IOD Product Direction Project Portfolio EPC - Business case- Luxemburg, February 17 th 2004

1. IOD Product Direction Project PortfolioEPC - Business case-Luxemburg, February 17th 2004

2. Project Portfolio Product Line Management main modules • IT Projects • Description • N° • Business Domain Module 1 Arcelor Advanced Catalogue Request For Quotation / Product Configuration Catalogue Management A2C + Esidel Module 2 Metallurgical Route Production Launching Specification Metallurgical Route Management Dynamic Routing Module 3 On Line Product Qualification Product Qualification on Production Line EPC Module 4 Anomalies Detection & Diagnosis Anomaly diagnosis Decision Support Tools EPC Module 5 Product Allocation & Re-allocation Product Allocation / Re-allocation COMET I Module 6 Available Products Available Products Management COMET I Module 7 On Line Measurement On-line Measurement Methodology - AQP Module 8 Knowledge Management Knowledge and Capitalisation Management Module 9 Score Boards Performance indicators Balance Score Cards Module 10 Transversal Issues Transversal topics of PLM modules

3. EPC Background (1/4) An efficient toolkit for preventive product quality assurance, cost reduction and metallurgical knowledge sharing • Product Quality Assurance • Cost Reduction • EPC has proven capabilities to • assist metallurgical and process people to detect deviations affecting products quality issues • deliver ability to detect early on process, any drift of captors or any changes regarding process operations • deliver continuous progress by analysing gaps between models and measures • Global cost reduction estimate is 1€ / ton / year over FCS based on : • Metallurgic rules loosening • Increase of metallurgical yields Effectiveness Highlights 2003 Savings Highlights 2003 • Optimisation of Titanium addition : 960 K€ / year • Decrease of tramp elements restriction : 740 K€ / year • Decrease of annealing temperature : 3 800 K€ / year • Decrease of slab allocation restriction in DK : 245 K€ in 2003 • Decrease of tensile test in Carlam : 53K€ since Sept 03 • Decrease tensile test in SOLMED : 24K€ since Sept 03 • Implementation of temper mill models enable: • detection of coil inversion, • detection of transition slabs • Example of Mardyck incident form

4. EPC Background (2/4) Example of detailed EPC cost reductions for steelwork over the past 3 years • Slabs qualification • Removal of analytical constraints • Bayesian networks, based on SIAS observations from coating lines, allow to foresee progress, comparing to the usual rules classification system (CQP) • Removal of constraint on the qualification (slabs are not re-allocated due to some of the process events) • Use of Bayesian network • In prospect : a direct qualification of slabs by a network. • The quantitative setting of IF routes, made through the physical modelisation, on each process, allows: • bear fitting of titanium values according to the performances in carbon achievement (C retake) • thresholds’ fitting of P, S, and N elements • fitting of Al and Mn values • removals of constraints on residual elements (lower constraints in Aceralia) • optimisation of lime addition according to the real phosphorus content • Control of carbon content by controlling the carbon pick-up • Sollac-Atlantique (benefits 2001) • Dynamic re-allocation : 3,5%4,5 Mt x 45€ *0,25 (EPC) i.e. 2,6M€. • Quality of slabs and coils measured with an improvement of 1st choice yield : 1,3M€ • Sollac-Lorraine (In progress 2002) • Decrease of H soundness capacity : 6.2k€ • Decrease of downgraded for exfoliation : 9.8k€ • Sollac Méditerranée • Deconstraint of slab qualification : 100 k€/year on A306 grades • SWB Bremen • Project to compare qualification and prediction with bayesian network (2003) • Cockerill-Sambre (2002) • Ti : 0.06€/t et pt x 15pts x 500Kt = 0.47M€/an • Sollac-Atlantique (2001 à 2003) • 2001 benefits : 2,4 M€ • Ti : 0.047€/t x 9pts x 2.5Mt = 1M€ (2003) • P + S : 2M€ • Removal of constraints on residual elements 5M€ • Linearization of lime addition scales : 400k€ • Sollac-Lorraine (2000 à 2001) • Ti : 75k€ • Al : 24.6k€ • N : 58.4k€ • SWB Bremen • Better control of the carbon pick-up

