Ferrous Metals Desk

Ferrous Metals Desk 155 Bishopsgate London EC2M 3TQ United Kingdom Email ferrousmetals@tullettprebon.com Tel +44 (0)20 7200 7477

Ferrous Metals Desk

Ferrous Metals Desk Contents

• Tullett Prebon – Company Overview

• Our team

• Ferrous Metals Desk – Overview

• Introducing Iron Ore

• Financial and Physical Brokerage Capability

• Iron Ore Indices

• Summary

Ferrous Metals Desk

Ferrous Metals Desk Tullett Prebon – Company Overview

• One of the world’s largest interdealer brokers listed on the London Stock Exchange

• Revenues of £910.2m in 2011*

• Offices in 21 countries worldwide, including London, New York, and Hong Kong, with more than 2400 employees

• Focus on: Rates, Treasury, Volatility, Credit, Equities, Energy & Commodities and Non-Banking.

*Source: Tullett Prebon Preliminary Results to 31st Dec 2011

Ferrous Metals Desk

Ferrous Metals Desk Our Team

• Over 25 years combined market experience

• Derek Newport and John Bush lead the desk, with each joining from Perret Associates and CF Partners respectively

• Derek’s ferrous experience stems from derivatives based roles at Credit Suisse, and physical commodity based roles at globalORE and Perret Associates

• John’s experience stems from fixed income and commodity roles at Industrial Bank of Japan, Cantor Fitzgerald, and CF Partners

Ferrous Metals Desk

Ferrous Metals Desk Ferrous Metals Desk - Overview

• Two strand business model based on: - Financial brokerage

• Financial derivatives – cash settled swaps and options (voice only) • We offer 8 ‘Virtual Steel Mill’ derivatives contracts:

- 4 x Iron ore contracts

- 2 x Steel contracts

- 1 x Coking coal contract

- 1 x Scrap contract

- Physical brokerage • Spec negotiation and matching of physical iron ore cargoes • Focuses on facilitating access for Mid Tier and Low Tier iron ore buyers / sellers.

• Tullett Prebon does not act as ‘principal’ – purely an ‘IDB’ role

Ferrous Metals Desk

Ferrous Metals Desk Introducing Iron Ore

• Iron ore is the world’s largest seaborne commodity

• Total seaborne tonnages reached approx 1.8bn tonnes in 2011*

• Market principally driven through Chinese demand

- Imports of approximately 695 million tonnes in 2011 and an estimated 700 million tonnes in 2012*

- Recent upheaval in industry pricing mechanism has resulted in a rapidly growing ‘spot’ market

• Sell side currently dominated by a small number of international mining firms based in Brazil, Australia, India, etc.

• Buy side currently experiencing squeeze on their profits

• Derivative enabled risk management is a new concept to this industry

*Source: Metal Bulletin Research Bulletin Research

Ferrous Metals Desk

Ferrous Metals Desk Financial Brokerage

Source: Metal Bulletin Research June 2012

Iron ore swap volumes since market inception

Ferrous Metals Desk

Ferrous Metals Desk Physical Brokerage

Physical iron ore volumes 2001 – Present

Source: Metal Bulletin Research June 2012

Ferrous Metals Desk

Ferrous Metals Desk Iron Ore Indices

• Three in operation

- The Steel Index (TSI): Financial standard

- Platts (IODEX): Physical standard

- Metal Bulletin (MBIO): Negligible

• Differing calculation methodologies have caused delay in industry consolidation around a single index

- Has affected iron ore swap performance

• Important to note that McGraw Hill (Platts) has recently acquired TSI showing the first signs of consolidation in the market

Ferrous Metals Desk

Ferrous Metals Desk Iron Ore Indices

Source: Metal Bulletin Research June 2012

Iron ore price volatility since inception of indices

Ferrous Metals Desk

Ferrous Metals Desk Summary

• Global reach

• Experienced team

• Cross sector exposure to both the physical and financial markets

• Special focus on physical Medium and Lower Tier ferrous participants

Ferrous Metals Desk

Ferrous Metals Desk 155 Bishopsgate London EC2M 3TQ United Kingdom Email ferrousmetals@tullettprebon.com Tel +44 (0)20 7200 7477