Program

Tuesday, June 21

8:35 am Welcome: Martin Abbott, Publisher, AMM

8:45 am Keynote Presentation: Steel Surprise Strategies, Success or Survival for Whom?

Peter F. Marcus and Karlis M. Kirsis, Managing Partners, World Steel Dynamics

9:15 am Highlight Speaker: Leo W. Gerard, International President, USWA

10:30 am Panel I: Steel in the Americas: What New Behavior Patterns?

Moderator: Martin Abbott, Publisher, AMM

Panelists: Donald F. Barnett, President, Economic Associates Inc.

Keith Busse, President & CEO, Steel Dynamics Inc. Alejandro M. Elizondo, President & CEO, Hylsamex, Mexico

Donald A. Pether, President & CEO, Dofasco Inc., Canada

David Sutherland, President & CEO, Ipsco Inc.

James L. Wainscott, President & CEO, AK Steel

12:00 noon Luncheon Speaker:

Lakshmi N. Mittal, Chairman and CEO, Mittal Steel Co., UK, introduced by Thomas C. Graham, Principal, TC Graham Associates

2:15 pm Panel II: Global Steel: Fewer Players and Tight Metallics: What's the Consequence?

Moderator: John Lichtenstein, Partner, Accenture LLP

Panelists: Phillip E. Casey, Chairman and CEO, Gerdau Ameristeel

Antonio Marcegaglia, CEO and Managing Director, Marcegaglia, Italy

Alexei Mordashov, Chairman of the Board, Severstal Group, Russia

Masatoshi Nakamura, Vice President, JFE Steel Corp., Japan

Konstantin Pisarchuk, Deputy Director for Strategy, Azovstal, Ukraine

Louis Schorsch, Chief Executive Officer, Mittal Steel USA

3:30 pm Panel III: Buyers to Lament or Rejoice in 2005?

Moderator: Peter F. Marcus, Managing Partner, World Steel Dynamics
Panelists: C. Lourenco Goncalves, President and CEO, Metals USA Inc.

Joseph W. Harden, President, Worthington Steel Co.

Patrick A. McCormick, Vice President, Global Steel, Emerson

Ralph Oppenheimer, Executive Chairman, Stemcor, UK

Bud Siegel, President and CEO, Russel Metals Inc, Canada

Dave Styka, Senior Sourcing Manager, International Truck & Engineering Corp.

If you enjoyed New York's Conference in June, you will love the London Program in November!

STEEL SUCCESS STRATEGIES - EUROPE III

A joint effort of Metal Bulletin and World Steel Dynamics

November 27-29, 2005

2006: Delight, Delirium or Disaster?

Royal Lancaster Hotel
London, England

For registration information -

Tel: +44 (0) 207 827 9977 Fax: +44 (0) 207 827 5292

Email: enquiries@metalbulletin.com Online: www.metalbulletin.com

Wednesday, June 22

8:30 am Panel IV: Steelmakers' Raw Materials: No Price Inflation After 2005?

Moderator: Michael Marley, Secondary Materials Editor, AMM Panelists: Andrew Aloe, President, Shenango Inc.

Benjamin M. Baptista Filho, Commercial Director, CST, Brazil

John Brinzo, Chairman and CEO, Cleveland Cliffs

Neil Bristow, Chief Analyst, BHP Billiton, Australia

Alberto Hassan, President, HBIA Association, Venezuela

Blake Kelley, Vice President, Hugo Neu Corp.

10:00 am Keynote Presentation:

Daniel R. DiMicco, Vice Chairman, President and CEO, Nucor Corp.

11:00 am Panel V: China & India: Controlling the Mind and Body of the Global Steel Industry?

