Current Drivers Impacting Steel Competitiveness UPDATE – January 2007 Thomas A. Danjczek, President Steel Manufacturers Association January 23, 2007 Valve Manufacturers Association of America Leadership Forum

From October 15, 2004 VMAA – Annual Meeting 1.SMA 2.Changes –August 2003 –Scrap Impact –World Steel Production 3.China, China, China… –Key Statistics –Steel Production –SMA Mission –Lessons Learned –Currency 4.Steel Production Costs –Key Issues –Energy & Raw Material Costs –Asset Values –Exchange Rates –Bankruptcy/Restarts –Scrap Costs 5.Other Costs –Restrictive Scrap Exports –Freights –Coke –Energy 6.Market –Overview –Public Works Construction 7.Conclusion Current Drivers Impacting Steel Competitiveness

In August 2003, The Times they were a’changing… From October 15, 2004 VMAA – Annual Meeting Steel Demand Weakening 201 Tariffs/ Exclusions Increasing Imports Bankruptcies Semi-Finished Imports N.A. Economy Plant Closures/ Restarts Perennial Problems Consolidations US PBGC Mini-mill Industry Condition Pricing Volatility ISG’s Labor Contract Exchange Rate Shifts Public Policy Legacy Costs Operating Costs Benefits & Energy Capital Constraints

From October 15, 2004 VMAA – Annual Meeting Up $130 since June 2004!

CHINA STEEL PRODUCTION China produced 220 MT of crude steel in 2003 – double the next largest producer Japan at MT and 2.4 times the U.S. (92.2 MT, shown) – and will produce as much as 275 MT, 350 MT, and 425 MT by 2005, 2010, and 2015, respectively. China United States Courtesy – Metal Strategies From October 15, 2004

From October 15, 2004 VMAA – Annual Meeting Conclusion Uncertainty – Cycle has Changed (Shorter Term & Greater Peaks & Valleys) Revenue vs. Costs – Not the Same Business Model CHINA, CHINA, CHINA… Bankruptcy Laws Unfair to Competitors Investments – Earn Cost of Capital Mini-Mills Must Compete in the World, as it is, and We Can! Meaningful Optimism with Good Long Term Consumption, Relative Value, and Excellent Recyclability for Steel

VMAA Leadership Forum 2006/2007

In January 2007, The Times they are still a’changing… VMAA Leadership Forum Steel Demand Weakening Energy Costs World Steel Growth Freight Costs China’s Subsidies U.S. Government Debt Perennial Problems Consolidations Ore/Coal Costs Democratic Congress 59% EAF in U.S. Labor Contracts China’s Steel Growth Trade Imbalance Operating Costs Benefits & Energy

VMAA Leadership Forum A Few Facts -Steel prices through August 2006 were at historic high levels -Steel producer mergers continue – top 3 U.S. companies (Mittal, U.S. Steel, Nucor) now approximately 70% -ITC cases not favoring U.S. producers (Wire Rod, Corrosion Resistant, Pipe 421, etc.) -WTO cases also unfavorable (“Zeroing” & “Bratsk”) -Cost pressures continue (ore up 70% in 2005, 20% in 2006; natural gas in 2005 double 2004, etc.)

VMAA Leadership Forum China Facts -China trade surplus swelled to $177 billion in 2006 – up 74% over China trade surplus in 2001 (WTO joining year) was $22 billion -China currency has only changed by 5.9% since July 2005

VMAA Leadership Forum China Facts, cont.

VMAA Leadership Forum China Facts, cont.

VMAA Leadership Forum Steel Production

VMAA Leadership Forum Imports by Year

VMAA Leadership Forum Steel Scrap Prices

VMAA Leadership Forum Price Forecasts Source: AMM Research Forecast Prices

VMAA Leadership Forum Imports & Inventory

VMAA Leadership Forum Conclusion -It’s still a cyclical business (percent utilization, scrap, inventories, etc.) -Still no Global Subsidies Agreement – massive subsidized growth continues -No trade help from U.S. Government (421, antidumping, countervailing duties, etc.) -When will inventories return to normal levels? -Consolidation will continue -China! China! China! (everything else is only an embellishment) -Unknowns (interest rates, housing starts, economic growth, imports, customer base, pricing???)