CSC — Investor Presentation 2021

Sep 15, 2021

China Steel Corporation

September 16, 2021

25

1 3 Steel and Raw Material Dynamics

2 Operating Performance - - 電動車 再生能源 Agenda國防產業 3 產業升級 Key Strategies 4 Appendixes

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Safe Harbor Statement

This presentation may contains forward-looking statements. All statements other than historical and current fact, without limitation, including business outlook, predictions, estimates, are forward-looking statements.

Such statements are based current beliefs and upon management’s expectations and are subject to various risks, uncertainties and other factors that could cause actual outcomes and results to differ materially.

We caution readers not to place undue reliance on forward-looking statements as these statements speak only as of the date they are made, and we disclaim any obligation to, update or alter any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law or regulation.

This cautionary statement is applicable to all forward-looking statements contained in this presentation.

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Macroeconomic overview

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• With growing vaccination rates in various countries, the roll-out of infrastructure plan and recovery of private consumption contributes to the continuous growth of the global economy. However, the strength of recovery in various countries may diverge due to inequity in vaccine access. Developed countries are more expected to get back toward normal.

• Owing to concerns over economic stability and inflation, the Chinese government launched several control policies recently. The US is also expected to taper bond buying by the end of this year with the concern of accelerating inflation rate.

• The economies of Southeast Asia are showing a hit again as the delta variant fueled a new wave of infections, which may pose more challenges to the tightened shipping capacity and supply chain activities.

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Major steel market dynamics

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 US&EU ：

• Due to summer holiday and flood damage, transaction has reduced in the European steel market. However, production control and cancellation of tax rebates in China and potential US’ Section 232 tariff relief for EU may support the steel price.

• The $1 trillion U.S. infrastructure plan is expected to keep the demand strong in steel-using industries such as vehicles and construction. However, the current historical high price levels would attract steel imports into the US market.

• China ：

• To curb carbon emission, China’s ministry of industry and information technology (MIIT) proposed that the crude steel output should decline year-on-year in 2021. Production control is expected to strengthen in the second half of this year. The average daily output of crude steel shrank to 2.8 million tons in July, falling 10.5% from June and hitting the lowest level since April 2020.

• In order to secure sufficient domestic steel supply under the policy of reducing carbon emission and steel production, China removed export tax rebate for key steel products (HRC, bars and wire rods) from May 1[st] . Starting from August 1[st] , the government further raised the export tariffs on pig iron and ferrochrome and removed the export tax rebate for 23 steel products. The policy is expected to lend support to the international steel prices.

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Major steel market dynamics

Vehicle

Construction

 Southeast Asia ：

• Due to the surge in COVID-19 cases, local government raised restrictions on economic activities again. Automobile and motorcycle manufacturers and auto part factory could only operate limitedly. Steel market sentiment has weakened resulting from aforementioned restriction and lower demand in rainy season.

• As the manufacturing industry improves, steel demand in India is expected to recover gradually when the rainy season ended in late August, leading to a stabilization of steel prices.

 Taiwan ：

• As coronavirus restrictions gradually lifted in the US and EU, the strong momentum in consumption has benefited Taiwan’s export and manufacturing sector. With coronavirus being contained domestically and the raining season coming to an end, private consumption and investment levels have been on the rise.

• Recently, the construction sector is witnessing a boom in both local and international markets and the sales of electronic devices remains strong. Other sectors such as electric vehicles (EV) components are expanding as major governments are implementing EV policies, and leisure related industries such as fitness equipment and bicycles are seeing rising sales as well. The surge of demand in these industries has raised steel consumption and is expected to continue to grow in the near future.

