Steel – A Year Later

Steel A Year LaterThomas A. Danjczek, PresidentSteel Manufacturers AssociationNovember 1, 2005Concrete Reinforcing Steel Institute

Fall Business Meeting - 2005

Steel A Year LaterSMAReview 2004 Presentation Highlights/Conclusions2005 World Steel Production/Operating Rate China Scrap, Ore, Steel, Gas Prices ConsolidationsIV.ConclusionCRSI Fall Business Meeting - 2005

CRSI Fall Business Meeting - 2005The Steel Manufacturers Association (SMA)39 North American companies:32 U.S., 4 Canadian, and 3 Mexican103 Associate members:Suppliers of goods and services to the steel industrySMA member companiesOperate 120 Steel plants in North AmericaEmploy about 40,000 peopleMinimill Electric Arc Furnace (EAF) producersProduce nearly 100% of structural, wire rod, rebar, minimill plate and hot rolled, and a high percentage of SBQ productsAlso represent several integrated steel producers and rerollers

CRSI Fall Business Meeting - 2005Production capabilitySMA represents over half of U.S. steel production (app. 70%)RecyclingSMA members are the largest recyclers in the U.S.Last year, the U.S. recycled over 70 million tons of ferrous scrapGrowth of SMA membersEfficiency and quality due to low costFlexible organizationsEAF growth surpassed 53% in 2004, and anticipated to be 60% by 2010

Concrete Reinforcing Steel InstituteFall Business Meeting, 2004SMA

ChangesAugust 2003Scrap ImpactWorld Steel Production

China, China, ChinaKey StatisticsSteel ProductionSMA MissionLessons LearnedCurrency

Other Government ImpactsExchange RatesValue of the DollarScrap Imports/ExportsUS Overhead CostsTEA 21 Lunacy

Steel Production CostsKey IssuesEnergy & Raw Material CostsAsset ValuesBankruptcy/Restarts

ConclusionWashingtons Impact on SteelLAST YEAR - 2004

Courtesy IMFSome things are the same

Technical Read on Crude Oil PricesCourtesy JP MorganSome things are worse

Concrete Reinforcing Steel InstituteFall Business Meeting, 2004ConclusionDont count on Washington for help! i.e. TEA 21

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

LAST YEAR - 2004

2005

WORLD CRUDE STEEL OPERATING RATE

World Crude SteelOperating Rate %Operating rates recovered from 76 percent in 2000, to a peak of 87 percent in 2004, and have moved moderately downward since late 2004.Source: Metal Strategies

World Raw Steel Production8 Months 2005 (000 metric tonnes)Source: IISIalthough total world steel production is increasing, Chinese production continues to increase, rest of the world production is flat, and North America production declines...

U.S. Raw Steel Capability Utilization2000 August 27, 2005US steel makers reduced production (and capability utilization) to support inventory drawdown, and undertook maintenance in early 2005 to be prepared for stronger demand in 2H 2005

CRSI Fall Business Meeting - 2005Chinas ImpactAfter 4 Trips in a YearKey Questions:- When will Chinese steel production significantly exceed its own domestic consumption I.e. 50/60 MMT?

- Will the Chinese government shut down inefficient, excess capacity? (Has not done so with polluting facilities despite strong policy)

- How can North American Steel Industry compete against Chinese government - - IT CANT!

Chart1

8.27658.2765

8.27658.2765

8.27658.2765

8.27658.2765

8.11118.1111

8.08676678.1097

8.06250639998.1099

8.03831888078.1128

8.01420392418.108

7.99016131238.1056

7.96619082838.1046

7.94229225598.1032

7.91846537918.1051

7.8947099838.1027

7.8710258538.1037

7.84741277558.109

7.82387053718.107

7.80039892558.1062

7.77699772878.1002

7.75366673568.098

7.73040573538.0971

7.70721451818.1002

7.68409287468.0997

7.6610405968.1007

7.63805747428.1047

7.61514330178.1056

7.59229787188.1012

7.56952097828.1005

7.54681241538.1002

7.5241719788.0965

7.50159946218.0954

7.47909466378.0973

7.45665737978.0998

7.43428740768.0949

7.41198454548.0935

7.38974859178.0913

7.3675793468.0925

7.34547660798.0945

7.32344017818.0956

Yuan Revalued

Hypothetical Yuan per US$*

Actual Yuan per US$

Yuan per U.S. Dollar

Chart 1: U.S. Dollar Exchange Rate for the YuanDaily, July 18th, 2005 - Present

Sheet

Table 1: 2005 Foreign Exchange Rates for the Chinese Yuan

(Rates in Currency Units per Dollar)

August 15 - 19:

CountryMonetaryUnitAug. 15Aug. 16Aug. 17Aug. 18Aug. 19WeeklyAverage% Change vs.PreviousWeek Avg.

ChinaYuan8.09718.10028.09978.10078.10478.1005-0.0%

August 22 - 26:

CountryMonetaryUnitAug. 22Aug. 23Aug. 24Aug. 25Aug. 26WeeklyAverage% Change vs.PreviousWeek Avg.

ChinaYuan8.10568.10128.10058.10028.09658.10080.0%

August 29 - September 2:

CountryMonetaryUnitAug. 29Aug. 30Aug. 31Sep. 1Sep. 2WeeklyAverage% Change vs.PreviousWeek Avg.

ChinaYuan8.09548.09738.09988.09498.09358.0962-0.1%

September 5 - September 9:

CountryMonetaryUnitSep. 5*Sep. 6Sep. 7Sep. 8Sep. 9WeeklyAverage% Change vs.PreviousWeek Avg.

ChinaYuan-8.09138.09258.09458.09568.0935-0.0%

* - Holiday

Source: Federal Reserve Board, Release H.10

* Hypothetical value of the Yuan derived by assuming full 0.3% maximum daily appreciation against the US$, as announced by the People's Bank of China on July 21, 2005.

