Thomas A. DanjczekPresidentSteel Manufacturers AssociationSeptember 13, 2011

Changing Times in Steel – Safety & Markets

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Outline

•SMA

•Safety

•Changes

•Steel Demand Drivers & Forecasts

•Raw Materials

•What the U.S. Needs to Do

•Final Thoughts

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About the SMA

-Composed of 35 North American electric arc furnace (“EAF”) steel producing Member Companies, and 123 Associate Member steel industry suppliers

-Today, roughly two-thirds of U.S. steel production comes from the scrap-based EAF process, up from just 10% in the early 1970s

-SMA Members account for approximately 80% of total domestic steel capacity

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SMA Safety OverviewKey Drivers to the SMA Safety Committee Success

• Safety Committee Meetings

• Safety Statistics Benching

Marking

• Fatality Prevention Initiative

• Workplace Specific Safety

Surveys• Sharing of Site-Specific Best

Practices

• SMA Safety Website

• Upstream/Downstream

Safety Awareness

• Education & Outreach

• First Hand Governmental

Compliance Awareness

• SMA Safety Awards

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Key to SMA Safety Committee SuccessKey Drivers to the SMA Safety Committee Success

• Need within our industry (2003)

– 14 fatalities…

• Strong initial leadership

• Board top down directives (at every meeting)

• Involved core industry members (i.e. 4 leaders plus 6

additional) in planning, soliciting, “boots on the

ground”

• Inclusive

– Union and non-union

– Companies and suppliers

– Safety professionals , safety committees, production

managers, and “hourly” employees

• Awards and Recognitions

• OSHA involvement

• More focus on industry specific

process and procedures versus

governmental regulations

• Costs

- None additional to SMA

- Modest hotels

- Cohesive and full schedule, all

work…

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- Meetings are held in the spring and fall each year

- Attendance averages around 100 members, associate members, and

guests

- Opportunity for sharing information on best practices and new safety

tools and protection

- Includes a presentation from an OSHA representative

- OSHA Director Dr. Michaels addressed group in fall 2010 in Arlington, VA

- Usually include an optional plant tour

SMA Safety Committee MeetingsSFSA Annual Meeting

Held on March 2011 in Jacksonville, Florida

•141 Attendees (member company representatives and associate members)• OSHA Update from Compliance Assistance Specialist • Optional plant tour of Gerdau Jacksonville Mill• Agenda Items Included

– Addressing Contractor/Trucking Fatalities– Truck Driver Fall Protection– Mobile Equipment Lock Out and Maintenance– Pedestrian Pathways– Electrical Safety NFPA 70E Compliance– Surviving an OSHA Inspection– Industrial Hygiene: Hex Chrome and Crystalline Silica– Aging Workforce– First Aid– Emergency All Call Systems– Unsafe Act Audits– Duel-Hearing Protection

Spring 2011 SMA Safety MeetingSFSA Annual Meeting

SMA Safety StatisticsSMA Members voluntarily report monthly data on number of recordable cases, lost workday cases, days lost, and hours worked.

Compiled year-to-date data is circulated to members as a spreadsheet each month.

Company A Company B Company C Company D

0

2

4

6

8

10

12

14

16

18

20

Lost Time

Recordables

First Aids

SMA Safety DocumentsSMA’s safety documents do not provide an industry standard, and do not set industry best practice.

These surveys and guides are intended as tools to assist individuals and companies in their efforts to prevent injuries in the steel industry.

The purpose is not to take the place of an individual company policy or procedure, but rather to provide general procedures and practices to assist member companies in developing safe procedures as part of a comprehensive safety program.

Fatality Prevention Initiative

Addresses Six (6) critical areas:

1. Confined Space;

2. Fall Protection; Lockout-Tryout;

3. Mobile Equipment

4. Material Handling; and

5. Rail

6. Cranes (Completed in 2011)

Focusing on five priorities in addressing crane fatalities:

◦ operator visibility and attentiveness;

◦ maintenance;

◦ fall hazards;

◦ charging the EAF/ladle handling; and

◦ non-routine procedures

Videos to be completed by the end of summer and introduced to the SMA in October 2011

SMA Safety SurveysRegular questionnaires distributed by member request to address specific safety topics – anonymous results shared with all members

-Topics have included: prescription medication,

aerial lifts/permits,

cellular phone policies,

heat illness/fruit program,

hot works permit/fire prevention,

protective eyewear/sealed eyewear,

lifting and rigging/inspections,

motivational safety speakers,

safety incentives,

hearing protection/NRR/sized ear plugs

kevlar FR jackets,

measuring annual safety performance

SMA Safety Websitewww.steelsafety.org

-Notes and presentations from Committee meetings, 2002-2011

-Safety survey results, grouped by date and topic

-Meeting notes grouped by date

-Presentations from meetings grouped by date and topic

-Catalogue of company incident and near miss reports

-Fatality Prevention – document, audit tools, and videos

-Radiation safety resources

Contractor Safety

SMA members have many contractors that work on our sites exposing the facility to higher exposure to risk. Improving the safety of the industry means that we must also improve contractor safety on our sites.

