1. Thomas A. Danjczek President Steel Manufacturers Association July 30, 2009 Steel Orbis – Steel Trade Conference Steel Producers Issues in Today’s Economy

2. The Steel Manufacturers Association (SMA) –36 North American companies: 31 U.S., 3 Canadian, and 2 Mexican –125 Associate members: Suppliers of goods and services to the steel industry SMA member companies –Operate 125 steel recycling plants in North America –Electric Arc Furnace (EAF) steelmakers using recycled steel SMA Steel Orbis – Steel Trade Conference

3. Production capability –EAF steel producers accounted for 60% of U.S. production in 2008 –62% first half 2009 –SMA represents over 70% of all U.S. steel production Recycling –SMA members are the largest recyclers in the U.S. –EAF steel producers are the largest recyclers in the world –Last year, the U.S. recycled over 75 million tons of steel Growth of SMA member companies –Highly efficient users of labor, energy, and materials –Modern plants producing world class quality products SMA Steel Orbis – Steel Trade Conference

4. Outline SMA Today’s Concerns Today’s Deterioration China, China, China Other Issues (Energy, GHG, Infrastructure Spending) Consolidation Scrap Protectionism and Trade Issue Legislative Items (Cap & Trade, Infrastructure, Trade) Is Enough Being Done? Conclusion Steel Orbis – Steel Trade Conference

5. Steel Executive- 1 st Half 2009

6. The Obvious Concerns -Our Jobs -US Recession and financial meltdown -Infrastructure Spending -Value of the RMB -Energy shortfalls and pricing -Federal Bailouts -China, China, China -Global Steel Overcapacity -Subsidies and other trade distortions -US Legislation (111 th Congress and the 44 th President) Steel Orbis – Steel Trade Conference

7. 2009 in a long term context Global steel annual production changes Source: worldsteel, First River YearDecline 11921-38% 21932-27% 31931-27% 41945-25% 51919-24% 61908-22% 71930-21% 81914-21% 91938-19% 102009F-15% 111982-9% 121975-9% 131958-7% 141918-6% 151944-5%

8. 2009 in a long term context US steel industry production changes Source: AISI, First River YearDecline 11921-53% 21932-47% 31938-44% 41908-40% 51982-38% 61931-36% 72009F-30% 81930-28% 91914-25% 101958-24% 111919-22% 121954-21% 131975-20% 141980-18% 151946-16%

9. US raw steel capacity utilization Long-term average is 78%, stable level is 85% Source: AISI, First River 63% 48% 65% 61% Average Utilization Rates Periods of adjustment (red bars): 60% Periods of relative stability: 85%

10. World Steel Capacity Grew by Over 50% in the Past Eight Years. Source: German Steel Federation and IISI verifications Global Steel Capacity Through 2008 90* * Additions to Capacity Steel Orbis – Steel Trade Conference

11. Crude Steel Supply in China, 2005-2009 (million metric tons) 20052006200720082009 (e) Capacity450.0530.0599.0640.0 (e)660.0 Production352.0416.0489.0498.0520.0 Net Exports0.529.741.751.038.0 Source: Growell Research, “China Steel Capacity Forecast for 2006-2010” and CISA Presentation at OECD, December 15, 2008. Steel Orbis – Steel Trade Conference

12. China Steel Comments China has NOT become the world’s Largest steel producer by accident, or by operation of free markets, or comparative advantage China is NOT a low-cost steel producer China has reached its position through a combination of subsidies, mandates, and planned intervention In finished goods containing steel, China’s exports to absorb overproduction Chinese steel industry is overbuilt and under-demolished Steel Orbis – Steel Trade Conference

13. China’s Trade Surplus with the U.S. YearChina’s Trade Surplus 2001$22 billion (year China joined WTO) 2006$177 billion 2007 $262 billion (up 47.7%) 2008$290 billon The U.S. has lost 3.3 million manufacturing jobs since 2000… imbalances cannot go on forever. Steel Orbis – Steel Trade Conference

14. Other Issues - Energy Steel Orbis – Steel Trade Conference

15. Energy Summary US power generation industry is at a critical juncture, with social pressures and pending legislation demanding massive changes. Competing demands for reliable, low-cost energy and climate change mitigation appear incongruent. Our Nation’s liquid fuel dependence on foreign resources continue to grow. Uncertainty of regulatory outcomes and rising costs impact industry’s willingness to commit capital investments, endangering near-term production capacity. The United States must foster new processes that address conflicting energy objectives simultaneously. Other Issues - Energy Steel Orbis – Steel Trade Conference