Moderator: Peter F. Marcus, Managing Partner, World Steel Dynamics
Panelists: Ashis Das, Director Raw Materials and Planning, SAIL, India

Guo Jianhua, Vice President, China Coal & Coke Holdings Ltd., China

Jim Lennon, Executive Director, Macquarie Bank, UK

T. Mukherjee , Deputy Managing Director, Tata Iron & Steel, India

Prashant Ruia, Managing Director, Essar Steel Ltd., India

Dr. Zhongbo Xu, President, Beijing Metal Consulting Ltd., China

Zhu Jingchang, General Manager, Minmetals Steel Co., Ltd., China

12:15 pm Luncheon Speaker:

Dr. C. Fred Bergsten, Director, Institute for International Economics

2:00 pm Panel VI: Bankers Optimistic, Investors Paranoid. Who's Crazy?

Moderator: Rodney Mott, Former President and CEO, International Steel Group

Panelists: Dieter Hoeppli , Managing Director, UBS Securities

Jeffrey M. Kabel, Vice President, Koch Metals Trading Ltd.

Aldo Mazzaferro, Vice President, Goldman Sachs & Co.

Robert M. Miller, Managing Director, Miller Mathis & Co., LLC

James S. Tumulty, Senior High Yield Trader, Raymond James and Assoc. Inc.

Spiro Youakim, Director, European Metals & Mining, Citigroup, UK

3:15 pm Panel VII: Technology to Untie the Industry's Straightjacket?

Moderator: Peter F. Marcus, Managing Partner, World Steel Dynamics
Panelists: Gianpietro Benedetti, Chairman & CEO, Danieli & C. SpA, Italy

Gerhard Falch, Chairman, Voest-Alpine Ind., Austria

Shohei Manabe, General Manager, Iron Unit Div., Kobe Steel, Japan

Kay Mayland, President and CEO, SMS Demag, Germany

Richard L. Wechsler, General Manager, Intl. Business, Nucor Corp.

Steel Success Strategies XX

Metallics Mania/Shock Therapy

The conference this year set a record attendance mark, surpassing 1,100 delegates. Last year, the presentations focused on the 2004 global steel shortage and the widespread raw materials tightness. But what a difference a year makes. The 2005 conference reflected massive uncertainty in the market-on the part of both buyers and sellers-regarding the direction of pricing in the near future.

Delegates and panelists alike appeared to be equally divided as to whether prices would rebound in the second half of the year. Steel buyers grumbled about the "shabby" treatment they received at the hands of steelmakers last year--in the form of breaking contracts. There is renewed apprehension of more steelmakers in the United States declaring Chapter 11 bankruptcy in late 2005 and 2006.

Highlights: Keynote and luncheon speakers

· Peter F. Marcus and Karlis M. Kirsis, managing partners, World Steel Dynamics. Their keynote address, "Steel Surprise Strategies, Success or Survival for Whom?" was e-mailed to WSD subscribers on Thursday, June 23^rd. A hard copy of the full presentation (the same as that distributed at the conference, with text, tables and charts) was also sent via regular mail.

· Leo W. Gerard, international president of the USWA, used much of his time as the first keynote speaker at the conference to stress the need to fix the US healthcare system. "We've got to deal with exploding healthcare costs," he said, "When you look around the world there is no country that delivers health care to its citizens at the (high) cost that the US does.

We (the union) worked with the capital companies and steel company management to get through the last steel crisis. Now, we must change health care in some way. We need a national health-care solution."

· Lakshmi N. Mittal, chairman & CEO, Mittal Steel Co., who was introduced by Thomas C. Graham, Principal, TC Graham Associates, noted, "the foundation now exists for the steel industry to create a sustainable business model that should over time lead to a re-rating of the sector." He added that the year 2004 proved that companies in the steel industry have the ability to create considerable value.

Mr. Mittal said that the biggest opportunity for GDP-driven growth in steel demand in the future would come from "BRIC" countries (Brazil, Russia, India and China). "If the economies of these countries continue to develop at the anticipated growth rates," Mittal said, "demand growth for the steel industry has the potential to continue at around 3-5 percent over the foreseeable future."

· Daniel R. DiMicco, vice chairman, president and chief executive officer of Nucor Corp., remarked that governments in China, India and Brazil-as well as others-are supporting the addition of massive amounts of steel capacity that should be scrapped. "It is capacity that is well above their domestic needs," he said. "The governments of the world need to stop such foolishness."

