------------+
| NTS    | 520,000      | -   Tax exemption for 8 years from the       |
|        |              |     commencement of operation (2006 - 2013)  |
| Phase  | 500,000      |                                              |
| II     |              | -   Net loss incurred between 1^(st) –       |
|        |              |     8^(th) year can be realized against      |
| MBF*   |              |     taxable profits during the next 5 years. |
|        |              |                                              |
|        |              | -   Tax exemption for 8 years for the net    |
|        |              |     profit from the first income             |
|        |              |                                              |
|        |              | -   Net loss incurred between 1^(st) –       |
|        |              |     8^(th) year can be realized against      |
|        |              |     taxable profits during the next 5 years. |
+--------+--------------+----------------------------------------------+
| SCSC   | 200,000      | -   Tax exemption of 50% from 2006 - 2010.   |
|        |              |                                              |
| Phase  |              | -   Net loss incurred between 1998 through   |
| II     |              |     2005 be realized against taxable profits |
|        |              |     between 2006 - 2010.                     |
+--------+--------------+----------------------------------------------+

  * Mini Blast Furnace Project

4.2 Market Situation and Competition

4.2.1 Major marketing policies and products’ characteristic

  (1) Strategies, Distribution System and Channel

  To maintain and enhance its market share of the Company and its
  subsidiaries, the Company has set its marketing strategies,
  distribution system, and distribution channels as follows:

  Domestic markets

  Rebars:

  Utilization of the three distribution channels from its three
  subsidiaries:

-   Contractors and Developers undertaking vast projects from government
    or private sectors.

-   Stockists with considerable volume consumptions before reaching end-
    consumer hands.

-   SCGN Distribution which has its own inclusively well-built marketing
    management system, logistics, and distribution channels maintained
    solely for SCG construction business. Also, with the SCG Retail Co.,
    Ltd. focusing on marketing operations with an approximate of 500
    small retailers.

  Moreover, the Company has well positioned itself in several areas by
  adjusting the prices to align with the current market conditions,
  promote the new product trials, enhancing brand awareness, building
  the Company image through the use of well-organized media, as well as
  aiming to strengthen the relationships with the distributors.

  High Carbon Wire Rods: HCWR

  Given the fact that the Company is the only major player with the
  Billet production for the manufacturing of HCWR, therefore, the
  Company can undoubtedly maintain its policy of selling an exceptional
  high quality HCWR to its existing clients. Furthermore, the Company
  has aimed to broaden its customer base, extend quality assurance
  offers, provide technical services to its clients, offer an on-time
  delivery, as well as seek to present clients with a variety of
  products to fit the needs of different type of end consumers.

Low Carbon Wire Rods: LCWR

  To consolidate the existing strong customer base, the Company also
  anticipates to expand its product line into those categories with
  heavy imports. Seeking to provide the clients with a variety of
  products as well as improving the relationships with distributors
  would be the Company’s main focus.

Small Sections

The existing distribution channel for this type of product is through
the Stockists which in turns re-distributes to the construction
contractors, fabricators and government agencies.

With increased competition faced within this product category, the
company relentlessly aims to enhance its quality corresponding to the
increasing demands from fabricators and government agencies and provide
enhanced services levels.

International Market

  The Company strategically exports approximately 10 percent of its
  production annually. The geographic markets that the Company focuses
  on are Laos, Cambodia, Vietnam, Indonesia, Singapore, Malaysia and
  Philippines. The company has expanded into new market like India,
  Bangladesh and Myanmar. The products for export market are value added
  wire rod products like Medium Carbon, Y-11 and CHQ. Rebar have been
  included in our export strategy. The Company’s aim to build
  relationship with select international customers in the countries
  mentioned above.

  (2) Customer characteristics and target customers of long steel
  product industry

Types of customers and its target can be divided into three parts as
follows:

  1. Medium and small construction market: It is employed by the
  residential project in which the rebars will be used by the
  contractors. This segmentation is highly price sensitive and not much
  emphasis given for product quality. Furthermore, most homebuyers have
  no in-depth knowledge to distinguish the quality of its product.

  2. Large construction market: Most customers are well known
  contractors who care about the product quality. Thus, this segment
  strategy is based on the relationship and reliability of the steel
  producers. The local competitors include rebar producers with and
  without EAF.

  3. Manufacturing market: Group of products in this market includes
  LCWR, HCWR and special bar product, in which the quality of product
  for specific application plays critical role. As a result, the key
  success factors are the relationship and reliability of steel
  producers same as the large construction market. Currently, there are
  a few rebar producers with EAF who have gained expertise and
  experience, equipped with machineries and know-how to manufacture
  LCWR, HCWR and special bar products, thus making this market group
  rely on imports.

