Usiminas Speeding up its Investment...

São Paulo São Paulo –– July 24, 2008July 24, 2008

Usiminas Usiminas SSpeedingpeeding up its Investment Programup its Investment Program

2

AgendaAgenda

•Steel Outlook

•Usiminas speeding up its Investment Program

•Financial Highlights

•Market trends – 2008

SteelSteel outlookoutlook

4

2.2

2.8

3.6

4.94.4

5.0 4.9

3.7

0.0

1.0

2.0

3.0

4.0

5.0

6.0

'01 '02 '03 '04 '05 '06 '07 '08(e)

Inflation (%)Global GDP (Growth %)

EconomyEconomy

4.2

3.5 3.7 3.6 3.7 3.63.9

4.7

0.0

1.0

2.0

3.0

4.0

5.0

6.0

'01 '02 '03 '04 '05 '06 '07 '08(e)

Global Steel IndustryGlobal Steel Industry

• The world is undergoing a new phase with sustainable growth and inflation under control

Source: IMF - July 2008

Average 2.9

Average 4.8

Average 3.7

5

0%

2%

4%

6%

8%

10%

12%

'03 '04 '05 '06 '07 '08(e)

'09(e)

'10(e)

'11(e)

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Global Production Chinese ProductionGlobal Variation


• With positive effects for the steel industry

15% 19%31%

48%58%

85% 81%69%

52%42%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

'70 '80 '90 '00 '10(e)

Emerging Markets OECD

Source: CRU International; World Steel Dynamics

Obs: 2005: ~ 50%/ 50%

Global Production x ChinaMillion tons

Transfer of ProductionDeveloped x Emerging (Countries)

Consolidation% of production of the 15 largest

Steel IndustrySteel Industry

Source: IISI

Source : IISI

26%29%

34%

0%

5%

10%

15%

20%

25%

30%

35%

40%

94 '00 '07

6


• A recent phenomenon is once again changing the outlook

Coal Iron Ore Scrap (Japan)

Raw Materials Raw Materials –– Price ChangesPrice Changes

US$/tUS$/t US$/tUS$/t US$/tUS$/t

Souce : Tex ReportSouce : Tex ReportSouce: Metal Bulletin

3238

6577

85

141

0

20

40

60

80

100

120

140

160

'03 '04 '05 '06 '07 '08

217269

210

287

395

734

0

100

200

300

400

500

600

700

800

'03 '04 '05 '06 '07 Jul '08

47 57

125 11598

300

0

50

100

150

200

250

300

350

'03 '04 '05 '06 '07 '08

7

Brazilian Steel IndustryBrazilian Steel Industry

• The country outlook is similar

Source: IBGE , Bacen

Inflation (%) - IPCABrazilian GDP (Growth %)

EconomyEconomy

1.3

2.7

1.1

5.7

3.2

3.8

5.4

4.8

0.0

1.0

2.0

3.0

4.0

5.0

6.0

'01 '02 '03 '04 '05 '06 '07 '08(e)

6.8

8.5

14.7

6.6 6.9

4.23.6

4.8

0.0

5.0

10.0

15.0

'01 '02 '03 '04 '05 '06 '07 '08(e)

Average 7.3

Average 4.5

Average 1.7

8

Usiminas26%

Gerdau22%

CSN16%

Others6%

ArcelorMittal30%

Brazilian Steel IndustryBrazilian Steel Industry

• The country outlook is similar

(33.8 million tons. = Brazilian crude steel production)

Source: IBS - 2008 e Metal Bulletin - 2008

ConsolidationLargest steel producers - 2007

Flat Steel Demand (million tons)


9.29.9

11.7

12.9

0

2

4

6

8

10

12

14

2005 2006 2007 2008(e)

+17.8%+10.7%

9

350 375 336 342402 430

342 375 342287

358256 259

331

443

722

606562

689

1,174

0

250

500

750

1,000

1,250

´90 ´91 ´92 ´93 ´94 ´95 ´96 ´97 ´98 ´99 ´00 ´01 ´02 ´03 ´04 ´05 ´06 ´07 ´08 Jun08