DiMicco noted that in Nucor's case, the company would work to achieve long-term economic growth by improving on the business culture instilled in the company by its founder, the late F. Kenneth Iverson, and by working to advance breakthrough technologies, and at the same time cultivate global/customer relationships, via its Castrip LLC and Hismelt projects.

· Dr. C. Fred Bergsten, director, Institute for International Economics in Washington, DC, was bullish about the global economic outlook through 2006-largely because of the twin "locomotives" of the United States, which is experiencing 2.5-3% GDP growth in 2005, and China, which is growing at more than twice that rate. An "upside surprise" for the world's economy could happen in Germany, where Bergsten said new reforms could spark spending later this year. German savings are in the range of 9-14%, and if its economy rebounds robustly, there could be a ripple effect into Italy and France. A spike in energy prices, however, could derail global growth, along with a more rapidly weakening US dollar than expected. Bergsten noted that a sharp boost to $80-90 per barrel for oil, along with a free-falling US dollar could result in a 1970s-type "stagflation economy."

Panel I: Steel in the Americas: What New Behavior Patterns?

Panelists agreed that smaller companies can survive long term if they find their market niches and can serve them well. The industry leaders discussed at length the changes the industry has gone through in the past 12-18 months-especially the impact of consolidation and its ability to bring newfound discipline to what traditionally has been an unruly market.

Donald F. Barnett, steel industry consultant and president of Economic Associates Inc., Great Falls, Va., noted that some mills will survive and some won't. "If you have a well-defined niche, you can survive," he said. "But there are a few players who have problems. They will be vulnerable at some point in time to being taken up by one of the (larger) merger partners."

Keith Busse, president and chief executive officer of Steel Dynamics Inc. (SDI), Fort Wayne, Ind., said there is room for smaller independents if they act properly in the market. "It is important to invest in cutting edge technology because that can help companies deal with the cycles in the business that we all have to face," he remarked. "The ability to face those challenges will afford those companies greater leverage in the down cycles."

Alejandro M. Elizondo, president and CEO of Mexico's Hylsamex, addressed the impact of consolidation from the perspective of his company's recent involvement in the process with the Techint Group. "I think the smaller mills will still be able to succeed as niche players, but it is becoming increasing difficult to find that position," he said. "For the majority of players, it is easy to participate in the consolidation process-but it is not easy to find that niche for the smaller companies."

Donald A. Pether, president and chief executive officer, Dofasco Inc., Hamilton, Ontario, Canada, agreed that the independent companies that survive will do so only if they are the right size in the markets they serve. They must also maintain reasonable access to raw materials.

David Sutherland, president and chief executive officer of Ipsco Inc., Lisle, IL contended that his company is the right size for its markets. "On a global basis, we are one of the smaller players," he said, "But we think on a regional scale, and in the two products we make (carbon steel sheet and plate), we are quite large."

James L. Wainscott, president and CEO, AK Steel, Middletown, OH, responded to speculation concerning its own place in the consolidation process by saying, "We looked at a number of options about six quarters ago. You have to pick your niches. That strategy has served us well with our customer base. Will it protect us forever? Perhaps not. But we have to be competitive from a cost standpoint. Our plan is working. We are involved in a fight for what we believe will be a bright future." Wainscott added that AK Steel's raw material costs increased $500 million in both 2004 and 2005. Looking to offset that billion-dollar cost increase, Wainscott said the company would be hoping to negotiate higher contract prices for 2006, despite a declining spot market. "We will go after another bite at the apple. About 65% of our business is contract-some of which are still below the current spot prices."

Panel II: Global Steel: Fewer Players and Tight Metallics: What's the Consequence?

Steel executives participating in this panel made the point that steel's resurgence in demand and profitability during the past 18 months can be sustained-but only if capacity and production are brought under control now.

