North American Steel IndustryRecent Market Developments,

Future Prospects and Key ChallengesOECD Steel CommitteeDecember 10-11, 2009

Paris, France*

American Iron and Steel Institute (AISI)Steel Manufacturers Association (SMA)

Specialty Steel Industry of North America (SSINA)Canadian Steel Producers Association (CSPA)

Mexican Steel Producers Association (CANACERO)

2

Presentation Summary

I. NAFTA Economic Conditions And Outlook

II. NAFTA Steel Trade Situation

III. Growing Concerns About NAFTA Manufacturing

3

I. NAFTA Economic Conditions And Outlook

4

N. America: -45.1Canada: -51.9U.S.: -47.0Mexico: -29.5

S. America: -30.3Brazil: -31.4

EU27: -39.3Turkey: -13.5Russia: -26.8Ukraine: -31.9

Asia: -2.2Japan: -34.0S. Korea: -14.9China: +7.5India : +1.6

Global Production: -16.4Excluding China: -30.9

NAFTA Production Declines More Than Other World RegionsGlobal Output Sharply Down, With Few Exceptions

Global Crude Steel Production2009 YTD vs. 2008 % Change

Source: Worldsteel

5Source:Worldsteel

NAFTA Raw Steel Production - 2009 vs. 2008

0

5,000

10,000

15,000

20,000

JAN

UA

RY

FEBR

UA

RY

MA

RCH

APR

IL

MA

Y

JUN

E

JULY

AU

GU

ST

SEPT

EMBE

R

OCT

OBE

R

NO

VEM

BER

DEC

EMBE

R

JAN

UA

RY

FEBR

UA

RY

MA

RCH

APR

IL

MA

Y

JUN

E

JULY

AU

GU

ST2008 2009

Mon

thly

Ton

nage

(MT)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Util

izat

ion

perc

enta

ge

Production Tons - NAFTA NAFTA - Rate of Capability Utilization

China - Rate of Capability Utilization ROW ex China - Rate of Capability Utilization

• Several NAFTA facilities have been restarted, after having been offline for close to a year. Some facilities have no future return date.

• The NAFTA economic recovery is still very fragile, and a return to pre-crisis steel production levels remains years away.

• The NAFTA and rest of world (ROW) utilization rates have stayed well below China’s rate.

While NAFTA Production Has Risen Recently, Capacity Utilization Is 30% Below 2008 Levels

6

The Great Recession of 2008-2009 Affected the Entire NAFTA Region

NAFTA Real GDP Since 2007

2.8

0.3

-6.2

-12

-10

-8

-6

-4

-2

0

2

4

6

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2007 2008 2009

Qua

rter

ly %

cha

nge

USA Canada Mexico

Sources: Bureau of Economic Analysis (US) , Statistics Canada, Canacero

7

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG

Met

ric

Tons

('00

0)

Source: World Steel Association, NAFTA Steel Trade Monitor

NAFTA Demand for Steel, Aug 2008 – August 2008

Steel Orders Collapsed After The Financial MeltdownAnd Still Have Not Recovered

• In the U.S., steel purchases were cut in half within 7 months (Aug. ’08 -Mar. ’09), and 50% of U.S. output was shuttered.

• In Canada, August 2009 shipments were 39% lower than a year earlier. A number of facilities remain idled or operating at reduced rates.

•In Mexico, ASC for 2009 (Jan – Sept) is 25% below 2008 levels. The September figure is 31% below the last peak (June 2008).

8

Since the statistical start of the Great Recession in December 2007, the U.S. Department of Commerce reported negative GDP for 5 of 6 Quarters (with 1Q ’09 being the worst, at -6.4%). Due to government stimulus funds, “cash for clunkers” and a first-time home buyers’ tax credit, 3Q U.S. GDP grew 2.8%. But consumer spending fell 0.5% in September, and the unemployment rate now stands at 10.0%,in what many economists are calling a “jobless recovery.”