5. Logistic Chain • Use of Bayesian networks allows a decrease of the systematic scarfing Sollac-Lorraine (2000 - 2001) : 145.6k€ EPC Background (3/4) Example of detailed EPC cost reductions for steelwork over the past 3 years • Process Constraints • Defects prediction • Use of nozzle with carbon free liner • Use or alternative to Foseco Turbostop by using Aceralia technical solution • Triangular oscillation can result in deconstraint on the casting speed keeping a constant defect rate. An hydraulic oscillator is necessary. • Measurements of total oxygen content • Generalisation of viscous mould slag for ULC steel grades. Apply the viscous mould slag as in EKO and Sollac for ULC. • Productivity : sequence length, mix of steel grades • Removal of constraints on casting speed. • The joint use of segregation and Mechanical Characteristics prediction models allows to fit the casting speed to the chemical analysis Sollac-Atlantique: valorisation in progress Sollac-Lorraine (2000 to 2001) :1.1M€ • Sollac-Méditerranée (2003) • Stakes for using same CC nozzle material as Sollac Lorraine or Atlantique : 0,3-0,4 M€/year. Possible project • Sollac Lorraine & EKO stahl (2003-2004) • Alternative to turbostop: stakes 0,5 M€/year • Sollac-Lorraine (2000 à 2001) • 1,2 M€/year if casting speed is deconstraint from 0.9 to 1.1 m/min without increasing the defect rates • SWB Bremen • Better control of the liquid steel cleanliness in the tundish. Alternative to Turbostop. • Aceralia • Save the sample + total measurements of total oxygen to qualify the heat (stakes to be evaluated) • Decrease of slivers rates (to be evaluated with the removal of systematic scarfing rule)1,1 M€ • Slabs conditioning • Remove constraint on scarfing in Aceralia where 100% of ULC slabs are scarfed Aceralia Cost for scarfing is 4€/t

6. EPC Background (4/4) EPC industrial operations has underlined some IS / IT weaknesses • IS / IT Diagnosis • EPC is still running with a prototype version launched in 1997, some bugs of the initial prototype are still remaining • Software modularity is insufficient especially regarding split of real time (coil release and process alarms) and batch mode dedicated to metallurgical studies • EPC is not based on a multilingual approach • Not enough user friendly • Users depends from Tixis for any adjustments or fine tuning • During EPC roll out, non anticipated additional functions have brought complexity to IS / IT architecture • Software coil allocation for Surface Inspection System SIAS is not integrated to EPC A fully operational system needs : 1. a more robust, reliable system with a convivial user interface 2. an architecture that splits “ real time “ operation (coil quality release, process alarms) from batch mode dedicated to metallurgical studies

7. EPC Objectives Following the issues listed before, objectives of EPC are: • Project Objectives • Phase Objectives • Arcelor FCS Objectives • Phase 1 : Design, development and deployment of EPC V1 on 16 lines over 3 years 2000 - 2003 to demonstrate business value and payback • Phase 2 : EPC V2 definitive system • EKO delivery in June 04, full package for cold rolled lines except defect application • Bregal delivery in Sept 04, full package for cold rolled lines • Florange and Dunkerque steel plants upgrade, Nov 2004, full package for all lines • Upgrade of already equipped lines, delivery end 2004 • Preventive Product Quality Assurance • Decrease of internal and external non quality • Increase productivity of quality teams • Integrate EPC to quality release and process control applications • Ease use of EPC from any people within Arcelor (multilingual, user friendly…) • Integration of surface inspection coil allocation software • Develop a modular software to become the baseline of the Global Product Quality System • Guarantee low claims level by delivering reliable products • Reduce production costs without impairing quality issues • Increase industrial ramping up of new products Subject of this BOSCAR Subject of this BOSCAR

8. EPC Scope - Business (1/3) Location Organisation Business Process • Metallurgical business knowledge management shared services • Online models of products properties and associated critical process parameters • Follow up of gap between models and measurement • FCS production lines team • FCS Local Metallurgical Quality teams • FCS RTC or MTS (Manager Technical Support) • All people from Arcelor can access results through the web and use them if appropriate for their own purposes • Please refer to next slide • Stainless Steels sector plants would be included in scope In Scope • Process Control SPC (Statistical Process Control) • Any other plants from Long Carbon steels or DTT Out of scope

