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Steel Industry Update/256 November 2010

Locker Associates, 225 Broadway, Suite 2625 New York NY 10007 Tel: 212-962-2980

Table 1: Selected U.S. Steel Industry Data, September & Year-To-Date


Month of September Year-to-Date
(000 net tons) 2010 2009 % Chg 2010 2009 % Chg
Raw Steel Production ........................7,280 6,367 14.3% 67,115 44,789 49.8%
Capacity Utilization .......................... 70.2 62.1 -- 71.2 48.0 --
Mill Shipments ................................ 7,140 5,793 23.3% 63,154 42,791 47.6%
Exports .............................................. 988 990 -0.2% 9,064 6,434 40.9%
Total Imports................................ 2,076 1,211 71.4% 18,383 11,802 55.8%
Finished Steel Imports .....................1,585 1,026 54.5% 14,266 10,794 32.2%
Apparent Steel Supply*......................7,737 5,829 32.7% 68,356 47,150 45.0%
Imports as % of Supply* .................. 20.5 17.6 -- 20.9 22.9 --
Average Spot Price** ($/ton) ............... 694 605 14.6% 693 600 15.4%
Scrap Price# ($/gross ton) ................... 365 290 25.9% 343 221 55.5%
Source: AISI, Global Insight *Excl semi-finished imports **Avg price of 8 carbon products #shredded bundles

Table 2: U.S. Spot Prices for Selected Steel Products, October & Year-to-Date
Month of October Year-To-Date
($ per net ton) 2010 2009 % Chg 2010 2009 % Chg
Hot Rolled Sheet………….. 556 535 3.9% 609 465 30.9%
Cold Rolled Sheet......…….. 666 630 5.7% 718 554 29.6%
HD Galvanized Sheet..…… 726 645 12.6% 767 608 26.3%
Coiled Plate................…….. 575 587 -2.0% 634 611 3.8%
Cold-Finished Bar (SBQ)….. 884 777 13.8% 845 799 5.8%
Wide-Flange Beams....…… 705 653 8.0% 720 719 0.1%
Wire Rod/Low Carbon.…… 625 584 7.0% 654 555 17.8%
Rebar.........................…….. 565 517 9.3% 571 505 13.2%
Average Spot Price+…….. 663 616 7.6% 690 602 14.6%
OCTG Seamless Tube…… 1,781 1,478 20.5% 1,746 1,738 0.4%
Scrap ($/gross ton)*....………. 341 264 29.2% 343 225 52.4%
Sources: Global Insight, Spears Research +Comp price of 8 carbon products *shredded bundles

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Steel Industry Update/256

Table 3: World Crude Steel Production by Region, September & Year-To-Date


(000 metric tons) Month of September Year-to-Date
Region 2010 2009 % Chg 2010 2009 % Chg
European Union……. 14,288 13,783 3.7% 129,988 97,869 32.8%
Other Europe………. 2,925 2,517 16.2% 23,986 21,019 14.1%
C.I.S…………………. 8,710 8,845 -1.5% 79,124 70,837 11.7%
North America……… 9,338 7,895 18.3% 84,340 57,668 46.3%
South America……... 3,682 3,779 -2.6% 32,616 26,861 21.4%
Africa………………... 1,398 1,253 11.9% 12,458 10,939 13.9%
Middle East…………. 1,621 1,490 8.8% 14,061 12,918 8.8%
Asia………………….. 69,114 70,535 -2.0% 663,238 574,184 15.5%
Oceania………...…... 670 675 -0.7% 6,124 3,994 53.3%
Total………………… 111,748 110,773 0.9% 1,045,935 876,290 19.4%
Countries
China………………… 47,945 50,961 -5.9% 474,532 420,890 12.7%
Japan………………... 9,233 8,269 11.7% 81,932 60,925 34.5%
United States……….. 6,645 5,776 15.0% 60,926 40,632 49.9%
India(e)…….………… 5,640 5,293 6.6% 50,092 46,454 7.8%
Russia(e)...…..……… 5,600 5,420 3.3% 49,480 43,431 13.9%
South Korea..………. 4,655 4,510 3.2% 42,110 34,978 20.4%
Germany.…………… 3,311 3,179 4.1% 32,974 22,655 45.5%
Brazil…..…………….. 2,685 2,717 -1.2% 24,803 18,455 34.4%
All Others…………... 26,034 24,648 5.6% 229,086 187,870 21.9%
Source: World Steel Association, 11/10