The “Great Recession” Has Technically Ended, But The U.S. Economy Still Faces Major Challenges

Source: U.S. Department of Commerce, Bureau of Economic Analysis

Quarterly Change in U.S. Gross Domestic Product,

1997-2009

-8

-6

-4

-2

0

2

4

6

8

10

1997

1998

1998

1999

1999

2000

2000

2001

2001

2002

2002

2003

2003

2004

2004

2005

2005

2006

2006

2007

2007

2008

2008

2009

Perc

ent

9

30

35

40

45

50

55

60

65

70

Q3 2007 Q1 2009

From Q3 2007 to Q1 2009, U.S. Net Worth Fell by Over $13 Trillion, Or 20 percent

Net Worth of U.S. Household and Nonprofit Organizations (Trillions of $)

Source: U.S. Federal Reserve, Flow of Funds Accounts of the United States (March 12, 2009 and Sept. 17, 2009).

10

U.S. Housing Permits, Starts and Completions

0.25

0.5

0.75

1

1.25

1.5

1.75

2

2.25

2.5

2001

2002

2003

2004

2005

2006

2007

2008

2009

Mill

ion

Uni

ts

Permits Starts Completions

• The residential housing market has bottomed in the past 6 months – to 40-year lows.

• Home foreclosures are continuing to rise. Government incentives (e.g., a tax credit for first-time buyers) are helping, but limited. Tighter credit standards are reducing the pool of available new buyers.

• An uptick in the non-residential, commercial market is not expected until late next year.

Source: U.S. Department of Commerce.

The U.S. Construction Market Is Still Weak

11

0

500

1000

1500

2000

2500

thou

sand

uni

ts p

rodu

ced

2009YTD

2008YTD

Detroit 3 Production Jan-September 2009 vs. 2008

Chrysler

Ford

GM

While the “cash for clunkers” program has helped increase production and sales, “Detroit 3”production has declined by over 50% YTD vs. 2008.

With the end of this incentive program and with unemployment likely to stay high for several years, automotive production and sales are unlikely to return to pre-crisis levels for the medium term.

Source: Ward’s Automotive. * 2009 Annualized based on September year-to-date.

NAFTA Light Vehicle Production 1999-2009

17.0

17.2

15.5 16

.4

15.9

15.8

15.8

15.3

15.1

12.8

7.7

10.1 11

.80

2

4

6

8

10

12

14

16

18

20

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f 2011f

Mill

ions

of U

nits

The NAFTA Automotive Production Remains Deeply Depressed

12

MSCI Average Daily Shipments & InventoryFor U.S. & Canada Metric Tonnes (000)

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

2006JAN

JUL 2007JAN

JUL 2008JAN

JUL 2009JAN

JUL

Dai

ly S

hipp

ing

Rat

e

02,0004,0006,0008,00010,00012,00014,00016,00018,000

Inve

ntor

y

Daily Shipping Rate Inventory

Source: Metals Service Center Institute

NAFTA Service Center Inventories At Multi-Year Lows, But Reduced Demand Delaying Restocking

• Service center demand has fallen in line with overall steel demand.

• NAFTA service center shipments are off 30% vs. 1 year ago.

• As of October 2009, U.S. and Canadian service center inventories (2.3 months each) are at 5-year lows, but a lack of consumer confidence and low end-use demand are preventing restocking.

13

Bank Of Canada Senior Loan Officer Survey: 3Q 2009

-40

-20

0

20

40

60

80

Easier

Tighter

Canada: Economic Indicators ModeratingFrom Extremely Low Levels

Ivey Canadian Purchasing Managers IndexSince January 2007

20

30

40

50

60

70

80

90

Jan-07 Sep-07 May-08 Jan-09 Sep-09

Expanding

Contracting

Canada: Manufacturing Inventories Through August 2009 Canada: Manufacturing Sales Through August 2009

Sources: Bank of Canada, Richard Ivey School of Business, Statistics Canada

14

Mexico Economic Indicators: Worst In Latin America

Mexico: Credit to consumers (June 2009 / Var %)

Mexico: Gross Fixed Investment (July 2009 / Var %)

- 29 %

-14 % 2Q (09): – 10.1 %(The worst since 1930)

3Q(09): - 6.2 %

Mexico: Gross Domestic ProductIndex Oct. 2009 (%)

- 23.7 %• To Rest of the World

- 32.3 %- Autos

- 23.4 %• To United States

- 23. 5 %TOTAL EXPORTS

January – September 2009

Non-Oil Exports (September 2009 / Var % (annual)

15

Mexico Economic Indicators: Strongly Related To U.S. Economy

Rate of growth Mexican Exports vs US Imports (July 2009Var %)