• Steel prices follow raw materials prices

Prices in US$/ton in the US (spot market) - HRC

Source: CRU Monitor - Steel

10

UsiminasUsiminas within this contextwithin this context

• In order to face this scenario of transformation, Usiminas sought its integration

Source: Usiminas

MiningSerra Azul MinesLimestone Mine

EnergyIpatinga Power PlantsCubatão Power Plants

SteelmakingInt. Câmara PlantJ. Bonifácio PlantSantana do ParaísoTernium

Capital GoodsUMSA

LogisticsMRSUsifastPraia Mole PortCubatão PortIngá Terminal

Distribuition/ ServicesFasalDuferRio NegroUsiparts

11

UsiminasUsiminas within this contextwithin this context

• Today, its HRC production cost is among the 7% most competitive in the world

Hot Rolled Coil (US$/ton.)

Productions costs ( w/ COGS) Productions costs ( w/ COGS) -- 160 producers in the world160 producers in the world

Source: WSD – World Steel Dynamics - May 2008

72

100

147

-10

10

30

50

70

90

110

130

150

170

Usiminas Average (basis = 100)

Maximum

Average global production cost

is 38% above Usiminas’

12

0

200

400

600

800

2000 2001 2002 2003 2004 2005 2010E 2015E

USA, Japan & EU-15

China

Rest of world

Steel DemandSteel Demand

• The outlook is for continued growth

Source: IBS – April 2008Source: WSD

Global Apparent Steel Consumption Brazilian Demand (Flat Steel)

Consumption and DemandConsumption and Demand

Million Tons

8.4 8.6 8.6 8.910.1

9.2 9.9

11.713.0

15.216.1

17.118.2

19.220.3

21.5

0

5

10

15

20

25

´00 ´01 ´02 ´03 ´04 ´05 ´06 ´07 ´08 ´09 ´10 ´11 ´12 ´13 ´14 ´15

Million Tons

Speeding up Usiminas’ Investment

Program

14

ValueValue creationcreation for for shareholdersshareholders, , customerscustomers andand communitycommunity

Usiminas Usiminas AcceleratingAccelerating

• Goals

Consolidate its leadership in the domesticflat steel market

Create solid basis for future internationalsteps

15

Increase steelmaking and rolling capacity

Increase iron ore extraction and processingcapacity

Technology updating, cost savings andenvironmental control


• The investment program has strategic focus:

16

US$ 14.1 billion


• Investments will target:

New slab plant (Santana do Paraíso)

Intendente Câmara Plant (Ipatinga)

José Bonifácio Plant (Cubatão)

Mining assets

Logistics assets

17

US$ 14.1 billion






Mining assets

Logistics assets

18

Usiminas Usiminas AcceleratingAcceleratingNew New SlabSlab PlantPlant (Santana do Para(Santana do Paraííso)so)

Usiminas airportarea = 4.2 km2

(flat)

Industrial areaoccupied by

Usiminas today= 4.0 km2

Outstanding location Synergy with existing structure

Flat land / Abundant water Labor with a vocation

19


Production capacity5 million tons/yr

Start of works1st Half 2009

Start up2.5 million t/yr in 20112.5 million t/yr in 2012

Coke plant2.0 million t/yr

Power plant250 MW

TOTAL TOTAL InvestmentsInvestments: US$ 5.7 : US$ 5.7 billionbillion *** Does not include investment in thermoelectric powerplant of approximately US$ 400 million

20


• Location in Santana do Paraíso proves to be more adequate whencompared to the previous plan

Potential for higher Potential for higher returnreturn

Lower Lower implementation risksimplementation risks

Opening up of future Opening up of future optionsoptions

21

Greater steel expansion without significant capexincrease

Maintenance of existing synergies

Cost minimization for elimination of physicalinterferences with current operations



Potential for higher Potential for higher returnreturn

22

Expectation of lower environmental restriction

Lower risk of delay due to reduced interferenceswith current operations



Lower Lower implementation risksimplementation risks

23



New site supports additional slabs and rollingmills expansions, according to future demand

Opening of future Opening of future optionsoptions

24


• The slabs will be absorbed by Usiminas rolling mills andremainder will be exported

