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The Age

The Age. OF. P. S. R. T. O. I. F. Presentation by: Karlis M. Kirsis Managing Partner World Steel Dynamics Inc. www.worldsteeldynamics.com. WORLD STEEL DYNAMICS. Volcanic Activity: The Steel Market. WORLD STEEL DYNAMICS. Death Spirals and Volcanoes

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The Age

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  1. The Age OF P S R T O I F Presentation by: Karlis M. Kirsis Managing Partner World Steel Dynamics Inc. www.worldsteeldynamics.com

  2. WORLDSTEELDYNAMICS Volcanic Activity: The Steel Market

  3. WORLDSTEELDYNAMICS Death Spirals and Volcanoes (HRB -- $ per tonne, Tier I mills, FOB the port) $450 Mar. 2006 $420 Jan 2006

  4. WORLDSTEELDYNAMICS HRB Pricing Troika: USA, China and World

  5. WORLDSTEELDYNAMICS Dollars-per-Euro drives World HRB Price

  6. WORLDSTEELDYNAMICS Age of Steelmakers’Metallics

  7. WORLDSTEELDYNAMICS Spread: USA Autobundle less USA #1 Heavy Melting

  8. WORLDSTEELDYNAMICS Return of the Steel Phoenix “Profitability”

  9. WORLDSTEELDYNAMICS China Dominates Steel Growth

  10. WORLDSTEELDYNAMICS Chinese Fixed Asset Investment Bubble

  11. WORLDSTEELDYNAMICS Global Steelmaking Metallics Requirements

  12. WORLDSTEELDYNAMICS China Region Metallics Requirement

  13. WORLDSTEELDYNAMICS Global Metallics Requirements excluding China

  14. WORLDSTEELDYNAMICS 2006 Outlook

  15. WORLDSTEELDYNAMICS • Global economic news appears favorable. Economic activity continues to expand notwithstanding oil prices in the mid-high $60s. • In China, the economy has shifted to an even faster growth rate in the past six months. • In the USA, the economy is strong, with signs that non-residential construction may rise 10% or more this year. • In Germany, business confidence is up sharply. • In Japan, confidence is also up and capital spending by manufacturers is rising. Big Picture

  16. WORLDSTEELDYNAMICS The Odds for Non-Chinese Mills • Steel shortage – 50% odds. • High operating rate – 45% odds. • Sizable oversupply outside of China – 5% odds.

  17. WORLDSTEELDYNAMICS The Odds for Chinese Mills • Steel shortage – 5% odds. • High operating rate – 35% odds. • Reduced operating rate in China – 60% odds.

  18. WORLDSTEELDYNAMICS USA – Sole Strong Region • The USA mills are benefiting from a favorable supply/demand balance reflecting lagging steel production, relatively low imports of both steel products and semi-finished steel and good underlying demand. • Based on the recent annualized steel production rate and the imports of semis, the USA mills at present have a shipment capability of only about 104 million net tons versus the shipment forecast requirement of 109+ million tons. • This shortfall of steel deliveries is why hot-rolled band in the USA spot market is priced at the high level of about $615 per metric tonne, FOB the steel mill.

  19. WORLDSTEELDYNAMICS USA Crude Steel Production Difficulties?

  20. WORLDSTEELDYNAMICS USA Steel Consumption/Shipment Outlook (million short tons)

  21. WORLDSTEELDYNAMICS HRB and Other Items: Price Forecast

  22. WORLDSTEELDYNAMICS Age of Profits • The profit performance of the steel’s sheet-producing group, will probably be better than that for the long-products group. • One reason is that the steel sheet segment of the industry has grown far more concentrated in recent years.

  23. WORLDSTEELDYNAMICS Improved Steel Cycle Portion of the Steel Cycle For World Spot Export Pricing Past 25 years Next 10 years Shake-out 21% 5% Bad times 25 25 Average times 25 30 Good times 12 30 Boom times 17 10

  24. WORLDSTEELDYNAMICS Steelbenchmarker.com • A global steel benchmark pricing system designed to provide a reliable set of benchmark prices that will become trusted by steel buyers and sellers the world over by the end of 2006. • Over the next few years, it will become the foundation for an extraordinary surge in the trading of financial instruments for the hedging of steel price risks. • Benchmark prices will be published for hot-rolled band, cold-rolled coil, standard plate and rebar in each of these regions: the USA, Western Europe, China and the world export market. Also: a USA shredded steel scrap price benchmark. • Register to provide pricing opinion data, and receive benchmark prices the moment they are published. • Go to www.steelbenchmarker.com.

  25. WORLDSTEELDYNAMICS Register Now Steel’s New Game : Bigger Bets – Bigger Jackpots SSS XXI – United States Co-sponsored by World Steel Dynamics and AMM June 19-21, 2006 Sheraton Towers New York New York City, USA www.worldsteeldynamics.com

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