9. EPC Scope - Business (3/3) BREGAL1BREGAL 2 Lines equipped with on line product property models : EUROGAL CARLAM DKACIDKTCCMKGALMAMKGALMA2    Lines equipped (17)  7 new lines to be equipped in 2004/2005    Swb HSM Swb BA Swb steelplant  EKOVZA2      •  MKETAM FLCC2FLGALVAFLRCM Type of equipped lines : Steel plant Hot rolling mill Galvanisation line Continuous annealing Skin-pass Tinning line       MTGA2MTGA3 BISKPBIETAM1 FLSK482   BIETAM2   FOTAC SOLMED VEGA 

10. EPC Scope - IT Technology Application Data • On line product characteristics and product diagnosis • Database to store incoming data and calculated data • Model knowledge base system • Statistical process control : following between the measures and the model results • Treatment pipe editor (Process Editor) • Target and production & process data • Validity indicator • Measures on the product • Surface defaults • Model calculated data • Java / Websphere / WSAD • MQ Series • Network belief (Hugin) • Windows NT • UDB DB2 In Scope • Customer data • Coil grading surface inspection system • Dunkerque Hot Strip Mill product qualification system (SPQR) Out of scope

11. EPC Constraints The implementation of EPC has the following constraints Business constraints IS / IT constraints • EPC shall be deployed over 6 new lines in 2004 • EPC models shall run under quality assurance • Arcelor is a multinational company which means EPC shall be available in many languages • Non specialists shall be able to use EPC which implies a very user friendly interface based on today’s web sites • EPC must be compliant with Arcelor’s IS / IT policy • Availability of local products and processing data

12. EPC Assumptions (1/5) EPC deployment would lead to the following benefits • Business efficiency (cost) benefits • Business effectiveness (value) benefits • IT benefits • Standard EPC business benefits. As a matter of interest, business cost reduction are estimated to 1 Euro / ton / year. • Compliance with following initiative like GPQS • Durability of quality supervision systems and of product quality assurance • Increased autonomy of production lines in terms of maintenance, studies and release beta trials • Additional use of EPC thanks to 24/7 system availability • User friendly • Decrease of maintenance costs from 3200 Euros / months / lines to 1650 in 2005 which means for 21 lines, a yearly benefit of 391 K€ from 2005 • Decrease of deployment cost of 12% which implies potential benefits of around 65 K€ in 2004 and 117 K€ estimate for 9 lines in 2005

13. EPC Assumptions (2/5) Overview of expected deployment cost evolution, breakdown per activity Actual cost Cost evolution with EPC NG Deployment Deployment activities of Central team* and local team** 80 K€/ line* + 32 K€/ line** 69 K€/ line* + 30 K€/ line** -12% MCO Maintaining in Operational Condition 38,4 K€/year/line 19,8 K€/year/line - 48% Dev / Tests / Studies environment Software licences & servers needed for developments, tests, studies 11,8 K€/year/line 7 K€/year/line - 40% Local server On line server, Software licences (OS, BD, RT) & Services Depends on Local provider

14. EPC Assumptions (3/5) Details of expected deployment cost evolution, breakdown per activity Central deployment costs Maintaining in Operational Condition 24 K€/year/line 69 K€/ line* + 30 K€/ line** € / line / month Fixed Price (€) -12 % -48 % 4000 4000 3200 3200 2800 92000 80000 1650* 1650* 69000 2000 2001 2002 2003 2004 2005 2006 Input data • Plan of progress carried out during 2003, maintenance is reduced by 12,5% for the year 2004 through : • Re organisation of the team • Transfer of competence • reduction in the number of versions • instruction of procedure for test and diagnosis • introduction of tools for analysis (application, network) > 300 <150 300 >>150 Share environment for Test, Studies, Simulation and Know How Data Base € / line / month 7 K€/year/line 1268 984 - 40 % 580* * on the assumption to have EPC NG ( -14,2% on the MCO) and with all planned lines equipped by end 2004 2000 - 2001 2005 - 2001-2004

15. EPC Assumptions (4/5) Example of cost reduction and pay back experience in Carlam Profits (€) Euros Saving more 50 K€ in less than 6 months 60000 50000 40000 Monthly 30000 Cumulated 18 K€ Low production In December 20000 11 K€ 9 K€ 10000 5 K€ jul-03 aug-03 sept-03 oct-03 nov-03 dec-03 This indicator is built to identify all the samples envisaged and not carried out due to EPC .