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Raw material price trend

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The incoming raw material price in 2021 Percentage change compared to Dec. 2020 CSC incoming raw material price trend

70.00%

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63.30%
The iron ore price kept climbing in 2021 and the
60.00%
53.96%
coking coal price has also surged since June.
51.86%
50.00% The average raw material cost has increased 48.24%
gradually until the iron ore price started to 46.86%
40.00%
decline in August, slightly mitigating the
upward trend of costs. 29.50%
30.00%
20.00%
10.00%
0.00%
-10.00%
202012 202101 202102 202103 202104 202105 202106 202107 202108
Iron Ore Coking Coal Raw Material Cost Contained in Hot Metal
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Consolidated Financial Performance

Consolidated Financial Performance	Consolidated Financial Performance	Consolidated Financial Performance	Consolidated Financial Performance	Consolidated Financial Performance	Consolidated Financial Performance	Consolidated Financial Performance
L i l
Amount: NT$ million atest operatng resuts Item 2021.7* 2021.6 MoM 2021.1~7 2020.1~7 YoY* Operating Revenue 41,883 38,824 8% 255,153 175,217 46% Operating Income 8,160 7,883 4% 41,407 (3,726)1211% Operating Income Margin 19.48% 20.31% 16.23% -2.13% Income Before Income Tax 9,085 8,306 9% 44,286 (4,111)1177%
Item	*2021.7	2021.6	MoM	*2021.1~7	2020.1~7	YoY
Operating Revenue	41,883	38,824	8%	255,153	175,217	46%
Operating Income	8,160	7,883	4%	41,407	(3,726)	1211%
Operating Income Margin	19.48%	20.31%		16.23%	-2.13%
Income Before Income Tax	9,085	8,306	9%	44,286	(4,111)	1177%

*preliminary result

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Quarterly profits trend
NT$ million  As countries lifted restrictions in
25,000 20.00%
17.98% 2020H2, the rapid recovery in demand
22,500 18.00% and tight steel supply contributed to
20,000 16.00%
17,500 12.77% 14.00% the rising steel price.
15,000 12.00%  Thanks to the increase of both
12,500 10.00% monthly and quarterly pricing,
10,000 8.00%
7,500 6.70% 6.00% especially the significant price
5,000 4.00% increase in Q2, the ASP increase was
2,500 2.00%
5,867 6,260 12,489 13,099 20,758 22,102 larger than that of ASC in the same
- 0.00%
2020.4Q 2021.1Q 2021.2Q period. As a result, the profit keeps
Operating Profit Pretax Income Operating Margin growing in Q4 and Q2. 9
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Standalone Production / Sales Performance

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Sales analysis

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thousand tons
2,639
2,490 2,432
67%
64%
60%
Sales Volume
Domestic Sales
2020.4Q 2021.1Q 2021.2Q
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• Because of the strong global steel demand, CSC runs at full capacity after the completion of revamping of No.2 blast furnace at the end of 2020.

• As the supply of slabs from Nippon Steel’s Wakayama Steel Works reduces since 2021, CSC no longer arranges these slabs and the procurement shifted to Chung Hung Steel. As a result, CSC’s standalone sales of slabs decreased.

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2021.1H Sales value breakdown Production analysis
thousand tons
2,521
2,480
Billet/Slab, 2,451
2,188 2,214
Bar, 9% 3% Hot Rolled,
26%
Plate, 10% Export 32% 2,088
Wire Rod,
16% Domestic 68%
Cold Rolled, 2020.4Q 2021.1Q 2021.2Q
36%
Crude Steel Production Product Production
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– 2021.1H Sales Analysis CSC standalone

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2021.1H sales volume totaled 4.92 million tons – Sales Breakdown

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Hot-Rolled,
28.5%
Cold-Rolled,
17.8%
Billet/Slab, 4.3%
China
21.2% Japan 15.1%
Bar/Rod, 22.7% Coated Products,
16.2%
Plate, 10.5% Export
Ship-building 0.4% 34.74%
Wire-rope 0.6% 1.71 million Others 33.3%
Hand tools 1.2% Domestic
tons
Vehicles 4.6%
Piping 5.8% 65.26%
Trader 6.2% 3.21 million tons
Others 6.6% S.E Asia 30.4%
Steel structure 7.1%
Re-rolling 13.0%
Coil center 13.6%
Bolts-nuts 16.9%
Direct users 24.0%
0% 5% 10% 15% 20% 25% 30%
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- 2021.1H Sales Analysis CSC & BF products of DSC

