Steel Financial Contracts - Now Not Tomorrow? Effective Risk Management Tools for Managing Volatile Steel Prices

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About Koch Steel

Who is Koch Steel Trading?

Until now, steel price volatility and its effect on producer profits and consumer costs have been an unmanageable fundamental characteristic of the steel industry. Product tariffs coupled with changing regional demand/supply patterns have led to a significant increase in observed price volatility over the past three years. Unlike most sizeable commodity sectors which have financial markets to manage price risk (e.g. petroleum, agriculture, metals and energy) there is little that steel producers or consumers can do to manage their price exposure. This is changing. The steel trading arm of Koch Supply & Trading, LP and Koch Metals Trading Limited* (collectively referred to below as “Koch Steel Trading”), seeks to apply its expertise in solving client challenges to the steel industry. Koch Steel Trading is offering a variety of steel financial price risk management and structured products to aid clients exposed to steel price fluctuations.

*Koch Metals Trading Limited is regulated in the UK by the Financial Services Authority (FSA registration number 184882, UK company number GB 3320973, and VAT registration number GB 341 4539 69).

Koch Companies

More than 25 years ago Koch companies began trading crude oil, a business that today has grown to be one of the largest oil trading operations worldwide. Koch companies also manufacture, transport, market and trade a variety of other products, including non-ferrous and precious metals, nitrogen-based fertilizers, coal, and various chemical compounds. Koch companies continue to innovate and grow.

It’s all about value...

Koch companies strive to discover what people value and to deliver superior customer value with fewer resources. Employees live by a set of values and principles that include integrity, humility, entrepreneurship and respect – to name a few. And they are dedicated to adding value in the many communities in which their companies operate, through civic and charitable contributions and employee involvement.

Live Values by Acting on Principle

Koch companies focus on building competitive advantages in the industries in which they operate.

Koch companies create these advantages and capture profitable opportunities in the marketplace through leadership in developing and practicing Market Based Management®. MBM®, implemented in Koch companies worldwide, was developed based on these beliefs:

• Long-term business success comes only from creating real value for customers and society, not the illusion of value.
• The world is experiencing an unprecedented (and accelerating) rate of change.
• To create value amid this change requires a well-founded understanding of what people value and how the world works.
• Throughout history, the framework that leads to the greatest value creation is one based on economic freedom.
• A market system based on economic freedom has proven to be the most effective and efficient system for creating prosperity and social progress.

Create Value in the Marketplace and for Customers

The companies in the Koch Industries group work to increase efficiency and create superior value. By applying core capabilities and continuously improving management systems, Koch companies strive to meet the highest standards for compliance excellence while satisfying customer needs.

These companies also cultivate a disciplined style of managing operations and investments. This has helped spur success in current businesses and is a critical part of positioning these companies to grow profitably.

To ensure Koch companies achieve superior results, employees strive to continuously improve core capabilities:

• Market Based Management®: attracting and retaining talent, communication, economic thinking, entrepreneurial culture, and incentives.
• Operations Excellence: compliance, employee health and safety, environmental stewardship, audit and assurance, benchmarking, cost effectiveness, and merger and acquisition support.
• Trading: point of view, value chain analysis, strategy development, risk management, cross-product trading, and execution.
• Transaction Excellence: opportunity network, value creation strategy, decision-making framework, mergers and acquisitions, financial and organizational structuring, and due diligence.
• Public Sector: legal, communications, community and governmental relations, and philanthropy.

With the 2004 purchase of INVISTA, broader capabilities in technology, product development and differentiation can be developed. Creating superior branded products should serve not only as a central driver of future value for INVISTA, but for all of Koch Industries.

Add Value by Enhancing Communities

Besides providing customers with products and services that enhance their daily lives, Koch companies believe that being good citizens and neighbors is the right thing to do. Koch companies engage in many charitable activities, giving their time, talent and financial support to add value to their communities and help others help themselves. Koch’s commitment to its local communities also include the many investments Koch companies make to operate their facilities safely and cleanly, as well as the communications that connect these companies to their neighbors. Since Koch company employees live in the communities where their businesses operate, they have a strong desire to protect and enhance them. Koch companies support a wide variety of nonprofit organizations that share their values and market-based philosophy.

Areas of focus:

• Education
• Environmental Stewardship
• Human Services

Koch companies continue to expand rapidly. For more information on all Koch companies please visit www.kochind.com.