16. EPC Assumptions (5/5) The implementation of a EPC is submitted to the following assumptions Assumptions • Production lines request EPC deployment (Agreements in principle for line planned in 2004) • Strong support of key decision makers to boost EPC deployment over the remaining non equipped lines dedicated to automotive products

17. EPC Reporting (1/5) The project was planned to be fully implemented by end 2004. Investment approvals lead to a little delay with the end of implementation at the end of first quarter 2004 Q1 2004 Q2 2004 Q3 2004 Q4 2004 Design and development of EPC V2 for mechanical properties Development of EPC V2 for defect surface Development of steel plants specifics Bregal upgrade EKO VZA2 Steel Plants upgrade This planning was established for a kick-off decision expected mid Feb. To postpone decision making systematically postpone development and deployment. Other plants upgrade Basse Indre Temper mill Deployment of other lines (Basse Indre Tinning line 2, Avilès HDGL, Vega HDGL, Bremen HSM) Interdependencies

18. EPC Reporting (3/5) EPC Project Organisation Business Owner A. Tivolle EPC Steering Committee ( Every 2 months) Business Owner Project Managers Local metallurgical Managers Business Project IS / IT Project Manager Manager S. Ségalini Tixis/CCSF G. Pasquet IS / IT Team Business Team B.Belouin X.Marc D. Blanchard A.Djemo Alexandre Durier JM Rabiol Local correspondents in the plants K. Nontanakorn R. Sommavilla

19. EPC Reporting (4/5) EPC Project Methodology (a CCSF standard) Client : Business Units Client : Arcelor IOD Deployment Site 1 AFCS Project Deployment Site 2 Maintenance Activities Deployment Site 3 Deployment Site N • Specification / Architecture • Conception • Development • Validation • => Models & System • Connection with local IS/IT systems Process & Product Management • Training • Tests & Validation • Plant integration • Central Team responsibility : • Corrective Maintenance • Maintenance for upgrade • Full compatible insurance

20. EPC Reporting (5/5) EPC reporting toolkit includes : Dashboard • Work progress against planning presented by project managers • Local savings presented by local metallurgical managers

21. EPC Scoring The Expert Product Control upgrade project has been scored as medium - high priority according to the AFCS project approval criteria Compliance with the AFCS approval process Comments • Grade • Points • 898 K€ • M • Project size • EPC upgrade cost 898 K€, between 501 and 1000 K€ including local upgrade costs. • M/H • 3 • Pay-back • EPC upgrade pay back on a IS/IT point of view is around 1,5 year. New deployment business benefits are not included in the pay back. • Competitive advantage • Improve performance significantly on customer key business factors for strategic segments • H • 4 • Operational urgency • M • 2 • Reduce weak points on current operations • Decision support • M • 1 • High impact for other management • Overall Business priority • M / H • 4 • CU • Function scope • Impacts all OU within FCS • WA • Technologic fit • Well aligned 290 K Euros operating costs for 3 years are dedicated to Fair Isaac license fee. Operating costs are not included in this evaluation.

22. 4. Appendices

23. EPC, example of incident form

24. Project Portfolio Those 3 projects position in Arcelor project portfolio are : Knowledge Management Human Resources Supply Chain Management Supply Chain Referential Demand/Supply Synchronisation Steering by margin Capacity Management Product Technical Data Maintenance technical data Common Data (Suppliers, customers...) E-sourcing e-proc Dynamic Routes E-commerce Inventory Management A2C EPC Quality Management Production Tracking Front-Office Sales Management Purchasing / Procurement Production and non production PPS Production Planning System COMET 1 MES Manufacturing executing system Shipping Maintenance Receivables / Payables General Ledger Fixed assets Accounting / Controlling Financial Consolidation Costing Data Warehouse R&D Product Process Support / Management HR Cial/ Supply Chain Back Office Production