Table 2: 2005 Foreign Exchange Rates for Selected Asian Currencies

(Rates in Currency Units per Dollar)

August 15 - 19:

CountryMonetaryUnitAug. 15Aug. 16Aug. 17Aug. 18Aug. 19WeeklyAverage% Change vs.PreviousWeek Avg.

ChinaYuan8.09718.10028.09978.10078.10478.1005-0.0%

JapanYen109.4109.37109.63110.54110.68109.92-0.8%

MalaysiaRinggit3.7553.7633.7673.76853.76733.76420.4%

South KoreaWon10151016.41017.11022.11028.151019.80.6%

August 22 - 26:

CountryMonetaryUnitAug. 22Aug. 23Aug. 24Aug. 25Aug. 26WeeklyAverage% Change vs.PreviousWeek Avg.

ChinaYuan8.10568.10128.10058.10028.09658.10080.0%

JapanYen109.75109.83110.35109.9109.85109.940.0%

MalaysiaRinggit3.7663.76983.76953.76953.76953.76890.1%

South KoreaWon1021.1510281029.151026.41028.71026.70.7%

August 29 - September 2:

CountryMonetaryUnitAug. 29Aug. 30Aug. 31Sep. 1Sep. 2WeeklyAverage% Change vs.PreviousWeek Avg.

ChinaYuan8.09548.09738.09988.09498.09358.0962-0.1%

JapanYen110.53111.49110.84110.16109.66110.540.5%

MalaysiaRinggit3.76833.76983.76983.77133.7643.7686-0.0%

South KoreaWon10301039.210391030.751024.751032.70.6%

September 5 - September 9:

CountryMonetaryUnitSep. 5*Sep. 6Sep. 7Sep. 8Sep. 9WeeklyAverage% Change vs.PreviousWeek Avg.

ChinaYuan-8.09138.09258.09458.09568.0935-0.0%

JapanYen-109.67110.06110.49109.69109.98-0.5%

MalaysiaRinggit-3.76453.76453.7693.76953.7669-0.0%

South KoreaWon-1024.41026.41026.81024.31025.5-0.7%

* - Holiday

Source: Federal Reserve Board, Release H.10

&CPrepared by Georgetown Economic Services

Sheet

8.27658.2765

8.27658.2765

8.27658.2765

8.27658.2765

8.11118.1111

8.08676678.1097

8.06250639998.1099

8.03831888078.1128

8.01420392418.108

7.99016131238.1056

7.96619082838.1046

7.94229225598.1032

7.91846537918.1051

7.8947099838.1027

7.8710258538.1037

7.84741277558.109

7.82387053718.107

7.80039892558.1062

7.77699772878.1002

7.75366673568.098

7.73040573538.0971

7.70721451818.1002

7.68409287468.0997

7.6610405968.1007

7.63805747428.1047

7.61514330178.1056

7.59229787188.1012

7.56952097828.1005

7.54681241538.1002

7.5241719788.0965

7.50159946218.0954

7.47909466378.0973

7.45665737978.0998

7.43428740768.0949

7.41198454548.0935

7.38974859178.0913

7.3675793468.0925

7.34547660798.0945

7.32344017818.0956

Yuan Revalued

Hypothetical Yuan per US$*

Actual Yuan per US$

Yuan per U.S. Dollar

Chart 1: U.S. Dollar Exchange Rate for the YuanDaily, July 18th, 2005 - Present

Raw - Open as Fixed Width

100100100100

100101.1915427343100101.0653753027

100101.6126142268100101.0653753027

10098.9697186884100100.2421307506

98.001570712399.426626052799.539473684298.6440677966

97.984655349599.973123096298.960526315899.1767554479

97.9870718299100.60920981998.710526315899.7094430993

98.0221107956100.60920981998.697368421199.6610169492

97.9641152661100.645045690798.671052631699.5351089588

97.9351175014100.564414979498.697368421199.4188861985

97.9230350994100.447948396398.678947368499.2251815981

97.906119736699.695395090598.578947368498.7409200969

97.929076300499.489338828298.592105263298.401937046

97.900078535699.596846443398.592105263298.1598062954

97.9121609376100.421071492698.7598.401937046

97.9761976681100.223974198298.684210526398.401937046

97.9520328641100.403153556798.644736842198.2082324455

97.942366942599.148898046998.697.9757869249

97.869872530798.476975452498.623684210598.1210653753

97.843291246398.145493639198.623684210598.2179176755

97.832417084598.011109120298.815789473798.3050847458

97.869872530797.984232216499.026315789598.4406779661

97.863831329798.217165382599.131578947498.5084745763

97.875913731699.032431463999.171052631698.9927360775

97.924243339699.157857014999.139473684299.5786924939

97.935117501498.324672997799.105263157998.9007263923

97.881954932698.396344741199.205263157999.5641646489

97.873497251398.862211073399.197368421199.6755447942

97.869872530798.459057516699.197368421199.4092009685

97.825167643398.414262676999.197368421199.6319612591

97.811877001199.02347249699.165789473799.7578692494

97.834833564999.88353341799.2052631579100.6489104116

97.865039569999.301200501799.2052631579100.6295399516

97.805835800298.691990682799.244736842199.8305084746

97.788920437498.244042286399.052631578999.2493946731

97.76233915398.253001254399.065789473799.215496368

97.776838035498.602401003499.065789473799.4092009685

97.801002839498.987636624399.184210526399.4479418886

97.814293481598.270919190199.197368421199.205811138

Yuan Revalued

China

Japan

Malaysia

South Korea

7/18/2005 = 100

Chart 2: U.S. Dollar Exchange Rates for Various Asian CurrenciesDaily, July 18th, 2005 - Present