(3) Proportion of production distribution

  The distribution channel of the Company is heavily reliant on domestic
  market, accounting for 91% and 9% for export market. The distribution
  channel can be detailed below:

  ------------------------ -------------- ------------ ------------ ----------
  Distribution Channels    % to                                     
                           distribution                             

                           Year 2008      Year 2007    Year 2006    Year 2005

  Direct Sales             28             27           41           40

  SCG Network              22             23           27           29

  TSTH Dealers             50             50           32           31

  Total                    100            100          100          100
  ------------------------ -------------- ------------ ------------ ----------

4.2.2 Industry Outlook and Competition

(1) Competition within the industry

  The industry of steel producer in Thailand can be categorized by types
  of products i.e. Long Product and Flat Product. The long product is
  deemed to be more fragmented in which the Company which is holding
  Company invests in its subsidiaries including NTS, SISC and SCSC are
  grouped as the long product producer.

  The long product producers comprise of medium and small enterprises,
  most of which are regarded as family-run business. The plants whose
  production capacity is more than 200,000 tons per annum are consisted
  of approximately 12 numbers, thereby generating excess supply to
  outstrip the local demand. The excess supply is also due to pressure
  of many smaller units in the market.

(2) Competitors

  The Company’s competitors can be divided into two types including the
  producers with and without Electrical arc furnace (EAF). Those who own
  EAF procure the scrap both domestically and internationally as its
  production raw material to produce semi-finished product comprising
  billets and produce finished products i.e. rebars, wire rods, small
  sections and special bars, in which the Company possesses in the
  category. Those who don’t possess EAF are required to procure or
  import all semi-finished products including billets from other steel
  producers to manufacture finished products.

  In terms of overall production capacity of the long steel industry, it
  is reckoned that the supply has far outstripped local demand, mainly
  due to the fact that the number of rebar producers is much more than
  wire rod producers, thus making competition in rebar industry higher
  than that in wire rod industry.

  With respect to the wire rod products, Thailand has been dependent on
  imported wire rods from foreign countries, most of which are regarded
  as high quality wire rods. Nonetheless, in the aftermath of economic
  crisis in the year 1997, there have been financial difficulties
  incurred with lots of steel entrepreneurs, many of which decided to
  exit their business, thus making less competitors in the market. Thus,
  the Company and its subsidiaries have gained an opportunity to enlarge
  its target customers. These factors resulted in the Company to gain
  more market shares.

  For the overall imported wire rods, most imported products are
  high-grade wire rods whose country of origin are from China, Japan,
  South Korea and Taiwan.

Table 1 : Long product producer in steel industry and its production
capacity (as at March 31, 2009)

  (Tons per annum)

  ---------------------------- ------------ ------------ ------------ -----------
  Company                      Production                             Melting
                               Capacity of                            Capacity
                               Long                                   
                               Products                               

                               EAF Rolling  Non-EAF      Total        
                               Capacity     Rolling                   
                                            Capacity                  

  Tata Steel (Thailand) (TSTH) 1,700,000    -            1,700,000    1,200,000

  Bangsaphan Barmill (BSBM)    -            700,000      700,000      -

  Bangkok Steel Industry (BSI) 750,000      -            750,000      300,000

  Bangkok Iron and Steel Works 500,000      -            500,000      240,000
  (BISW)                                                              

  Tycoon (TYCN)                -            300,000      300,000      -

  Burapa Steel (BRP)                        120,000      120,000      -

  Namheng Steel (NHS)          300,000      -            300,000      300,000

  BNS Steel Group (BNS)        240,000      -            240,000      250,000

  Union Metal Limited (UMC)    200,000      -            200,000      420,000

  Siam Steel Syndicate (SSS)   200,000      -            200,000      110,000

  Triumph Steel (Triumph)      120,000      -            120,000      120,000

  Thai Steel Bar (GS)          120,000      -            120,000      120,000

  Thai-India Steel (TICO)      72,000       -            72,000       78,000

  Parthongkij Commercial (PTK) -            240,000      240,000      -

  Thai Steel Profile (TSC)     -            240,000      240,000      -

  Siam Yamato Steel (SYS)      640,000      -            640,000      640,000

  Nova Steel                   -            240,000      240,000      

  Others                       -            5,252,000    5,252,000    132,000

  Total Capacity               4,842,000    7,092,000    11,934,000   3,910,000
  ---------------------------- ------------ ------------ ------------ -----------

Source: Iron and Steel Institute of Thailand (ISIT)

Table 2: Local long product consumption during the year 2002 - 2008

  ---------------------- ---------------------------- -------------------
  Year                   Long Products (Tons)         Growth (%)

