Thomas A. Danjczek President Steel Manufacturers Association September 13, 2011 Changing Times in Steel – Safety & Markets SFSA Annual Meeting

Outline SMA Safety Changes Steel Demand Drivers & Forecasts Raw Materials What the U.S. Needs to Do Final Thoughts SFSA Annual Meeting 2

About the SMA -Composed of 35 North American electric arc furnace (“EAF”) steel producing Member Companies, and 123 Associate Member steel industry suppliers -Today, roughly two-thirds of U.S. steel production comes from the scrap-based EAF process, up from just 10% in the early 1970s -SMA Members account for approximately 80% of total domestic steel capacity SFSA Annual Meeting

SMA Safety Overview Key Drivers to the SMA Safety Committee Success Safety Committee Meetings Safety Statistics Benching Marking Fatality Prevention Initiative Workplace Specific Safety Surveys Site-Specific Sharing of Site-Specific Best Practices SMA Safety Website Upstream/Downstream Safety Awareness Education & Outreach First Hand Governmental Compliance Awareness SMA Safety Awards SFSA Annual Meeting

Key to SMA Safety Committee Success Key Drivers to the SMA Safety Committee Success Need within our industry (2003) – 14 fatalities… Strong initial leadership (at every meeting) Board top down directives (at every meeting) (i.e. 4 leaders plus 6 additional) Involved core industry members (i.e. 4 leaders plus 6 additional) in planning, soliciting, “boots on the ground” Inclusive – Union and non-union – Companies and suppliers – Safety professionals, safety committees, production managers, and “hourly” employees Awards and Recognitions OSHA involvement More focus on industry specific process and procedures versus governmental regulations Costs -None additional to SMA -Modest hotels -Cohesive and full schedule, all work… SFSA Annual Meeting

- Meetings are held in the spring and fall each year - Attendance averages around 100 members, associate members, and guests - Opportunity for sharing information on best practices and new safety tools and protection - Includes a presentation from an OSHA representative - OSHA Director Dr. Michaels addressed group in fall 2010 in Arlington, VA - Usually include an optional plant tour SMA Safety Committee Meetings SFSA Annual Meeting

Held on March 2011 in Jacksonville, Florida 141 Attendees (member company representatives and associate members) OSHA Update from Compliance Assistance Specialist Optional plant tour of Gerdau Jacksonville Mill Agenda Items Included – Addressing Contractor/Trucking Fatalities – Truck Driver Fall Protection – Mobile Equipment Lock Out and Maintenance – Pedestrian Pathways – Electrical Safety NFPA 70E Compliance – Surviving an OSHA Inspection – Industrial Hygiene: Hex Chrome and Crystalline Silica – Aging Workforce – First Aid – Emergency All Call Systems – Unsafe Act Audits – Duel-Hearing Protection Spring 2011 SMA Safety Meeting SFSA Annual Meeting

SMA Members voluntarily report monthly data on number of recordable cases, lost workday cases, days lost, and hours worked. Compiled year-to-date data is circulated to members as a spreadsheet each month.

SMA’s safety documents do not provide an industry standard, and do not set industry best practice. tools These surveys and guides are intended as tools to assist individuals and companies in their efforts to prevent injuries in the steel industry. The purpose is not to take the place of an individual company policy or procedure, but rather to provide general procedures and practices to assist member companies in developing safe procedures as part of a comprehensive safety program.

Fatality Prevention Initiative Addresses Six (6) critical areas: 1. Confined Space; 2. Fall Protection; Lockout- Tryout; 3. Mobile Equipment 4. Material Handling; and 5. Rail 6. Cranes (Completed in 2011)  Focusing on five priorities in addressing crane fatalities: ◦ operator visibility and attentiveness; ◦ maintenance; ◦ fall hazards; ◦ charging the EAF/ladle handling; and ◦ non-routine procedures  Videos to be completed by the end of summer and introduced to the SMA in October 2011

Regular questionnaires distributed by member request to address specific safety topics – anonymous results shared with all members -Topics have included:  prescription medication,  aerial lifts/permits,  cellular phone policies,  heat illness/fruit program,  hot works permit/fire prevention,  protective eyewear/sealed eyewear,  lifting and rigging/inspections,  motivational safety speakers,  safety incentives,  hearing protection/NRR/sized ear plugs  kevlar FR jackets,  measuring annual safety performance

-Notes and presentations from Committee meetings, Safety survey results, grouped by date and topic -Meeting notes grouped by date -Presentations from meetings grouped by date and topic -Catalogue of company incident and near miss reports -Fatality Prevention – document, audit tools, and videos -Radiation safety resources

