Thomas A. Danjczek President Steel Manufacturers Association November 2, 2010

1. North American Steel Conference CRU 2010 U.S. Minimills – Competitive Position and Drivers Thomas A. Danjczek President Steel Manufacturers Association November 2, 2010

2. Outline CRU 2010 • SMA • Growth of Minimills • U.S./Global Demand for Scrap • Ferrous Scrap Trade – Equity and Distortions • Other Drivers • Is Enough Being Done? • What Does the U.S. Need to Do? • Conclusion

3. SMA CRU 2010 The Steel Manufacturers Association (SMA) • 34 North American companies: 29 U.S., 3 Canadian, and 2 Mexican • Operate 125 steel recycling plants in North America • Electric Arc Furnace (EAF) steelmakers using recycled steel • EAF steel producers accounted for nearly 2/3 of U.S. production in 2009 • SMA represents approximately 90 million of U.S. 120 million ton capacity (75%) • 128 Associate members - Suppliers of goods and services to the steel industry • Governance – i.e. vast majority

4. CRU 2010 Where SMA Member EAFs are located…

5. Minimill Growth CRU 2010 U.S. Capacity and Production Figures – 2000-2009 Source – U.S. Geological Survey – Iron & Steel Statistics and Information web page = http://minerals.usgs.gov/minerals/pubs/commodity/iron_&_steel/

6. Minimill Growth CRU 2010

7. Minimill Growth Global Steel Production by Process – 2009 BOFEAF World Total 70.6% 28.1% U.S. 36.0% 64.0% *Remaining 1.3% of world total by open hearth process

8. Global Steel Capacity Continues to Increase World Crude Steel Capacity 2000-2012 World Crude Steel Capacity CAGR 2,055 2,100 20 1,997 1,917 1,816 1,850 1,654 1,583 1,600 1,453 15 1,356 1,350 1,245 1,170 1,095 1,062 1,062 1,100 Current Average Growth Rate (CAGR) 10 Steel Capacity (million metric tonnes) 850 600 5 350 100 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010(e) 2011(e) 0 CRU 2010 2012(e) Source: Worldsteel

9. Scrap CRU 2010

10. Scrap CRU 2010 U.S. Steel Scrap Exports

11. Scrap CRU 2010 World Demand for Steel Scrap • -World demand for steel scrap is likely to continue to increase: • -Increased steel production in China, India, and Brazil • -Economic recovery • -But a large number of countries still impose restrictions on exports of scrap and other raw materials • -Steel scrap is subject to more export restrictions than any other raw material • -There is a significant problem with transparency because export restrictions change frequently, making supply even more problematic

12. Scrap CRU 2010 World Trade in Scrap • By the Numbers: • Although global electric arc furnace (EAF) production fell by 16% in 2009, ISSB estimates that world trade in steel scrap actually increased by 1%.

13. Scrap CRU 2010 World Trade in Scrap

14. Scrap CRU 2010 Exports and Imports • The world’s leading net exporters of scrap in 2009 were: • -United States (19.5 million MT) • -Japan (9.2 million MT) • -United Kingdom (5.8 million MT) • -Germany (3.4 million MT) • The world’s leading importers of scrap in 2009 were: • -Turkey (15.7 million MT) • -China (13.7 million MT) • -Korea (7.8 million MT) • -India (5.1 million MT)

15. Scrap CRU 2010 Countries Imposing Export Restrictions on Steel Scrap -China – 40% export tax (up from 15% in 2008) -Russia – 15% export tax -Ukraine -India – 15% export tax -Argentina -Azerbaijan -Egypt -Iran – reported 70% export tax -Kazakhstan -Saudi Arabia -Thailand -United Arab Emirates

16. Scrap CRU 2010 Forms of Export Restrictions -Export bans -Quotas -Export taxes -No VAT export rebates -Non-automatic (discretionary) licensing requirements -Other administrative barriers (such as port restrictions)

17. Scrap CRU 2010 Effects of Export Restrictions -Reduced international supply -Higher international prices -Lower prices on raw materials in countries with export restrictions -Subsidy to downstream industries in countries with export restrictions -Price volatility

18. CRU 2010 Impact of Export Restrictions

19. While China Restricts Exports of Scrap, U.S. Exports to China Have Surged

20. EAF Steelmaking is Energy Efficient Scrap – Energy/Environment

21. Scrap – Energy/Environment

22. Scrap CRU 2010 • -Restrictions on exports of steel scrap and raw materials for steelmaking: • -Give domestic producers in the exporting country an unfair competitive advantage • -Increase worldwide costs of production • -Violate WTO agreements, and are not justifiable under international trade law

23. Other Drivers CRU 2010 • New Congress • -Maybe less helpful on trade • -Gridlock, or center-driven policymaking? • Administration • -Increased oversight • China, China, China • -Currency impact

24. CRU 2010 Is Enough Being Done? Raw Materials No Barriers continue Lack of policy continues Energy No Currency manipulation; subsidies; not playing by the rules No China Distortions continue; who’s the protectionist? Trade No No long-term structural policy changes are being proposed in Washington for taxes, trade imbalance, and energy.

25. CRU 2010 What does the U.S. need to do? • Assume a Pro-Manufacturing Agenda • Business Tax Reform • Border Adjustable Taxes • Currency Adjustments • Energy Independence • Reasonable regulatory measures (Environment/Labor) • Climate for investments (Jobs, Jobs, Jobs) and Infrastructure • Solve the structural problems that caused the recession - Real Foundation • Bad loans and securities on bank balance sheets • Reduce huge trade deficits • Policy incrementalism is not sufficient

26. Conclusion CRU 2010 • We’re in a traffic jam, moving slightly forward, but don’t know other consequences • Don’t look to Washington for help. Pendulum moves slowly. • Reasons for optimism in steel • Scrap-based • Low cost on global basis • Relatively strong U.S. market and U.S. resiliency • Better U.S. company balance sheets • Impact of currency long-term