Steel Industry Outlook Georgia State University May 2009 Agenda - PowerPoint PPT Presentation

Steel Industry Outlook Georgia State University May 2009

Agenda • Company Profile • Market Indicators • Steel consuming markets • Risks • Summary 5/20/2009 Confidential 1

The world’s number one steel company • The largest steel company in the world • 320,000 employees • Operations in more than 60 countries • Manufacturing facilities in 20 countries • 2008 revenue of almost $125 billion • 1500 scientists and 14 research centers in Europe and the Americas • Products include – Flat rolled steel – Bars and Structurals – Plate – Stainless steel – Electrical steels – Pipe and tube • Our Vision: “ To be the World’s Most Admired Steel Company ” • Our Slogan: “ Transforming Tomorrow ”. 5/20/2009 Confidential 2

Leading position in the most attractive markets A global steel production of 116 million tonnes (2007) Market position and market share estimates by region* No 1 in Eastern No 1 in No 1 in Europe and CIS Western Europe North America 11% 26% 23% 74% 89% 77% No 1 in Africa No 1 in South America 47% 24% 53% 76% Number 1 in 5 regions and 4 continents ArcelorMittal 5/20/2009 Confidential 3 *Source ArcelorMittal estimates based on IISI crude steel production Other

North American Operations • The largest steel company in North America • 20,000 employees in USA • North American legacy companies include: – Bethlehem Steel – LTV Steel – Inland Steel – Acme Steel – Weirton Steel – Dofasco, Canada 5/20/2009 Confidential 4

5 Steel Market Outlook Confidential 5/20/2009

Industrial Production Manufacturing Only Recession of 2001 Through April 2009 120 83 81 115 Production Index 79 % Utilization 77 110 75 73 105 71 69 100 67 95 65 '00 '01 '02 '03 '04 '05 ,06 '07 '08 Jan Index Utilization U.S. manufacturing activity fell precipitously beginning in late 3Q’08. Manufacturing Production Index and Capacity Utilization –U.S. Federal Reserve 5/20/2009 Confidential 6

ISM Manufacturing Index 2006 through April 2009 57% Future 52% Expansion 47% 42% Future Contraction 37% 32% 2006 2007 2008 J-09 Manufacturing index drops to 32.4% in November. Recession zone of ISM is 40-45%. The New Orders component of the index is the lowest since 1948. This index is usually predictive of manufacturing activity across the next ~6 months. 5/20/2009 Confidential 7

Weekly US Raw Steel Production Capacity Utilization (Capacity reduction as demand falls) 90% 80% 70% 42.1% 60% May 1 50% 40% 33.5% Dec 27 30% Jan-08 Mar-08 May-08 Jul-08 Sep-08 Oct-08 Dec-08 Feb-09 Apr-09 Source: American Iron & Steel Institute 5/20/2009 Confidential 8

Raw Steel Production 2008 and 2009 • 1st Quarter: 27.5m tons, 2.1m tons / wk • 2nd Quarter: 27.6m tons 2.1m tons / wk • 3rd Quarter: 27.2m tons 2.0m tons / wk • 4th Quarter: 18.5m tons 1.5m tons / wk • 1st Quarter 2009: 13.6m tons 1.03m tons / wk Source: American Iron and Steel Institute 5/20/2009 Confidential 9

Scrap $890 Flat scrap prices with no $785 $850 significant change expected in 2009 $720 short term. $570 $600 $430 $420 $340 $332 $322 $310 $300 $300 $290 $410 $255 $260 $220 $195 $170 $125 2008 2007 J- A- S- O- N- D- J- F- M- A- M- J- J- A- S- O- N- D- J- F- M- A- 07 07 07 07 07 07 08 08 08 08 08 08 08 08 08 08 08 08 09 09 09 09 Source: American Metal Market 5/20/2009 Confidential 10

Pig Iron $796 $789 $740 $731 Pig iron prices will not recover $653 2009 until scrap demand improves. $613 $510 2007 $417 $395 $377 $358 $341 $316 $306 $306 $304 $297 $290 $250 $241 $227 $214 2008 J- A- S- O- N- D- J- F- M- A- M- J- J- A- S- O- N- D- J- F- M- A- 07 07 07 07 07 07 08 08 08 08 08 08 08 08 08 08 08 08 09 09 09 09 Source: American Metal Market 5/20/2009 Confidential 11

In 2008 Steel Markets Outperformed the Overall Economy • Weakening Markets • Non-residential construction • Energy (line pipe, OCTG) • Machinery • Mining • Farming • Infrastructure (highways, roads, bridges) • Exports • Weak Markets • Auto • Banking and Financial • Residential Housing 5/20/2009 Confidential 12

Idled capacity • 33 Blast Furnaces in the U.S. and Canada • 20 are idled 5/20/2009 Confidential 13

U.S. GDP Forecast 4.8% 4.8% GDP growth forecast = 2008: 1.1% / 2009: -3.5% 2.8% 0.9% 0.2% 0.7% 0.0% 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 -0.2% -0.5% -2.5% Actual Forecast -6.3% -6.1% Source: Global Insight 5/20/2009 Confidential 14