Phillip Casey, chairman and CEO of Gerdau Ameristeel Corp., Tampa, Fla., urged that it's time for the industry to take advantage of the lessons learned from the recent wave of consolidation. "We have demonstrated the advantages of market discipline, accelerated supply responsiveness, improved asset utilization, an improved network ability to exchange operating knowledge and best operating practices, and an improved capital structure. I think all these will improve the stability of our industry. We can take advantage of the education we have received and learn from it, and will find that fewer players and tighter metallics will be beneficial for the overall industry."

Antonio Marcegaglia, chief executive officer, Marcegaglia, SpA of Italy, said that at the end of 2004, some European companies misled the market by pointing to a potential shortage of some products and possibly higher prices in 2005. This misinformation, from Marcegaglia's perspective, led to an inventory buildup. "People must be careful how they play with expectations," he said. "Generally, prices may go down another 10-15% from today's level, but I believe we will start seeing good, but shy, signals in demand." Marcegaglia added that perhaps this might happen before the fourth quarter.

Alexei A. Mordashov, chairman of the board, Severstal Group in Russia, noted that the behavior of suppliers despite robust steel demand growth is "proof again that unbalance and undisciplined supply could have a very bad impact on price and in the market." He added that "low-cost" regions are creating the the pressure again in the steel marketplace.

Masatoshi Nakamura, vice president at Japan's JFE Steel Corp., said the challenge to keep and maintain steel's sustainability right now is endangered by efforts to create new capacity. "Yesterday we had consolidation, which created fewer players and tighter metallics, but with growing demand," he commented. "Today we have overproduction and less metallics, a cycle we have repeated for many years and it seems to be emerging again." Nakamura noted that this is why the steel industry is generally preceded by adjectives such as "declining, marginal, dying and smokestack." He pointed out that consolidation in steel-compared to oil, automotive, mining and some other mature industries-is still low.

Louis Schorsch, chief executive officer of Mittal Steel USA, posed the question: "Are we going to invest to grow demand or invest to grow supply?" He acknowledged a fundamental, underlying sustainable demand growth rate in developed countries of 1-1.5% annually. "Frankly, that's not much greater than the debottlenecking rate at an integrated facility," said Schorsch. "So what we need to think about, since we have more funds available, is investing funds in value-added products that we have and providing better products and service. We also need to increase competitiveness of our value chain in terms of growing demand for our product-not in terms of growing supply."

Konstantin Pisarchuk, deputy director for strategy, Azovstal Iron and Steel Works, Mariupol, Ukraine, discussed the advantages of being an integrated producer with its own - or easy access to - raw materials. He also used the opportunity to introduce Azovstal to the audience, noting that the company is one of Ukraine's biggest exporters of steel -- in particular slab and plate. In the past year or so, Azovstal has invested more than $400 million in new equipment and technology. He said the company is fast-emerging as a key player in the global slab market, and is increasingly being recognized for its slab quality.

Panel III: Buyers to Lament or Rejoice in 2005?

Based on comments from steel buyers and service center executives, it appears that the steel industry's supply chain to its customers is in need of a little attention. What's more, steel prices appear to be near the bottom, with a rebound expected after July of this year-although uncertain Chinese demand remains a key issue.

C. Lourenco Goncalves, president and CEO, Metals USA Inc., agreed with his service center colleagues in noting that the best way for an OEM to save money is to work through a service center. "The biggest lesson of last year was lost on a number of those in the industry," he said. "And that is, it was not about price, but about getting the steel." He added that inventory levels are now about 3 months out, which is down from more than 4 months.

Joseph W. Harden, president of Columbus, OH-based Worthington Steel Co., said he thought the mills missed the handwriting on the wall almost a year ago, when they did not meet the challenge to manage supply beginning in the fall of 2004. He added that buyers might also have sent the wrong signals about their expected needs, which contributed to the volatility of steel supplies and pricing. "The current challenge is to appropriately manage inventory," Harden said. "It's not easily done without reliable and predictable deliveries. For mills to be reliable and predictable they have to make money."