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2021.1H sales volume totaled 6.85 million tons – Sales Breakdown

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Hot-Rolled,
43.3%
Cold-Rolled,
12.8% China
17.9% Japan 14.9%
Billet/Slab, 8.5%
Coated Products,
11.6%
Plate, 7.5%
Bar/Rod, 16.3% Export
Ship-building 0.4% 37.38%
Wire-rope 0.4% 2.56 million Others 30.2%
Hand tools 0.9% Domestic
tons
Vehicles 3.5%
62.62%
Trader 5.0%
Steel structure 5.6% 4.29 million tons
Piping 7.7% S.E Asia 37.0%
Coil center 11.5%
Bolts-nuts 12.6%
Others 13.5%
Direct users 18.2%
Re-rolling 20.7%
0% 5% 10% 15% 20% 25% 30%
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Consolidated Income Statement

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IFRSs	Units: NT$ millions	Units: NT$ millions	Units: NT$ millions
	2021.1H	2020.1H	YoY
Revenues	213,270	150,528	+42%
Gross profit	40,611	2,830	+1335%
Gross margins	19.04%	1.88%
Profit (loss) before tax	35,201	(3,819)	+1022%
Net profit (loss)	28,905	(3,414)	+947%
Attributable to
Owners of the corporation	24,741	(3,664)	+775%
Non-controlling interests	4,164	250	+1566%
Earnings Per Share(NTD)	$ 1.60	($ 0.24)	+767%

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Consolidated Financial Position

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Units: NT$ millions

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105.15%
101.15% 100.66%
96.77% 96.86%
89.64%
676,122 667,716 674,527 666,632
636,083 656,665
51.25% 50.29% 49.18% 50.17% 49.20%
47.27%
346,542 335,764 331,729 334,417
312,976 310,387
37.62%
35.71% 34.50%
31.57% 31.95%
254,390 238,426 212,949 229,965 203,225 26.81%
176,076
12/31/2016 12/31/2017 12/31/2018 12/31/2019 12/31/2020 06/30/2021
Asset Debt Net Debt ＊ Debt/Equity Debt/Asset Net Debt/Asset
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• Cash flows from operating activities remains steady; keep paying back debts and reducing debt ratio.

• Keep reducing financial costs by issuing corporate bonds and paying back US dollardenominated debt in recent years.

• Credit rating: Taiwan Ratings twAA- ; Outlook Stable (2021.04.23) Fitch Ratings AA-(twn);Outlook Stable (2020.12.23)

＊ 2014~2017 ：

Net debt = Interest Bearing Debt – cash & cash equivalents – ( financial assets at fair value through profit or loss-current+ available-for-sale financial assetscurrent +held-to-maturity financial assets-current+ derivative financial assets for hedging-current) ＊ 2018~ ：

Net debt = Interest Bearing Debt – cash & cash equivalents – ( financial assets at fair value through profit or loss-current+ financial assets at fair value through other comprehensive income-current)

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Historical EPS and Dividends Paid

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2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Dividend
85 132 86 70 102 82 81 63 88 600
payout(%)
Cash Dividend
74 105 67 70 102 82 81 63 88 600
payout(%)
in NTD per share
2.00
1.00
-
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Cash Dividend Stock Dividend EPS
0.15
0.20
1.01 1.00 1.00
0.10 0.85 0.88
0.70
0.40 0.5 0.5
1.36 0.38 1.05 1.43 0.49 1.04 1.09 1.58 0.57 0.05 0.3
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10 Measures
1. Develop Advanced Premium Steel
2. Establish Excellent Manufacturing Capability
3. Improve Marketing Capability
4. Deepen the Upgrade of Steel-using Industry
5. Introduce the Application of AIoT
6. Build up Highly Efficient Business Systems and Processes
7. Move towards High Productivity
8. Pass on and Enhance Corporate Culture
9. Explore and Cultivate in the Green Industry Business
10. Mitigate Coal Phase-out and Carbon Reduction Pressure
Transform into a high value-added steel mill throughintelligent innovation.
Expand new business opportunity in promising industry through
engagement in thegreen energyfield.	17