MONETARY

COUNTRYUNITJul. 18Jul. 19Jul. 20Jul. 21Jul. 22Jul. 25Jul. 26Jul. 27Jul. 28Jul. 29Aug. 1Aug. 2Aug. 3Aug. 4Aug. 5Aug. 8Aug. 9Aug. 10Aug. 11Aug. 12Aug. 15Aug. 16Aug. 17Aug. 18Aug. 19Aug. 22Aug. 23Aug. 24Aug. 25Aug. 26Aug. 29Aug. 30Aug. 31Sep. 1Sep. 2Sep. 6Sep. 7Sep. 8Sep. 9

*AUSTRALIADOLLAR0.75410.74920.7540.7630.76610.76330.75850.75560.75710.75940.76180.76490.77180.77390.76710.76520.76010.7640.77370.77230.76830.76880.76230.75370.75050.75480.75510.75520.760.75840.75220.74690.75140.76090.76490.76680.76840.77120.7731

BRAZILREAL2.32652.3422.35752.352.37732.4192.43652.4432.4142.38552.3772.34972.3092.29652.30052.30952.3122.27452.33052.37352.3422.3452.3512.3692.452.39712.4022.42052.41862.422.41062.38842.3542.36452.34052.32812.32852.31532.3209

CANADADOLLAR1.21541.21861.22181.21771.2181.21941.22911.23411.23451.22571.21361.21221.21281.21191.21851.21321.2141.21131.20251.19461.19681.1981.2071.21781.21521.2041.19811.19561.18881.19491.19651.19191.18931.18551.1881.18671.18551.18221.1749

CHINA, P.R.YUAN8.27658.27658.27658.27658.11118.10978.10998.11288.1088.10568.10468.10328.10518.10278.10378.1098.1078.10628.10028.0988.09718.10028.09978.10078.10478.10568.10128.10058.10028.09658.09548.09738.09988.09498.09358.09138.09258.09458.0956

DENMARKKRONE6.17526.21476.19246.16316.17566.18856.21266.19316.15426.14966.11596.10996.04766.02536.05296.03416.04326.04295.99966.0026.03466.04486.06836.12296.13726.09316.10576.09266.05696.05126.09066.11096.04835.99185.94625.97275.99436.01125.9941

*EMU MEMBERSEURO1.20771.20011.20461.21131.20791.20541.20071.20481.21211.21291.21951.22091.23371.23831.23271.23611.23471.23451.24341.24281.23621.23421.2291.21781.21471.22351.22131.22391.23111.23241.22481.22041.2331.24471.25381.24831.24391.241.2433

HONG KONGDOLLAR7.7767.7777.77777.76857.77337.77327.77647.77737.77437.77447.77227.77227.77127.77297.77117.77097.77137.76937.76877.76917.76847.77147.77137.76927.77117.7717.77347.77337.77097.76887.76917.7717.77187.76937.7677.76737.76717.76597.7645

INDIARUPEE43.4743.4843.4643.0543.443.4543.4143.3443.3243.443.3743.4143.3643.4343.4243.4443.4643.5443.543.4843.4543.4543.4643.543.5143.5843.5743.6943.643.643.8643.974443.9443.8743.8243.7943.7843.76

JAPANYEN111.62112.95113.42110.47110.98111.59112.3112.3112.34112.25112.12111.28111.05111.17112.09111.87112.07110.67109.92109.55109.4109.37109.63110.54110.68109.75109.83110.35109.9109.85110.53111.49110.84110.16109.66109.67110.06110.49109.69

MALAYSIARINGGIT3.83.83.83.83.78253.76053.7513.75053.74953.75053.74983.7463.74653.74653.75253.753.74853.74683.74773.74773.7553.7633.7673.76853.76733.7663.76983.76953.76953.76953.76833.76983.76983.77133.7643.76453.76453.7693.7695

MEXICOPESO10.58610.6210.65710.59110.63110.67110.69610.63810.61610.610.59810.59810.59510.57810.59610.60510.63810.59210.58510.63510.59710.57510.60810.65210.75810.72810.77710.88210.80610.85810.89510.83710.79410.72810.6810.69110.71810.71110.705

*NEW ZEALANDDOLLAR0.67850.6740.67430.68450.6870.68380.68290.68050.6830.68340.68460.68780.69150.69240.68950.69320.69150.69410.70520.70770.7050.7040.70290.69540.69310.69690.69730.69780.69720.69720.69360.68790.69320.70230.70540.70720.70570.70530.707

NORWAYKRONE6.61296.67386.61586.57066.58316.5636.58166.57426.52556.47856.43226.42776.35966.34776.4136.4046.40436.39156.33696.35686.43356.4436.44276.52396.57316.51946.5316.50456.446.43976.46466.48246.37256.2896.21256.26526.26156.28896.2674

SINGAPOREDOLLAR1.68481.6911.6891.65351.65841.66181.66821.66421.66511.6611.66021.65451.65111.6521.65421.65321.65381.64621.64791.6511.661.65621.65751.66541.67121.66721.6681.66971.67081.67321.68061.6861.6831.67711.67471.67581.67811.67781.6738

SOUTH AFRICARAND6.6656.7156.67556.5836.6356.64156.6916.63856.60856.566.52256.5256.4416.44886.4556.456.47256.4026.34356.356.4256.4276.46256.536.55256.486.56.4866.46256.4556.45756.52856.46.31256.2556.3256.3456.32756.295

SOUTH KOREAWON1032.51043.51043.510351018.510241029.510291027.71026.51024.51019.510161013.51016101610141011.61013.11014.110151016.41017.11022.11028.151021.1510281029.151026.41028.710301039.210391030.751024.751024.41026.41026.81024.3

