Thomas A. Danjczek President Steel Manufacturers Association May 10, 2010 Milwaukee, WI LONG PRODUCTS SUPPLY CHAIN SYMPOSIUM ACTIONS FOR ECONOMIC RECOVERY.

Thomas A. DanjczekPresidentSteel Manufacturers AssociationMay 10, 2010Milwaukee, WI

LONG PRODUCTS SUPPLY CHAIN SYMPOSIUM ACTIONS FOR ECONOMIC RECOVERY

From the Steelmaker’s Perspective

Outline

•SMA

•Set the Stage

-U.S. Steel Production

-SMA Long Product Data

-Global Steel Outlook

• Trade Issues

-China

-Scrap

-Raw Materials

• Environmental / Safety Washington, DC Issues

•Is Enough Being Done?

•What does the U.S. need to do?

•Conclusion

Long Products Supply Chain Symposium

• 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

SMALong Products Supply Chain Symposium

US Steel Production (All in Million Net Tons)

(Numbers are Approximate)

PAST – From 1986 through 2008, U.S. steel production has been around 100 m tons – up & down 10%

2009

1st Half 25m (45% utilization)

2nd Half 36m (62% utilization) Now 1.5m/week vs. 2.1m/week

Year 63m (Minimills at 63% of production)

2010 (from November 2009)

World Steel 78m (up 19% over 2009), optimistic

Peter Marcus 68m (Back to 75m in 2012)

US Poll 69m (up 10% over 2009)

2010 – Today (Through March 30) Capacity Utilization (67.7%); or approximately 80 million tons annual rate

42.9% in 2009

Set the StageLong Products Supply Chain Symposium

United States

Million MT2009 (e) 2010(f)

Change (%)

Crude Steel Use

65.1 81.8 25.5%

Finished Steel Use

57.4 72.7 26.5%

Exports 8.5 11.3 32.9%

Imports 12.9 13.7 6.2%

Canada

Million MT2009 (e) 2010(f)

Change (%)

Crude Steel Use 10.6 13.1 23.9%

Finished Steel Use 9.5 11.8 23.9%

Exports 4.9 6.4 29.6%

Imports 6.0 7.7 28.3%

Mexico

Million MT2009 (e) 2010 (f)

Change (%)

Crude Steel Use 17.7 22.1 24.5%

Finished Steel Use

13.9 15.5 10.9%

Exports 2.0 2.4 20.0%

Imports 3.2 3.6 12.5%

Source: Worldsteel Economic Studies Committee, April 2010

The Worldsteel Short Range Outlook


Source: Worldsteel

World Crude Steel Capacity 2000-2012

1,062 1,062 1,0951,170

1,2451,356

1,453

1,583

1,8161,917

1,9972,055

1,654

100

350

600

850

1,100

1,350

1,600

1,850

2,100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010(e) 2011(e)

Ste

el

Cap

ac

ity

(m

illio

n m

etr

ic t

on

ne

s)

0

5

10

15

20

Cu

rre

nt

Av

era

ge

Gro

wth

Ra

te (

CA

GR

)

World Crude Steel Capacity CAGR

2012(e)

Global Steel Capacity Continues to Increase


SMA Long Product Summary Data – (4/16/10)


SIMA Import License Data Detail for March as published April 13, 2010:

PRODUCT TONS

Rebar40,147

Wire Rod130,187

Merchant Bar16,374

Light Shapes6,129

Parallel Flange Sections23,056

Structural Angles & Channels5,092

All Other Structural Sections14,751

Total Licenses 235,737


Product NameTotal – 1st Q 2010

(3 months)YTD 2009 % Change

1. Bloom & Billets for Rerolling 423,447 132,826 218.8%

2. Rebar 1,446,113 1,342,481 7.7%

3. Wire Rod 693,357 427,271 62.3%

4. Merchant Bars 454,931 364,776 24.7%

5. Light Shapes 273,876 229,368 19.4%

6. Parallel Flange Sections 920,376 608,746 51.2%

7. Structural Angles & Channels 378,158 320,236 18.1%

8. All Other Structural Shapes 79,265 38,213 107.4%

Subtotal of Products 6, 7, and 8 1,377,800 967,195 42.5%

Total Shipments (excludes blooms & billets) 4,246,077 3,331,091 27.5%

Total Mill Shipments – 1st Quarter 2010(Total Mill Shipments = Net Domestic Mill Shipments plus Exports;

Table in Short Tons)


Globalization and Consolidation Developments Have Dramatically Changed the NAFTA Steel Landscape

Acquiring Company Acquiring Company Acquiring CompanyAcquired Company Acquired Company Acquired Company

Arcelor Mittal Nucor Duferco/NLMKArcelor Connecticut Steel Winner Steel

Dofasco TricoMittal Birmingham Evraz

Ispat Inland Corus Tuscaloosa Oregon SteelISG Worthington-Decatur Claymont Steel

LTV Marion Ipsco CanadaUS Steel Plate

WeirtonNelson SteelHarris Steel Severstal

Acme-Riverdale Auburn Steel Arcelor Mittal-Sp. Pt.North Star Arizona Rouge

WCI

Georgetown American Iron ReductionSicartsaBayou

LMP Steel & Wire

CSNHeartland

US Steel Gerdau AmeristeelLone Star Sheffield

EssarNational Chaparral AlgomaLTV Tin Co-SteelMinnesota SteelISG IH#2 Pkl. North Star