Patrick A. McCormick, vice president of global steel at Emerson Electric Co., St. Louis, cited several laments. "The first lament is the current state of buyer-seller relationships: The heavy use of take-it-or-leave-it selling tactics has decimated the level of trust between buyers and sellers. This assumes, of course, that there was some level of trust to start with." McCormick acknowledged that some steel selling organizations believe buyers had the price run-ups that hit the market in the past year "coming to them," after previously forcing steel prices to decline for several years. "Sometimes the innocent get hurt in a gun battle," he said, adding that since falling prices have kicked in recently, "the buyer terminator pricing mentality is back on the rise. That's pretty harsh. I like to believe reasonable people can work things out. But we've had 100-percent-plus change in value of the products and we're trying to sell against global competition. That is not reasonable."

Ralph Oppenheimer, executive chairman, Stemcor of the UK, noted that China is "still the secret riddle" of what is going to happen to steel prices. He remarked that despite Chinese government efforts to dampen the country's overheated steel sector, it is likely there will be a hard landing for China's economy and that GDP growth will fall to 4% annually from about 10% currently. "For China," Oppenheimer said, "that is a considerable setback." He added that late last year China moved from being a net steel importer to a net steel exporter, which meant that the rest of the world had to find markets for 40 million to 50 million tonnes of steel-or 5.5-7% of the production of the non-China world.

Bud Siegel, president and chief executive officer of Russel Metals Inc., Mississauga, Ontario, said the balance of 2005 should not result in too much pain for either buyers or producers. "It never ceases to amaze me that people forget this is a cyclical business," Siegel commented. "This will probably be the second best year for metal investors in the past 20 years. The real question is what 2006 will look like once the steel stocking is depleted at the service centers and we're in a lower environment." He also used the opportunity to note that his company was rated the "second most profitable traded North American service center" in 2004.

Dave Styka, senior sourcing manager at International Truck & Engineering Corp., Warrenville, Ill., allowed that additional price reductions were a strong possibility near term, but sometime in the fourth quarter, steel prices were likely to increase modestly. "Perhaps up to a couple cents a pound, but certainly not what we saw in 2004," he said. Styka said he believed steel mill efforts to impose discipline by reducing inventories and production to hold off price erosion will be only partially successful. "The US manufacturing sector is expected to continue to soften," he commented, explaining that the dollar had recently begun to strengthen and this would result in increased imports, especially from Europe, along with depressed prices.

Wednesday, June 22, 2005

Panel IV: Steelmakers' Raw Materials: No Price Inflation after 2005?

All the panelists agreed that 2004 was an unprecedented year for raw material price escalation, and the executives from iron ore, coke, slab, HBI and scrap companies contended that more moderate conditions would prevail in the future.

Andrew Aloe, president, Shenango Inc., Pittsburgh, noted that coke and coal prices appear to be in the process of being reset at higher levels compared to historic norms. "The worst appears to have passed," he said. Aloe added that, "Due to the strong steel market, these prices have-for the most part-been passed through to the consumer." He commented that the price and availability of Chinese export coke continues to influence the price of coke on the world market, and that the Chinese government has promised that the United States will receive about the same amount of coke as in 2004. Through the end of February 2005, USA blast furnaces imported nearly 550,000 tonnes of coke from China at an average price of $276 per tonne CIF, and more than 900,000 tonnes from all foreign sources, at an average price of $268 per tonne CIF.

Benjamin M. Baptista Filho, commercial director, CST, Brazil, acknowledged that slab prices have indeed been falling recently, but that a floor is likely to be set by the costs at major mills. He noted that the historical price spread between steel slab and hot-rolled band is about $80 per tonne, which can sometimes narrow to $50 per tonne at the bottom of the market. "If the hot band market does not allow them (mills) to buy slabs and make money, then they don't buy," he said. "The slab business is not a price maker. We are price followers."

John Brinzo, chairman and CEO, Cleveland Cliffs, commented that if iron ore price increases were to occur, they would be at a much lower rate compared with recent moves. "We believe that after the rapid run-up of the past two years, it is more likely that prices will stabilize at or near current levels," Brinzo said.

