Thomas A. Danjczek President Steel Manufacturers Association July 30, 2009

1. Steel Orbis – Steel Trade Conference Steel Producers Issues in Today’s Economy Thomas A. Danjczek President Steel Manufacturers Association July 30, 2009

2. Steel Orbis – Steel Trade Conference SMA • The Steel Manufacturers Association (SMA) • 36 North American companies: 31 U.S., 3 Canadian, and 2 Mexican • 125 Associate members: Suppliers of goods and services to the steel industry • SMA member companies • Operate 125 steel recycling plants in North America • Electric Arc Furnace (EAF) steelmakers using recycled steel

3. Steel Orbis – Steel Trade Conference SMA • Production capability • EAF steel producers accounted for 60% of U.S. production in 2008 • 62% first half 2009 • SMA represents over 70% of all U.S. steel production • Recycling • SMA members are the largest recyclers in the U.S. • EAF steel producers are the largest recyclers in the world • Last year, the U.S. recycled over 75 million tons of steel • Growth of SMA member companies • Highly efficient users of labor, energy, and materials • Modern plants producing world class quality products

4. Steel Orbis – Steel Trade Conference Outline • SMA • Today’s Concerns • Today’s Deterioration • China, China, China • Other Issues (Energy, GHG, Infrastructure Spending) • Consolidation • Scrap • Protectionism and Trade Issue • Legislative Items (Cap & Trade, Infrastructure, Trade) • Is Enough Being Done? • Conclusion

5. Steel Executive- 1st Half 2009

6. Steel Orbis – Steel Trade Conference The Obvious Concerns • Our Jobs • US Recession and financial meltdown • Infrastructure Spending • Value of the RMB • Energy shortfalls and pricing • Federal Bailouts • China, China, China • Global Steel Overcapacity • Subsidies and other trade distortions • US Legislation (111th Congress and the 44th President)

7. 2009 in a long term contextGlobal steel annual production changes Source: worldsteel, First River

8. 2009 in a long term contextUS steel industry production changes Source: AISI, First River

9. US raw steel capacity utilizationLong-term average is 78%, stable level is 85% 63% 48% 61% 65% Average Utilization Rates Periods of adjustment (red bars): 60% Periods of relative stability: 85% Source: AISI, First River

10. World Steel Capacity Grew by Over 50% in the Past Eight Years. Steel Orbis – Steel Trade Conference Global Steel Capacity Through 2008 90* • *Additions to Capacity Source: German Steel Federation and IISI verifications

11. Steel Orbis – Steel Trade Conference Crude Steel Supply in China, 2005-2009 (million metric tons) Source: Growell Research, “China Steel Capacity Forecast for 2006-2010” and CISA Presentation at OECD, December 15, 2008.

12. Steel Orbis – Steel Trade Conference China Steel Comments • China has NOT become the world’s Largest steel producer by • accident, or by operation of free markets, or comparative advantage • China is NOT a low-cost steel producer • China has reached its position through a combination of • subsidies, mandates, and planned intervention • In finished goods containing steel, China’s exports to absorb overproduction • Chinese steel industry is overbuilt and under-demolished

13. Steel Orbis – Steel Trade Conference China’s Trade Surplus with the U.S. YearChina’s Trade Surplus 2001 $22 billion (year China joined WTO) 2006 $177 billion 2007 $262 billion(up 47.7%) 2008 $290 billon The U.S. has lost 3.3 million manufacturing jobs since 2000… imbalances cannot go on forever.

14. Steel Orbis – Steel Trade Conference Other Issues - Energy

15. Steel Orbis – Steel Trade Conference Other Issues - Energy Energy Summary • US power generation industry is at a critical juncture, with social • pressures and pending legislation demanding massive changes. • Competing demands for reliable, low-cost energy and climate change • mitigation appear incongruent. • Our Nation’s liquid fuel dependence on foreign resources continue to • grow. • Uncertainty of regulatory outcomes and rising costs impact industry’s • willingness to commit capital investments, endangering near-term • production capacity. • The United States must foster new processes that address conflicting • energy objectives simultaneously.

