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Steel

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Title: Steel


1
National Slag Association 89th Spring
Meeting Clearwater, FL
Steel 2005/2006
Thomas A. Danjczek, President Steel Manufacturers
Association March 20, 2006

2
Steel 2005/2006
NSA Spring Meeting
  • SMA
  • 2005
  • World Steel Production/Operating Rate
  • China
  • Scrap, Ore, Steel, Gas Prices
  • Consolidations
  • 2006
  • Chinas Challenges
  • Trade
  • Energy Environment
  • Other
  • IV. Slag Issues
  • V. Conclusion

3
NSA Spring Meeting
  • The Steel Manufacturers Association (SMA)
  • 39 North American Companies
  • 33 U.S., 3 Canadian, and 3 Mexican
  • 109 Associate Members
  • Suppliers of goods and services to the steel
    industry
  • SMA member companies
  • Operate 120 Steel plants in North America
  • Employ about 40,000 people
  • Minimill Electric Arc Furnace (EAF) producers
  • Produce nearly 100 of structural, wire rod,
    rebar, minimill plate and hot rolled, and a high
    percentage of SBQ products
  • Also represent several integrated steel producers
    and rerollers

4
NSA Spring Meeting
  • Production capability
  • SMA represents over two-thirds of U.S. steel
    production (app. 70)
  • Recycling
  • SMA members are the largest recyclers in the U.S.
  • Last year, the U.S. recycled over 70 million tons
    of ferrous scrap
  • Growth of SMA members
  • Efficiency and quality due to low cost
  • Flexible organizations
  • EAF growth surpassed 53 in 2004, and anticipated
    to be 60 by 2010

5
2005
6
WORLD CRUDE STEEL OPERATING 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.
World Crude Steel Operating Rate
Source Metal Strategies
7
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8
NSA Spring Meeting
Chinas Impact
After 4 Trips in a Year
Key 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!
9
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10
Chart 2 The Exploding Trade Deficit With China
11
Chart 3 Chinas Foreign Exchange Reserves
12
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13
CONCERNS   Steel Item Comment North American
steel industry CANNOT Currency, banks, land,
environment, compete against Chinese steel
companies consolidations, policies financed and
controlled by their government In 2005,
compared to 2004, China steel Trend worsens in
2006 with new imports are projected to drop by
6.1 capacity on line, and Chinas million tons,
while exports are projected slowdown to
increase by 12.3 million tons   North American
steel industry loss of a Government de facto
subsidies significant increment of its
customer (industrial parks, infrastructure, base
to relocation to Chinese factory space,
loans) production sites
14
Steel Making Raw Material Prices
Prices of key steel making cost inputs have more
than doubled in 2004 and 2005. The outlook for
2006 is for continuing cost pressures...
15
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16
Source Iron and Steel Statistics Bureau
17
Rebar Prices, 1990-2005 (Midwest, per ton)
June 2005 470 July 2005 450 Aug. 2005
435 Sept. 2005 485 Oct. 2005 494 Nov.
2005 486 Dec. 2005 481
Source Purchasing Magazine
18
Wire Rod Prices, 1990-2005 (Midwest, per ton)
June 2005 505 July 2005 472 Aug. 2005
469 Sept. 2005 523 Oct. 2005 492 Nov.
2005 503 Dec. 2005 503
Source Purchasing Magazine
19
Wide-Flange Beam Prices, 1990-2005 (Midwest, 8 x
8, per ton)
June 2005 516 July 2005 506 Aug. 2005
496 Sept. 2005 545 Oct. 2005 560 Nov.
2005 574 Dec. 2005 587
Source Purchasing Magazine
20
U.S. Oil and Natural Gas Prices
oil prices are the major uncertainty in the
outlook for 2006, with forecasts ranging from
thirty-five to seventy-five US per bbl
21
Natural Gas Cost Impact
sharp 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
22
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..2003-041702005225

Source Metal Strategies
23
2006
24
NSA Spring Meeting
2006 China
CHINAS CHALLENGES
Area Comment Environment Trade
policy and laws are not enforced
regarding emissions and effluents Province
versus Beijing employment rules, not
environment   Consolidations State-owne
d facilities only non-controlling
foreign ownership allowed antiquated
facilities policy is 20 large producers,
push small producers out  
Technology/Quality Quality in flat rolled
will affect export capabilities. Switch from
long to flat not easy  
Inventories Run full out. Not always
market-oriented   Capital Will not
always be free could lose state credit  
Personnel Some unrest expressed toward
elite class. Internet is politically
uncontrollable
25
2006 China
Chinas Steel Trade Balance   Year 2004 2005
2006   Imports 33.1 27.0 22.0   Exports
20.2 32.5 36.0   (Semis) 6.2 9.0 5.0 S
teel Trade Balance -12.9 5.5 14  

26
2006 China
COMPLIANCE WITH THE WTO
  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
imbalance 2. Continued currency
manipulation 3. Arbitrary VAT taxes and
rebates 4. Massive counterfeiting and
piracy 5. Discriminatory standards 6.
Inadequate regulatory transparency
27
Chinese steel industry expansion continues in a
region that is deficient in resources (supply and
quality) and environmental compliance
2006 China
28
2006 Prices
29
2006 Trade
Section 421 Disappointment No Relief
Wire Rod Case No Import Injury Solicit
Congressional Assistance Action -
Ryan/Hunter - Graham/Schumer - Other???
Doha Agenda only lose?
30
2006 Energy
No National Energy Policy For EAFs,
Demand Response is Perfect Peaker Need for
Nuclear After Metallic Exports, Number One
Threat for Competitiveness
31
2006 Environment
Mercury End of Pipeline Regulation Risk
(Area Source Rule vs. Negotiated Settlement)
TOSCA Not Recognizing Benefits of Recycling
i.e. Automotive Scrap, Fluff, Slag Trend
Toward Measure Monitor Control, vs. Under
the Bar Compliance Continued Risk With Lost
Radioactive Sources, TRI Reporting, and GGG
32
2006 Other
Metallics Exports Concerns
Transportation Challenges Congressional
Gridlock TEA 21 - Finally U.S.
Government Financial Policies (Trade Budget
Deficit) Need for Border Adjustable Tax
33
NSA Spring Meeting
SLAG ISSUES
Two Primary Issues
  1. Revision of the Slag Risk Assessment
  2. Regulatory Status of Slag as a Product

34
NSA Spring Meeting
SLAG RISK ASSESSMENT PROJECT
Conducted by Steel Slag Coalition Anticipate
completion, Spring 2006 Updated to reflect
current toxicological data, standards, and risk
methodology Work completed, now doing human
health portion Ecological report will be
valuable in responding to potential impact on the
environment
35
NSA Spring Meeting
REGULATORY STATUS OF SLAG
SMA is engaged with EPA and various state
agencies that EAF SLAG IS NOT A WASTE MATERIAL,
BUT IS A USEFUL PRODUCT Regulations in Iowa are
attempting to classify EAF slag as a waste under
beneficial reuse regulations SMA is
coordinating a federal effort to prompt the EPA
to clarify the status of EAF slag under federal
solid waste regulations
36
NSA Spring Meeting
Conclusions
Hell, its still a cyclical business We need
to continue to work together on slag issues
Fundamental shift in both demand and supply due
to China its appetite for raw materials China
is still the wild card. Risk near term is
autos long term is China 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
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