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Steel Review

Steel Review. FY’02 Steel Purchases. Scrap $2,562. Purchases: $454,738 Divisions: 47 Suppliers: 748 Commodity Codes: 41 Part Numbers: 15,000+. Bar, Rod & Wire $82,316. 18%. Carbon Flat Products $57,226. 8%. 51%. 9%. Stainless Products $42,122. 9%. CRML $233,396.

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Steel Review

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  1. Steel Review

  2. FY’02 Steel Purchases Scrap $2,562 Purchases: $454,738 Divisions: 47 Suppliers: 748 Commodity Codes: 41 Part Numbers: 15,000+ Bar, Rod & Wire $82,316 18% Carbon Flat Products $57,226 8% 51% 9% Stainless Products $42,122 9% CRML $233,396 Tubing & Plate $37,116

  3. Steel Market Update • Steel Prices are Rising Globally • Other Countries have Implemented Safeguard Programs on Steel Imports • N.A. Steel Pricing has Risen Beyond Initial Expectations • The steel industry and the ITC only forecasted a 10-12% price increase from 201 action • Hot rolled steel prices have increased 67% in 2002 • Cold rolled steel prices have increased 53% in 2002 • N.A. Flat Rolled Availability and Delivery Issues are Dimenishing • ISG (LTV) & Nucor Decatur (Trico) are re-entering the market • Bethlehem Steel Could be Forced into Chapter 7 in CY03 • This will cause another wave of price increases and availability issues

  4. EMR’s Management of the Current Steel Market • Maintaining Supply is Top Priority • Long Term Agreement Strategy is Protecting EMR From Current Pricing Dynamics • 70% of N.A. steel purchases are under fixed price contracts through 02 • 93% have been honored to date • 35% of N.A. steel purchases are under fixed price contracts through 03 • Continue to Manage Negotiations at Corporate Procurement • Delay and minimize impact • Increase the Quoting Activity on Non Flat Rolled Products • $30 million scheduled for Freemarkets in 03 • Recent FMKT events have saved 6%-15%

  5. Steel Team FY03 Key ProjectsInflation Model Projects Annualized Savings $000 Fiscal 03 Savings $000 • Implement Flat Rolled See-Through Program $2,448 $1,224 • Distribution Steel FMKT Event $548 $137 • Eliminate Hylsa Cleaning Line $508 $296 • Implement Hylsa Chemistry Modification Project $364 $182 • Eliminate Hylsa Tension Leveling $385 $225 • Implement Corus at LS Lexington $280 $210 • Alloy Wire FMKT Event $190 $16 • Stainless Wire FMKT Event $130 $65 • Transformer Lam FMKT Event $118 $59 • SLCD Contract at Motors (qualifying S. African Mtl.) $112 $56 • Implement Indian Seamless (LCCS) Bar at EPT $100 $50 • Valti (LCCS) Tubing Contract at EPT $100 $75 • Carbon Wire FMKT Event $99 $99 • Carpenter Negotiation $80 $60 • Eliminate Hylsa Packaging $77 $19 • Total $5,639 $2,773

  6. Net Inflation Forecast FY’02 FY’03 Best Case Purch Net Net Team Purch Net Net Team $ Gross c/o % $ FCST $ Gross c/o % $ FCST Q1 $480,277 1.7% -1.6% -1.9% -$9,355 -3.0% $471,050 3.8% .2% .1% $346 2.0% Q2 $467,535 -3.3% -1.6% -2.9% -$13,744 -3.0% $453,901 4.4% .3% .9% $3,980 3.5% Q3 $462,643 -4.0% -1.6% -2.9% -$13,422 -3.0% $449,327 6.4% .2% 1.7% $7,615 2.7% Q4 $470,827 -1.9% -1.5% -2.9% -$13,731 -2.9% $454,738 4.8% .6% 3.6% $16,440 4.5% Note: Q4 FY03 forecast of 4.5% would be 6.8% without negotiated avoidance and projects 13

  7. Corporate Steel Team Web Site Steel Team Main Page: Drop-Down Lists containing History & Industry Links

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