Thomas A. Danjczek President Steel Manufacturers Association March 29, 2013 Guangzhou, China

1. CISA: China Iron and Steel Association Metallurgical Council of CCPIT (MC-CCPIT) 11th International Steel Market and Trade Conference Thomas A. Danjczek President Steel Manufacturers Association March 29, 2013 Guangzhou, China Update 3-6-13

2. 11th International Steel Market and Trade Conference Outline • About the SMA • Set the Tone - Economy • Set the Tone - Steel • US Steel Imports • Expanding Future US Steel Production • Final Thoughts

3. 11th International Steel Market • and Trade Conference About the SMA SMA - Composed of 35 North American electric arc furnace (“EAF”) steel producing Member Companies, and 118 Associate Member steel industry suppliers - SMA Members account for approximately 75% of U.S. domestic steel capacity - Today, roughly two-thirds of North American steel production comes from the scrap-based EAF process, up from just 10% in the early 1970s Approximately 2/3 of U.S. Steel Production

4. 11th International Steel Market • and Trade Conference Set the Tone - Economy • The US “fiscal cliff“ poses the most immediate risk to the US economy • Pace of US growth in 2013 estimated at 2%, near stagnation • While US unemployment rate declined, still above pre- recession levels • Rising energy production and housing rebounding are bright spots (“race to gas”) • Capital spending is a downside risk • US trade deficit is unsustainable

5. 11th International Steel Market • and Trade Conference Total US Trade Deficit with China (in million US$) Million US $ Source: US Census Bureau 2012 US trade deficit with China was a record $315.1 billion, accounting for 43.3% of overall $727.9 billion US trade deficit. 2012 US steel imports from China were 1,505,751 metric tons, a 33.9% increase over 2011 levels, and a 92.8% increase over 2010 levels.

6. 11th International Steel Market • and Trade Conference Set the Tone - Economy UNSUSTAINABLE US GOOds Annual Deficit is the most significant barrierto U.S. economic recovery

7. 11th International Steel Market • and Trade Conference Set the Tone - Steel • Primary metal 4% growth YTD 2012 over 2011 in US • U.S. capacity utilization approx. 74.4% in 2012 • Y.T.D. capacity utilization approx.76.9% (w/reduced capacity) • Scrap price volatility (75% of minimill costs) Sources: census.gov, worldsteel.org

8. 11th International Steel Market • and Trade Conference 2012 Steel Shipments by Market Classification

9. 11th International Steel Market • and Trade Conference NAFTA Auto Production Source: Wards Automotive

10. 11th International Steel Market • and Trade Conference Construction Activity *Non-building structures (e.g., infrastructure) not included Source: McGraw-Hill (Dodge)

11. 11th International Steel Market • and Trade Conference Energy Production Source: Baker Hughes, U.S. Dept. of Energy

12. 11th International Steel Market • and Trade Conference Demand Forecast Source: AISI

13. 11th International Steel Market • and Trade Conference • US Steel Imports US Imports of Total Steel Products Up 17% Source: U.S. Department of Commerce (Census Bureau)

14. 11th International Steel Market • and Trade Conference • US Steel Imports Comparing 2012 to 2011 by product category: • Semi-finished imports increased 14.2% to 6,772,056 metric tons; • Flat product imports increased 16.4% to 9,550,032 metric tons; • Pipe and tube imports increased 24.4% to 7,710,529 metric tons; • Long product imports increased 14.6% to 5,191,504 metric tons; • and stainless imports increased 13.5% to 1,143,515 metric tons.

15. 11th International Steel Market • and Trade Conference • US Steel Imports Increase in Total Steel Imports is from Numerous Countries, Across the Globe +30% +27% +30% +74% +34% +84% +24% Source: U.S. Department of Commerce (Census Bureau)

16. 11th International Steel Market • and Trade Conference • US Steel Imports Surge in Steel Imports is Across Various Product Lines +25% +41% +37% +19% +49% Source: U.S. Department of Commerce (Census Bureau)

17. 11th International Steel Market • and Trade Conference US Steel Imports Factors in the Surge of Steel Imports • Weakened global economy • Asian market downturn, large overcapacity of steel • European recession • U.S. market still weak • Market interference by foreign governments: • Subsidies • Raw material export restrictions • Import restrictions on steel or steel containing products • Other interventions

18. 11th International Steel Market • and Trade Conference Expanding Future US Steel Production The United States is unique among major steel producing nations: • The US is a net importer of steel, yet domestic capacity is utilization only at appox 75% • The US is the world’s largest exporter of scrap • The US is a low cost steel producer

19. Expanding US Steel Production Comparative Advantages in US The United States: • Is self-sufficient in steelmaking raw materials, especially scrap (2011 – generated 84mmt of scrap, but consumed only 55mmt) (~ 75%of production costs) • Since 2002, imports 26.2% of steel consumption, while capacity utilization only appox 80% • Has relatively low energy prices • Has high productivity to offset wage rates • Has the world’s largest capital market

20. Expanding Future US Steel Production Conclusions • Need policies that encourage expanded domestic steel production to utilize domestic capacity • Foreign export restrictions on steel scrap have many negative consequences • Expanding US steel production through the conversion of scrap into steel would create high-paying jobs, increase GDP, reduce the trade deficit, and provide added tax revenues • The expansion must occur without massive government investments, subsidies, and interventions; but needs to be based on comparative economics and market forces • Significant amounts of imports should be replaced with domestically produced steel

21. 11th International Steel Market • and Trade Conference Final Thoughts • Volatile and fragile times continue • U.S. is in a traffic jam, moving slightly forward, but don’t know other consequences. Gridlock continues • Uncertainty will continue. • Increasing steel capacity without regard to market forces or comparative advantage is wrong • Reasons for optimismin steel in North America: • Favorable gains with reemerging manufacturing base, including benefits of shale gas • Scrap-based, 75% of cost – local supply • Low cost on global basis (energy is positive, labor less than 10%, others have higher transportation costs) • Relatively strong market and resiliency • Better & stronger company balance sheets