World Crude Steel Production

Source: World Steel Association, 11/10

Steel Industry Update (ISSN 1063-4339) published 12 times/year by Locker Associates, Inc. Copyright © 2010 by Locker Associates Inc. All
rights reserved. Reproduction in any form forbidden w/o permission. Locker Associates, Inc., 225 Broadway Suite 2625 New York NY 10007.

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World Steel Capacity Utilisation Ratio

Source: World Steel Association, 11/10

Table 4: US Steel Imports, Year-to-Date 2010


Steel Mill Products Y-T-D '10 Y-T-D '09 % Chg
Ingots & Billets and Slabs 4,057,158 995,726 307.5%
Sheets Hot Rolled 1,799,112 1,197,947 50.2%
Oil Country Goods 1,747,143 1,455,036 20.1%
Line Pipe 1,232,614 1,249,192 -1.3%
Sheets & Ship Galv HD 1,121,590 7,874,49 42.4%
Wire Rods 1,061,697 472,134 124.9%
Sheets Cold Rolled 876,386 836,674 4.7%
Bars-Hot Rolled 787,279 455,610 72.8%
Plates in Coils 767,867 546,490 40.5%
Plates Cut Lengths 562,813 409,306 37.5%
Standard Pipe 560,887 469,957 19.3%
Wire Drawn 474,810 339,478 39.9%
Bars - Reinforcing 414,638 356,606 16.3%
Structural Shapes Heavy 386,544 294,348 31.3%
Tin Plate 358,323 227,904 57.2%
Sheets & Strip All Other 330,916 227,958 45.2%
Mechanical Tubing 300,832 274,291 9.7%
All Other 1,573,238 1,205,788 30.5%
Total 18,413,847 11,801,894 56.0%
Subtotal Finished Imports 14,273,081 10,793,557 32.2%
Source: American Iron & Steel Institute, 10/28/10; in tonnes; YTD as of September

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Table 5: U.S. Steel Co Financial Results, 3rd Quarter 2010


Item (in US$) 3q'10 2q'10 3q'09
Net sales 4,497 4,681 2,817
Total segment income -80 241 -379
Retiree benefit expenses -43 -43 -33
Income from operations -138 198 -412
Net interest/other financial costs -78 150 25
Income tax provision -9 72 -130
Source: Steel Guru, 10/27/10; in US$ millions

Table 6: TATA Steel Financial Results, 1st Half 2010


(in US$) 1stH’11 1stH’10 % Chg
Steel Deliveries (million tonnes) 11.7 11.3 3.9%
Turnover 12,427 10,835 14.7%
EBITDA 2,008 135 1,387.4%
EBITDA Margin (%) 16.2% 1.2% 1,250.0%
Depreciation 472 499 --
Net Finance Charges 281 356 --
PBT 1,225 -981 --
PBT Margin (%) 9.9% -9.1% --
Profit after T, MI and SoA 847 -1,094 --
PAT Margin (%) 6.8% -10.1% --
Source: Steel Guru, 11/13/10; in US$ millions unless noted; PBT=Profit Before Tax;
PAT=Profit After Tax; MI=Minority Interest; SoA=Share of Profits of Associates

Table 7: ArcelorMittal Financial Results, 3rd Quarter 2010


(in US$) 3q'10 2q'10 3q'09 YTD'10 YTD'09
Sales 21,039 21,651 16,170 61,342 46,468
EBITDA 2,265 3,002 1,610 7,155 3,714
Operating Income 1,057 1,723 326 3,466 -2,341
Net Income 1,350 1,704 910 3,733 -945
Iron ore production (Mt) 17.4 16.4 13.1 49.6 37.1
Crude steel production (Mt) 22.7 24.8 19.6 70.6 50.7
Steel shipments (Mt) 21.0 22.8 18.2 65.2 51.1
EBITDA/tonne (USD/t) 108 132 89 110 73
Op income/tonne (USD/t) 50 76 18 53 -46
Basic EPS (USD) 0.89 1.13 0.6 2.47 -0.66
Source: Steel Guru, 10/27/10; in US$ millions unless noted

