1. Steel – A Year Later Thomas A. Danjczek, President Steel Manufacturers Association August 16, 2005 National Fluid Power Association Economic Outlook Conference Rev. 8/2/05

2. Steel – A Year Later I.SMA II.Review 2004 Presentation Highlights/Conclusions III.2005 World Steel Production/Operating Rate China Scrap, Ore, Steel Prices Consolidations IV.Expert Views V.Conclusion NFPA – Economic Outlook Conference

3. The Steel Manufacturers Association (SMA) –38 North American companies: 31 U.S., 5 Canadian, and 2 Mexican –103 Associate members: Suppliers of goods and services to the steel industry SMA member companies –Operate 120 Steel plants in North America –Employ about 40,000 people –Mini-mill Electric Arc Furnace (EAF) producers

4. NFPA – Economic Outlook Conference Production capability –SMA represents over half of U.S. steel production Recycling –SMA members are the largest recyclers in the U.S. –Last year, the U.S. recycled over 70 million tons of ferrous scrap Growth of SMA members –Efficiency and quality due to low cost –Flexible organizations –EAF growth surpassed 53% in 2004, and anticipated to be 60% by 2010

5. Last Year (2004) Current Drivers Impacting Steel Competitiveness NFPA – Economic Outlook Conference August 17, 2004 I. Trade 201 Real World Impact World Steel Production (up 7.1%) China, China, China… (up 21.1%) (Its Impact) II. Steel Production Costs Key Issues (Scrap $100 to $285) Asset Values Exchange Rates Steel Imports – Value of U.S. $ Bankruptcy/Restarts III. Other Costs Restrictive Scrap Exports Freights Coke Energy IV. Market Overview Public Works Construction V. Conclusion Uncertainty Optimistic

6. Courtesy – IMF Some things are the same…

7. Courtesy – IMF

9. Some things are different…

10. IRON ORE PRICES - ANNUAL The 2004 iron ore price-increase benchmark of 18.5% was established in early- January by CVRD, following a 9% gain in 2003. China now accounts for over 25% (110 MT) of world sea-borne demand, while three producers (CVRD, RTZ and BHP) now control over 80% of the supply. Pellets Lump Fines Prices shown are from CVRD (Brazil) to Western European steel customers (fob) Courtesy – Metal Strategies Some things got worse…

11. Technical Read on Crude Oil Prices Courtesy – JP Morgan

12. 2004 Conclusions Uncertainty – Cycle has Changed (Shorter Term & Greater Peaks & Valleys) Revenue vs. Costs – Not the Same Business Model Bankruptcy Laws Unfair to Competitors Investments – Earn Cost of Capital Minimills 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 NFPA – Economic Outlook Conference

13. 2005

14. WORLD STEEL PRODUCTION World steel production was up 6.5 percent through March, following increases of 8.9 percent and 6.8 percent in 2004 and 2003, respectively. China accounted for 92 percent of the y-t-d worldwide net gain and 25 percent of total world production. Steel Production: March 2005 Percent Change, Year Ago Month: 6.5% Year-to-Date: 6.5% Steel Production: March 2005 Percent Change, Year Ago Month: 6.5% Year-to-Date: 6.5% World Excluding China World Excluding China World Total In the five years from 1998 to 2003, China and the former-USSR states increased production by a cumulative 140 MT, equal to 70 percent of the combined total output in 2003 of both the U.S. or Japan. Source: Metal Strategies

15. WORLD CRUDE STEEL OPERATING RATE World Crude Steel Operating Rate % World Crude Steel Operating Rate % Operating rates recovered from 76 percent in 2000, to a peak of 87 percent in 2004, and have moved moderately downward since late 2004. Source: Metal Strategies

16. NFPA – Economic Outlook Conference China’s Impact After 4 Trips in a Year… Key Questions: - When will Chinese steel production significantly exceed its own domestic consumption – I.e. 50/60 MMT? - Will the Chinese government shut down inefficient, excess capacity? (Has not done so with polluting facilities despite strong policy) - How can North American Steel Industry compete against Chinese government - - IT CAN’T!

19. Source: Iron and Steel Statistics Bureau

20. Hot-Rolled Sheet Prices, 1990-2005 (Midwest, $ per ton) Source: Purchasing Magazine June 2005 = $495 July 2005 = $460

21. Wide-Flange Beam Prices, 1990-2005 (Midwest, 8 x 8, $ per ton) Source: Purchasing Magazine June 2005 = $516 July 2005 = $506

22. Rebar Prices, 1990-2005 (Midwest, $ per ton) Source: Purchasing Magazine June 2005 = $470 July 2005 = $450

23. Wire Rod Prices, 1990-2005 (Midwest, $ per ton) Source: Purchasing Magazine June 2005 = $505 July 2005 = $472

24. U.S. STEEL INDUSTRY CONSOLIDATION (Percent Change, 2000 compared to 2005) Mittal Steel weighted average share of all markets served = ~33% (major product range-15-40%+) -FRP acquisition price ($/ton, going-concern basis) 2002= $110……..2003-’04=$170……2005=$225 Source: Metal Strategies

25. NFPA – Economic Outlook Conference Expert Views Plummer – Metal Strategies - May 18, 2005 - Eight months of downward market correction, focused in sheet - Auto market under pressure, especially SUV’s - Positive outlook despite current conditions (Supply moving in balance with demand; imports are down; inventories coming down by inventory liquidation and mill shutdown) - Demand still healthy (industrial equipment up by 7 percent; now residential recovering; auto transplants are strong

26. NFPA – Economic Outlook Conference Expert Views Michelle Applebaum – June 26, 2005 - Inventories decline modestly - Sheet prices showed decline reflecting automotive - Plate and long products sideways (Cut to length plate unchanged in May 2005; rebar unchanged) - Minimills more disciplined

27. NFPA – Economic Outlook Conference Expert Views SBB Global Market Outlook – May, 2005 - Production cuts too little, too late - Buyers holding back - Inventory draw down ends in the third quarter (For long products, some products are potentially in short supply due to de-stocking) - Plate is still strong

28. NFPA – Economic Outlook Conference Expert Views Peter Marcus – World Steel Dynamics – 5/27 & 7/7/05 - Bottom of the “V” pricing for hot-rolled on the world export market may occur in third quarter - “Prime” U.S. automotive scrap plummeted another $60 to about $170 in May (vs. high of $450 in November, 2004) - Steel shipments in USA 5-10 percent projected below 2004 - Chinese steel production is likely to decline sharply in months ahead - Lower freight rates ($70 to $55 per ton)

29. NFPA – Economic Outlook Conference Expert Views MEPS Steel News – June 1, 2005 - Flat products fell by 5.5 percent in May - Long product price held up Charles A. Bradford – Soleil – July 13, 2005 - Improvement in inventories - Oil country, rail & light shapes strong - Sheet products weak

30. NFPA – Economic Outlook Conference Conclusions Hell, it’s still a cyclical business Fundamental shift in both demand and supply due to China and its appetite for raw materials – China is still the “wild card” Consolidations have had an impact to reduce volatility Role of inventories affecting pricing and production Unknowns (Oil, Interest rate, Auto sector, Energy, China, China, China) Still reasons for meaningful optimism