Steel Industry Update/248 March 2010

Locker Associates, 225 Broadway, Suite 2625 New York NY 10007 Tel: 212-962-2980

Table 1: Selected U.S. Steel Industry Data, January & Year-To-Date

Month of January Year-to-Date
(000 net tons) 2010 2009 % Chg 2010 2009 % Chg
Raw Steel Production ............... 6,872 4,500 52.7% 6,872 4,500 52.7%
Capacity Utilization ................. 64.2 42.6 -- 64.2 42.6 --
Mill Shipments .......................... 6,580 4,576 43.8% 6,580 4,576 43.8%
Exports ..................................... 951 681 39.6% 951 681 39.6%
Total Imports............................. 1,662 2,368 -29.8% 1,662 2,368 -29.8%
Finished Steel Imports ............ 1,285 2,156 -40.4% 1,285 2,156 -40.4%
Apparent Steel Supply*............. 6,914 6,052 14.2% 6,914 6,052 14.2%
Imports as % of Supply*.......... 18.6 35.6 -- 18.6 35.6 --
Average Spot Price** ($/ton) ...... 612 698 -12.3% 612 698 -12.3%
Scrap Price# ($/gross ton) .......... 340 232 46.6% 340 232 46.6%
Source: AISI, Purchasing Magazine *Excl semi-finished imports **Avg price of 8 carbon products #shredded bundles

Table 2: World Crude Steel Production by Region, January & Year-To-Date

(000 metric tons) Month of January Year-to-Date
Region 2010 2009 % Chg 2010 2009 % Chg
European Union.......... 13,477 10,080 33.7% 13,477 10,080 33.7%
Other Europe .............. 2,430 2,245 8.2% 2,430 2,245 8.2%
C.I.S............................ 8,553 6,583 29.9% 8,553 6,583 29.9%
North America............. 8,588 5,876 46.2% 8,588 5,876 46.2%
South America ............ 3,705 2,504 48.0% 3,705 2,504 48.0%
Africa .......................... 1,290 1,065 21.1% 1,290 1,065 21.1%
Middle East................. 1,461 1,227 19.1% 1,461 1,227 19.1%
Asia............................. 69,059 56,700 21.8% 69,059 56,700 21.8%
Oceania ...................... 676 513 31.8% 676 513 31.8%
Total ........................... 109,238 86,792 25.9% 109,238 86,792 25.9%
Countries
China………………… 48,694 41,192 18.2% 48,694 41,192 18.2%
Japan………………... 8,723 6,378 36.8% 8,723 6,378 36.8%
United States……….. 6,075 4,082 48.8% 6,075 4,082 48.8%
Russia………..……… 5,190 3,903 33.0% 5,190 3,903 33.0%
India.………………… 5,420 4,720 14.8% 5,420 4,720 14.8%
South Korea..………. 4,512 3,408 32.4% 4,512 3,408 32.4%
Germany.…………… 3,402 2,663 27.7% 3,402 2,663 27.7%
Ukraine …………….. 2,726 2,123 28.4% 2,726 2,123 28.4%
All Others…………... 24,496 18,323 33.7% 24,496 18,323 33.7%
Source: World Steel Association, 3/10

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 Steel Industry Update/248

Exhibit 1: Iron Ore Fines: Spot vs Contract, January 2008 - January 2010

Source: Reuters, Metal Bulletin Iron Ore Index, Platts, TSI

Exhibit 2: Iron Ore: Steel Price Ratio (China), January 2006 - January 2010

Source: Mysteel.com, CISA

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Table 3: MEPS Global Crude Steel Production, 2009e & 2010f

Region 2009e 2010f % Chg
EU 27 138.3 161.5 16.8%
Other Europe 29.0 32.9 13.4%
CIS 97.0 105.0 8.2%
NAFTA 82.9 100.5 21.2%
South America 37.6 45.0 19.7%
Africa 14.9 15.3 2.7%
Middle East 17.1 18.7 9.4%
China 567.7 609.0 7.3%
Japan 87.0 102.0 17.2%
Other Asia 140.1 152.5 8.9%
Oceania 6.0 7.7 28.3%
World Total 1,217.5 1,350.0 10.9%
Source: MEPS, 2/9/10; in million tonnes; e=estimate; f=forecast