16. Steel Orbis – Steel Trade Conference Other Issues - GHG

17. Steel Orbis – Steel Trade Conference Other Issues - GHG

18. Steel Orbis – Steel Trade Conference Globalization and Consolidation Developments Have Dramatically Changed the NAFTA Steel Landscape Acquiring Company Acquiring Company Acquiring Company Acquired Company Acquired Company Acquired Company Arcelor Mittal Nucor Duferco/NLMK Arcelor Connecticut Steel Winner Steel Dofasco Trico Evraz Mittal Birmingham Ispat Inland Corus Tuscaloosa Oregon Steel Bethlehem ISG Worthington-Decatur Claymont Steel Marion Ipsco Canada LTV Nelson Steel US Steel Plate Weirton Severstal Harris Steel Auburn Steel Arcelor Mittal-Sp. Pt. Acme-Riverdale North Star Arizona Rouge WCI Georgetown American Iron Reduction Sicartsa Bayou LMP Steel & Wire Wheeling Pitt The David J. Joseph Co. (Scrap) CSN US Steel Gerdau Ameristeel Heartland Lone Star Sheffield Essar National Chaparral Algoma LTV Tin Co-Steel Minnesota Steel ISG IH#2 Pkl. North Star Stelco Sidetul Tultitlan Quanex Macsteel BlueScope Corsa IMSA Steelscape SSAB OAO TMK ICH/Grupo Simec Ipsco Plate (U.S.) Ipsco Tubular (U.S.) Republic Tenaris Steel Dynamics Ternium GalvPro-Jeffersonville Maverick Tube (U.S.) Hylsa The Techs Prudential Canada IMSA Roanoke Steel Hydril Company Steel of West Virginia Omnisource (Scrap) 1/1/09

19. Steel Orbis – Steel Trade Conference Infrastructure Stimulus • US aging infrastructure is functionally obsolete and structurally deficient • FHWA estimates $78.8 billion per year for the next 20 years to maintain infrastructure, $131.7 billion to improve • Gas tax at 18.54/gallon generates app. $40 billion • Current gas tax woefully insufficient, only half of maintenance

20. Steel Orbis – Steel Trade Conference U.S. Steel Scrap (Data in million metric tons) Source: US Geologic Survey, January 2008 1. 2008 is a rough estimate based on 3 normal quarters; 4th Quarter @ 60% steel production

21. Steel Orbis – Steel Trade Conference Free Trade vs. Protectionism Is “Protectionism” the enemy of “Free Trade” • Protectionism • Predatory Pricing • Trade distorting subsidies • Government Ownership • National power by protecting our industries and state • Piling up currency measures • One way trade • Need “Balanced” Trade over “Mercantilism” • Who’s the Protectionist? 1. Taken in part from C. Blum

22. Steel Orbis – Steel Trade Conference U.S. Cap & Trade Climate Legislation HR 2998, “the American Clean Energy & Security Act”; or the Waxman-Markey bill U.S. House of Representatives passed bill – June 26, 2009 -House passed bill in vote on Friday June 26 -219-212 vote (1 in 5 Democrats did NOT vote for the bill) -White House called for a vote on bill, but did not endorse it -President Obama indicated that tariff concept included by Ways & Means Committee may have to be removed from final bill No Equivalent Bill introduced in Senate -Senate has been surprised by quick movement of House bill Expect Senate to move much more slowly in dealing with aspects of any climate change legislation – could be 2010 before something is voted on and conferenced with House version of bill

23. Steel Orbis – Steel Trade Conference Highway Bill Reauthorization • Current six-year, $286 billion plan expires at end of September • House working to produce $500 billion bill that would create new fund for road repairs, increase funding for rail and public transit, and include reforms to reduce fossil fuel reliance; estimated to create or sustain six million family-wage jobs • Administration has requested 18-month $20 billion extension of current bill – contention over how to fund increased spending • Immediate patch required to address current insolvency in Highway Trust Fund – expected to run dry in July 2009

24. Steel Orbis – Steel Trade Conference Trade Cases Against China • Section 421 – Against Chinese Tires • When China joined WTO, part of agreement was a 421 Safeguard to avoid surges & injuries • Filed by Unions only, case heard at ITC, 4-2 in favor, awaiting remedy recommendation by ITC • Key is Presidential discretion; under Bush; won 6 cases, but no remedy • If positive from President (probably quotas), low cost legal approach only needs to show surge and harm, not dumping, subsidies, etc. • WTO Complaint By US Government • 9 materials, some steelmaking raw materials • Seems counterintuitive - don’t want Chinese exports, but the complaint is against hoarding of materials. But, quotas are illegal. • Chinese defense will be Article 20, preserve raw materials; Coke is a key. • Next steps: consultation between governments, followed by dispute resolution • Allows Chinese finished goods to be artificially cheaper

25. Steel Orbis – Steel Trade Conference Is Enough Being Done? Raw Materials No Barriers continue Lack of policy continues Energy No Currency manipulation, Subsidies, Not playing by the rules No China Distortions continue, Who’s the protectionist Trade No No long term structural policy changes are being proposed in Washington for taxes, trade imbalance, and energy.

26. Steel Orbis – Steel Trade Conference Conclusion • U.S. Steel Industry in Better Position Today to Manage the Down Cycle • (but what a down cycle!) • Improved Economics From Consolidations, i.e. “Reacted Quicker in October”; • Improved Control of Variable Costs • Scrap-Based Metallics (In 2009, U.S. will be nearly 2/3 EAF-based • Energy Costs • Transportation Costs • Labor Efficiency (U.S. at Below 2MH/Ton; Minimills Often Below 1MH/Ton) • Improved Inventory Control (Inbound Materials, Steel, and Customer Products). NOT THE OLD INVENTORY OVERHANG! • Improved Debt and Equity; Balance Sheet Position • Still Challenging – But Reasons for Meaningful Long-Term Optimism!