SRI LANKARUPEE100.31100.2100.4100.33100.35100.62100.73100.68100.62100.67100.36100.45100.51100.55100.4100.66100.47100.64100.77100.79100.85100.86100.9100.87100.7100.83100.71100.8100.7100.8100.94101.22101.2101.22101.35101.3101.28101.42101.51

SWEDENKRONA7.78297.84377.84617.8077.81877.8037.86187.83717.75267.76147.70587.67487.60737.53547.57167.5577.5677.56377.47627.48797.51657.54857.59357.65487.71217.65027.64757.62517.58067.57577.62417.65127.55997.48697.39367.4487.48597.51637.4954

SWITZERLANDFRANC1.29161.30351.29711.28871.29511.29651.30071.29861.2881.2871.2781.27531.26161.25841.26631.26071.26181.26081.24871.2491.25531.25731.25981.27051.27561.26921.27221.26841.25561.25411.26421.27031.25461.241.22871.23661.23991.24421.2413

TAIWANDOLLAR31.873231.8931.9431.6131.7231.9431.9131.8531.9231.931.8231.8431.8531.7731.8131.9631.8831.931.8831.9531.9832.0532.1932.1532.132.1632.2332.2532.232.4432.7232.7132.7132.5232.5432.632.7432.7

THAILANDBAHT41.7241.9542.1241.3241.3641.3441.5941.6441.7841.6541.5541.2741.2141.1241.1641.1541.1440.8640.8240.8640.9741.1341.2541.3241.244140.9541.141.064141.2641.3641.2541.0541.0941.1241.0240.9640.95

*UNITED KINGDOMPOUND1.75231.73641.73031.74711.74131.74551.74151.74381.75471.75931.76951.77281.78081.77971.77481.78631.78441.79221.80711.81481.80881.80961.80761.79491.79331.80221.79961.79651.80451.80661.80061.7841.80121.82791.84031.8421.83941.83881.84

VENEZUELABOLIVAR2144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.6

GRAPH 1

Hypothetical Yuan per US$*8.27658.27658.27658.27658.11118.08676678.06250639998.03831888078.01420392417.99016131237.96619082837.94229225597.91846537917.8947099837.8710258537.84741277557.82387053717.80039892557.77699772877.75366673567.73040573537.70721451817.68409287467.6610405967.63805747427.61514330177.59229787187.56952097827.54681241537.5241719787.50159946217.47909466377.45665737977.43428740767.41198454547.38974859177.3675793467.34547660797.3234401781

Actual Yuan per US$

GRAPH 2

China10010010010098.001570712397.984655349597.987071829998.022110795697.964115266197.935117501497.923035099497.906119736697.929076300497.900078535697.912160937697.976197668197.952032864197.942366942597.869872530797.843291246397.832417084597.869872530797.863831329797.875913731697.924243339697.935117501497.881954932697.873497251397.869872530797.825167643397.811877001197.834833564997.865039569997.805835800297.788920437497.76233915397.776838035497.801002839497.8142934815

Japan100101.1915427343101.612614226898.969718688499.426626052799.9731230962100.609209819100.609209819100.6450456907100.5644149794100.447948396399.695395090599.489338828299.5968464433100.4210714926100.2239741982100.403153556799.148898046998.476975452498.145493639198.011109120297.984232216498.217165382599.032431463999.157857014998.324672997798.396344741198.862211073398.459057516698.414262676999.02347249699.88353341799.301200501798.691990682798.244042286398.253001254398.602401003498.987636624398.2709191901

Malaysia10010010010099.539473684298.960526315898.710526315898.697368421198.671052631698.697368421198.678947368498.578947368498.592105263298.592105263298.7598.684210526398.644736842198.698.623684210598.623684210598.815789473799.026315789599.131578947499.171052631699.139473684299.105263157999.205263157999.197368421199.197368421199.197368421199.165789473799.205263157999.205263157999.244736842199.052631578999.065789473799.065789473799.184210526399.1973684211

Singapore100100.3679962013100.249287749398.142212725598.43304843398.634852801599.014719848198.77730294498.830721747498.587369420798.539886039998.201566951697.999762583198.053181386598.183760683898.124406457798.160018993497.708926875697.809829059897.993827160598.528015194798.302469135898.379629629698.848528015299.192782526198.95536562299.002849002899.103751187199.169040835799.311490978299.7507122507100.071225071299.893162393299.542972459699.400522317299.465811965899.602326685799.584520417999.3471035138

South Korea100101.0653753027101.0653753027100.242130750698.644067796699.176755447999.709443099399.661016949299.535108958899.418886198599.225181598198.740920096998.40193704698.159806295498.40193704698.40193704698.208232445597.975786924998.121065375398.217917675598.305084745898.440677966198.508474576398.992736077599.578692493998.900726392399.564164648999.675544794299.409200968599.631961259199.7578692494100.6489104116100.629539951699.830508474699.249394673199.21549636899.409200968599.447941888699.205811138