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Develop Advanced Premium Steel

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Definition of Advanced Premium Steel (APS)

Products with ”High Technical Content, High Profitability, High Industrial Benefit,” creating over 20% gross profit margin.

Focus on 8 items(Meet customers' needs & Follow industry trend)

	Focus on 8 items(Meet customers' needs & Follow industry trend)	Focus on 8 items(Meet customers' needs & Follow industry trend)	Focus on 8 items(Meet customers' needs & Follow industry trend)	Focus on 8 items(Meet customers' needs & Follow industry trend)	Focus on 8 items(Meet customers' needs & Follow industry trend)	Focus on 8 items(Meet customers' needs & Follow industry trend)	Focus on 8 items(Meet customers' needs & Follow industry trend)	Focus on 8 items(Meet customers' needs & Follow industry trend)
	High- Quality Forging Steels	Superior Hand Tool Steels	High Performance Structural Steels	Steel for Green Energy	Ultra-High Strength and Toughness Steels	Advanced Alloy Steels	Cross- Generational Automotive Steels	Ultra- High Efficiency Electrical Steels
	Year			2021	2022	2023	2024	2025
	Advanced Premium Steel volume target			35.0	46.2	58.5	71.3	85.2
	Total sales volume target (Not including leeways, secondary and salvage products, and semi-products)			833	840	848	849	852
	Advanced Premium Steel proportion target (%)			4.2%	5.5%	6.9%	8.4%	10.0%
	~~(Unit: 10 thousand tons)~~

 Sales volume of APS to achieve 10% in 2025 and 20% in 2030.

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 In 2021H1, the sales volume of APS reached 296.7 thousand tons, accounting for 7.24%.

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- Deepen the Upgrade of Steel using Industry

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Cultivating core technologies Integrating the resources from government, academia and research institutes to execute the collaborative programs such as power system of EV.

Facilitating industry 4.0

• Constructing industry cloud to enhance cross-factory efficiency.

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• Introducing AI-based production and marketing.

Promoting industry service teams

EVI-based Concurrent Engineering

Providing multi-program of process technology, quality control, logistics management, etc. to cultivate medium-sized enterprises.

Establishing JRL to proceed overall researches from materials to end products and enhancing the effect of industry chain.

Promoting Integrated Innovation Facilitating Upgrade and Transformation Generating Demand and Benefits from Advanced Premium Steel

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Explore and Cultivate in the Green Industry Business

Sing Da Marine Structure Corporation - Substructures

• Officially commenced operation in January, 2020

• Capital: NTD$6.842 billion with equity ratio 50%, CSC holds 100% of shares.

• Progress: Producing the substructures for Orsted

• Greater Changhua Offshore Wind Farm Project. The first 100% domestically made substructure was completed in July, 2021.

Jacket substructures: the one on the left was completed, and the upper jacket and lower jacket of the one on the right are currently being welded. 

China Steel Power Corporation - Offshore Wind Farm

• Capacity: Got distribution of 300MW grid capacity for installation.

• Developers: China Steel Corporation and Copenhagen Infrastructure Partners (CIP) jointly established China Steel Power Corporation to develop #29 offshore wind farm. CSC holds 51% of shares.

• Progress: Obtained the establishment permit, signed power purchase agreement (PPA) with Taipower, and passed the 2[nd] environmental impact assessment. The wind farm is expected to connect to the gird in 2024 and generate an estimated 1.1 billion kwh annual output.