Source: Oxford Economic & CAPEM and INEGI

Mex Exports: % var

US Imports: % var

Mexico: Remittancess (July 2009Var %)

- 15 % Very sensible

16

129.7

2008

97.082.7141.2155.7138.3149.0Finished Steel

2010 f2009 f 2007200620052004(mil. MT)

Apparent Steel Use (ASU)

Survey of the Short Range OutlookFall 2009 NAFTA Region

4.4%

492%

3.7%

4.9%

% Ch.vs.1982*

United States

12.9

8.8

60.3

67.7

2009

18.0%79.9Crude Steel Use

20.2%15.5Imports

12.5%9.9Exports

18.8%71.7Finished Steel Use

% Ch.’09/10

2010ForecastMillion MT

Canada

6.1

4.7

10.3

12.2

2009

12.8%13.7Crude Steel Use

8.2%6.6Imports

36.2%6.4Exports

13.6%11.7Finished Steel Use

% Change2010

ForecastMillion MT

Mexico

2.5

1.7

12.1

17.5

2009

12.7%19.7Crude Steel Use

52.0%3.8Imports

-23.6%1.3Exports

12.3%13.6Finished Steel Use

% Change2010ForecastMillion MT

While Global Insight is forecasting that U.S. ASU will return to pre-crisis levels by 2012, key metrics in the U.S. economy -- including unemployment levels and manufacturing production -- leave doubt that steel demand in the United States will recover fully to pre-crisis levels even in 3 years’ time.

Source: Worldsteel Association Economic Studies Committee

2009-2010 NAFTA Region Steel Use Expected To Remain Far Below 2004-2008 Levels

* The lowest annual steel demand in the U.S. in the post-WWII period was recorded in 1982, at 68.6 million MT.

17

World Crude Steel Capacity 2000-2011

1,062 1,062 1,0951,170

1,2451,356

1,453

1,583

1,8161,917

1,997

1,654

588

677

740783

804

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Wor

ld S

teel

Cap

acity

/Dem

and

(thou

sand

met

ric to

nnes

)

0

100

200

300

400

500

600

700

800

900

Chin

ese

Cap

acity

(tho

usan

d m

etric

tons

)

World Crude Steel CapacityFinished steel useChinese Capacity

…While World Capacity Continues to Grow

Source: Worldsteel Association

18

NAFTA capacity growth slows due to reduced demand during economic crisis75 million tons of underutilized capacity in 2009

Source: World Steel Association

… And NAFTA Capacity Additions Are on Hold

NAFTA Crude Steel Capacity and Demand 2005-2009

149156 155 158 160

0

25

50

75

100

125

150

175

200

2005 2006 2007 2008 2009

Ste

el C

apac

ity (t

hous

and

met

ric

tonn

es)

0

25

50

75

100

125

150

175

200

NAFT

A S

teel

Dem

and

NAFTA Crude Steel CapacityNAFTA APPARENT DEMAND

19

II. NAFTA Steel Trade Situation

20Source: NASTA Monitor, US Dept. of Commerce, Global Trade Atlas

NAFTA Steel Mill Products Trade Balance:A Fundamentally Different Situation For The Medium Term

NAFTA Imports and Exports of Steel Mill Products

(27,775,535)(23,909,952)

(38,622,092)

(21,571,987) (18,296,095) (9,387,570)

(40,000,000)

(30,000,000)

(20,000,000)

(10,000,000)

-

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

2004- 2005- 2006- 2007- 2008- 2009*

Met

ric T

onne

s

NAFTA Imports NAFTA Exports Balance of Trade

• The NAFTA market is open to fairly traded steel, and the NAFTA region has historically been a net steel importing region.

• YTD in 2009 -- given the depressed market conditions and the low capacity utilization rate --the NAFTA steel trade deficit is the lowest it has been for many years.

• For the medium term, the NAFTA steel industry has more than ample capacity to meet the needs of both domestic and offshore customers.

20* 2009 Annualized based on 8 months.

21

Source: NAFTA Steel Trade Monitor, US Department of Commerce, Canacero and World Trade Atlas.

NAFTA Imports During Crisis Period

NAFTA Imports 2008 & 2009 - Monthly

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG

Met

ric

Tonn

es

NAFTA External Imports NAFTA Internal Imports

• Steel imports from other regions exceeded intra-NAFTA steel trade when the market collapsed.