Chart2

100100100100

100101.1915427343100101.0653753027

100101.6126142268100101.0653753027

10098.9697186884100100.2421307506

98.001570712399.426626052799.539473684298.6440677966

97.984655349599.973123096298.960526315899.1767554479

97.9870718299100.60920981998.710526315899.7094430993

98.0221107956100.60920981998.697368421199.6610169492

97.9641152661100.645045690798.671052631699.5351089588

97.9351175014100.564414979498.697368421199.4188861985

97.9230350994100.447948396398.678947368499.2251815981

97.906119736699.695395090598.578947368498.7409200969

97.929076300499.489338828298.592105263298.401937046

97.900078535699.596846443398.592105263298.1598062954

97.9121609376100.421071492698.7598.401937046

97.9761976681100.223974198298.684210526398.401937046

97.9520328641100.403153556798.644736842198.2082324455

97.942366942599.148898046998.697.9757869249

97.869872530798.476975452498.623684210598.1210653753

97.843291246398.145493639198.623684210598.2179176755

97.832417084598.011109120298.815789473798.3050847458

97.869872530797.984232216499.026315789598.4406779661

97.863831329798.217165382599.131578947498.5084745763

97.875913731699.032431463999.171052631698.9927360775

97.924243339699.157857014999.139473684299.5786924939

97.935117501498.324672997799.105263157998.9007263923

97.881954932698.396344741199.205263157999.5641646489

97.873497251398.862211073399.197368421199.6755447942

97.869872530798.459057516699.197368421199.4092009685

97.825167643398.414262676999.197368421199.6319612591

97.811877001199.02347249699.165789473799.7578692494

97.834833564999.88353341799.2052631579100.6489104116

97.865039569999.301200501799.2052631579100.6295399516

97.805835800298.691990682799.244736842199.8305084746

97.788920437498.244042286399.052631578999.2493946731

97.76233915398.253001254399.065789473799.215496368

97.776838035498.602401003499.065789473799.4092009685

97.801002839498.987636624399.184210526399.4479418886

97.814293481598.270919190199.197368421199.205811138

Yuan Revalued

China

Japan

Malaysia

South Korea

7/18/2005 = 100

Chart 2: U.S. Dollar Exchange Rates for Various Asian CurrenciesDaily, July 18th, 2005 - Present

Sheet

Table 1: 2005 Foreign Exchange Rates for the Chinese Yuan

(Rates in Currency Units per Dollar)

August 15 - 19:

CountryMonetaryUnitAug. 15Aug. 16Aug. 17Aug. 18Aug. 19WeeklyAverage% Change vs.PreviousWeek Avg.

ChinaYuan8.09718.10028.09978.10078.10478.1005-0.0%

August 22 - 26:

CountryMonetaryUnitAug. 22Aug. 23Aug. 24Aug. 25Aug. 26WeeklyAverage% Change vs.PreviousWeek Avg.

ChinaYuan8.10568.10128.10058.10028.09658.10080.0%

August 29 - September 2:

CountryMonetaryUnitAug. 29Aug. 30Aug. 31Sep. 1Sep. 2WeeklyAverage% Change vs.PreviousWeek Avg.

ChinaYuan8.09548.09738.09988.09498.09358.0962-0.1%

September 5 - September 9:

CountryMonetaryUnitSep. 5*Sep. 6Sep. 7Sep. 8Sep. 9WeeklyAverage% Change vs.PreviousWeek Avg.

ChinaYuan-8.09138.09258.09458.09568.0935-0.0%

* - Holiday

Source: Federal Reserve Board, Release H.10

* Hypothetical value of the Yuan derived by assuming full 0.3% maximum daily appreciation against the US$, as announced by the People's Bank of China on July 21, 2005.

Table 2: 2005 Foreign Exchange Rates for Selected Asian Currencies

(Rates in Currency Units per Dollar)

August 15 - 19:

CountryMonetaryUnitAug. 15Aug. 16Aug. 17Aug. 18Aug. 19WeeklyAverage% Change vs.PreviousWeek Avg.

ChinaYuan8.09718.10028.09978.10078.10478.1005-0.0%

JapanYen109.4109.37109.63110.54110.68109.92-0.8%

MalaysiaRinggit3.7553.7633.7673.76853.76733.76420.4%

South KoreaWon10151016.41017.11022.11028.151019.80.6%

August 22 - 26:

CountryMonetaryUnitAug. 22Aug. 23Aug. 24Aug. 25Aug. 26WeeklyAverage% Change vs.PreviousWeek Avg.

ChinaYuan8.10568.10128.10058.10028.09658.10080.0%

JapanYen109.75109.83110.35109.9109.85109.940.0%

MalaysiaRinggit3.7663.76983.76953.76953.76953.76890.1%

South KoreaWon1021.1510281029.151026.41028.71026.70.7%

August 29 - September 2:

CountryMonetaryUnitAug. 29Aug. 30Aug. 31Sep. 1Sep. 2WeeklyAverage% Change vs.PreviousWeek Avg.

ChinaYuan8.09548.09738.09988.09498.09358.0962-0.1%

JapanYen110.53111.49110.84110.16109.66110.540.5%

MalaysiaRinggit3.76833.76983.76983.77133.7643.7686-0.0%

South KoreaWon10301039.210391030.751024.751032.70.6%

September 5 - September 9:

CountryMonetaryUnitSep. 5*Sep. 6Sep. 7Sep. 8Sep. 9WeeklyAverage% Change vs.PreviousWeek Avg.