Stelco Sidetul Tultitlan Quanex Macsteel

BlueScope CorsaIMSA Steelscape

OAO TMKSSAB

Ipsco Tubular (U.S.)ICH/Grupo Simec Ipsco Plate (U.S.)Republic

Steel DynamicsTernium GalvPro-Jeffersonville

Hylsa The TechsIMSA Roanoke Steel

Steel of West Virginia

TenarisMaverick Tube (U.S.) Prudential Canada Hydril Company

Wheeling Pitt

1/1/09

Bethlehem

The David J. Joseph Co. (Scrap)

Omnisource (Scrap)

Red = Long Product ProducerLong Products Supply Chain Symposium

China’s Trade Surplus with the U.S.

Year China’s Trade Surplus

2001 $22 billion(year China joined WTO)

2006 $177 billion

2007 $262 billion (up 47.7%)

2008 $290 billon

2009 $196 billion The U.S. has lost 3.3 million manufacturing jobs since The U.S. has lost 3.3 million manufacturing jobs since 2000… imbalances cannot go on forever.2000… imbalances cannot go on forever.


0

10

20

30

40

50

60

70

80

90

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Mill

ion

To

ns

Exports

U.S. Consumption

U.S. Scrap Consumption and Exports


2009 – Exports 22.3mtImports (e) 3.0mtU.S. Consumption 48.0mt

RMDASTM Ferrous Scrap Price Index

Effective 4/20/10


Raw Material Export Restrictions are Continuing to Disadvantage U.S. Steel Producers

• Many countries continue to impose a variety of restrictions on exports of vital raw materials– Export prohibitions– Export duties– Export quotas– Other measures

• Trade-distorting restrictions on exports of raw materials– Give domestic producers in the exporting country an unfair

advantage– Increase worldwide costs of production– Do not accord with the justifications given– Place a heavy burden on steel industries in developing countries

that do not have substantial iron ore reserves or steel supplies scrap

US Steel Industry, Then. . . . . . . . .and Now

Smoke pouring into the air from a Pittsburgh steel mill, 1890. Image by Corbis - Bettmann

Electric Arc Furnace facilityImage by SMA.

U.S. Steel Industry – Energy / TONU.S. Steel Industry – Energy / TON

Source: Dr. John Stubbles

0

10

20

30

40

50

1950 1960 1970 1980 1990 2000 2010

MIL

LIO

NS

BT

U/T

ON

B.F BURDEN PREPARATIONBOF STEELMAKING

MINIMILLS

CONTINUOUS CASTING

EAF/ THIN SLAB CASTING


EAF Steelmaking is Energy Efficient


0

50

100

150

200

250

CHINA E.U. JAPAN U.S.

MIL

LIO

NS T

ONS

C (A

S CO

2)

BOF EAF

GLOBAL C ( FOSSIL FUELS ) ~ 8 BILLION TONSU.S. C ( FOSSIL FUELS ) ~ 2 BILLION TONSU.S. STEEL INDUSTRY ~ .034 BILLION TONSU.S.EAF'S ~ .011 BILLION TONS


SMA Climate Change Policy – Federal

Legislation Needs to Address the Following: 1. Reward Recycling

2. Recognize Steel Industry Improvement Limitations

3. Include Global Participation and Monitoring with No Exemptions

Available for Any Nation

4. Prevent Double Counting of Carbon Costs

5. Promote GHG Emissions Reductions From Efficiency and

Technology Improvements and Not Demand Destruction of North

American Steel Production

6. Preempt Competing State Carbon Regulation Policies with a Single

Federal GHG Policy, to Ensure a Level Playing Field within the U.S.

7. Avoid Unintended Consequences


Is Enough Being Done?

Raw Materials

Energy

China

Trade

No

No

No

No

Barriers continue

Lack of policy continues

Currency manipulation, Subsidies, Not playing by the rules

Distortions continue, Who’s the protectionist

No long term structural policy changes are being proposed in Washington for taxes, trade imbalance, and energy.


What does the US 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


ConclusionThe decline in U.S. Manufacturing has been so severe, policy incrementalism is not sufficient.

U.S. Steel Industry in Better Position Today to Manage the Down Cycle (but what a down cycle!)

― Improved Economics From Consolidations, i.e. “Reacted Quicker”;― Improved Control of Variable Costs― Scrap-Based Metallics (In 2009, U.S. will be nearly 2/3 EAF-based― Energy Costs― Transportation Costs― Labor Efficiency (U.S. at Below 2MH/Ton; Minimills Often Below 1MH/Ton)― Improved Inventory Control (Inbound Materials, Steel, and Customer Products). NOT THE OLD INVENTORY OVERHANG!― Concerns with Scrap, Climate Change, Energy, U.S. Debt, Taxes, Currency, but especially Climate for Investment

― Still Challenging – But Reasons for Meaningful Long-Term Optimism!


Thomas A. Danjczek President Steel Manufacturers Association May 10, 2010 Milwaukee, WI LONG PRODUCTS SUPPLY CHAIN SYMPOSIUM ACTIONS FOR ECONOMIC RECOVERY.

Documents

finished steel use

us steel production

crude steel use17

steel recycling plants

e global steel capacity

sma long product summary

steelmakers perspective

capacity utilization