SMA members have many contractors that work on our sites exposing the facility to higher exposure to risk. Improving the safety of the industry means that we must also improve contractor safety on our sites. Many SMA members utilize contractor management systems that allow host steel companies to only allow contractors on-site who have demonstrated past positive safety performance, and have the safety programs in place to ensure safe job performance Contractors are frequently invited to participate in and contribute to company safety committees Spring 2011 meeting included a focus on Contractor Safety

SMA partnering with the Association for Iron & Steel Technology to fund Don B. Daily Memorial Fund to promote steel industry safety and health Will challenge North American university teams (students and professors) to submit proposals for grant funding in the theme area of safety and health awareness within the steel manufacturing industry Dual objectives: promote safe workplaces for the steel manufacturing industry, and increase the number of students studying health and safety awareness relative to the manufacturing environment

 SMA Board of Directors recognizes outstanding safety performance through the annual Don Daily SMA Achievement in Safety Award. ◦ 2011 recipient:  Chris Bullard and the Logistics Team Gerdau Ameristeel Midlothian

SMA members have made great strides, and will be relentless in pursuit of continuous improvement until we achieve zero injuries in our workplaces SMA members have benefited from relationship with OSHA, including speakers at meetings, training resources, and cooperative programs The SMA, through its members, has been a driving force in improving safety performance

18 SFSA Annual Meeting Changes Deeper Recession Variable Cost Control Engineers Scrap Prices High Unemployment Labor Intensity Inventory Levels China Safety Consolidations Customer Requirements Environmental Regulations Foreign Ownership Transportation Costs Ore Prices Energy Costs Currency State-Owned Enterprises Other Factors…

19 SFSA Annual MeetingSteel Changes

20 Raw steel capacity utilization may reach 75% in 2011 SFSA Annual Meeting

21 Finished steel demand drivers in US ActualFitted Three variables drive demand: NA auto build Non-residential construction Appliance shipments R² = 85% Source: First River SFSA Annual Meeting

22 U.S. finished steel demand forecast Actual ADC Forecast Source: CSM, FW Dodge, AHAM, First River SFSA Annual Meeting

Auto build & non-res construction expected to recover, but not to previous peak NA Auto Build (Million Units) 23 Source: CSM Worldwide, FW Dodge Forecast Non-Res Construction (Million Sq. Feet) Forecast SFSA Annual Meeting

U.S. net imports expected to remain lower US Imports & Exports (Million Tons) 25 Source: AISI, First River Net Imports & US Dollar Net Imports as % of demand (3 year rolling average) $ IndexImports (%) SFSA Annual Meeting

Recovery underway, but slow Increased exports and imports (5mmt of semi’s imports) YOY Not normal cycle of recession, overcapacity Relative strong demand in auto; construction lagging Comments on Current U.S. Production SFSA Annual Meeting 26

Raw Material Cost and Availability is #1 Issue for NAFTA Producers Many countries continue to impose a variety of restrictions on exports of vital raw materials – Export prohibitions – Export duties – Export quotas – Other measures Trade-distorting restrictions on exports of raw materials – Give domestic producers in the exporting country an unfair advantage – Increase worldwide costs of production – Place a heavy burden on steel industries in developing countries that do not have substantial iron ore reserves or steel scrap supplies Raw Materials SFSA Annual Meeting 28

29 World Scrap Supply and Consumption, By Region Source: World Steel Association SFSA Annual Meeting

While China Restricts Exports of Scrap, U.S. Exports to China Have Surged 30 SFSA Annual Meeting

What does the U.S. need to do? Assume a Pro-Manufacturing Agenda – Business Tax Reform – Border Adjustable Taxes – Currency Adjustments – Energy Independence – Reasonable regulatory measures (Environment/Labor) – Climate for investments (Jobs, Jobs, Jobs) and Infrastructure Solve the structural problems that caused the recession - Real Foundation – Bad loans and securities on bank balance sheets – Reduce huge trade deficits Policy incrementalism is not sufficient SFSA Annual Meeting 31

Final Thoughts Ultimately, the world needs greater total supply of scrap and steel U.S. is in a traffic jam, moving slightly forward, but don’t know other consequences. Don’t look to Washington, DC for help Environment of uncertainty and volatility will continue in U.S. industry until economic fundamentals are in equilibrium In U.S., dissatisfaction/perception that U.S. Government is not tackling the right issues (i.e. “It’s the economy, stupid.”) Reasons for optimism in steel in U.S.: – Scrap-based, 70% of cost – local supply – Low cost on global basis (energy is neutral, labor less than 10%, others have higher transportation costs) – Relatively strong U.S. market and U.S. resiliency – Better U.S. company balance sheets SFSA Annual Meeting 32