ChinaYuan-8.09138.09258.09458.09568.0935-0.0%

JapanYen-109.67110.06110.49109.69109.98-0.5%

MalaysiaRinggit-3.76453.76453.7693.76953.7669-0.0%

South KoreaWon-1024.41026.41026.81024.31025.5-0.7%

* - Holiday

Source: Federal Reserve Board, Release H.10

&CPrepared by Georgetown Economic Services

Sheet

8.27658.2765

8.27658.2765

8.27658.2765

8.27658.2765

8.11118.1111

8.08676678.1097

8.06250639998.1099

8.03831888078.1128

8.01420392418.108

7.99016131238.1056

7.96619082838.1046

7.94229225598.1032

7.91846537918.1051

7.8947099838.1027

7.8710258538.1037

7.84741277558.109

7.82387053718.107

7.80039892558.1062

7.77699772878.1002

7.75366673568.098

7.73040573538.0971

7.70721451818.1002

7.68409287468.0997

7.6610405968.1007

7.63805747428.1047

7.61514330178.1056

7.59229787188.1012

7.56952097828.1005

7.54681241538.1002

7.5241719788.0965

7.50159946218.0954

7.47909466378.0973

7.45665737978.0998

7.43428740768.0949

7.41198454548.0935

7.38974859178.0913

7.3675793468.0925

7.34547660798.0945

7.32344017818.0956

Yuan Revalued

Hypothetical Yuan per US$*

Actual Yuan per US$

Yuan per U.S. Dollar

Chart 1: U.S. Dollar Exchange Rate for the YuanDaily, July 18th, 2005 - Present

Raw - Open as Fixed Width

100100100100

100101.1915427343100101.0653753027

100101.6126142268100101.0653753027

10098.9697186884100100.2421307506

98.001570712399.426626052799.539473684298.6440677966

97.984655349599.973123096298.960526315899.1767554479

97.9870718299100.60920981998.710526315899.7094430993

98.0221107956100.60920981998.697368421199.6610169492

97.9641152661100.645045690798.671052631699.5351089588

97.9351175014100.564414979498.697368421199.4188861985

97.9230350994100.447948396398.678947368499.2251815981

97.906119736699.695395090598.578947368498.7409200969

97.929076300499.489338828298.592105263298.401937046

97.900078535699.596846443398.592105263298.1598062954

97.9121609376100.421071492698.7598.401937046

97.9761976681100.223974198298.684210526398.401937046

97.9520328641100.403153556798.644736842198.2082324455

97.942366942599.148898046998.697.9757869249

97.869872530798.476975452498.623684210598.1210653753

97.843291246398.145493639198.623684210598.2179176755

97.832417084598.011109120298.815789473798.3050847458

97.869872530797.984232216499.026315789598.4406779661

97.863831329798.217165382599.131578947498.5084745763

97.875913731699.032431463999.171052631698.9927360775

97.924243339699.157857014999.139473684299.5786924939

97.935117501498.324672997799.105263157998.9007263923

97.881954932698.396344741199.205263157999.5641646489

97.873497251398.862211073399.197368421199.6755447942

97.869872530798.459057516699.197368421199.4092009685

97.825167643398.414262676999.197368421199.6319612591

97.811877001199.02347249699.165789473799.7578692494

97.834833564999.88353341799.2052631579100.6489104116

97.865039569999.301200501799.2052631579100.6295399516

97.805835800298.691990682799.244736842199.8305084746

97.788920437498.244042286399.052631578999.2493946731

97.76233915398.253001254399.065789473799.215496368

97.776838035498.602401003499.065789473799.4092009685

97.801002839498.987636624399.184210526399.4479418886

97.814293481598.270919190199.197368421199.205811138

Yuan Revalued

China

Japan

Malaysia

South Korea

7/18/2005 = 100

Chart 2: U.S. Dollar Exchange Rates for Various Asian CurrenciesDaily, July 18th, 2005 - Present

MONETARY

COUNTRYUNITJul. 18Jul. 19Jul. 20Jul. 21Jul. 22Jul. 25Jul. 26Jul. 27Jul. 28Jul. 29Aug. 1Aug. 2Aug. 3Aug. 4Aug. 5Aug. 8Aug. 9Aug. 10Aug. 11Aug. 12Aug. 15Aug. 16Aug. 17Aug. 18Aug. 19Aug. 22Aug. 23Aug. 24Aug. 25Aug. 26Aug. 29Aug. 30Aug. 31Sep. 1Sep. 2Sep. 6Sep. 7Sep. 8Sep. 9

*AUSTRALIADOLLAR0.75410.74920.7540.7630.76610.76330.75850.75560.75710.75940.76180.76490.77180.77390.76710.76520.76010.7640.77370.77230.76830.76880.76230.75370.75050.75480.75510.75520.760.75840.75220.74690.75140.76090.76490.76680.76840.77120.7731

BRAZILREAL2.32652.3422.35752.352.37732.4192.43652.4432.4142.38552.3772.34972.3092.29652.30052.30952.3122.27452.33052.37352.3422.3452.3512.3692.452.39712.4022.42052.41862.422.41062.38842.3542.36452.34052.32812.32852.31532.3209

CANADADOLLAR1.21541.21861.22181.21771.2181.21941.22911.23411.23451.22571.21361.21221.21281.21191.21851.21321.2141.21131.20251.19461.19681.1981.2071.21781.21521.2041.19811.19561.18881.19491.19651.19191.18931.18551.1881.18671.18551.18221.1749

CHINA, P.R.YUAN8.27658.27658.27658.27658.11118.10978.10998.11288.1088.10568.10468.10328.10518.10278.10378.1098.1078.10628.10028.0988.09718.10028.09978.10078.10478.10568.10128.10058.10028.09658.09548.09738.09988.09498.09358.09138.09258.09458.0956

DENMARKKRONE6.17526.21476.19246.16316.17566.18856.21266.19316.15426.14966.11596.10996.04766.02536.05296.03416.04326.04295.99966.0026.03466.04486.06836.12296.13726.09316.10576.09266.05696.05126.09066.11096.04835.99185.94625.97275.99436.01125.9941

*EMU MEMBERSEURO1.20771.20011.20461.21131.20791.20541.20071.20481.21211.21291.21951.22091.23371.23831.23271.23611.23471.23451.24341.24281.23621.23421.2291.21781.21471.22351.22131.22391.23111.23241.22481.22041.2331.24471.25381.24831.24391.241.2433

HONG KONGDOLLAR7.7767.7777.77777.76857.77337.77327.77647.77737.77437.77447.77227.77227.77127.77297.77117.77097.77137.76937.76877.76917.76847.77147.77137.76927.77117.7717.77347.77337.77097.76887.76917.7717.77187.76937.7677.76737.76717.76597.7645

INDIARUPEE43.4743.4843.4643.0543.443.4543.4143.3443.3243.443.3743.4143.3643.4343.4243.4443.4643.5443.543.4843.4543.4543.4643.543.5143.5843.5743.6943.643.643.8643.974443.9443.8743.8243.7943.7843.76

