Review of 2013

The overall steel market in China improved in 2013 compared with 2012, particularly in the second half of 2012 when the industry experienced volatility in raw material prices, although this eased in 2013. As the Chinese economy transitions from being investmentdriven to consumption-driven, the growth of fixed asset investment has slowed. This, coupled with various tightening measures implemented by the government, will continue to affect the steel market. Excess capacity in steel production will also put pressure on the operations and profitability of individual steelmakers in China.

This general operating environment is affecting the special steel sector as well. However, CITIC Pacific Special Steel outperformed the market in 2013 as we continued to improve efficiency and optimise the product mix. We also intensified our marketing and sales efforts in the auto components and power generation sectors by leveraging our competitive advantage.

For the year 2013, CITIC Pacific Special Steel sold a total of 7.24 million tonnes of special steel products, 11% more than in 2012. The majority of the increase came from our new product – special steel plates. Although the average selling price of all products was lower than 2012, our profit margin improved with the fall in price of raw materials such as iron ore and coke. Attributable profit from the special steel business was $1,306 million, a substantial rise of 519% compared with 2012.

Improvements in the European and Asia markets created greater demand for high quality special steel products during the year. Our marketing team successfully broadened our product penetration rate, and this accounted for a 22% rise in export volume over 2012 accounting for 15% of our total sales volume.

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