Neil Bristow, chief analyst, BHP Billiton, Australia, pointed out that China-along with Brazil, India, Russia and the Southeast Asia region-would continue to drive growth in iron ore, coke and other raw material consumption. "The track record of experts in predicting China is poor," he claimed. "We have consistently under-predicted China." Even with the most pessimistic of forecasts, Bristow said that the growth rates are "quite good."

Alberto Hassan, president of the Hot Briquetted Iron (HBI) Association, Venezuela, echoed Bristow's remarks saying, "It's impossible to overestimate the impact of Chinese growth on the world."

Blake Kelley, vice president, Hugo Neu Corp., New York, said his company believes scrap, pig iron and HBI prices will increase in the near future-if the market functions normally-because steel inventories have been drawn down and steel production remains at record levels. But in the longer term, he said that scrap prices could remain at lower levels relative to steel output volumes because of planned new capacity in ore-based steelmaking.

Panel V: China & India: Controlling the Mind and Body of the Global Steel Industry?

Panelists agreed that China is setting the global steel market pace, but India is also on a fast-track to dominance.

Ashish Das, director and member of the board at India's SAIL, maintained that India's steel industry could become "the major engine of growth" for the global steel industry. He acknowledged, however, that there are two potential roadblocks. One is the scarcity of coking coal to fuel such growth. The other is an inadequate infrastructure to support steel industry growth.

Guo Jianhua, vice president, China Coal & Coke holdings Ltd., China, joked that China's coke expansion has come a long way since the days when government officials didn't "know coke from Coca-Cola." Currently, with an annual capacity of 240 million tonnes, China has 245 coke projects under construction with a combined capacity of 120 million tonnes per year, while additional projects could amount to 35.4 million tonnes per year. Guo forecast that Chinese steel consumption would reach 357 million tonnes in 2005, versus 311 million tonnes in 2004.

Jim Lennon, executive director, Macquarie Bank, UK, said that quality problems and market saturation are likely to preclude China from becoming a major exporter in the near-term, despite the country's massive production and a cooler domestic market. Lennon does not expect Chinese steel output to get slashed before the end of 2005, but he allows that the pace of its production growth will slow as closures occur-especially in the case of smaller and less-efficient long-product mills. As for India, Lennon said, it "has a long way to go" before it can claim to match China's prodigious steel growth. He pointed out that while China accounts for 25% of global steel demand, India represents just 3.5%.

Tridibesh Mukherjee, deputy managing director, Tata Iron & Steel, Mumbai, India, stated that the country's large reserves of high-quality iron ore would permit DRI to be "a major solution for India." India is already the world's largest producer of DRI. He acknowledged that India is "close to the inflection point" that should propel its steel industry toward global dominance. The country is expected to produce 60 million to 68 million tonnes of crude steel annually within seven years, which compares to 32 million tonnes in 2004.

Prashant Ruia, managing director, Essar Steel, Mumbai, India, noted that his company made about 3 million tonnes of flat products last year and is expected to reach 5 million tonnes within two years. He said that India's steel industry is being driven by 7-8% per annum growth in major steel-consuming sectors including construction, capital goods production and consumer durables. Essar's goal is to achieve an operating cost for hot-rolled band of less than $250 per tonne.

Dr. Zhongbo Xu, president, Beijing Metal Consulting Ltd., China, reasoned that China was in a position to maintain its dominance in the global steel industry. He said the country could "run very fast" in boosting production, as evidenced by the 37% increase in May 2005 output versus a year ago. And in what was viewed by the audience as an attempt to dismiss India's potential, Xu claimed that 90% of the world's new steelmaking machinery and technology was being built for projects in China. He said the country was installing some of the world's best flat-rolling equipment-equipment that would enable the country to export a class of flat-rolled steel to challenge the likes of Japan and South Korea.

