Boot Scootin’ Boogie: A Look at Current Trends in the USA Steel Market and

EconomyPresentation to the:

AWMI TN ChapterNashville, TN

by: Becky E. Hites, President

May 15, 2014

USA Shipments and Consumption Sideways in 2013; Well Off 2004 Peak Levels

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USA Steel Shipments, Imports, Exports & Consumption

Shipments Imports Exports ASC

2000 109.6 38.7 6.6 141.7 5.6%2001 98.6 30.2 6.1 122.6 -13.5%2002 99.0 32.7 6.0 125.6 2.5%2003 104.6 23.0 8.2 119.4 -5.0%2004 111.0 35.8 7.9 138.9 16.3%2005 103.2 32.1 9.5 125.8 -9.4%2006 108.6 45.3 9.7 144.2 14.6%2007 106.1 33.2 11.1 128.3 -11.0%2008 98.4 32.4 13.4 117.4 -8.5%2009 60.3 16.2 9.3 67.3 -42.7%2010 83.4 23.9 12.0 95.3 41.6%2011 91.9 28.5 13.5 106.9 12.2%2012 95.9 33.5 13.7 115.7 8.2%2013 95.4 32.2 12.7 114.9 -0.7%

Source: AISI

(million tons)

USA Producing at the Mid-1990s Level

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Imports of Semis now 7.5% of Shipments Due in Part to the Calvert, AL Plant

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1995 2000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

First quarter 24.9 28.6 28.2 27.1 27.8 26.3 27.5 13.3 20.5 22.5 25.4 23.6Second quarter 24.4 28.5 29.0 25.6 28.8 26.5 27.7 13.5 21.7 22.3 24.7 23.8Third quarter 24.0 27.3 27.4 25.7 26.8 27.1 26.2 16.8 20.8 23.7 23.5 24.5Fourth quarter 24.2 24.7 26.8 26.6 26.1 26.5 17.1 18.6 20.4 23.4 22.3 23.5Shipments 97.5 109.1 111.4 105.0 109.5 106.4 98.5 62.2 83.4 91.9 95.9 95.4Plus: Imports 24.4 38.0 35.8 32.1 45.3 33.2 31.9 16.2 23.9 28.5 33.5 32.2Less: Imported semis converted to finished 5.0 8.6 7.4 6.9 9.3 6.6 5.9 2.0 5.0 6.6 7.6 7.3 products by AISI-reporting companiesLess: Exports 7.1 6.5 7.9 9.4 9.7 11.1 13.5 11.9 13.5 13.5 13.7 12.7Subtotal: Apparent steel demand 109.8 131.9 131.9 120.8 135.8 121.9 111.0 64.5 88.9 100.3 108.1 107.6Less: Est. user/buyer inventory build -2.0 -2.0 8.1 -6.4 6.6 -2.5 -4.0 -10.0 4.0 1.5 1.0 0.5Equals: Actual steel consumption 111.8 133.9 123.8 127.2 129.2 124.4 115.0 74.5 84.9 98.8 107.1 107.1% change 2.0% 3.1% 7.1% 2.8% 1.6% -3.7% -7.6% -35.2% 14.0% 16.5% 8.3% 0.0%

Source: AISI & WSD estimates

USA Steel Consumption / Shipment Outlook(million short tons)

Domestic Shipments at 1.84 Million Tons Per Week, or a 86.3 Million Finished Ton Annualized Rate

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Utilization at 76.9% TTM thru Apr 2014 versus 75.0% TTM thru Apr 2013

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Utilization About Where It’s Been for Four Years

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1986 62 1996 90 2006 851987 76 1997 90 2007 861988 89 1998 86 2008 821989 84 1999 81 2009 511990 84 2000 86 2010 701991 73 2001 75 2011 751992 80 2002 89 2012 761993 87 2003 81 2013 771994 91 2004 90 2014E 761995 90 2005 87

Source: AISI

USA Raw Steel Production Utilization Rate

Total Imports Through Dec Were 32.2 Million Tons Compared to Exports of 12.7 Million Tons

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Imports Run About A Third of USA Consumption

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USA Apparent Steel Consumption at 115 Million Ton Rate in 2013, About Flat with 2012

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EAF-Based Steelmaking Dominates Now, But Not Taking More Share in the Last Few Years

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EAF Steelmaking Represents 58-60% of the USA Market

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USA Finished Product Shipments Increased 4.2%; Sheet Still Dominates at 54%

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Carbon Sheet Market is 44% Hot-Rolled Band With Imports at 12% of Consumption

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Shipments Imports Exports ASC %