“Premium” slabs to serve selected, highvalue-added markets

40% 40%

60% 60% ExportsExports

25

US$ 14.1 billion






Mining assets

Logistics assets

26

Usiminas Usiminas AcceleratingAcceleratingIntendenteIntendente CâmaraCâmara Plant (Plant (IpatingaIpatinga))

LINE VOLUMEthsd tons

START UPFORECAST

PROJECT AMOUNT

UNIGAL II(Galvanized) 550 1st Half 2011 US$ 460 million

Heavy Plates 500 2nd Half 2010 US$ 500 million

Hot Rolled Coils 150 1st Half 2011 US$ 130 million

Other US$ 1.0 billion

Total Investments

Technology updating, cost savings and environmental control, with highlight for Coke

Plant 3 (+750kt/yr) and thermolectric powerplant (60 MW) in 2008

US$ 2.1 billion

Investments

Investments to serve “high value-added markets”

27

Usiminas AcelerandoUsiminas AcelerandoGalvanizedGalvanized Steel Steel -- Unigal IIUnigal II

• Greater capacity in Brazil to supply sophisticated steel with advanced technology

Quality & Excellence

28

Usiminas Usiminas AcceleratingAcceleratingIntendenteIntendente CâmaraCâmara Plant (Plant (IpatingaIpatinga))

• Usiminas will be qualified to supply heavy plates with even more stringent specifications

Sole Latin American company to detain “accelerated cooling” technology, enabling Usiminas to meet new market demands for sophisticated

products.

North AmericaNorth AmericaOregonOregon SteelSteel

CISCISSeverstalSeverstal

AsiaAsiaNipponNippon SteelSteel

JFEJFEPoscoPosco

BaosteelBaosteelChina China SteelSteel

EuropeEuropeAcelorMittalAcelorMittal

DillingerDillingerRaultaruukiRaultaruuki

MannesmannMannesmann

RivaRivaSSABSSAB

ThyssenThyssenVAIVAI

29

US$ 14.1 billion






Mining assets

Logistics assets

30

LINE VOLUMEthsd tons

START UPFORECAST

PROJECT VALUE

Hot Strip Mill 2,300 / 4,800 1st Half 2011 US$ 1.0 billion

BF1 Revamping 3.5 thsd/day => 4.5 thsd/day Concluded US$ 170 million

Continuous Casting Machine +350 / ano Concluded US$ 140 million

Other US$ 1.1 billion

Total Investments

Technology updating, cost savings and environmental control

US$ 2.4 billion

Usiminas Usiminas AcceleratingAcceleratingJosJoséé BonifBonifááciocio Plant (Plant (CubatãoCubatão))

Investments

31

Usiminas 2013Usiminas 2013TechnicalTechnical configurationconfiguration ofof thethe plantsplants afterafter thethe investmentinvestment programprogram

TheThe secondsecond expansionexpansion phasephase in in slabsslabs (3 (3 millionmillion t/t/yryr) to ) to bebe executedexecuted, , withwith Cubatão as 1Cubatão as 1stst optionoption, , willwill dependdepend onon marketmarket demanddemand

Current After Current After

Slabs 5.00 5.00 4.50 4.80

Hvy Plate 1.00 1.50 1.00 1.00

Hot Strip 3.60 3.80 2.10 4.40 / 6.10

Cold Strip 2.50 2.50 1.20 1.20

EG 0.36 0.36 - -

HDG 0.48 1.03 - -

Intendente Câmara Plant

million tons

José Bonifácio Plant Santana do Paraíso

New Plant

-

-

5.00

-

-

-

Source: Usiminas

32

US$ 14.1 billion






Mining assets

Logistics assets

33

Usiminas Usiminas AcceleratingAcceleratingMiningMining AssetsAssets

• With the goal of eliminating risks / dependency, Usiminas acquired iron ore assets in February 2008

J.MendesJ.Mendes GlobalGlobal SomisaSomisa PauPau de de VinhoVinho

Current production capacity5 million tons/yr

Future production capacity29 million tons/yr (2013)*

Reserves1.1 to 1.8 billion tons

DownpaymentDownpayment ofof US$ 925 US$ 925 millionmillion. T. Totalotal disbursement limited to disbursement limited to US$ 1.9 billionUS$ 1.9 billion, , dependingdepending onon reserves and reserves and qualityquality underunder drillingdrillingprocessprocess. . MaximumMaximum reserves reserves consideredconsidered : 1.4 : 1.4 billionbillion tons.tons.

