Current Drivers Impacting Steel Competitiveness UPDATE – January 2007

1. Valve Manufacturers Association of America Leadership Forum Current Drivers Impacting Steel Competitiveness UPDATE – January 2007 Thomas A. Danjczek, President Steel Manufacturers Association January 23, 2007

2. SMA Changes August 2003 Scrap Impact World Steel Production China, China, China… Key Statistics Steel Production SMA Mission Lessons Learned Currency Steel Production Costs Key Issues Energy & Raw Material Costs Asset Values Exchange Rates Bankruptcy/Restarts Scrap Costs Other Costs Restrictive Scrap Exports Freights Coke Energy Market Overview Public Works Construction Conclusion Current Drivers ImpactingSteel Competitiveness From October 15, 2004VMAA – Annual Meeting

3. In August 2003, The Times they were a’changing… From October 15, 2004VMAA – Annual Meeting Capital Constraints Legacy Costs Steel Demand Weakening Consolidations Public Policy Pricing Volatility 201 Tariffs/ Exclusions Bankruptcies Increasing Imports Mini-mill Industry Condition Semi-Finished Imports Exchange Rate Shifts N.A. Economy Perennial Problems Plant Closures/ Restarts Operating Costs Benefits & Energy US PBGC ISG’s Labor Contract

4. From October 15, 2004VMAA – Annual Meeting Up $130 since June 2004!

5. From October 15, 2004 CHINA STEEL PRODUCTIONChina produced 220 MT of crude steel in 2003 – double the next largest producer Japan at 110.5 MT and 2.4 times the U.S. (92.2 MT, shown) – and will produce as much as 275 MT, 350 MT, and 425 MT by 2005, 2010, and 2015, respectively. China United States Courtesy – Metal Strategies

6. From October 15, 2004VMAA – Annual Meeting Conclusion • Uncertainty – Cycle has Changed (Shorter Term & Greater Peaks & Valleys) • Revenue vs. Costs – Not the Same Business Model • CHINA, CHINA, CHINA… • Bankruptcy Laws Unfair to Competitors • Investments – Earn Cost of Capital • Mini-Mills 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

7. VMAA Leadership Forum 2006/2007

8. In January 2007, The Times they are still a’changing… VMAA Leadership Forum Steel Demand Weakening Consolidations Trade Imbalance 59% EAF in U.S. Energy Costs Freight Costs World Steel Growth Democratic Congress China’s Subsidies China’s Steel Growth U.S. Government Debt Perennial Problems Operating Costs Benefits & Energy Ore/Coal Costs Labor Contracts

9. VMAA Leadership Forum 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 70% • ITC cases not favoring U.S. producers (Wire Rod, Corrosion Resistant, Pipe 421, etc.) • WTO cases also unfavorable (“Zeroing” & “Bratsk”) • Cost pressures continue (ore up 70% in 2005, 20% in 2006; natural gas in 2005 double 2004, etc.)

10. VMAA Leadership Forum 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

11. VMAA Leadership Forum China Facts, cont.

12. VMAA Leadership Forum China Facts, cont.

13. VMAA Leadership Forum Steel Production

14. VMAA Leadership Forum Imports by Year

15. VMAA Leadership Forum Steel Scrap Prices

16. VMAA Leadership Forum Price Forecasts Forecast Prices Source: AMM Research

17. VMAA Leadership Forum Imports & Inventory

18. VMAA Leadership Forum Conclusion -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???)