16. Other Issues - GHG Steel Orbis – Steel Trade Conference

17. Other Issues - GHG Steel Orbis – Steel Trade Conference

18. Globalization and Consolidation Developments Have Dramatically Changed the NAFTA Steel Landscape Acquiring Company Acquired Company Arcelor MittalNucorDuferco/NLMK ArcelorConnecticut SteelWinner Steel DofascoTrico MittalBirmingham Evraz Ispat InlandCorus TuscaloosaOregon Steel ISGWorthington-DecaturClaymont Steel LTV MarionIpsco Canada US Steel Plate Weirton Nelson Steel Harris Steel Severstal Acme-Riverdale Auburn SteelArcelor Mittal-Sp. Pt. North Star Arizona Rouge WCI Georgetown American Iron Reduction Sicartsa Bayou LMP Steel & Wire CSN Heartland US SteelGerdau Ameristeel Lone StarSheffield Essar NationalChaparral Algoma LTV TinCo-Steel Minnesota Steel ISG IH#2 Pkl.North Star StelcoSidetul Tultitlan Quanex Macsteel BlueScope Corsa IMSA Steelscape OAO TMK SSAB Ipsco Tubular (U.S.) ICH/Grupo Simec Ipsco Plate (U.S.) Republic Steel Dynamics Ternium GalvPro-Jeffersonville HylsaThe Techs IMSARoanoke Steel Steel of West Virginia Tenaris Maverick Tube (U.S.) Prudential Canada Hydril Company Wheeling Pitt 1/1/09 Bethlehem The David J. Joseph Co. (Scrap) Omnisource (Scrap) Steel Orbis – Steel Trade Conference

19. US aging infrastructure is functionally obsolete and structurally deficient FHWA estimates $78.8 billion per year for the next 20 years to maintain infrastructure, $131.7 billion to improve Gas tax at 18.54/gallon generates app. $40 billion Current gas tax woefully insufficient, only half of maintenance Infrastructure Stimulus Steel Orbis – Steel Trade Conference

20. U.S. Steel Scrap (Data in million metric tons) Source: US Geologic Survey, January 2008 1. 2008 is a rough estimate based on 3 normal quarters; 4 th Quarter @ 60% steel production Salient Statistics— United States: 20032004200520062007(e)2008(e) 1 Production Home Scrap 17141513 12 Production Purchased Scrap 565958 52 Imports for Consumption 454554 Exports 11121315 23 Consumption, reported 656766 59 Steel Orbis – Steel Trade Conference

21. Free Trade vs. Protectionism Protectionism -Predatory Pricing -Trade distorting subsidies -Government Ownership -National power by protecting our industries and state -Piling up currency measures -One way trade Need “Balanced” Trade over “Mercantilism” Who’s the Protectionist? Is “Protectionism” the enemy of “Free Trade” 1. Taken in part from C. Blum Steel Orbis – Steel Trade Conference

22. HR 2998, “the American Clean Energy & Security Act”; or the Waxman-Markey bill U.S. House of Representatives passed bill – June 26, 2009 -House passed bill in vote on Friday June 26 -219-212 vote (1 in 5 Democrats did NOT vote for the bill) -White House called for a vote on bill, but did not endorse it -President Obama indicated that tariff concept included by Ways & Means Committee may have to be removed from final bill No Equivalent Bill introduced in Senate -Senate has been surprised by quick movement of House bill Expect Senate to move much more slowly in dealing with aspects of any climate change legislation – could be 2010 before something is voted on and conferenced with House version of bill U.S. Cap & Trade Climate Legislation Steel Orbis – Steel Trade Conference

23. -Current six-year, $286 billion plan expires at end of September -House working to produce $500 billion bill that would create new fund for road repairs, increase funding for rail and public transit, and include reforms to reduce fossil fuel reliance; estimated to create or sustain six million family- wage jobs -Administration has requested 18-month $20 billion extension of current bill – contention over how to fund increased spending -Immediate patch required to address current insolvency in Highway Trust Fund – expected to run dry in July 2009 Highway Bill Reauthorization Steel Orbis – Steel Trade Conference

24. 1.Section 421 – Against Chinese Tires -When China joined WTO, part of agreement was a 421 Safeguard to avoid surges & injuries -Filed by Unions only, case heard at ITC, 4-2 in favor, awaiting remedy recommendation by ITC -Key is Presidential discretion; under Bush; won 6 cases, but no remedy -If positive from President (probably quotas), low cost legal approach only needs to show surge and harm, not dumping, subsidies, etc. 2.WTO Complaint By US Government -9 materials, some steelmaking raw materials -Seems counterintuitive - don’t want Chinese exports, but the complaint is against hoarding of materials. But, quotas are illegal. -Chinese defense will be Article 20, preserve raw materials; Coke is a key. -Next steps: consultation between governments, followed by dispute resolution -Allows Chinese finished goods to be artificially cheaper Trade Cases Against China Steel Orbis – Steel Trade Conference

25. Is Enough Being Done? 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. Steel Orbis – Steel Trade Conference

26. Conclusion U.S. Steel Industry in Better Position Today to Manage the Down Cycle (but what a down cycle!) ― Improved Economics From Consolidations, i.e. “Reacted Quicker in October”; ― Improved Control of Variable Costs ― Scrap-Based Metallics (In 2009, U.S. will be nearly 2/3 EAF-based ― Energy Costs ― Transportation Costs ― Labor Efficiency (U.S. at Below 2MH/Ton; Minimills Often Below 1MH/Ton) ― Improved Inventory Control (Inbound Materials, Steel, and Customer Products). NOT THE OLD INVENTORY OVERHANG! ― Improved Debt and Equity; Balance Sheet Position ― Still Challenging – But Reasons for Meaningful Long-Term Optimism! Steel Orbis – Steel Trade Conference