Table 4: Chinese Long Product Output, 2009

Category 2009 2008 % Chg
Railway steel products 5.86 4.74 23.5%
Heavy rail 4.42 3.26 35.7%
Light rail 0.90 0.87 2.5%
Large section 9.47 8.87 6.7%
Light and medium section 41.19 30.93 33.2%
Bar products 55.65 47.70 16.7%
Rebar 121.51 95.60 27.1%
Wire rod 95.86 79.30 20.9%
Source: Steel Guru, February 2010; in million tonnes

Table 5: China Primary Steel Product Trade Balance, 2007-2009*

Dollar Value (in million US $) 2007 2008 2009*
China exports to US 1,701 2,134 455
US exports to China 285 535 3,443
China over US 1,416 1,599 112
Tons (in 000’s) 2007 2008 2009
China exports to US 1,957 1,700 377
US exports to China 120 185 172
China over US 1,838 1,515 205
Source: Metal Center News, January 2010; *annualized from October

Table 6: Chinese Crude Steel Production, February 2010

(in million tonnes) Feb ‘10 Y-o-Y Jan-Feb ‘10 Y-o-Y
Pig Iron 47.5 17.2 97.2 22.3%
Crude Steel 50.4 22.5 102.9 25.4%
Steel Products 55.6 18.1 117.4 27.7%
Source: Metal Center News, January 2010

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Exhibit 3: US Hot Rolled Coil and No. 1 Bushelings Prices, January, 2006-March 2010

Source: The Friday Report, March 5, 2010

Table 7: Vale’s Financial Performance, 2005-2009

2005 2006 2007 2008 2009
Operating Revenues 13,405 20,363 33,115 38,509 23,939
Adjusted EBIT 5,432 7,637 13,194 15,698 6,057
Adjusted EBIT margin (%) 42.5 38.9 40.9 41.9 26.0
Adjusted EBITDA 6,540 9,150 15,774 19,018 9,165
Net earnings 4,841 6,528 11,825 13,218 5,349
CAPEX (Ex acquisitions) 4,198 4,824 7,625 10,191 9,013
Source: Steel Guru, 2/11/10; in US dollars

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Table 8: ArcelorMittal Financial Results, 4th Quarter and Year-end 2009 & 2008
Q4 '09 Q4 '08 FY '09 FY '08
Sales 18,642 22,089 65,110 124,936
EBITDA 2,131 2,808 5,824 24,478
Operating Income 684 -3,466 -1,678 12,236
Net Income 1,070 -2,632 118 9,399
Iron Ore Production (million mt) 15.6 15.5 52.7 64.7
Crude Steel Production (million mt) 22.5 14.9 73.2 103.3
Steel Shipments (million mt) 20 17.1 71.1 101.7
EBITDA per tonne (US$/t) 107 165 82 241
Operating Income (loss) per tonne (US$/t) 34 -203 -24 120
Basic Earnings per share (USD) 0.71 -1.93 0.08 6.8
Source: Steel Guru, 2/11/10; in US dollars

Table 9: Ternium Financial Results, Year-end 2009 & 2008

FY '09 FY '08 % Chg
Shipments (tons) 6,361,000 7,543,000 -16%
Net Sales 4,959.0 8,464.9 -41%
Operating Income 296.4 1,676.0 -82%
EBITDA 708.5 2,089.6 -66%
EBITDA Margin (% of net sales) 14% 25% --
EBITDA/Ton, Flat & Long Steel 103.0 263.0 -61%
Net Foreign Exchange Result 83.1 -632.7 --
Discontinued Operations Result 428.0 157.1 --
Net Income 767.1 875.2 -12%
Equity Holders' Net Income 717.4 715.4 --
Source: Steel Guru, 2/25/10; in US dollars, except shipments

Table 10: TATA Steel Financial Results, 3rd Quarter 2010 & 2009
3q '10 2q '10 3q ‘09
Shipments (million tons) 6.21 6.22 6.02
Turnover 5,632 5,459 7,137
EBITDA 731 86 644
EBITDA Margin 13.0% 1.60% 9.0%
Depreciation -248 -248 -233
Net Finance Charges -164 -154 -196
PBT before Exceptional Items 310 -318 197
Exceptional Items -42 -196 -48
PBT after Exceptional Items 268 -514 149
PBT Margin 4.8% -9.4% 2.1%
PAT, Minority Interest 102 -582 175
PAT Margin 1.8% -10.7% 2.5%
Source: Steel Guru, 2/17/10; in US dollars, except shipments