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Table 8: Chinese Investments and Contracts in US Companies, 2007-2009

Year Chinese Investor Investment Partner Sector Sub-sector


2007 Sinopec $100 Syntoleum Energy Coal
2007 CIC $3,100 Blackstone Finance Investment
2007 Minsheng $200 UCBH Finance Banking
2007 CIC $5,000 Morgan Stanley Finance Investment
2008 Wuxi PharmaTech $150 AppTec Lab Technology Biomedical
2008 CIC $100 Visa Finance --
2008 China Life $260 Visa Finance --
2008 CIC $3,200 JC Flowers Finance Investment
2008 China National Cereals $140 Smithfield Foods Agriculture --
2008 SAFE $2,500 TPG Finance Investment
2008 CIC $200 Blackstone Finance Investment
2009 CIC $800 Morgan Stanley Real Estate Property
2009 CIC $500 Blackstone Finance Investment
2009 CIC $530 Blackrock Finance Investment
2009 CIC $1,210 Morgan Stanley Finance Banking
2009 CIC $600 Oaktree Capital Finance Investment
2009 CIC $600 Goldman Sachs Finance Investment
2009 Beijing West Industries $100 Delphi Transport Autos
2009 State Construction Eng $100 -- Transport Rail
2009 CIC $1,580 AES Power --
2009 Jinjiang Int’l Hotels $150 Thayer Lodging Real Estate Tourism
2009 BAIC $200 Saab Transport Autos
Sources: Wiley Rein LLP, October 2010; investment in million US$

Table 9: Ownership of the Top Ten Chinese Steelmakers, 2010


2009 % Gov’t
Producer Production Owner/Majority Shareholder Ownership
Hebei Iron & Steel Group 40.2 Hebei Province SASAC* 100%
Baosteel Group 38.9 Central SASAC 100%
Wuhan Iron & Steel Group 30.4 Central SASAC 100%
Central SASAC and Liaoning
Anben Iron & Steel Group 29.2 100%
Province SASAC
Runyan Trading Co. (17.4%), 39
Shagang Group 26.4 individuals (64%) and Jiangsu 19%
Shagang Group Labor Union (18.6%)
Shandong Iron & Steel Group 21.3 Shandong Province SASAC 100%
Shougang Group 17.3 Central SASAC 100%
Wenfeng I&S Co, Puyang I&S Co,
Xinghua I&S Co, and nine other mills
Xinwu’an Group 16.7 16.3%
which have 83.7% ownership; Wu’an
City SASAC has 16.3% ownership
Magang Group 14.8 Anhui Province SASAC 100%
Valin Iron & Steel Group 11.8 Hunan Province SASAC 100%
Source: Wiley Rein LLP, October 2010; 200; production is in million metric tons

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Table 10: NA Light Vehicle Production Outlook


Year Million of Units
2007 15.0
2008 12.6
2009 8.5
2010f 11.7
2011f 12.7
2012f 14.1
2013f 15.0
2014f 15.7
2015f 15.9
2016f 16.2
2017f 16.3
Source: J.D. Power Automotive, October 2010

Table 11: North American Light Vehicle Production, 2010


Sales Group YTD’10 YTD’09 ’09-’10 Chg % Chg
BMW Group 158,435 121,666 36,769 30%
Chrysler (w /Fiat) 1,509,791 931,197 578,594 62%
Daimler 125,121 96,129 28,992 30%
Ford 2,330,680 1,832,174 498,506 27%
Fuji Heavy 148,839 82,953 65,886 79%
General Motors 2,734,484 1,884,762 849,722 45%
Honda 1,295,267 1,030,589 264,678 26%
Hyundai 411,430 199,215 212,215 107%
Mazda 56,778 41,373 15,405 37%
Mitsubishi 27,542 18,502 9,040 49%
Renault-Nissan 987,628 727,148 260,480 36%
Suzuki 2,123 1,931 192 10%
Tesla 1,456 1,409 47 3%
Toyota 1,450,483 1,232,816 217,667 18%
Volkswagen 423,083 323,866 99,217 31%
Total Production 11,663,140 8,525,730 3,137,410 37%
Source: J.D. Power Automotive, October 2010