Housing Starts Millions of units Actual 2.07 1.95 Forecast 1.85 1.81 1.71 1.60 October 2008 (Nov. 19 release) has the 1.34 following SAAR: 1.082 1.Housing Starts at 0.927 791,000 0.715 2.Building Permits at 708,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Global Insight Forecast has housing market hitting bottom in 2Q09 . Regardless of when the bottom hits, a very slow recovery will proceed. 5/20/2009 Confidential 15

Investment - USA Fixed Non-Residential and Residential (% change in $) 10% Forecast 5% 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 -5% -10% -15% -20% Non-Residential Residential -25% Source: Global Insight, May 2009 Residential investment (housing, remodeling, etc) is having another very tough year while non-residential investment (plants, equipment, computers, etc) began to decline in 2009 after 6 years of strong growth. 5/20/2009 Confidential 16

Non-Residential Construction Demand Non Residential Steel Consumption US Non-Residential Building - Floor Area (Millions of Estimated Non-Residential Building Steel Square Feet) Consumption (in Tons) 16,000,000 1800 1670 1668 -22% 1606 1600 1517 14,000,000 13,360,000 13,344,000 1443 12,848,000 1428 Floor Area (Millions of Square Feet) 1368 12,136,000 1333 1400 11,544,000 12,000,000 11,424,000 10,944,000 10,664,000 1200 1063 10,000,000 8,504,000 1000 Tons 8,000,000 800 6,000,000 600 4,000,000 400 2,000,000 200 0 0 2001 2002 2003 2004 2005 2006 2007 2008 2009F 2001 2002 2003 2004 2005 2006 2007 2008 2009F Assumptions : -Actual data for square footage per McGraw-Hill Spring 2009 Outlook. -Steel consumption based on average steel weight developed by ArcelorMittal USA. -Degree of accuracy for model is unknown, for estimation purposes only. 5/20/2009 Confidential 17

Automotive Sales • In 2009 the auto market will continue to buck serious headwinds. Cyclical downturn, USA Sales economic uncertainty, and structural changes (millions of units) contribute to depressed sales outlook. 18.2 • High gas prices in 2008 started to change the vehicle mix that consumers want. Auto companies did not respond fast enough to the change. Small cars gained market share and 16.2 demand for large trucks and SUVs has not come back. • Tightness in consumer credit is now cutting off sales. 14.2 • Residual values for gas guzzlers is low. Consumers are choosing to delay purchase decisions. • The continuing slump in housing is depressing 12.2 pickup truck sales. • 2008 4th quarter sales rate (10.3 million units) was below the replacement rate (about 13 million units/yr). 10.2 • With severe sales declines from 2008 to 2010 0 1 2 3 4 5 6 7 8 9 0 1 2 3 0 0 0 0 0 0 0 0 0 0 1 1 1 1 pent up demand offers some upside potential 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 in the next decade. Source: JD Power & Associates 5/20/2009 Confidential 18 Last update: March 2009

Automotive Production • 2009 forecast is the lowest production NA production total since the early 1980’s. (millions of units) • We will see production cuts by all 19.2 manufacturers and nearly all segments. Detroit 3 will be 1.7 million units lower in 2009 vs 2008. Honda, Toyota, and Nissan will be 260,000 units lower in 2009 17.2 vs 2008. • Detroit 3 to account for 54% of production in 2009, down from 63% in 2007 & 58% in 15.2 2008. • Pass car will account for 53% of production. 13.2 • Total imports dropped in 2008, 4.2 million, but gain in share, 33% vs 30%, vs 2007. Imports will gain marginal share in 2009, 11.2 due to mix change from trucks to cars. • No inventory rebuild in 2009. OEMs remain vigilant. 9.2 • Toyota Woodstock and Honda 0 3 5 7 9 1 3 0 0 0 0 0 1 1 Greensburg ramp up in 2009. Hyundai, 0 0 0 0 0 0 0 2 2 2 2 2 2 2 Georgia, starts in late 2009. Source: JD Power & Associates 5/20/2009 Confidential 19

NAFTA Auto Production 4.0 3.8 3.6 3.5 3.5 3.5 3.0 2.7 2.6 2.5 1.9 1.7 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 2007 2008 2009 Source: J.D. Power & Associates 5/20/2009 Confidential 20

USA Energy Market Steel Demand million of tons 6 5 4 2006 2007 3 2008 2 2009 1 0 line pipe OCTG Source: Preston Pipe & Tube Report 5/20/2009 Confidential 21

Wind Power U .S. Installed Capacity 5,000 MW new capacity expected in 2009 2008 2006 Plate consumption of 125 tons per wind turbine or over 375,000T in 2007 2004 2002 2000 -3,000 2,000 7,000 12,000 17,000 22,000 27,000 Megawatts Source: AWEA 5/20/2009 Confidential 22