Steel Manufacturers Association Annual Board of Directors Meeting

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Steel Manufacturers AssociationAnnual Board of
Directors Meeting

• Presented by
• The David J. Joseph Company
• February 14 - 16, 2007

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The David J. Joseph Company Corporate Locations
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Brokerage Offices and Mill Services Locations
Ferrous Brokerage Offices
Mill Services Sites
1/2007
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The David J. Joseph Company Processing Regions
1/2007
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Busheling vs. Shredded Composites
sww2a
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Steel Economy

• Historically, U.S. GDP below 2.89 has resulted
  in a contraction in steel usage
• In the 4th quarter of 2006, producers reduced
  production to react to build up of inventories
• U.S. demand for raw materials to produce steel
  declined
• Impact on domestic commodity prices
• Export market helped determine domestic prices
  and acted as pricing floor

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Tight supplies ? rising steel prices ? double
orders ? inventory build.Inventories at Service
Centers rose 23 from April 2004 to April 2005,
then declined by 18 by year end. Inventories
rose 22 from Jan-Oct 2006 before declining
slightly in November.
SmewsStats/SVC INV
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Significant growth in demand was met by
developing new supplies and by re-orienting to
domestic markets scrap previously exported.
Millions NT Millions NT Millions NT Millions NT Millions NT Millions NT Millions NT
Est.
1991 2001 2002 2003 2004 2005 2006
46 64 65 63 69 66 70 Domestic Demand
10 8 10 12 13 15 14 Export
56 72 75 75 82 81 84 Total Demand

54 62 64 65 67 67 67 Domestic Scrap Production
lt1 1 lt1 lt1 lt1 lt1 lt1 Domestic Pig DRI
2 9 11 10 15 13 17 Import Scrap, Pig DRI
0 0 0 0 0 0 0 Balance
Market Clears
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FRD Major Currencies Dollar Index vs. Scrap
frb1
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Shredder Capacity Planned Additions

• Shredder operations and capacity has increased
  nearly 25 since the early 2000s. Announced new
  shredders and planned increases to existing
  operations will add approximately 240,000 tpm of
  shredding capacity in the next couple of years.
• Normal
• Shredders Production
• 2002 04 205 1.7 M/tons per month
• 2006 208 2.1 M/tons per month
• Planned
• New 14 180,000
• Incremental 3 60,000

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Advanced Technologies
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Residue Pricing Chart
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Transportation

• Throughout scrap industry, significant
  investments continue to be made in transportation
  assets
• Increasingly becoming a part of total investment
  capital versus an outsourced service
• Transportation shortages have been a primary
  driver of market volatility

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Selected Current Scrap Consolidations
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Scrap Futures

• Primary reasons it hasnt (wont ?) occur
• Traded products must be universally acceptable
• Ferrous scrap qualities / traits vary from region
  to region
• Liquidity requirement
• Speculators need a liquid financial market
• Credit-worthiness of market participants
• Private nature of scrap industry limits the
  availability of financial information
• Regionalization
• Ferrous scrap more freight sensitive than many
  other commodities (i.e., low value to weight
  ratio)
• Physical attributes / qualities of scrap vary
  from region to region
• Price Discovery Mechanism
• There must be a Buyer / Seller of last resort
  (inventory must be held)

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(No Transcript)