JAPANYEN111.62112.95113.42110.47110.98111.59112.3112.3112.34112.25112.12111.28111.05111.17112.09111.87112.07110.67109.92109.55109.4109.37109.63110.54110.68109.75109.83110.35109.9109.85110.53111.49110.84110.16109.66109.67110.06110.49109.69

MALAYSIARINGGIT3.83.83.83.83.78253.76053.7513.75053.74953.75053.74983.7463.74653.74653.75253.753.74853.74683.74773.74773.7553.7633.7673.76853.76733.7663.76983.76953.76953.76953.76833.76983.76983.77133.7643.76453.76453.7693.7695

MEXICOPESO10.58610.6210.65710.59110.63110.67110.69610.63810.61610.610.59810.59810.59510.57810.59610.60510.63810.59210.58510.63510.59710.57510.60810.65210.75810.72810.77710.88210.80610.85810.89510.83710.79410.72810.6810.69110.71810.71110.705

*NEW ZEALANDDOLLAR0.67850.6740.67430.68450.6870.68380.68290.68050.6830.68340.68460.68780.69150.69240.68950.69320.69150.69410.70520.70770.7050.7040.70290.69540.69310.69690.69730.69780.69720.69720.69360.68790.69320.70230.70540.70720.70570.70530.707

NORWAYKRONE6.61296.67386.61586.57066.58316.5636.58166.57426.52556.47856.43226.42776.35966.34776.4136.4046.40436.39156.33696.35686.43356.4436.44276.52396.57316.51946.5316.50456.446.43976.46466.48246.37256.2896.21256.26526.26156.28896.2674

SINGAPOREDOLLAR1.68481.6911.6891.65351.65841.66181.66821.66421.66511.6611.66021.65451.65111.6521.65421.65321.65381.64621.64791.6511.661.65621.65751.66541.67121.66721.6681.66971.67081.67321.68061.6861.6831.67711.67471.67581.67811.67781.6738

SOUTH AFRICARAND6.6656.7156.67556.5836.6356.64156.6916.63856.60856.566.52256.5256.4416.44886.4556.456.47256.4026.34356.356.4256.4276.46256.536.55256.486.56.4866.46256.4556.45756.52856.46.31256.2556.3256.3456.32756.295

SOUTH KOREAWON1032.51043.51043.510351018.510241029.510291027.71026.51024.51019.510161013.51016101610141011.61013.11014.110151016.41017.11022.11028.151021.1510281029.151026.41028.710301039.210391030.751024.751024.41026.41026.81024.3

SRI LANKARUPEE100.31100.2100.4100.33100.35100.62100.73100.68100.62100.67100.36100.45100.51100.55100.4100.66100.47100.64100.77100.79100.85100.86100.9100.87100.7100.83100.71100.8100.7100.8100.94101.22101.2101.22101.35101.3101.28101.42101.51

SWEDENKRONA7.78297.84377.84617.8077.81877.8037.86187.83717.75267.76147.70587.67487.60737.53547.57167.5577.5677.56377.47627.48797.51657.54857.59357.65487.71217.65027.64757.62517.58067.57577.62417.65127.55997.48697.39367.4487.48597.51637.4954

SWITZERLANDFRANC1.29161.30351.29711.28871.29511.29651.30071.29861.2881.2871.2781.27531.26161.25841.26631.26071.26181.26081.24871.2491.25531.25731.25981.27051.27561.26921.27221.26841.25561.25411.26421.27031.25461.241.22871.23661.23991.24421.2413

TAIWANDOLLAR31.873231.8931.9431.6131.7231.9431.9131.8531.9231.931.8231.8431.8531.7731.8131.9631.8831.931.8831.9531.9832.0532.1932.1532.132.1632.2332.2532.232.4432.7232.7132.7132.5232.5432.632.7432.7

THAILANDBAHT41.7241.9542.1241.3241.3641.3441.5941.6441.7841.6541.5541.2741.2141.1241.1641.1541.1440.8640.8240.8640.9741.1341.2541.3241.244140.9541.141.064141.2641.3641.2541.0541.0941.1241.0240.9640.95

*UNITED KINGDOMPOUND1.75231.73641.73031.74711.74131.74551.74151.74381.75471.75931.76951.77281.78081.77971.77481.78631.78441.79221.80711.81481.80881.80961.80761.79491.79331.80221.79961.79651.80451.80661.80061.7841.80121.82791.84031.8421.83941.83881.84

VENEZUELABOLIVAR2144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.62144.6

GRAPH 1

Hypothetical Yuan per US$*8.27658.27658.27658.27658.11118.08676678.06250639998.03831888078.01420392417.99016131237.96619082837.94229225597.91846537917.8947099837.8710258537.84741277557.82387053717.80039892557.77699772877.75366673567.73040573537.70721451817.68409287467.6610405967.63805747427.61514330177.59229787187.56952097827.54681241537.5241719787.50159946217.47909466377.45665737977.43428740767.41198454547.38974859177.3675793467.34547660797.3234401781

Actual Yuan per US$

GRAPH 2

China10010010010098.001570712397.984655349597.987071829998.022110795697.964115266197.935117501497.923035099497.906119736697.929076300497.900078535697.912160937697.976197668197.952032864197.942366942597.869872530797.843291246397.832417084597.869872530797.863831329797.875913731697.924243339697.935117501497.881954932697.873497251397.869872530797.825167643397.811877001197.834833564997.865039569997.805835800297.788920437497.76233915397.776838035497.801002839497.8142934815

