1. Steel – A Few Items Impacting U.S. Minimills Thomas A. Danjczek, President Steel Manufacturers Association February 23, 2007 HBIA 2007 Spring Meeting

2. In February 2007, The Times they are a’changing… HBIA 2007 Spring Meeting Steel Demand Fluctuating 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 Service Center Inventories Up

3. HBIA 2007 Spring Meeting 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 60% -ITC cases not favoring U.S. producers (Wire Rod, Corrosion Resistant, Pipe 421, etc.) -WTO cases also unfavorable (“Zeroing” & “Bratsk”) -Current U.S. Government Prohibitive Subsidies Case -Cost pressures continue (ore up 70% in 2005, 20% in 2006; natural gas in 2005 double 2004, etc.)

4. HBIA 2007 Spring Meeting Steel Production

5. HBIA 2007 Spring Meeting Price Forecasts Source: AMM Research Forecast Prices

6. HBIA 2007 Spring Meeting Imports & Inventory

7. Scrap Demand Source: DJJ, 2/07

8. HBIA 2007 Spring Meeting China Facts -China trade surplus swelled to $177 billion in 2006 – up 74% over 2005 -China trade surplus in 2001 (WTO joining year) was $22 billion -China currency has only changed by 5.9% since July 2005

9. HBIA 2007 Spring Meeting China Facts, cont.

10. HBIA 2007 Spring Meeting China Facts, cont.

11. U.S. Trade Balance with China Source: U.S. Census Bureau 2006 Estimate based on data from January to November 1992199319941995199619971998199920002001200220032004 2005 2006 (est.) China Facts, cont. HBIA 2007 Spring Meeting

12. $7.5 billion in debt-to-equity swaps in 2000 An additional $6 billion in announced subsidies during 2000 2005 steel policy commits China to further subsidies, micromanagement Support from local and provincial governments uncontrolled by central government State-owned enterprises account for 57 percent of total Chinese production Chinese steelmakers regularly obtain preferential loans from state-owned banks Manipulation of key raw materials markets, including coke and ferroalloys China Has the Most Heavily Subsidized Steel Industry in the World Chinese steel producers enjoy government assistance with energy and other input costs Inadequate protection of workers’ rights and enforcement of environmental standards China Facts, cont. HBIA 2007 Spring Meeting

13. Within the Last Year, U.S Producers Have Been Hit with a Flood of Chinese Imports Total U.S. Imports from ChinaU.S. Imports of Critical High-Value Products Source: AISI and IM-145 data China Facts, cont. HBIA 2007 Spring Meeting

14. Aggressive Policy Measures Are Necessary to Prevent China from Causing a Major Crisis Enact real China legislation (apply CVD law to China, address currency manipulation, WTO reform) Strict enforcement of U.S. AD/CVD laws (appearance at HR hearing, letters, Congressional hearings) Make clear that Congress will not accept any new agreements (Doha, Korea FTA, etc.) with trade law weakening. Current system is broken. HBIA 2007 Spring Meeting

15. Conclusion -Need aggressive policy measures to prevent China from causing a major crisis -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???)