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Explore and Cultivate in the Green Industry Business

CSC Solar Corporation

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Shareholding
CSC
10%
CEC
15%
CSCC
55%
20% DSC
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• Invested NTD 4.36 billion in setting up 84.8MW PV panels on the roof of factories in CSC group.

 Continue to deploy the rooftop photovoltaic power station in CSC group related industries, and enter into the ground-mounted PV projects when opportunities arise.

Year	2017	2018	2019	2020	2021	Total
Estimated Capacity Installed (MW)	30	30	20	2.5	4.9	87.4
Actual Capacity Installed (MW)	31.16	30.01	22.04	1.59	--	84.8
Electricity Output (100m kwh)	0.04	0.47	0.74	1.04	0.71 (until Aug.)	3.00

 As of Aug. 2021, the accumulated electricity output of solar power in CSC group reached 300 million kwh. Revenues from electricity sales reached $1.38 billion. Carbon reduction reached 153 thousand tons, equivalent to the CO2 absorption of 392 Taipei Daan Park. 21

(Estimated based on the 2019 Taipower electricity carbon emission factor, 0.509 kg CO2e/kwh)

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Environmental Protection Action

Became a TCFD supporter & adopted the TCFD framework.

Enclosed Building in Coking Coal Storage Yard

Investment on environmental protection

• Accumulated investment in environmental protection equipment reached 76.3 billion.

• Investment on air quality improvement projects in the recent 5 years reached 4.756 billion.

• To invest 44.714 billion in air quality improvement projects from 2020~2026.

Reduction of green house gas

• Participate in the GHG voluntary reduction program held by Industrial Development Bureau since 2005.

• Until 2020, 1,280 reduction projects has been implemented. Carbon reduction reached 1.875 million tons CO2e per year, equivalent to the CO2 absorption of 4,821 Taipei Daan Park.

Water resources development

• Water recycled rate is 98.4%. (higher than the 65% required by the government)

• Won 16 Water Conservation awards from the Water Resources Administration of Ministry of Economic Affairs .

• The first company in Taiwan to use domestic reclaimed water.  Fengshan Creek reclaimed water was introduced in 2018.

Introduce the reservoir for reclaimed water

• Linhai reclaimed water will be introduced in early 2022.

• Built a seawater desalination pilot plant in March 2021.

• Target: Develop an integrated seawater desalination process, which produces water at a cost less than NTD 25/ton in 2 years.

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ESG performance

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ESG Performance

• 2021.05 CSC was ranked top 5% in TWSE listed companies in the 7th (2020) Corporate Governance Evaluation.

• 2020.11 CSC received the highest honor - “Top 10 Domestic Companies Sustainability Model Awards (Manufacturing Industry)” by Taiwan Corporate Sustainability Awards (TCSA).

• 2020.11 CSC won the “Leader in Sustainability Resilience Award” by British Standards Institution (BSI).

• 2020.11 CSC was included in the Emerging Market Index of Dow Jones Sustainability Index (DJSI) for the 9th consecutive year.

• 2020.10 CSC was ranked 50th in the 100 Most Sustainably Managed Companies in the World by Wall Street Journal, and became one of the five Taiwanese companies awarded.

• 2020.08 CSC was selected as one of the Top 50 Large Enterprises (ranking No. 17) of 2020 Excellence in Corporate Social Responsibility Award by CommonWealth Magazine.

• 2020.06 CSC won the 2019 Sustainability Champions of World Steel Association (worldsteel).

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Thank you!

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- Company overview Business snapshot

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• CSC is the leading Taiwanese steel manufacturer with integrated production capabilities. Crude steel capacity of CSC Group reached about 16 mmt.

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CSC Group domestic market share ( 2021.1H )
88%
25%
51%
11% 34%
77% 82%
60%
51%
40%
26% 29%
Hot- Bar/Rod Electro- Plate Cold-rolled Hot-rolled Electrical
中鋼集團 Galvanized Galvanized Steel
Steel
CSC Dragon Steel Chung Hung
----- End of picture text -----

• CSC: 9.9 mmt

• DSC: EAF & No.1&2 BF around 6 mmt

• Dominant position in the domestic market

• Focus on Leading-edge Steel Mill & green energy business.