Table 12: US Heavy Equipment Performance and Outlook, 3rd Quarter 2010
3q’10 3q’10 Investment
Company Earnings Revenues Plans Outlook
Agco Corp……… 461.3% 19.3 Yes Improving
Bucyrus Int’l*…… -15.7% 261.3 Yes Bullish
CNH Global NV... back in black 19.6 Yes Solid
Cummins, Inc….. 197.9% 34.4 Heavily Major growth
Paccar, Inc....….. 822.3% 31.0 Doubling Ramping up
Source: American Metal Market 11/1//10; *2010 results include acquisition of Terex Mining

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Table 13: U.S. Metal Industries Employment, October 2010


Item Oct ‘10 Sept ‘10 % Chg Oct ‘09 % Chg
Primary metals 374,700 376,400 -0.5% 353,800 5.9%
Fabricated metal products 1,335,200 1,331,000 0.3% 1,280,800 4.2%
All manufacturing 11,743,000 11,758,000 -0.1% 11,674,000 0.6%
Source: U.S. Bureau of Labor Statistics

Table 14: Vale Iron Ore Production, 3rd Quarter 2010


(000 tonnes) Q3 '10 Q3 '09 % Chg YTD '10 YTD'09 % Chg
Southeastern System 32,619 25,528 27.8% 89,825 64,221 39.9%
Itabira 10,621 8,939 18.8% 28,668 23,128 24.0%
Mariana 9,697 7,834 23.8% 27,702 21,001 31.9%
Minas Centrais 11,212 8,482 32.2% 30,515 19,820 54.0%
Corumbá 749 0 na 1,953 0 na
Urucum 339 273 24.3% 987 273 na
Southern System 20,258 15,684 29.2% 56,489 40,643 39.0%
Minas Itabirito 8,275 5,403 53.2% 22,581 12,883 75.3%
Vargem Grande 5,938 5,697 4.2% 16,938 15,344 10.4%
Paraopebas 6,044 4,584 31.8% 16,970 12,415 36.7%
Carajás 26,997 22,941 17.7% 73,164 63,698 14.9%
Total 79,873 64,152 24.5% 219,479 168,562 30.2%
Source: Steel Guru, 11/12/10; YTD data is first nine months of 2009 and 2010

Table 15: Vale Pellet Production, 3rd Quarter 2010


(000 tonnes) Q3 '10 Q3 '09 % Chg YTD '10 YTD'09 % Chg
Tubarão I and II 1,434 1,311 9.3% 4,246 3,159 34.4%
Fabrica 1,058 0 na 2,793 235 1,089.1%
São Luís 1,656 0 na 3,391 3 na
Vargem Grande 1,425 809 76.1% 4,113 1,034 na
Nibrasco 2,395 2,404 -0.3% 6,465 3,641 77.6%
Kobrasco 1,163 0 na 3,547 889 nm
Itabrasco 1,049 656 60.0% 2,852 656 na
Total 10,181 5,180 96.6% 27,407 9,616 185.0%
Source: Steel Guru, 11/12/10; YTD data is first nine months of 2009 and 2010

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SAIL’s Existing Plants, Posco’s Plans and Target Customer Base in India, October 2010

