It brings a good degree of satisfaction to see such a significant proportion of our strategic decisions starting to deliver on their objectives, indeed in this last fiscal year we have been fortunate to see many of our projects start to bear fruit.

The group should feel proud of our results which have once again beaten our expectations. These results however should be viewed in the context of a benign economic environment and high steel prices, clearly macro economic factors beyond our control have had a very significant role in our financial returns. Areas which we can control, such as our approach to risk management of the volatile price moves in steel and freight, we have continued to handle very well. With this in mind thanks must again go to directors and employees for another year of extraordinary attention to detail in a very intense market environment.

During the last fiscal year the group managed some 17.5 million MT of sales which were composed of some 11.3 million MT of steel and 6.2 million MT of raw materials.

We are particularly pleased with the volumes now being managed by our distribution businesses which despite a very poor US domestic market we managed to increase our sales by some 430’000 MT, equating to a year on year increase of 13%. As a result the productivity of our group improved and in fact in 06/07 our global steel sales averaged less than 250 MT per invoice.

In addition to strengthening distribution, our strategic geographical moves into China, India, Middle East and Africa have all paid dividends and we are well positioned to build on the progress already achieved.

We are confident that these regions will continue to play a very significant role in our portfolio of businesses and we will strive to consolidate our position in these markets in the years to come.

We enter 2008 looking at the steel sector against a backdrop of very different global economic fundamentals which ushered in 2007. It is therefore difficult to ignore the current environment in North America and the warning signals in Europe but having said this we are confident that the first two quarters of the calendar year 2008 will be positive overall, with a consolidated industry better placed to help drive cost-push related price increases.

The real challenge for all trading businesses will be to maintain global trade volumes in increasingly regionalised markets being reinforced by increased production costs, high freights and consolidated ownership. As ever the only country which can have a material affect on such a global stage is China and we must wait and see whether the Chinese domestic market can absorb all the new capacity coming on stream in 2008. It would be difficult to envisage this scenario, especially for HRC, but under estimating Chinese growth is always a risky proposition.

The outlook for the freight market remains, as ever, very bullish. We expect overall demand to remain strong and don’t forecast any respite from very high freight rates.
Continued financial speculation and strong physical fundamentals means we will need to maintain a very vigilant watch on our freight book in 2008.

Every year one becomes more and more aware of the futility of trying to predict market conditions for the year ahead. The only absolute in business is change and in a global environment the numbers of variables are such that we can only ensure we are properly prepared as a company to meet all the changes, unexpected or not. We feel confident that Duferco Trading has the right blend of talented, enthusiastic and experienced staff to meet whatever the market might bring us in 2008.

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