34

Usiminas AcelerandoUsiminas AcelerandoMiningMining AssetsAssets

Low level of P (phosphorus – 0.05%)

Low level of Al203 (alumina – 1.0%)

Sinter feed generation of 4.5% to 5.0% of SiO2 (silica)

Pellet feed generation for pellets for BF and DRI

Favorable logistics (close to MRS & FCA railroads) and future Ingá Maritime Terminal

• Iron ore mines highlights:

35

0

10

20

30

2008 2009 2010 2011 2012 2013 2014

Pellet Feed

Sinter Feed

Lump


• Production - million tons

Source: Usiminas

5.2 5.88.8 9.0

10.5

27.729.2

13.0

2.2

14.0

36


• Although Ipatinga and Santana do Paraíso do not have logisticsaccess to be supplied by its mines on “Serra Azul”, Usiminas willhave the benefit of full “hedge” against iron ore price fluctuations

Mining29.2 MM t/yr

J. Bonifácio Plant10.3 MM t/yr

Dom. Mkt. Sales2.2 MM t/yr

Exports16.7 MM t/yr

Supply

IntendIntend. Câmara . Câmara PlantPlant8.0 MM t/8.0 MM t/yryr

Santana do ParaSantana do Paraíísoso8.0 MM t/8.0 MM t/yryr

JosJoséé BonfBonfááciocio PlantPlant2.0 MM t/2.0 MM t/yryr

HedgeHedge

37

Capacity7 million tons

InvestmentUS$ 750 million

Start up of operations2013


• Aiming to add value to iron ore, Usiminas will build a PELLET PLANT

TOTAL TOTAL investmentsinvestments in in miningmining: : US$ 3.5 US$ 3.5 billionbillion

38

US$ 14.1 billion






Mining assets

Logistics assets

39

Start of operations2012

Usiminas Usiminas AcceleratingAcceleratingLogisticsLogistics AssetsAssets

• Usiminas acquired land in Sepetiba Bay where it will build a maritime terminal

• Area will be a benchmark from the environmental point of view

• Amount estimated for environmental recovery - up to R$ 40 million

PriceR$ 72 million

Land850 thousand m²

Shipping capacity25 million tons of Iron Ore, in addition to other products

40

Usiminas Usiminas AcceleratingAcceleratingLogisticsLogistics AssetsAssets

• With the new terminal, the iron ore export corridor will beimproved for Usiminas mines at competitive costs

BrazilBrazil

(Minas Gerais)

(São Paulo) (Rio de Janeiro)

(Espírito Santo)

Praia MoleTerminal

IngáTerminal

CubatãoTerminal

São Paulo

Belo Horizonte

MRSJ. BonifJ. Bonifáácio cio

PlantPlant

Int. Câmara Int. Câmara PlantPlant

IronIron Ore Ore MinesMines

41


• Total Investments of:

US$ 14.1 billion

Financial Financial HighlightsHighlights

43

530734 657 831 999

1,9222,269

2,010

2,581

721

31%35%

32%35% 35%

46%42%

35% 36% 35%

0

1,000

2,000

3,000

4,000

5,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 1Q08

Ebitda Ebitda Margin

UsiminasUsiminasFinancial Financial HighlightsHighlights

• Over the last few years, Usiminas has prepared itself for this new phase

US$ Million

March, 2008

44


• Over the last few years, Usiminas has prepared itself for this new phase

US$ Million

March, 2008

2,491 2,334

1,317860

355 387(537)

3.12.3

0.7 0.4 0.2 -0.2 0.1

0

1,000

2,000

3,000

4,000

5,000

2002 2003 2004 2005 2006 2007 1Q08

Net Debt Net Debt / Ebitda

45


• The Investment Program foresees the following funding:

Capital Markets

Commerc'l Banks

ECAs

Own Funds~ 50%

Type AmountUS$ million

AmountR$ million

TermYears

BNDES - 400 6

BNDES - 500 6

Eurobond 400 - 10

Debentures - 500 4 / 5

Pre Payment 600 - 5 / 7

Type AmountUS$ million

AmountR$ million

TermYears

BNDES - 400 6

BNDES - 500 6

Eurobond 400 - 10

Debentures - 500 4 / 5

Pre Payment 600 - 5 / 7

EstimatedEstimated ffundingunding in in thethe amountamount ofof~ US$ 6.0 ~ US$ 6.0 billionbillion upup to 2012to 2012

Main Financial Transactions

46

STEELMAKING MINING TOTAL

2008 1,480 960 2,440

2009 2,550 1,060 3,610

2010 4,410 480 4,890

2011 1,830 770 2,600

2012 360 200 560

TOTAL 10,630 3,470 14,100


• Estimated Capex for the Investment Program fits into the capital structure considered adequate for the company

US$ million

MarketMarket trendstrends -- 20082008

48

DomesticDomestic MarketMarket 20082008DemandDemand growthgrowth

9,2299,902

11,66912,922

2005 2006 2007 2008

(thousand tons)

+17.8%+17.8%+10.7%+10.7%

Source: IBS / Usiminas

49

DomesticDomestic MarketMarket 20082008DemandDemand growthgrowth byby segmentsegment

1 – OEMs = Original Equipment Manufacturer2 - Industry: Shipbuilding/Tractors/agriculture/Highway/Industrial/Bottles/Containers/Large-diameter Tubes/Other

Appliances: Eletro-electronics/Domestic Appliances / Safes and Furniture3 - Distribuition : Rerolling/Small-diameter tubes/Distribution

Civil Construction: Civil construction/ Shapes

CONSUMER 08 / 07SEGMENTS ∆ %

1 - AUTOMOTIVE 2,677 3,198 3,636 13.7

OEMs 1,150 1,384 1,578 14.0

Autoparts 1,527 1,814 2,058 13.5

2 - INDUSTRIAL 2,337 2,706 2,918 7.8

Industry 1,541 1,842 2,049 11.2

Appliances 796 864 869 0.6

3 - SERVICE CENTERS 4,888 5,765 6,367 10.4

Distribuition 3,934 4,586 5,035 9.8

Civil Construction 954 1,179 1,332 13.0

General Total 9,902 11,669 12,922 10.7

20072006 2008

Market Market trendstrends -- 20082008

51

International Market 2008International Market 2008OverviewOverview

- Low inventory levels- Imports decreasing - 10%- Exports increasing - 17%- Stable prices

USA

- Significant demand growth- Exports decreasing- Higher imports- Prices increasing slightly

Latin America

- Demand increasing slightly - Eastern Europe growing 15%- From net exporter in 2005 to net importer- Main exporters reducing exports- Prices increasing slightly

Europe

- Strong demand growth pushed by energy and civil construction sectors- High level of imports

Middle East

- Growth in demand- Prices increasing slighttly- Regional transactions- Exports barriers threats

- Growth in demand - 12%- Production increase - 10%- Reduction of 23% in net exports (accum. 2008)- Stable prices- Threat of higher export taxes

Ásia

China

52

www.usiminas.com.br/ri

ADRLevel I

Declarations contained in this presentation in relation to the busines outlook of theComapany, operational and financial projections and references to the growth potential ofthe Comapany constitute mere forecasts and were based on the expectations of theManagement in relation to future performance. These expectations are highly dependent on market behavior, of the economic situation in Brazil, on industry and international markets, and are, therefore, subject to changes.

Investor Relations:

Bruno Seno Fusaro (Head of IR) Gilson Rodrigues Bentes Matheus Perdigão Rosa [email protected] [email protected] [email protected].: +55-31-3499-8772 Tel.: +55-31-3499-8617 Tel.: +55-31-3499-8056 Fax: +55-31-3499-9357 +55-11-5070-8980

Luciana Valadares dos Santos Diogo Dias Gonç[email protected] [email protected].: +55-31-3499-8619 Tel.: +55-31-3499-8710

São Paulo São Paulo –– July 24, 2008July 24, 2008

Usiminas Usiminas SSpeedingpeeding up its Investment Programup its Investment Program

Usiminas Speeding up its Investment...

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