Thomas A. Danjczek President Steel Manufacturers Association September 23, 2010 N ATIONAL S LAG A SSOCIATION Steel Producers Issues in Today’s Economy

Outline o SMA o Set a Tone  US Steel Production/Capacity Utilization, Steel Usage  World Steel Outlook & Capacity Growth  Mercury Collection Status  Inflation/Deflation o What does the US need to do? o Conclusion o Steel and Slag Coordination / Cooperation NSA Annual Meeting – 2010

The Steel Manufacturers Association (SMA) –34 North American companies: 29 U.S., 3 Canadian, and 2 Mexican –Operate 125 steel recycling plants in North America –Electric Arc Furnace (EAF) steelmakers using recycled steel –EAF steel producers accounted for nearly 2/3 of U.S. production in 2009 –SMA represents approximately 90 million of U.S. 120 million ton capacity (75%) –128 Associate members - Suppliers of goods and services to the steel industry SMA NSA Annual Meeting

Where SMA Member EAFs are located… NSA Annual Meeting

Steel / Slag Company Executive- 2010

Set A Tone (O’Bummer)

US Steel Production (All in Million Net Tons) (Numbers are Approximate) PAST – From 1986 through 2008, U.S. steel production has been around 100 m tons – up & down 10% st Half25m(45% utilization) 2 nd Half36m(62% utilization) Now 1.5m/week vs. 2.1m/week Year63m(Minimills at 63% of production) 2010 – Today Capacity Utilization (70.4%); or approximately 83 million tons annual rate NSA Annual Meeting

In 2010, Apparent Steel Use in the NAFTA Region Will Be More than 30 Percent Below Pre-Crisis Levels Apparent Steel Use in NAFTA Region (millions of MT) Source: Worldsteel Even if apparent steel use in the NAFTA region recovers to 107 million MT by 2011, as currently projected by the World Steel Association, it would still only match the 1993 consumption level – and be only 76% of the level in 2007.

2009 Was Only the Second Year Since 1963 in Which North America Produced Fewer than 9 million Cars and Trucks North America Car & Truck Production, Source: Ward’s Automotive. 9 million cars and trucks produced 1982 Recent gains in North American car and truck production notwithstanding, it is projected that it will take up to five years to return to pre- crisis ”normal” levels.

United States Million MT 2009 (e)2010(f) Change (%) Crude Steel Use % Finished Steel Use % Exports % Imports % Canada Million MT 2009 (e)2010(f) Change (%) Crude Steel Use % Finished Steel Use % Exports % Imports % Mexico Million MT 2009 (e) 2010 (f) Change (%) Crude Steel Use % Finished Steel Use % Exports % Imports % Source: Worldsteel Economic Studies Committee, April 2010 The Worldsteel Short Range Outlook NSA Annual Meeting

Source: Worldsteel World Crude Steel Capacity ,062 1,095 1,170 1,245 1,356 1,453 1,583 1,816 1,917 1,997 2,055 1, ,100 1,350 1,600 1,850 2, (e)2011(e) Steel Capacity (million metric tonnes) Current Average Growth Rate (CAGR) World Crude Steel CapacityCAGR 2012(e) Global Steel Capacity Continues to Increase NSA Annual Meeting

“Some countries simply prohibit scrap exports. Others, like China, impose export taxes to impede the flow of their domestic scrap overseas. Not one of them would countenance the export of up to one-third of their available supply.” AMM, July 2010

“Some countries simply prohibit scrap exports. Others, like China, impose export taxes to impede the flow of their domestic scrap overseas. Not one of them would countenance the export of up to one-third of their available supply.” -AMM, July, 2010

Raw Material Export Restrictions are Continuing to Disadvantage NAFTA Steel and Other Manufacturers 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 NSA Annual Meeting

Mercury in Scrap Issue Program is performing as the collection point for all convenience mercury switches removed from domestic automobiles; fully implemented in first quarter 2007 All US EAF Carbon Steel Facilities are operating under EAF Area Source Rule mercury source control plan option, and depend upon ELVS as the national program to collect mercury convenience switches Implementation Fund ($2 million from domestic auto makers & $2 million from US steel industry) exhausted in July 2009 Last statistics supplied by NVMSRP Stakeholder Group (August 2010) shows performance in retorting of switches similar to previous years – switches continue to be submitted to ELVS, regardless of lack of Implementation Fund payouts – Total Collection for life of Program to date = 2.9 million mercury switches Performance of program continues to lag, compared to EAF Area Source Rule “Goal” of 80% collection Need for emphasis or supplier audits on mercury collection EPA’s 114 Requests for Information NSA Annual Meeting

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

What does the US 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 NSA Annual Meeting

This 70% world is the new “norm” (Construction, Auto, Government driven) The economy will come back as jobs are created President Coolidge: “When more and more people lose their jobs, unemployment results.” We’re in a traffic jam, moving slightly forward, but don’t know other consequences Don’t look to Washington for help. Pendulum moves slowly. Reasons for optimism in steel –Scrap based –Low Cost on global bases –Relatively strong US market and US resiliency – Better US company balance sheets –Impact of Currency long term NSA Annual Meeting Conclusion

Steel Companies fully support the use of slag as a valuable and usable co-product. On August 15, 2010, Steel & Slag Companies participated in a conference call to discuss items affecting slag usage in the U.S. Participation included – 37 steel company representatives & 16 slag company representatives NSA Annual Meeting Steel & Slag Cooperation & Coordination

NSA Annual Meeting Steel & Slag Cooperation & Coordination Item DiscussedAction Slag Risk AssessmentEstablished steel industry review group SustainabilitySlag Benefits to be included State/Local RelationshipsProvide Information Codify Slag as a PRODUCTFederal vs. State by State; Possibly through ASTSWMO Restricted MarketsNY, PA, TX – Political solution between steel & slag companies w/ State Agencies Other State InitiativesIA, WA, WI, OR, AL, IN – Continue education & coordination with steel’s assistance

What can slag companies do for steel producers? Work together, especially on environment Spotlight on slag – consistency Assist cost competitiveness (Slag companies do many things more efficiently than steel) Safety (Learn from each other) Build Relationships locally - Accountability Question From Ray

 CONTINUE TO IMPROVE COOPERATION AND COORDINATION BETWEEN STEEL AND SLAG AT FACILITY, COMPANY, AND ASSOCIATION LEVELS. NSA Annual Meeting Steel & Slag Conclusion