Source: Goldman Sachs, 10/4/10

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Table 16: North American Service Center Industry Ranking, 2010p & 2009
2009 Sales Sales 2009 Stocking Square Primary
Rank Name 2010p ($mil) 2009 ($mil) Empl’s Locations Feet (000) Products
1. Reliance Steel & Aluminum n/a 5,320 9,000+ 220+ 23,300 C/A & SS
2. McJunkin Red Man n/a 3,660 3,650 245 n/a C/A & AL
3. Ryerson Inc. 3,800 3,070 4,060 100 9,100 C/A & SS
4. ThyssenKrupp Materials NA 2,400 2,100 3,000 77 5,100 C/A & SS
5. Samuel, Son & Co. LTD. 2,540 1,960 3,992 86 8,120 C/A & SS
6. O’Neal Steel n/a 1,730 2,540 70 4,141 C/A & SS
7. MACSteel Service Centers 1,900 1,600 3,300 80+ 40,000 C/A & SS
8. USA
Namasco Corp. n/a 1,200 1,131 30 n/a C/A & SS
9. Steel Technologies Inc. 1,400 1,200 1,400 30 3,350 C/A
10. Namasco Corp 1,500 1,195 1,300 23 2,700 C/A
11. Carpenter Technology Corp. n/a 1,190 n/a n/a n/a C/A & SS
12. Metals USA Holdings Corp. 1,300 1,100 1,723 38 4,600 C/A & SS
13. Worthington Steel Co. n/a 989 1,200 10 3,130 C/A & SS
14. Marmon/Keystone Corp. 920 850 1,410 48 4,900 C/A & SS
15. Alro Steel Corp. n/a 820 n/a 43 3,100 C/A & SS
16. Edgen Murray n/a 773 450 20 n/a C/A & SS
17. A.M. Castle & Co. n/a 726 1,576 33 3,400 C/A & SS
18. Kenwal Steel Corp. 880 720 450 6 1,200 C/A
19. Steel Warehouse Co. LLC 950 594 877 10 1,775 C/A
20. Coilplus Inc. 790 570 470 10 1,300 C/A
21. Olympic Steel Inc. n/a 523 1,057 16 2,009 C/A & SS
22. Central Steel & Wire Co. n/a 521 1,000 5 2,100 C/A & SS
23. Heidtman Steel Products Inc. 650 425 700 11 2,500 C/A
24. Triple-S Steel Holdings Inc. 480 390 500 8 2,000 C/A & AL
25. Majestic Steel USA Inc. n/a 354 200 1 450 C/A
26. Cargill Incorporated 400 300 210 8 1,000 C/A
26. Norfolk Iron & Metal 400 300 574 4 1,000 C/A
28. Trident Steel Corp. n/a 295 n/a 8 n/a C/A
29. Eaton Steel Bar Co. 350 250 275 5 700 C/A
30. Empire Resources Inc. n/a 246 80 10 1,000 C/A & AL
31. Kelly Pipe Co. LLC 260 225 250 49 n/a C/A & SS
32. Brown-Strauss Steel 250 220 200 7 275 C/A
33. McNeilus Steel Inc. 250 209 310 3 810 C/A & AL
34. Superior Supply & Steel 250 205 187 9 300 C/A & SS
35. Chicago Tube & Iron Co. 218 201 410 10 950 C/A & SS
36. Lapham-Hickey Steel Corp. 250 200 550 7 900 C/A & SS
37. New Star Metals Inc. 250 187 212 3 630 C/A
38. Mill Steel Co. 340 175 105 3 425 C/A
39. Misa Metals Inc. 207 171 200 5 626 C/A & SS
40. Esmark Steel Group 250 167 250 4 660 C/A &SS
41. Saginaw Pipe & Steel Co. 160 160 125 2 100 C/A
42. Liberty Steel Products 175 150 175 4 400 C/A & AL
43. Triad Metals International 182 149 103 3 480 C/A
44. Pacesetter Steel Service Inc. n/a 146 150 3 295 C/A
45. Eastern Metal Supply Inc. 163 145 320 7 691 AL
46. Contractors Steel Co. 190 142 300 5 1,100 C/A
47. Ranger Steel Services LP 200 140 23 4 750 C/A
48. McNichols Co. 138 136 316 17 573 C/A & SS
49. Tubular Steel Inc. 176 131 350 7 700 C/A & SS
50. Monarch Steel Co. Inc. 156 126 100 3 300 C/A
Total…..……………………… n/a 38,356 41,761+ 1,110+ 142,940+ --
Source: Metal Center News, September 2010