• Non-NAFTA imports at first surged, and then declined but have maintained a relatively high market share.

• Imports from China peaked in October 2008.

22Source: US Department of Commerce and World Trade Atlas

NAFTA Exports During Crisis Period

NAFTA Exports 2008 & 2009 - Monthly

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

JAN2008

FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN2009

FEB MAR APR MAY JUN JUL AUG

Met

ric

Tonn

es

NAFTA External Exports NAFTA Internal Exports • NAFTA producers send only a small portion of steel produced outside the region.

• During 4Q ‘08, intra-NAFTA steel trade declined sharply, more or less in line with the steep decline in market demand.

23

III. Growing Concerns About NAFTA Manufacturing

24

NAFTA Manufacturing Capacity Utilization Remains Significantly Below Pre-Crisis Levels

Source: U.S. Federal Reserve Board, Statistics Canada

Canada & U.S. Manufacturing Utilizaton

50

55

60

65

70

75

80

85

1st 2nd 3rd 4th 1st 2nd 3rd

2008 2009

Ut il

izat

ion

%

US Manufacturing Utilization Canada Manufacturing Utilization

25

NAFTA Manufacturing Employment Since 2007

13

13.5

14

14.5

15

15.5

16

16.5

2007 2008 2009

Mill

ions

Source: U.S. Bureau of Labor Statistics, Statistics Canada

Nearly 3 Million More Lost NAFTA Manufacturing Jobs During the Economic Crisis (2007-2009)

26Source: US Department of Commerce

Mexico Manufacturing: 13 Months With Negative GrowthMéxico: Industrial Activity Index

(August 2009 / Annual % rate of growth)

México: Manufacturing Activity Index (August 2009 / Annual % rate of growth)

México: Manufacturing Employment Index (August 2009 / Index: 2003 = 100)

• Main affected sectors:

. Transport equipment: -23.8%

. Machinery -16.3%

. Furniture: -14.5 %

. Metal products: -13.1%

. Steel: - 7.7 %

- 10.8 %

27Source: US Department of Commerce

US Trade Deficit - Manufacturing

166 206 240 267 279

277297

289 237 178

-

100

200

300

400

500

600

2004 2005 2006 2007 2008

$ B

ILLI

ON

CHINA NON-NAFTA (excl. China)

U.S. Trade Deficit - Manufacturing2009

108 124

33

95

-

50

100

150

200

250

6 MO. 2009 6 MO. 2008

$ (B

illio

n)

CHINA NON-NAFTA (excl. China)

• While the U.S. manufacturing trade deficit has declined during the 2008-09 recession, China’s share has increased and, through the 1st 6 months of 2009, China accounted for 78% of this deficit.

China Accounts For A Growing Share Of The U.S. Manufacturing Trade Deficit

28Source: AISI estimates (2009 annualized), based on U.S. Department of Commerce and Global Trade Atlas value data

NAFTA Indirect Steel Trade Deficit DownBut Remains Significant Area of Concern

NAFTA Indirect Steel Trade Balance With The Rest Of The World(excluding intra-NAFTA trade) 2000 - 2009

-9.9 -11.2 -12.8 -10.8 -11.5 -12.6 -13.9 -11.8

-1.4-1.4

-1.7-1.9 -2.2

-2.6-3.1

-2.8 -2.94-3.5

-1.6-2

-2.2-2.2

-3.2-3.7

-4.2-4.4 -4.18

-3.52

-8.0-11.0

-25

-20

-15

-10

-5

0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009Mill

ions

of M

etric

Ste

el T

ons

Equi

vale

nt

United States Canada Mexico

29

Given the fundamental changes that have occurred in the NAFTA and global economies, North America’s steel producers support:

• Restoring a policy commitment to North American manufacturing as a foundation for renewed economic growth and sustainable employment in the near and longer term

• Expanding trade based on internationally accepted rules and comparative advantage –not government-supported mercantilism

• Ensuring strong and effective trade laws throughout the NAFTA region to deal with market-distorting practices

• Addressing currency misalignments that create artificial competitive advantages

• Ensuring that climate change policies are both environmentally and economically effective, and do not generate new trade and investment distortions due to regulatory differences

Key Policy Messages