Hot-Rolled Band 21.6 2.7 1.0 23.3 44%Cold Rolled Sheet 11.5 0.9 0.6 11.8 22%Hot-Dip Galvanized (HDG) 14.7 1.8 1.0 15.5 29%Electro-Galvanized (EG) 1.5 0.1 0.3 1.3 2%Other Metallic Coated 1.6 0.7 0.3 2.0 4%HR & CR strip 0.7 0.2 0.4 0.4Total 51.6 6.4 3.6 54.4 Percent of ASC 95% 12% 7%

Source: AISI

Carbon Shipment Configuration 2013

Service Center Tonnage Dropped to 26 Million Tons in 2012

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USA Service Center Shipments Bottomed In June 2013 On A Twelve Month Moving Average Basis and Have Been Slowly Improving

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USA Service Center Inventories Have Been Down on a Year-Over-Year Basis and a Trailing Twelve Month Average Basis for 13 Months

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North American Auto Sales Expected to Top 16.4 Million Units in 2014

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Auto Purchases Volatile From Year to Year

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Trucks Represent 50% of the Market Since 1997; Hit 60% in 2004-05; Were 57% in 2013

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Consumer Confidence Improving Slowly

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Confidence Still Well Below the Highs

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University of Michigan Consumer Sentiment Index Breaking Out a Bit

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Michigan’s Consumer Sentiment IndexAlso Still Well Below the Peak

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Housing Starts Running At a Million a Month

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Interest Rates Remain at Low Levels

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Non-Residential Construction Improving Moderately in Recent Months – Now at $568 Billion

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Architecture Billings Index – Not Definitively Positive

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Industrial Production Setting New Highs

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Fabricated Metal Production Also Strong

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Non-Defense Capital Goods Orders at High Levels

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Non-Defense Capital Goods Orders But Leveling Off In Recent Months

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ISM New Orders Index at 55.1 Above the 52 that Generally Indicates Growth

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Chicago Purchasing Managers Index at 63 But Having Trouble Holding the Growth Trend Level of 60

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Oil Prices Have Stayed Above the Critical $100 per Barrel Level

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At 1.6 Billion Tonnes, Global Crude Steel Production Has Probably Leveled Off

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Cyclical Growth Patterns Repeat

Developing World is Growing While the Developed World is Contracting

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EU 27 CISOther

Europe NAFTA ChinaOther

AsiaSouth

AmericaMiddle

East Africa Oceania Global

2001 -3.1% 1.1% 1.4% -11.4% 18.0% -0.6% -4.4% 8.4% 7.9% 0.0% 0.3%2002 0.4% 1.6% 3.9% 2.6% 20.2% 5.2% 9.3% 6.9% 6.0% 5.9% 6.2%2003 2.3% 5.2% 10.5% 2.6% 22.0% 4.0% 5.3% 7.6% 3.0% 1.3% 7.4%2004 5.1% 6.5% 13.7% 6.2% 22.7% 4.4% 6.6% 6.0% 2.6% -1.2% 9.4%2005 -3.3% -0.1% 3.2% -4.8% 30.4% 5.5% -1.2% 7.0% 7.4% 4.2% 8.0%2006 6.0% 5.9% 13.0% 3.3% 18.3% 4.4% -0.1% 0.8% 4.2% 0.5% 8.9%2007 1.4% 3.6% 8.5% 0.6% 16.3% 5.7% 6.6% 7.0% -0.1% 1.1% 7.8%2008 -5.5% -7.9% 3.6% -6.1% 4.6% 1.1% -1.8% 1.2% -9.1% -4.1% -0.4%2009 -29.8% -14.6% -8.3% -33.7% 12.6% -13.8% -20.3% 6.7% -9.3% -28.6% -7.9%2010 24.0% 10.8% 16.0% 35.1% 10.7% 19.1% 16.2% 12.6% 7.9% 35.5% 15.8%2011 2.8% 4.1% 16.1% 6.4% 9.9% 4.9% 9.7% 15.2% -5.6% -11.1% 7.3%2012 -5.1% -1.5% 22.1% 2.5% 3.2% -1.9% -3.7% 7.2% -2.3% -19.9% 1.0%2013 -1.8% -2.0% 30.1% -1.9% 7.5% -2.4% -0.8% 4.9% 2.3% -20.0% 3.5%

Source: World Steel Association

WSA Crude Steel Production Year-Over-Year by Region(percentage change)

Colonial Model of Supply No Longer Holds True as Half of Global Crude Steel Production is in the Developing World Countries

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The World Changes; The Only Way to “Win” Is To Anticipate and Adapt – Critical Resources of the Past Can

Become Irrelevant to the Future

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World Export Price for Hot-Rolled Band Sidewaysfor 3 Months at $552 Per Tonne

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USA Hot-Rolled Price Spread to the World at $174 Per Tonne Will Attract Imports

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Current Stock Market Valuation – Producers “Priced” Higher on Revenues than Processors

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Processor Multiple Higher than Producers on EBITDA

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Steel-Insights, LLC – “Seeing” What Others Don’t

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Conclusion & Questions

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