Many SMA members utilize contractor management systems that allow host steel companies to only allow contractors on-site who have demonstrated past positive safety performance, and have the safety programs in place to ensure safe job performance

Contractors are frequently invited to participate in and contribute to company safety committees

Spring 2011 meeting included a focus on Contractor Safety

Education & OutreachSMA partnering with the Association for Iron & Steel Technology to fund Don B. Daily Memorial Fund to promote steel industry safety and health

Will challenge North American university teams (students and professors) to submit proposals for grant funding in the theme area of safety and health awareness within the steel manufacturing industry

Dual objectives: promote safe workplaces for the steel manufacturing industry, and increase the number of students studying health and safety awareness relative to the manufacturing environment

SMA Board of Directors recognizes outstanding safety performance through the annual Don Daily SMA Achievement in Safety Award. ◦ 2011 recipient:

Chris Bullard and the Logistics Team Gerdau Ameristeel Midlothian

SMA Safety Awards

Safety ConclusionsSMA members have made great strides, and will be relentless in pursuit of continuous improvement until we achieve zero injuries in our workplaces

SMA members have benefited from relationship with OSHA, including speakers at meetings, training resources, and cooperative programs

The SMA, through its members, has been a driving force in improving safety performance

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SFSA Annual Meeting Changes

Deeper Recession

Variable Cost Control

Engineers

Scrap Prices

High Unemployment

Labor Intensity

Inventory Levels

China

Safety

Consolidations

Customer Requirements

Environmental Regulations

Foreign Ownership

Transportation Costs

Ore Prices

Energy Costs

Currency

State-Owned Enterprises

Other Factors…

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SFSA Annual Meeting Steel Changes

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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F40%

50%

60%

70%

80%

90%

100%

Capacity Utilization (%)

Raw steel capacity utilization may reach 75% in 2011

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Finished steel demand drivers in US

Actual Fitted

Three variables drive demand:• NA auto build• Non-residential construction• Appliance shipmentsR² = 85%

Source: First River

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U.S. finished steel demand forecast

Actual ADC

Forecast

Source: CSM, FW Dodge, AHAM, First River

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Auto build & non-res construction expected to recover, but not to previous peak NA Auto Build (Million Units)

23Source: CSM Worldwide, FW Dodge

ForecastNon-Res Construction

(Million Sq. Feet) Forecast

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U.S. net imports expected to remain lowerUS Imports & Exports

(Million Tons)

25Source: AISI, First River

Net Imports & US Dollar

Net Imports as % of demand(3 year rolling average)

$ IndexImports (%)

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• Recovery underway, but slow

• Increased exports and imports (5mmt of semi’s imports) YOY

• Not normal cycle of recession, overcapacity

• Relative strong demand in auto; construction lagging

Comments on Current U.S. ProductionSFSA Annual Meeting

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Raw Material Cost and Availability is #1 Issue for NAFTA Producers

• Many countries continue to impose a variety of restrictions on exports of vital raw materials

– Export prohibitions

– Export duties

– Export quotas

– Other measures

• Trade-distorting restrictions on exports of raw materials

– Give domestic producers in the exporting country an unfair advantage

– Increase worldwide costs of production

– Place a heavy burden on steel industries in developing countries that do not have substantial iron ore reserves or steel scrap supplies

Raw MaterialsSFSA Annual Meeting

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World Scrap Supply and Consumption, By Region

World Scrap Supply, 2008

0

20

40

60

80

100

120

EU Turkey CIS NAFTA Latin America China Japan Other Asia

Mil

lio

n M

etr

ic T

on

s

Domestic Supply

Apparent Consumption

Source: World Steel Association

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0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

To

tal Q

ua

ntit

y E

xpo

rte

d (

Me

tric

To

ns)

2004 2005 2006 2007 2008 2009

Source: U.S. International Trade Commission - Dataweb

U.S. Scrap Exports to China - 2004 - 2009

While China Restricts Exports of Scrap, U.S. Exports to China Have Surged

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What does the U.S. need to do?

• Assume a Pro-Manufacturing Agenda– Business Tax Reform– Border Adjustable Taxes– Currency Adjustments– Energy Independence– Reasonable regulatory measures (Environment/Labor)– Climate for investments (Jobs, Jobs, Jobs) and Infrastructure

• Solve the structural problems that caused the recession - Real Foundation

– Bad loans and securities on bank balance sheets– Reduce huge trade deficits

• Policy incrementalism is not sufficient

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Final Thoughts

• Ultimately, the world needs greater total supply of scrap and steel• U.S. is in a traffic jam, moving slightly forward, but don’t know other consequences.

Don’t look to Washington, DC for help• Environment of uncertainty and volatility will continue in U.S. industry until economic

fundamentals are in equilibrium• In U.S., dissatisfaction/perception that U.S. Government is not tackling the right

issues (i.e. “It’s the economy, stupid.”)• Reasons for optimism in steel in U.S.:

– Scrap-based, 70% of cost – local supply– Low cost on global basis (energy is neutral, labor less than 10%, others have

higher transportation costs)– Relatively strong U.S. market and U.S. resiliency– Better U.S. company balance sheets

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