Japan100101.1915427343101.612614226898.969718688499.426626052799.9731230962100.609209819100.609209819100.6450456907100.5644149794100.447948396399.695395090599.489338828299.5968464433100.4210714926100.2239741982100.403153556799.148898046998.476975452498.145493639198.011109120297.984232216498.217165382599.032431463999.157857014998.324672997798.396344741198.862211073398.459057516698.414262676999.02347249699.88353341799.301200501798.691990682798.244042286398.253001254398.602401003498.987636624398.2709191901

Malaysia10010010010099.539473684298.960526315898.710526315898.697368421198.671052631698.697368421198.678947368498.578947368498.592105263298.592105263298.7598.684210526398.644736842198.698.623684210598.623684210598.815789473799.026315789599.131578947499.171052631699.139473684299.105263157999.205263157999.197368421199.197368421199.197368421199.165789473799.205263157999.205263157999.244736842199.052631578999.065789473799.065789473799.184210526399.1973684211

Singapore100100.3679962013100.249287749398.142212725598.43304843398.634852801599.014719848198.77730294498.830721747498.587369420798.539886039998.201566951697.999762583198.053181386598.183760683898.124406457798.160018993497.708926875697.809829059897.993827160598.528015194798.302469135898.379629629698.848528015299.192782526198.95536562299.002849002899.103751187199.169040835799.311490978299.7507122507100.071225071299.893162393299.542972459699.400522317299.465811965899.602326685799.584520417999.3471035138

South Korea100101.0653753027101.0653753027100.242130750698.644067796699.176755447999.709443099399.661016949299.535108958899.418886198599.225181598198.740920096998.40193704698.159806295498.40193704698.40193704698.208232445597.975786924998.121065375398.217917675598.305084745898.440677966198.508474576398.992736077599.578692493998.900726392399.564164648999.675544794299.409200968599.631961259199.7578692494100.6489104116100.629539951699.830508474699.249394673199.21549636899.409200968599.447941888699.205811138

Chinas Steel Trade Balance

Year200420052006Imports33.127.022.0Exports20.232.536.0(Semis)6.29.05.0

Steel Trade Balance-12.9+5.5+14

CONCERNSSteel ItemCommentNorth American steel industry CANNOTCurrency, banks, land, environment,compete against Chinese steel companiesconsolidations, policiesfinanced and controlled by theirgovernment In 2005, compared to 2004, China steelTrend worsens in 2006 with newimports are projected to drop by 6.1capacity on line, and Chinasmillion tons, while exports are projectedslowdownto increase by 12.3 million tons North American steel industry loss of aGovernment de facto subsidiessignificant increment of its customer(industrial parks, infrastructure,base to relocation to Chinesefactory space, loans)production sites

CHALLENGES

Area Comment EnvironmentTrade policy and laws are not enforced regardingemissions and effluents; Province versusBeijing; employment rules, not environment ConsolidationsState-owned facilities; only non-controlling foreignownership allowed; antiquated facilities; policy is20 large producers, push small producers out Technology/QualityQuality in flat rolled will affect export capabilities.Switch from long to flat not easy InventoriesRun full out. Not always market-oriented CapitalWill not always be free; could lose state credit PersonnelSome unrest expressed toward elite class.Internet is politically uncontrollable

Chinese steel industry expansion continues in a region that is deficient in resources (supply and quality) and environmental compliance

The National Association of Manufacturers (NAM) recently reviewed Chinas compliance with its WTO commitments in the accession protocol. While progress has been made in certain areas, there are serious concerns and problems with effective compliance relating to:1. Huge U.S. trade imbalance2. Continued currency manipulation3. Arbitrary VAT taxes and rebates4. Massive counterfeiting and piracy5. Discriminatory standards6. Inadequate regulatory transparency

COMPLIANCE WITH THE WTO

Steel Making Raw Material PricesPrices of key steel making cost inputs have more than doubled in 2004 and 2005. The outlook for 2006 is for continuing cost pressures...

9/26/05

Source: Iron and Steel Statistics Bureau

Rebar Prices, 1990-2005(Midwest, $ per ton)Source: Purchasing MagazineJune 2005 = $470July 2005 = $450Aug. 2005 = $435Sept. 2005 = $485

Wire Rod Prices, 1990-2005(Midwest, $ per ton)Source: Purchasing MagazineJune 2005 = $505July 2005 = $472Aug. 2005 = $469Sept. 2005 = $523

Wide-Flange Beam Prices, 1990-2005(Midwest, 8 x 8, $ per ton)Source: Purchasing MagazineJune 2005 = $516July 2005 = $506Aug. 2005 = $496Sept. 2005 = $545

Global Price Spreads Versus N.A. Spot Price Hot Rolled Sheetthe U.S. market had become less attractive to offshore steel with lower prices and lower spreads versus the rest of the world in 2005. However, price rebounds and increases in overcapacity may encourage imports to returnIncentives for imports to increase Incentive for import to fall

U.S. Oil and Natural Gas Pricesoil prices are the major uncertainty in the outlook for 2006, with forecasts ranging from thirty-five to seventy-five US$ per bbl

Natural Gas Cost Impactsharp gains in natural gas prices have more than doubled steel mill gas costs per ton since 2000. Costs for integrated mills have risen over $30 per ton

U.S. STEEL INDUSTRY CONSOLIDATION(Percent Change, 2000 compared to 2005)Mittal Steel weighted average share of all markets served = ~33% (major product range-15-40%+)

FRP acquisition price ($/ton, going-concern basis) 2002= $110..2003-04=$1702005=$225Source: Metal Strategies

CRSI Fall Business Meeting - 2005

Conclusions Hell, its still a cyclical business Fundamental shift in both demand and supply due to China and its appetite for raw materials China is still the wild card Consolidations and discipline have had an impact to reduce volatility Role of inventories affecting pricing and production Demand still healthy, construction solid Unknowns (Oil, interest rates, auto sector, energy, freight rates, federal spending, China, China, China) Still reasons for meaningful optimism