  2008                   5,389,000                    5%

  2007                   5,150,000                    4%

  2006                   4,963,000                    -11%

  2005                   5,586,000                    -2%

  2004                   5,674,000                    21%

  2003                   4,672,000                    6%

  2002                   4,402,000                    25%
  ---------------------- ---------------------------- -------------------

Source: South East Asia Iron and Steel Institute / Iron and Steel
Institute of Thailand

(3) Long Steel Product Industry overview for the year 2008-2009

  The Gross Domestic Product (GDP) growth in 2008 was 3% and growth of
  construction industry was -7%. The main demand in 2008 for the
  Company’s products came from the construction industry, mainly from
  projects like high rise building, residential construction and new
  condominium projects. Red Line was only one which was ordered and many
  other mega projects delayed such as Purple Line and Navy Blue
  Enhancing Line Commuter. Moreover, speculative demand led to high
  steel consumption in first half of 2008 due to constant price increase
  of long product. Many big project constructors faced pressure on their
  margins due to increasing input cost. In the latter half of 2008,
  drastically dropping price of domestic scrap and international scrap
  led to price decrease for Company’s finished products. Many steel
  manufacturers faced problem of high stock inventory since customers
  tried to order only minimum volume.

  Imports from China specially in high end wire rods continued and also
  the domestic steel industry faced pricing pressure due to import of
  finished goods from China like GI wire and Electrodes, etc.

  In terms of sale price of product in 2008-2009, the price was sharply
  rising in the first quarter and then continually dropping from August
  onward. The annual average selling price of all products was Baht
  26,200 per ton. Compared with Baht 21,500 per ton in 2007-2008,
  represented an increase of Baht 4,700 per ton or a 22% increased.
  Total billet import in 2008-2009 was 938,200 ton compare to 730,400
  ton in 2007.

(4) Industry trend for the year 2009-2010

  The forecasted GDP growth for 2009 is (-3) to 0% and growth for
  construction sector is forecasted at -17%. The negative trends are
  mainly from domestic economic slowdown and political uncertainty leads
  a slowdown in investment and consumer’s purchasing behavior. However,
  there will be various Mega Projects invested in 2009 like power plants
  and transportation projects. One factor to stimulate the economy, the
  government decide to continue a spending policy for residential market
  which started in 2008 such as reducing interest rate, special business
  tax, mortgage and transferring house fees. Home office is anticipated
  to be new market of construction. Construction demand is also expected
  to be fueled by new condominium projects and hotels mainly in tourist
  cities of Thailand.

  On the supply side, the change in raw material price, mainly scrap and
  billet, will dominate finished goods prices. In case of lower
  availability of billets and scrap, more imports, especially for wire
  rods, are expected into Thailand from China and Malaysia. We also
  expect imports from countries like Japan, Taiwan and South Korea into
  Thailand as their currencies are weak and their domestic demand is
  low.

4.3 Product/service procurement

  4.3.1 Manner of product procurement

  (1) Production capacity and plant location

  Plant and location

  N.T.S. Steel Group Plc.

  No. 351, Moo 6, 331 Highway, Hemaraj Chonburi Industrial Estate,
  Tambon Bowin, Amphoe Sri Racha, Chonburi Province

  Siam Iron and Steel (2001) Co., Ltd.

  No. 49 Moo 11, Tambon Bang Khamode, Amphoe Ban Mor, Saraburi Province

  Siam Steel Construction Co.,Ltd.

  Plot No. I-23, Map Ta Phut Industrial Estate, Amphoe Muang, Rayong
  Province

  Production capacity and policy

  Detail below indicating the production capacity and policy by each
  subsidiary:

+-------------------------+----------+----------+----------+----------+
|                         | NTS      | SISC     | SCSC     |   Total  |
+-------------------------+----------+----------+----------+----------+
| Capacity (tons per      |          |          |          |          |
| annum)                  |          |          |          |          |
+-------------------------+----------+----------+----------+----------+
| - Rebars                | 400,000  | -        | 500,000  | 900,000  |
+-------------------------+----------+----------+----------+----------+
| - Wire rods             | 400,000  | 230,000  | -        | 630,000  |
+-------------------------+----------+----------+----------+----------+
| - Small Sections        | -        | 170,000  | -        | 170,000  |
+-------------------------+----------+----------+----------+----------+
| Total capacity          | 800,000  | 400,000  | 500,000  | 1        |
|                         |          |          |          | ,700,000 |
+-------------------------+----------+----------+----------+----------+

Source: Tata Steel (Thailand) Plc.

  The utilization for the period ending on March 31, 2009 stood at 64%.

  (2) Source of raw material

  The Company sets out the raw material policy for its subsidiaries to
  generate highest production efficiency in terms of pricing, quality
  and transportation. The details of major raw material source
  categorized by types of raw material are appeared below:

-   Scrap: The local procurement accounted for 70%-75% of total
    procurement, with local suppliers stemming from general scrap
    entrepreneurs, whilst the remaining 25%-30% imported from a number
    of large scrap suppliers.

