SAUDI ARABIA. KPMG reviews emerging issues in customer demand, cost, financing, regulations and the availability of raw materials to find the answers. Are we are still in the midst of metals commodity super-cycle, albeit with a slowdown, or is the industry resetting itself? Is the slow down in the real economy likely to prevent any meaningful recovery for the metals industry in 2009? In order to find the answers, KPMG’s Diversified Industrials practice has published ‘What’s Ahead for the Metals Industry in 2009? The Metals Industry’s Response to the Economic Downturn.’ KPMG’s latest thought leadership, presents a situation analysis on the circumstances that led to the industry’s current conditions. The first half of 2008 gave little indication of the storm approaching with the industry experiencing record levels in prices, demand and volume, especially for steel and scrap. Nickel, titanium copper and platinum also enjoyed strong profits and broad-based demand. Yet storm clouds were already gathering and battered by the growing financial crisis the construction industry began to decline accompanied by a collapse in demand for durable goods such as automobiles. Indeed in the European Union and U.S markets demand for automobiles plunged by as much as 30 to 40% and as a result, global steel production began a steep decline and have now dropped approximately 60 to 70% since 2007 with prices for scrap in the US plummeting to levels last seen in 2002. As Abdullah Hamad Al Fozan, KPMG in Saudi Arabia’s Senior Partner comments. “Only the leanest and most proactive organizations will likely deliver satisfactory returns for their shareholder going forward. Those organisations that look to improve their internal efficiencies and control their fixed cost base should be in a position to price competitively and gain market share.” Therefore What’s Ahead for the Metals Industry in 2009 looks at the new ways many companies are finding to try to optimize their cost structure as they struggle under the pressure of falling profits, margins, liquidity and suffer market conditions in which their very survival is threatened. To add to the challenges the metals industry is facing are environmental concerns and regulations especially in the area of CO2 emissions. The EU is working to make renewables 20 percent of total energy demand by year 2012 and has announced the goal of reducing CO2 emissions by at least 20 percent by 2020. KPMG’s What’s Ahead for the Metals Industry in 2009? looks at the impact of significant regulatory challenges including the metal industry’s effort to achieve a coordinated, global approach to greenhouse gas (GHG) control. The publication also examines cash and working capital sufficiency and industry consolidation plus the growing trend of companies seeking cheaper alternatives in raw materials in order to lower costs. Other strategies for manufactures include vertical integration with suppliers. What’s Ahead for the Metals Industry in 2009 reveals that steel companies are acquiring scrap suppliers as well as iron ore and coke mine to insulate them from price volatility and ensure a dependable supply of raw materials. Abdullah Al Fozan continues to say. “Vertical value chain control provides one of the simplest methods of hedging. In the steel industry that means shifting value generation upstream.” What’s Ahead for the Metals Industry in 2009 concludes with a realistic analysis of any encouraging signs for the industry on the horizon. Al Fozan concludes by saying. “Steel is one of the world’s most rapidly transforming industries. It is important to recognize the dynamic nature of the industry and measure its impact on your organization’s cost, cash flow and revenue decisions.”

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