1. March 2007 UPDATE Eliminating Global Barriers to Trade in Steel Scrap and Raw Materials Alan Price and Tim Brightbill 1776 K Street, NW Washington, DC 20006 Presentation to SMA Board of Directors October 23, 2008

2. Page 2 1776 K Street, NW, Washington, DC 20006 Overview I.Barriers to Trade in Steel Scrap II.Barriers to Trade in Raw Materials

3. Page 3 1776 K Street, NW, Washington, DC 20006 I. Barriers to Trade in Steel Scrap The U.S. open scrap trade regime has led to a sustained, dramatic rise in steel scrap exports from the U.S. (on pace for 22-23 million tons) Our trading partners have imposed substantial barriers to the export of scrap, leading to a reduction in U.S. scrap imports Result: (1) Limited U.S. scrap supply and (2) Surge in scrap prices

4. Page 4 1776 K Street, NW, Washington, DC 20006 U.S. Exports of Steel Scrap

5. Page 5 1776 K Street, NW, Washington, DC 20006 U.S. Exports of Steel Scrap (cont.)

6. Page 6 1776 K Street, NW, Washington, DC 20006

7. Page 7 1776 K Street, NW, Washington, DC 20006 Foreign Barriers to Trade (cont.) List of scrap trade barriers: www.scrapcoalition.com www.scrapcoalition.com Examples – Russia: larger of 15% / 15€ per ton export tax, but plans to raise export tariffs to 120-130 € ($191 to $207 per ton). – Indonesia: imported 239,394 tons of U.S. scrap in 2007 but bans the export of Indonesian ferrous scrap – Saudi Arabia: decreed a halt on scrap exports as of June 2008 and may be strengthening enforcement of its export tax

8. Page 8 1776 K Street, NW, Washington, DC 20006 Foreign Barriers to Trade (cont.) List of scrap trade barriers: www.scrapcoalition.com www.scrapcoalition.com Examples – Malaysia: increased its consumption of U.S. scrap from 350,297 in 2002 to 1,367,785 in 2007; increased its export tax on scrap from 2.5% in 2001 to its present 30% – Vietnam – export tax of 35% – Pakistan – export tax of 25%. – Others include Iran, Argentina, India, UAE, Kazakhstan, Egypt, and others.

9. Page 9 1776 K Street, NW, Washington, DC 20006 American Scrap Coalition Actions Meetings with Congress, Commerce Department, and USTR Proposed Congressional Briefing Opposition to Ex-Im Financing of Scrap Sale to Turkey Section 301 Draft Petitions Address specific countries through negotiations or possible legal actions

10. Page 10 1776 K Street, NW, Washington, DC 20006 II. Barriers to Trade in Raw Materials All countries are currently engaged in a global race for access to raw materials Result has been unprecedented cost increases for dozens of commodities Governments are increasingly becoming involved in the search for raw materials Government intervention distorts the global market

11. Page 11 1776 K Street, NW, Washington, DC 20006 Barriers to Trade in Raw Materials Protectionism in the raw material sector unfairly tilts the playing field throughout the global manufacturing economy. These trade barriers often clearly violate World Trade Organization agreements, free trade agreements, or bilateral investment treaties The United States has repeatedly identified many of these barriers as trade distortive

12. Page 12 1776 K Street, NW, Washington, DC 20006 China Export Barriers – Export Quotas – Export Tariffs – Licensing requirements Restrictions on foreign investment in raw materials Subsidized raw material acquisition

13. Page 13 1776 K Street, NW, Washington, DC 20006 I.China’s Export Barriers - Quotas USTR Report on Foreign Trade Barriers: “China has continued to impose restrictions on exports of raw materials, including quotas, related licensing requirements, and duties, as China’s state planners have continued to guide the development of downstream industries. These export restrictions are widespread.” NOTE: These are WTO-prohibited.