-   Graphite Electrode, Ferro Alloys and Refractories: mostly imported
    with the direct procurement from a number of large importers.

-   Natural gas and fuel: 100% local procurement.

  However, the Company intends to procure raw material without any sole
  reliance on one core supplier. The raw material import is mostly
  procured through domestic traders, including the network of Siam
  Cement Group, who has long-experienced to select the manufacturers and
  by all means enhance its bargaining power.

  (3) Production Process and Production Technology

  Production diagram indicating the production process of rebars, wire
  rods and other types of steels of the Company

+-------------------------------+--------------------------------------+
| 1.  prepare the scrap for     |                                      |
|     melting taken the size    |                                      |
|     and quality into          |                                      |
|     consideration to suit     |                                      |
|     Electrical arc furnace    |                                      |
+-------------------------------+--------------------------------------+
|                               |                                      |
+-------------------------------+--------------------------------------+
| 2.  melting the scrap and     |                                      |
|     change it in form of hot  |                                      |
|     metal at                  |                                      |
|                               |                                      |
|   the temperature 1,650°C     |                                      |
+-------------------------------+--------------------------------------+
|                               |                                      |
+-------------------------------+--------------------------------------+
| 3. Mix other ores including   |                                      |
| Manganese and Carbon etc.     |                                      |
+-------------------------------+--------------------------------------+
|                               |                                      |
+-------------------------------+--------------------------------------+
| 4. Casting process to make    |                                      |
| billets                       |                                      |
+-------------------------------+--------------------------------------+
|                               |                                      |
+-------------------------------+--------------------------------------+
|                               | Stock storage                        |
+-------------------------------+--------------------------------------+
|                               |                                      |
+-------------------------------+--------------------------------------+
| 5.  Bring billets drying in   |                                      |
|     the temperature of        |                                      |
|     1,200°C and rolling       |                                      |
|     process with rolling      |                                      |
|     machine to have rebars,   |                                      |
|     wire rods and             |                                      |
|                               |                                      |
| other steel products in shape |                                      |
| required                      |                                      |
+-------------------------------+--------------------------------------+
|                               |                                      |
+-------------------------------+--------------------------------------+
| 6.Cooling process for Packing |                                      |
+-------------------------------+--------------------------------------+

Production process by Electric Arc Furnace (EAF) method

1.  Scrap Process

  Prepare the scrap for melting, taking into consideration the size and
  quality to suit the Electrical arc furnace.

2.  Process of Electric Steel Making

  Prepare the electrode into electrical arc furnace and apply the high
  voltage of electricity for melting the scrap and change it in the form
  of hot metal at temperature of 1,650°C for approximately 45-60 minutes
  for each melting time.

3.  Process of Metallurgy

-   Prepare hot metal arising from step 2 process and release it in the
    ladle furnace by way of Eccentric Bottom Tapping to make hot metal
    pure.

-   Process of (2) and (3) will be controlled by computerized system.

-   Mix with other ores to yield the required hot metal.

4.  Continuous Casting Process

  Bring hot metal arising from step 3 process and have it passed through
  the continuous casting process to make billets of 130 to 150 mm by
  controlling cool water system to produce the required billets. Partial
  billets will be stored up and some will be brought to rolling process
  for energy saving purpose.

5.  Rolling Process

  Bring Billets for drying in the temperature of 1,200°C and have them
  passed through the rolling process by rolling machines to get the
  reduction in shape and size. There are three forms of production line
  namely:

  Method 1: Rolling to be in straight of round bars, deformed bars and
  special bars

  Method 2: Rolling to be wire rods

  Method 3: Rolling to be small sections and rebars

6.  Packing Process

-   Rebars and Small sections

  Bring rebars and small sections and have them laid down for cooling
  purposes to ease the cutting to the required length for packing and
  dispatch.

-   Wire rods

  Bring wire rods to bind, weigh and paste it with sticker for storing
  and dispatched purposes.

(4) Environmental Impacts

  The Company has policies laid down and given to its subsidiaries to
  maintain all machineries/equipments in proper and efficient conditions
  to preserve environment. Any defective machineries and equipments
  found, the Company will immediately amend and repair such defects.
  Additionally, the Company hires an environment consulting Company to
  take charge in testing the quality of air and water frequently to
  comply with specified Laws and Regulations.

  The result of the environment testing (air and water) of NTS, SISC and
  SCSC is in compliance with all of the Laws and Regulations as
  specified by Authorities.

  Presently, the Company has no legal dispute or lawsuits relating to
  environment problems.

4.4 Work related to project or high value of purchases and sales pending
the delivery

- Not Available -