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Steel Manufacturers Association Annual Board of Directors Meeting

Steel Manufacturers Association Annual Board of Directors Meeting

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Steel Manufacturers Association Annual Board of Directors Meeting

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  1. Steel Manufacturers AssociationAnnual Board of Directors Meeting Presented by The David J. Joseph Company February 14 - 16, 2007

  2. The David J. Joseph Company Corporate Locations

  3. Maine Washington Montana North Dakota Minnesota VT Oregon Wisconsin NH South Dakota MA Wyoming CT New York NJ Pennsylvania California Iowa Michigan Idaho Illinois Nevada Ohio Indiana Nebraska Utah MD DE West Virginia Colorado Missouri Kansas Kentucky Virginia North Carolina Arizona New Mexico Oklahoma Tennessee Arkansas South Carolina Texas Georgia Alabama Mississippi Louisiana Florida Brokerage Offices and Mill Services Locations Ferrous Brokerage Offices Mill Services Sites 1/2007

  4. The David J. Joseph Company Processing Regions 1/2007

  5. Busheling vs. Shredded Composites sww2a

  6. Steel Economy • Historically, U.S. GDP below 2.89% has resulted in a contraction in steel usage • In the 4th quarter of 2006, producers reduced production to react to build up of inventories • U.S. demand for raw materials to produce steel declined • Impact on domestic commodity prices • Export market helped determine domestic prices and acted as pricing floor

  7. Tight supplies  rising steel prices  double orders  inventory build.Inventories at Service Centers rose 23% from April 2004 to April 2005, then declined by 18% by year end. Inventories rose 22% from Jan-Oct 2006 before declining slightly in November. SmewsStats/SVC INV

  8. Significant growth in demand was met by developing new supplies and by re-orienting to domestic markets scrap previously exported. Market Clears

  9. FRD Major Currencies Dollar Index vs. Scrap frb1

  10. Shredder Capacity + Planned Additions Shredder operations and capacity has increased nearly 25% since the early 2000’s. Announced new shredders and planned increases to existing operations will add approximately 240,000 tpm of shredding capacity in the next couple of years. Normal # ShreddersProduction 2002 – 04 205 1.7 M/tons per month 2006 208 2.1 M/tons per month Planned: New 14 180,000 Incremental 3 60,000

  11. Sandflo Eddy Current Gamma Metrics Advanced Technologies

  12. Residue Pricing Chart

  13. Transportation • Throughout scrap industry, significant investments continue to be made in transportation assets • Increasingly becoming a part of “total investment capital” versus an outsourced service • Transportation shortages have been a primary driver of market volatility

  14. Selected Current Scrap Consolidations

  15. Scrap Futures • Primary reasons it hasn’t (won’t ?) occur: • Traded products must be universally acceptable • Ferrous scrap qualities / traits vary from region to region • Liquidity requirement • Speculators need a liquid financial market • Credit-worthiness of market participants • Private nature of scrap industry limits the availability of financial information • Regionalization • Ferrous scrap more freight sensitive than many other commodities (i.e., low value to weight ratio) • Physical attributes / qualities of scrap vary from region to region • Price Discovery Mechanism • There must be a Buyer / Seller of last resort (inventory must be held)