CUSTOMERS AROUND THE WORLD LOOK TO THE GLOBAL MARKETING OFFICES OF CMC'S MARKETING AND TRADING SEGMENT TO SUPPLY A BROAD RANGE OF STEEL AND NONFERROUS METAL PRODUCTS, BASIC RAW MATERIALS AND A VARIETY OF SPECIALIZED SERVICES.

International Division - The International Division is involved in the marketing and trading of steel in Asia, Europe (including the United Kingdom), the Middle East, South America and Australia/New Zealand. In addition, in certain markets such as Australia we market and distribute industrial products, raw materials and nonferrous metals.

The Asian crisis, which began in Thailand on July 2, 1997, impacted our operations throughout fiscal 1998. Our careful attention to risk management ensured that we came through the year comparatively unscathed considering the magnitude of the crisis.

New opportunities arose for sourcing steel from northern Asia, both from Japan and South Korea as well as Southeast Asia, and for selling through our marketing and distribution activities in Australia, the United Kingdom, Germany and the U.S.A. Steel sales into Asian markets were, of course, severely curtailed. We structured our Asian operations to reflect market conditions, and the transition from selling to sourcing Asia has been very successful. International steel prices fell sharply during the year and this, coupled with the Asian currency devaluations, put a squeeze on profit margins.

We continued to expand our activities in trade finance projects with a further extension of the Essar business. In addition, we organized a working capital loan for a European steel mill (both loans are nonrecourse to CMC). During the past year we entered into a joint venture with Trinec, a Czech Republic steel mill, for selling long steel products to the German market. This new business is running smoothly.

All of our steel marketing and distribution operations in Australia, the United Kingdom and Germany increased their product range and sales volume during fiscal 1998.

The heat treatment plant in Australia was commissioned in November 1997, and by the end of fiscal 1998 was running profitably. During the year we acquired a ferro alloy and foundry products trading business from BHP in Australia. This business complements our existing industrial products business in Australia, which had a record year in fiscal 1998.

COMMONWEALTH METAL - Commonwealth Metal, a leading service organization, markets nonferrous metal products throughout North America. We serve large manufacturers and distributors acting as the link between first-class global producers and metal buyers by providing strategic technical expertise, execution, product development, and financial resources. The intermediate products we market are processed by our customers into finished components used in many consumer and industrial applications such as transport, residential and electronics. Results for fiscal 1998 exceeded our goals in terms of market share, volume and net revenue. Sales objectives for fiscal 1998 were exceeded by expanding both unit and dollar volume despite historically low metal prices, the Asian crisis, and market turbulence. By forming close partnerships with producers and consumers alike, Commonwealth will continue this growth trend through product diversification and offering innovative services to a cadre of blue chip clients.

As a supplier of semi-fabricated metals to industry spanning four decades, Commonwealth specializes in aluminum, copper, brass, bronze, nickel alloys, and specialty steels in all shapes and sizes, providing our customers with one-stop shopping. Concurrently, by virtue of Commonwealth's broad customer base, producers benefit from our efficient access to a wide and deep market. Complementing our product scope, our extensive service menu provides our trade partners with dynamic pricing strategies, just-in-time delivery programs, technical support, new product development, and flexible financing arrangements. Looking forward to fiscal year 1999, we anticipate continued and sustained growth in our major product areas and markets. We have re-organized our commercial structure, formed specialized business units for our core products, and invested in an enhanced service platform. These organizational changes are expected to generate exponential growth and maintain Commonwealth as a major force in the nonferrous metals field.

COMETALS - Cometals operates worldwide from four offices in New York, Beijing, Moscow and Belgium that supply a wide variety of minerals, metals and chemicals to the chemical, metal working and ceramic industries.

Fiscal year 1998 was another good year for Cometals. Sales and margins were at or above our projections as a result of the excellent performance of the Cometals' team in marketing our major products.

The strong economies in North America and Western Europe enabled us to maintain a steady pace during fiscal 1998, and despite difficult market conditions, we finished the year with very respectable sales figures in both China and Russia.

In addition to our traditional business, several promising new product lines were developed from sources in Russia, the Ukraine and China. New strategic long-term partnerships were formed with suppliers whose products we will market for years to come. Cometals successfully introduced new financing, handling and marketing concepts, extending the services provided to both producers and consumers.

Our focus now is to continue to build a stronger team with emphasis on training and a long-term approach to business. To accommodate our growing activities, the staff has been expanded in China and Belgium.

DALLAS TRADING - The Dallas Trading Division markets and distributes new steel products (long and flat), aluminum semi-finished flat rolled products, nonferrous scrap, steel scrap and steel rerolling stock into the Americas from diverse overseas sources and to customers throughout the world from the Americas. Marketing, trading, financial and logistical services are customized as required by our suppliers and customers.

In fiscal 1998, Dallas Trading recorded another year of impressive earnings growth. We enhanced our trading group through the addition of new transportation, support and trading personnel. Our traffic group completed its first full year of operation, a seamless transition from the corporate traffic department. We continued our trader trainee program, reaching a total of twelve participants since its inception in 1993. Close cooperation with our International Division and our Steel Group throughout the year resulted in increased profitability within our division and the Company.

In the early stages of the Asian economic crises we adapted to the market changes and new supply opportunities from that region to North America, which substantially increased our volumes for fiscal 1998. We also expanded our core businesses, further diversifying the products handled and increased our customer base.

Dallas Trading completed its initial three-year ISO 9002 certification with an outstanding performance that included zero nonconformances and zero noncompliances. During July, Dallas Trading was recertified for another three-year period. This is a clear indication of the strength of our organization, our commitment to our quality processes and to satisfying the requirements of our customers. We continue to focus our efforts on the increased demands resulting from our higher levels of business.

We are pleased to report another year of impressive growth that exceeded our initial business plan. Looking forward to fiscal 1999, there are some concerns regarding the world economic crises in the CIS, the Far East and Latin America. Negative pressure on the U.S. economy will likely ensue; however, our demonstrated ability to adapt to change should enable us to register another good year in fiscal 1999.