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Exhibit 4: India’s Domestic Demand for Finished Steel, 2001-2010e

Source: Bloomberg, GS Global ECS Research estimates

Exhibit 5: Indian Government Infrastructure Investment, 2003-2012e

Source: Planning Commission, GS Research estimates

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Exhibit 6: India’s Steel Consumption

Source: CRISINFAC, GS Research estimates

Table 11: U.S. Spot Market Steel Prices, Actual and Forecast Nov, 2009-May, 2010F
($/ton) Nov’09 Dec’09 Jan’10 Feb’10 Mar’10F Apr’10F May’10F
HR sheet 508 500 541 590 610 630 650
CR sheet 607 598 644 695 715 735 750
HD gal sheet 610 606 655 730 750 770 790
Electrogal sheet 639 639 733 750 770 800 800
Coiled plate 554 515 550 565 590 620 645
HR plate 617 602 612 669 700 720 735
Structural beam 643 639 675 710 710 725 735
Merchant bar 708 652 688 707 712 728 748
CF steel bar 743 733 734 747 796 626 660
Reinforcing bar 471 456 505 540 564 570 585
Wire rod 564 536 590 640 651 685 700
SS sheet (304) 2,484 2,468 2,578 2,691 2,705 2,690 2,725
Source: Purchasing Magazine, 2/25/10

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Locker Associates Steel Track: Spot Prices

U.S. Flat-Rolled Prices U.S. Other Product Prices
1100 1350
($ per ton) ($ per ton)
1250
1000
Plate 1150
900 CF Bar (SBQ)
1050

800
950

700 850
CR Sheet
600 750
Beam
650
500

HR Sheet 550
400 Wire Rod
450

300
350

200 250
89 93 97 04 05 07 q2 q4 J M M J A S O N D J F 89 93 97 04 05 07 q2 q4 J M M J A S O N D J F

Locker Associates Steel Track: Performance

U.S. Raw Steel Production 100%
U.S. Capacity Utilization
10.0
(mil net tons)
2010 2009
9.0 90%

8.0 2010 80%

2009
7.0 70%

6.0 60%

5.0 50%

4.0 40%

3.0 30%
J F M A M J J A S O N D J F M A M J J A S O N D
2010 6.9 2010 64%
2009 4.5 4.4 4.4 4.2 4.5 4.8 5.6 6.1 6.4 6.6 6.3 6.5 2009 43% 46% 43% 41% 43% 47% 52% 58% 62% 62% 61% 61%

U.S. Spot Prices for Selected Steel Products, February & Year-to-Date
Month of February Year-To-Date
($ per net ton) 2010 2009 %Chg 2010 2009 %Chg
Hot Rolled Sheet………….. 590 499 18.2% 566 514 10.0%
Cold Rolled Sheet......…….. 695 588 18.2% 670 607 10.3%
HD Galvanized Sheet..…… 730 669 9.1% 693 679 2.0%
Coiled Plate................……. 565 792 -28.7% 558 848 -34.3%
Cold-Finished Bar (SBQ)….. 747 826 -9.6% 741 837 -11.5%
Wide-Flange Beams....…… 710 839 -15.4% 693 844 -18.0%
Wire Rod/Low Carbon.…… 640 651 -1.7% 615 685 -10.2%
Rebar.........................…….. 540 533 1.3% 523 569 -8.2%
Average Spot Price+…….. 652 675 -3.3% 632 698 -9.4%
Stainless Sheet 304……… 2,691 2,416 11.4% 2,635 2,565 2.7%
OCTG Seamless Tube…… 1,596 2,272 -29.8% 1,583 2,462 -35.7%
Scrap ($/gross ton)*....………. 333 190 75.3% 337 211 59.5%
Sources: Purchasing Mag, Spears Research +Comp price of 8 carbon products *shredded bundles
Update #248

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