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Locker Associates Steel Track: Spot Prices


U.S. Flat-Rolled Prices U.S. Other Product Prices
1100 1350
($ per ton) ($ per ton)
1250
1000
Plate 1150
900
1050

800
950
CR Sheet CF Bar (SBQ)
700 850

600 750

HR Sheet Beam
650
500 Wire Rod
550
400
450

300
350

200 250
89 93 97 04 05 07 08 09 O N D J F M A M J J A S O 89 93 97 04 05 07 08 09 O N D J F M A M J J A S O

Locker Associates Steel Track: Performance


U.S. Raw Steel Production 100%
U.S. Capacity Utilization
10.0
(mil net tons)
2010 2010 2009
9.0 2009 90%

8.0 80%

7.0 70%

6.0 60%

5.0 50%

4.0 40%

3.0 30%
J F M A M J J A S O N D J F M A M J J A S O N D
2010 6.9 6.9 7.8 7.7 8.0 7.8 7.5 7.3 7.3 2010 64% 71% 73% 74% 75% 75% 72% 68% 70%
2009 4.5 4.4 4.4 4.2 4.5 4.8 5.6 6.1 6.4 6.6 6.3 6.5 2009 43% 46% 43% 41% 43% 47% 52% 58% 62% 62% 61% 61%

Steel Mill Products Foreign Trade, August & Year-to-Date


Imports: Country of Origin Month of September Year-to-Date
(000 net tons) 2010 2009 % Chg 2010 2009 % Chg
Canada……………………….. 570 462 23.4% 5,300 2,817 88.1%
Mexico………………………… 182 111 64.0% 2,180 1,286 69.5%
Other W. Hemisphere……….. 104 91 14.3% 828 614 34.9%
European Union……………… 398 208 91.3% 3,235 1,825 77.3%
Other Europe*……………….. 237 13 1,723.1% 1,792 823 117.7%
Asia……………………………. 516 291 77.3% 4,456 4,184 6.5%
Oceania………………………. 59 35 68.6% 509 228 123.2%
Africa………………………….. 11 1 1,000.0% 83 24 245.8%
Total 2,076 1,211 71.4% 18,383 11,802 55.8%
Imports: Custom District
Atlantic Coast………………… 167 145 15.2% 2,299 1,510 52.3%
Gulf Coast/Mexican Border… 790 352 124.4% 6,197 5,134 20.7%
Pacific Coast…………………. 408 202 102.0% 3,556 1,791 98.5%
Gr Lakes/Canadian Border…. 699 503 39.0% 6,175 3,236 90.8%
Off Shore……………………… 12 10 20.0% 157 130 20.8%
Source: AISI; * includes Russia
Update #256
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Steel Industry Update/256

Locker Associates, Inc.


LOCKER ASSOCIATES is a business-consulting firm that specializes in enhancing the
competitiveness of businesses and industries on behalf of unions, corporate and government
clients. By combining expert business and financial analysis with a sensitivity to labor issues,
the firm is uniquely qualified to help clients manage change by:
♦ leading joint labor/management business improvement initiatives;
♦ facilitating ownership transitions to secure the long-term viability of a business;
♦ conducting strategic industry studies to identify future challenges and opportunities;
♦ representing unions in strategic planning, workplace reorganization and bankruptcy
♦ formulating business plans for turnaround situations; and
♦ performing due diligence for equity and debt investors.
Over the last 28 years, the firm has directed over 225 projects spanning manufacturing,
transportation, distribution and mining industries. Typical projects involve in-depth analysis of a
firm’s market, financial and operating performance on behalf of a cooperative labor-
management effort. Locker Associates also produces a widely read monthly newsletter, Steel
Industry Update that circulates throughout the U.S. and Canadian steel industry.

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• IBT-Supervalu (2010): assist union and management to identify major operational problems
impacting warehouse performance and provide recommendations for joint improvement
• Institute of Scrap Recycling Industries (2010): presented a status report on the U.S. steel
market before the Institute of Scrap Recycling Industries Commodities roundtable
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