Zhu Jingchang, general manager, Minmetals Steel Co. Ltd., China, commented that China "is becoming the driving force for world steel prices." Zhu said that although prices traditionally have been supported by the United States market, that trend is changing. He cited September 2004 when demand for steel in the USA was weakening, yet world export prices showed only slight signs of decline because China's import demand remained robust. But, Zhu pointed out that when Chinese import buying came to a nearly full stop, world prices dropped considerably. "China is now well positioned to act as a trendsetter in the world steel market," he said.

Panel VI: Bankers Optimistic, Investors Paranoid. Who's Crazy?

High inventories and declining prices in recent months have made some investors squimish about the steel industry, but several panelists-bankers, traders and securities analysts-remain bullish for the future.

Dieter Hoeppli, managing director of UBS Securities LLC, remarked that he believes the steel industry's image has changed for the better, thanks mainly to consolidation, but much work still needs to be done. "I know some investors have become cynical and believe nothing has changed, that the old steel cycle has not been broken and profitability is going back to low levels," he said. "But bankers like me are optimistic that the decline in valuation will lead to a pickup in activity in the industry on a global basis." He pointed to renewed activity, since buyers are getting more comfortable and are not buying at the top of the cycle. "Investors are still cautious due to low levels of consolidation in the steel industry on a global basis," Hoeppli said, "because it is still highly fragmented and there is still a lot of work yet to be done on that front, but it is giving plenty of optimism to bankers."

Jeffrey M. Kabel, vice president, Koch Metals Trading Ltd., noted that the steel industry talked about cutting production earlier this year, but actually didn't do anything until later. "When the mills actually did start cutting, the market didn't believe them," he explained, "but again this is a new paradigm for the mills and I suspect that once the signals (of overproduction) start appearing, you will see quicker cuts and at a more pronounced rate." In the near future, Kabel sees further price weakening in the third quarter but is looking for a decent rebound by the end of the year and the first quarter of 2006.

Aldo Mazzaferro, vice president, Global Investment Research, Goldman Sachs & Co., cited three facts that make this steel cycle different than those of the past. First, steel stocks continued to rise while prices were falling, which indicated that people believe in the sustainability of the industry. Secondly, stocks remain above where they peaked in previous cycles, which makes for a different playing field in terms of stock structure. "There's a lot more production discipline," which in theory should keep steel prices above the cyclical lows of the past. Finally, he thinks that China's demand explosion and the consolidation of major capacity in the Western World is still having a big impact, which will make the industry less volatile and less crazy in the future.

Robert M. Miller, managing director, Miller Mathis & Co., said steel is in an age of discontinuity, which means you can throw out many of the old rules. He added that it would take bold, imaginative thinking by steelmakers in order to progress effectively as times change and the industry evolves. "Consolidation must continue in the industry if it is to soften periodic death spirals in a fragmented industry," Miller advised. "Each steelmaker has to decide whether they are a buyer or a seller or they need to hold onto their position. And holding can be problematic because consolidation ignores the fact that many smaller competitors will disappear

and be replaced by larger and stronger rivals." Miller said that competition for midsize assets could become fierce.

James S. Tumulty, vice president and senior high-yield trader for Raymond James & Associates Inc., noted that there are several reasons for investor paranoia. These include: memories of past bankuptcies and losses, no safety net when investing in steel companies, price declines that cast doubt about the industry to remove cyclical pricing, uncertainties surrounding China, downgrading of General Motors and Ford, raw materials costs, the perception that steelmakers are negotiating at a disadvantage, and just "Darwinian natural selection." Tumulty said it looks as though "we're a long way from showing anybody anything different about the industry, but I believe it is different this time from all the changes that have been and will be made obvious - once the industry works through the inventory mess it has created for itself."

Spiro Youakim, director, European Metals & Mining, Citigroup Global Markets Ltd., addressed the new conundrum facing steel valuations. Among the macro trends he cited is the increasingly global market dynamic that benefits low-cost producers and regions. In providing a global steel snapshot, Youakim noted that Mittal Steel's acquisition of ISG brought North America "into the international fold." He added that "Arcelor and ThyssenKrupp continue to show supply-side discipline in Europe." In Latin America, "Brazil remains the dominant low-cost producing country," Youakim said, adding that Asia is marked by "low-cost producers of quality steel," and that Australia is dominated by just three domestic players.