Improve the percentage of high-end and high-margin products.

Trading and Service and Logistics Investments

Industrial Materials

Steel Engineering

• CSC

• CSSC

• CSCC

   - Gains Investment
  

  • CSE

• China Ecotek

• CHS

• CHC Resources

  • China Steel Security

• CSGT

• DSC

• CSMC

• CSAC

• CSMQ

• CSC Steel Sdn. • Info-Champ Bhd. Systems

• Himag Magnetic

• CSMK

• CPDC

• CSPM

• CMC

• CSVC

• SDMS

• China Steel Resources

• CSC Solar

• CSCI

• China Steel Power

• KRTC

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– Company overview Overseas production sites and sales channels

Established southbound overseas production sites and sales channels to breakthrough tariff barriers.

Established southbound overseas production sites and sales channels to breakthrough tariff barriers.

Established southbound overseas production sites and sales channels to breakthrough tariff barriers.

Vietnam CSGT Metals Vietnam J Company Vietnam Hanoi Steel Center Co., Thailand Nippon Steel Thai Sumilox Co., Ltd. China PCMI Metal Products (Chongqing) Co., Ltd Italy Ardemagni SpA Thailand NST Coil Center (Thailand) Ltd. Thailand TSK Steel Co., Ltd. India Mahindra Auto Steel Private Limited China Xiamen Chunyuan Precision Mechatronic Co., Ltd China Maruichi Metal Product (Foshan) Co., Ltd

Malaysia CSCSteel Sdn. Bhd. CSC holds 46% of CSHB Capacity: CR 0.48 mmt (CRC 0.24 mmt including PO, GI 0.17 mmt, PPGI 0.07 mmt) oint Stock Ltd. India China Steel Corporation India Pvt. Ltd. (CSCI) CSC holds 100% of CSCI Capacity: ES 0.2 mmt Vietnam China Steel and Nippon Steel Joint Stock Co. (CSVC) CSC holds 56% of CSVC Capacity: 1.2 mmt (CR 0.5 mmt, GA/GI 0.3 mmt, ES 0.2 mmt, PO 0.2 mmt) China Changzhou China Steel Precision Materials Co., Ltd. CSC holds 70% of the equity interest Capacity: 8,000 metric tones China Qingdao China Steel Precision Metal Co., Ltd China China Steel Precision Metals Kunshan Co., Ltd.

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Overseas Investments of CSC group

Co-invest in coil centers with peers and customers through China Steel Global Trading Co.

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Segment revenues and operating results

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		Unit : NTD Thousands	Unit : NTD Thousands	Unit : NTD Thousands
2021.1H	Steel	Others	Adjustment & Elimination	Total
Revenues from external customers	$ 171,901,703	$ 41,367,921	$ -	$ 213,269,624
Inter-segment revenue	46,300,606	26,554,607	( 72,855,213)	-
Segment revenue	$218,202,309	$ 67,922,528	($ 72,855,213)	$ 213,269,624
Segment profit (loss)	$ 30,414,857	$ 4,766,333	($ 1,934,037)	$ 33,247,153
Interest income	61,045	77,874	( 19,107)	119,812
Financial costs	( 719,415)	( 282,056)	70,810	( 930,661)
Share of the profit (loss) of associates	13,540,528	1,744,648	( 14,906,797)	378,379
Other non-operating income and expenses	221,044	1,558,853	606,791	2,386,688
Profit (loss) before income tax	43,518,059	7,865,652	( 16,182,340)	35,201,371
Income tax	5,724,813	789,106	( 217,358)	6,296,561
Net profit (loss) for the period	$ 37,793,246	$ 7,076,546	($ 15,964,982)	$ 28,904,810

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