14. Page 14 1776 K Street, NW, Washington, DC 20006 I.China’s Export Barriers - Quotas 2007  2008 Export Quotas on Certain Raw Materials – Antimony: 61,800 metric tons (mt)  59,000 mt – Bauxite: 2008 quota is 940,000 mt – Coke: 13.3 mt  12 mt – Magnesium Carbonate: 2008 quota is 1.3 million mt – Molybdenum: 19,383 mt  26,300 mt – Silicon Carbide: 2008 quota is 216,000 mt – Tin: 37,000 mt  33,300 mt – Tungsten: 15,400 mt  14,900 mt – Also: Fluorspar, Indium, Rare Earths, Talc, Zinc

15. Page 15 1776 K Street, NW, Washington, DC 20006 I.China’s Export Barriers - Taxes USTR: “Over time, China’s state planners have increased the artificial advantages afforded to China’s downstream producers by making the export quotas more restrictive and by imposing or increasing export duties on many raw materials at issue.” Most of China’s export taxes on raw materials are also illegal according to its WTO accession agreement

16. Page 16 1776 K Street, NW, Washington, DC 20006 I.Barriers to Trade in Raw Materials China (contd.) Export Taxes Raw Material Export Tax (2008) Antimony5-10% Bauxite15% Coal Coke and Semi-coke40% Ferrous Scrap10% Magnesium Carbonate5-10% Manganese20% Molybdenum15-20% Silicon10-20% Tin10-20% Zinc5-15%

17. Page 17 1776 K Street, NW, Washington, DC 20006 I.Barriers to Trade in Raw Materials Russia Export Tariffs Export Restrictions Government Intervention

18. Page 18 1776 K Street, NW, Washington, DC 20006 I.Barriers to Trade in Raw Materials Russia (contd.) Export Tariffs CommodityCurrent Export Tax Ferrous Scrap 15% or € 15 per tonne Aluminum Ore and Concentrates6.5% Molybdenum Ore and Concentrates6.5% Tin Waste and Scrap6.5% Tungsten Waste and Scrap6.5% Antimony Waste and Scrap6.5% Nickel Waste and Scrap30.0% Nickel Products5.0% Coking Coal6.5%

19. Page 19 1776 K Street, NW, Washington, DC 20006 I.Barriers to Trade in Raw Materials Ukraine Export Tariffs Export Registration and Licensing Requirements

20. Page 20 1776 K Street, NW, Washington, DC 20006 I.Barriers to Trade in Raw Materials Ukraine (contd.) Export Tariffs - Though its WTO accession and related negotiations brought numerous promises to reduce or eliminate trade barriers, Ukraine has been slow or unwilling to fulfill them. Ukraine will maintain export tariffs on the following until 2014: Cast Iron (Ferrous) Waste and Scrap Alloy Steel Waste and Scrap Stainless Steel Waste and Scrap Ferro-Chromium-Nickel Unrefined Copper, Copper Waste and Scrap Nickel Waste and Scrap Aluminum Waste and Scrap Lead Waste and Scrap Zinc Waste and Scrap Tin Waste and Scrap Tungsten Waste and Scrap

21. Page 21 1776 K Street, NW, Washington, DC 20006 I.Barriers to Trade in Raw Materials India Export Tariffs Government Intervention

22. Page 22 1776 K Street, NW, Washington, DC 20006 I.Barriers to Trade in Raw Materials India (contd.) Export Tariffs – In June 2008, India enacted export tariffs of 15% on all grades of iron ore, pig iron, and ferrous scrap. – Iron ore exports to China (India’s main customer) have plummeted – The Indian steel industry is reaping massive benefits from the cheap domestic supply of iron ore.

23. Page 23 1776 K Street, NW, Washington, DC 20006 Actions Taken by Scrap Coalition and U.S. Industry Assistance to USTR on potential WTO case against China’s raw material export quotas and taxes Research on specific illegal trade barriers Contacts with other U.S. industries, EU, Japan and others to assist White paper: “Raw Deal” Importance of continuing these efforts

24. Page 24 1776 K Street, NW, Washington, DC 20006 Conclusion Please contact with any questions: Alan Price and Tim Brightbill aprice@wileyrein.com 202-719-3375 tbrightbill@wileyrein.com 202-719-3138