Rodney Mott, former president and CEO of International Steel Group, served as moderator for this panel and shared his concern about consolidation and globalization in that North American steel companies could be the "first piece shut down," when there is a need to cut capacity. Mott asked: "Is this going to lead to the death and disintegration of the steel business in North America?" A couple of the panelists responded-Mazzaferro and Hoeppli-by answering "no."

Panel VII: Technology to Untie the Industry's Straightjacket?

Panelists in this session acknowledged that better dialogue between mills and plant/equipment suppliers might result in the technology needed to untie the industry's straight-jacket-a jacket outfitted by high energy costs, persistent shortage of locally sourced raw materials, increasingly demanding consumers, and the push for optimal steel-product quality.

Gianpietro Benedetti, president and CEO, Danieli & C. SpA, Italy, noted that although business is slower at this point in time compared to the same period a year ago, great leaps have been taken to improve-and in several cases-to revolutionize the making of steel. And while innovation can help maximize steelmakers' profits by controlling costs, raising product quality and creating new markets, Benedetti said that steelmakers were not always ready to take the risk of pioneering new processes or equipment.

Gerhard Falch, chairman, VAI, Austria, said that factors in creating the straightjacket for steelmakers have been the concentration of raw material suppliers in a small number of companies; the limitation of energy resources; environmental restrictions; high fixed costs, and the growing commodity status of many steel products. He said the challenge for the industry is to use new technology "to embrace new realities, such as spiraling energy costs and growing environmental concerns."

Kay Mayland, president and CEO, SMS Demag, Germany pointed to the company's trademarked multi-purpose CONARC Plant-MPC for alternating between the production of carbon and stainless steel. He echoed the other panelists in saying that steel mills must work in cooperation with technology providers to address and overcome the issues that are holding back progress.

Shohei Manabe, general manager, Iron Unit Division, Kobe Steel Ltd., Japan, told the audience that the ever-increasing demand for iron units in the steelmaking process has seen a growing need for alternative ironmaking processes. He went on to describe Kobe Steel's ITmk3 technology, also known in the USA as "the Mesabi Nugget process." The technology produces a small pure iron nugget virtually equivalent to pig iron from iron ore fines and pulverized coal. Manabe provided an update regarding the first plant-a joint venture between Kobe Steel, Steel Dynamics Inc. of Butler, IN, and Cleveland Cliffs. Manabe pointed out that the iron nuggets, which are slag-free, transport easily without reoxidizing, and could create a new globally traded, high-quality furnace feed.

Richard L. Wechsler, general manager, international business, Nucor, provided an updated in-plant video of the Castrip mill process that directly casts wide, thin gauge hot-rolled band from molten steel. It provided a look inside Nucor's Crawfordsville plant, where the technology is located, and which is also the site of the world's first thin-slab/hot-rolled band facility. Castrip _LLC was formed as a joint venture between Nucor (45% ownership), BlueScope Steel (45%) and Mitsubishi Heavy Industries of Japan (10%). Most recently, Wechsler reports that the plant is producing about 22,000 tons per month, slightly more than 50% of its capacity. The average

gauge is 1.4-mm, but they have cast as thin as 0.8-mm. Finished Castrip product, according to Wechsler, has successfully replaced traditional cold-rolled steel in applications such as furniture tubing, shelving and racking and drum lids. The ASTM has already set a new standard for product emanating from the Castrip process-A 1039. A second Castrip plant in the United States may be announced as soon as the third quarter of 2005, Wechsler said.

STEEL SUCCESS STRATEGIES - EUROPE III

A joint effort of Metal Bulletin and World Steel Dynamics

November 27-29, 2005

2006: Delight, Delirium or Disaster?

Royal Lancaster Hotel
London, England

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