North American Steel Trade Issues

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American Metal Market Mexican Steel 2005 The
Next Era
North American Steel Trade Issues
Thomas A. Danjczek, President Steel Manufacturers
Association January 25, 2005
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AMM, Mexican Steel - 2005

• The Steel Manufacturers Association (SMA)
• 38 North American companies
• 33 U.S., 3 Canadian, and 2 Mexican
• SMA member companies operate 120 Steel plants in
  North America
• represent over half of US steel production
• Member companies employ about 40,000 people
• Mini-mill Electric Arc Furnace (EAF) producers,
  scrap-based
• Efforts in Environmental Trade Comments
  Energy Safety Issued
• Flexible small organization similar to its
  members
• 107 Associate members
• Suppliers of goods and services to the steel
  industry

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AMM, Mexican Steel - 2005
1. Changes in Steel - 2004 2. Steel Trade
Issues - 2005 3. Conclusions
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AMM, Mexican Steel - 2005
Changes in Steel - 2004
World Production
Ore, Coal, Coke Prices
Import Trends
Prices
U.S. Capacity
Scrap Prices
ISG Restructuring
Inventories
Consolidations
Demand
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Total U. S. Domestic Shipments
AMM, Mexican Steel - 2005
Changes in Steel - 2004
Notes Derived from data provided by US Dept. of
Commerce, US Geologic Survey, and reflects AISI
adjustments
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AMM, Mexican Steel - 2005
Changes in Steel - 2004
Change in Capacity US reduced steelmaking
capacity by about 15 million tons since 2000
Source Olympic Steel
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AMM, Mexican Steel - 2005
Changes in Steel - 2004
US Imports highest since 2000 - Up 9.5 million
tons, 2004 over 2003, or 40
M Tonnes
2003 2004
Source US Customs
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AMM, Mexican Steel - 2005
Changes in Steel - 2004
Up 100 over 2003
Up 100 USD in 2004
Source American Metal Market
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AMM, Mexican Steel - 2005
Steel Trade Issues - 2005
China Steel Production
China Steel Projection
North American Capacity/Demand
Consolidations
Trade with China
Dollar
World Capacity/ Demand
Ore, Coal Supplies
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CHINA vs. US STEEL PRODUCTION PROJECTION
AMM, Mexican Steel - 2005
Steel Trade Issues - 2005
China
United States
Courtesy Metal Strategies
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AMM, Mexican Steel - 2005
Steel Trade Issues - 2005
? ? ? If it all is built ? ? ?
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Steel Trade Issues - 2005
AMM, Mexican Steel - 2005
North America is NOT the source of trade
friction. The source is excess production
capacity, a large portion put in place with
government subsidies.
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AMM, Mexican Steel - 2005
Steel Trade Issues - 2005
Will it continue?
or will it result in trade friction/protectionism
due to loss of U.S. customer base? We
encourage China to revalue the Yuan, alleviating
the threat to the global financial system which
could undermine Chinas own economy by devaluing
Chinas one half trillion dollars of foreign
exchange reserves.
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AMM, Mexican Steel - 2005
Steel Trade Issues - 2005

• Key Points for 2005
• Consolidations continue
• US Dollar weakened, and may weaken more
• Chinas shift from 35 million ton importer to
  net (?) exporter
• Ore coke prices projected to rise (Marcus),
  scrap prices weakening
• Steel Business should be strong in 2005, outlook
  for 2nd Half cloudy (Bradford)
• Prices will continue to increase. How long? A
  while. (M. Siegel)
• ISG type restructuring well managed personnel
  downsizing vs. resources/training requirements
• Iron/Scrap substitutes development accelerated
  and cost advantages to todays scrap prices

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AMM, Mexican Steel - 2005
Conclusions

• Reasons for meaningful optimism with good long
  term
• consumption, relative value, better managed
  facilities,
• and excellent recyclability
• Tempered by steels past history with shorter
  term
• cycles and raw material supply
• Amount of government subsides in new steel
  capacity
• unresolved
• China, China, China! (Condition of N. A.
  Customer Base)
• US budget and trade deficits and their effects
  on global
• economy are not sustainable.