Steel Mill Products: United States

Freedonia Focus Reports US Collection

September 2012

Highlights

Demand Forecasts Market Environment | Product Forecasts | Market Forecasts

Industry Structure Industry Composition | Industry Leaders | Additional Companies Cited

Resources www.freedoniafocus.com Steel Mill Products: United States

ABOUT THIS REPORT Sources Steel Mill Products: United States represents the synthesis and analysis of data from various primary, secondary, macroeconomic and demographic sources including: • firms participating in the industry • government/public agencies • national, regional and international non-governmental organizations • trade associations and their publications • the business and trade press • The Freedonia Group Consensus Forecasts dated April 2012 • the findings of other industry studies by The Freedonia Group. Specific sources and additional resources are listed in the Resources section of this publication for reference and to facilitate further research.

Scope and Method The scope of Steel Mill Products: United States is defined as materials such as blooms, ingots, slabs, and sheets manufactured from molten steel through the processing of iron ore, coke, and other raw materials. Total product demand and shipments are provided in metric tons, and total demand is segmented by product in terms of: • carbon steel • alloy steel • stainless steel.

Total demand is also segmented by market in terms of: • service centers and distributors • construction • automotiveSAMPLE - NOT for DISTRIBUTION • other markets such as containers, appliances, and machinery.

Total demand, shipments, and the various segments are sized at five-year intervals for historical years 2006 and 2011 with a forecast to 2016. Forecasts emanate from the identification and analysis of pertinent statistical relationships and other historical trends/events as well as their expected progression/impact over the forecast period. Changes in quantities between reported years of a given total or segment are typically provided in terms of five-year compound annual growth rates (CAGRs). For the sake of brevity, forecasts are generally stated in smoothed CAGR-based descriptions to the forecast year, such as “demand is projected to rise 3.2% annually through 2016.” The result of any particular year over that period, however, may exhibit volatility and depart

Steel Mill Products: United States

from a smoothed, long-term trend, as historical data typically illustrate.

Key macroeconomic indicators are also provided at five-year intervals with CAGRs for the years corresponding to other reported figures. Other various topics, including profiles of pertinent leading suppliers, are covered in this report. A full outline of report items by page is available in the Table of Contents.

Industry Codes The topic of this report is related to the following industry codes:

NAICS/SCIAN 2007 SIC North American Industry Classification System Standard Industry Codes

331111 Iron and Steel Mills 3312 Steel Works, Blast Furnaces (including 331221 Rolled Steel Shape Manufacturing coke ovens), and Rolling Mills (except 331513 Steel Foundries (except Investment) coke ovens not integrated with steel mills and hot-rolling purchased steel) 3316 Cold-Rolled Steel Sheet, Strip, and Bars 3325 Steel Foundries, NEC

SAMPLE - NOT for DISTRIBUTION

Copyright and Licensing This publication is protected by copyright laws of the United States of America and international treaties. The entire contents of this publication are copyrighted by The Freedonia Group, Inc.

A full description of copyright and subscription or licensing provisions is available on the final page of this publication.

Steel Mill Products: United States

Table of Contents

Section Page

Highlights...... 1 Industry Overview ...... 2 Market Size & Trends ...... 2 Chart 1 | United States: Steel Mill Product Demand Trends, 2001-2011 ...... 2 Product Segmentation ...... 3 Chart 2 | United States: Steel Mill Product Demand by Type, 2011...... 3 Carbon Steel...... 3 Alloy Steel...... 4 Stainless Steel...... 4 Market Segmentation ...... 5 Chart 3 | United States: Steel Mill Product Demand by Market, 2011...... 5 Service Center & Distributors...... 5 Construction...... 6 Automotive...... 6 Other Steel Markets ...... 7 Technology ...... 8 Environmental & Regulatory Factors ...... 9 Global Crude Steel Production ...... 11 Chart 4 | Steel Mill Product Manufacture by Country, 2011 ...... 11 Trade ...... 12 Chart 5 | United States: Steel Mill Product Trade (million metric tons) ...... 12 Demand Forecasts ...... 13 Market Environment ...... 13 Table 1 | United States: Key Indicators for Steel Mill Product Demand (billion dollars) ...... 13 Product Forecasts ...... 14 Table 2 | United States: Steel Mill Product Demand by Type (million metric tons) ...... 14 Carbon Steel...... 14 Alloy Steel...... 14 Stainless Steel...... 15 Market Forecasts ...... 16 Table 3 | United States: Steel Mill Product Demand by Market (million metric tons) ...... 16 Service Center & Distributors...... 16 Construction...... 17 Automotive...... 17 Other Steel Markets.SAMPLE ...... - NOT for DISTRIBUTION 18 Industry Structure ...... 19 Industry Composition ...... 19 Industry Leaders ...... 20 ArcelorMittal ...... 20 Nucor Corporation ...... 21 United States Steel Corporation ...... 22 Additional Companies Cited...... 23 Resources ...... 24

To return here, click on any Freedonia logo or the Table of Contents link in report footers. PDF bookmarks are also available for navigation.

Steel Mill Products: United States

HIGHLIGHTS

• Steel mill product demand in the US is forecast to increase to 133 million metric tons in 2016, representing annual growth of 4.6%. A recovering economy, rising shipments of motor vehicles and other durable goods, and increased construction expenditures will drive gains.

• Carbon steel will remain the leading steel type in 2016, with consumption reaching 124 million metric tons. An expected rebound in both residential and nonresidential building construction, as well as growth in nonbuilding construction expenditures, will support demand.

• Service centers and distributors will continue to represent the largest discrete market for steel mill products, consuming 31.2 million metric tons in 2016, spurred by demand growth in end-use markets.

• Suppliers of steel mill products facing ongoing competition from lower-cost substitutes (such as plastic, concrete, and wood) as well as more expensive materials that feature performance and/or weight advantages (eg, aluminum, high performance composites).

• In 2011, global crude steel production reached 1.5 billion metric tons, an increase from 1.2 billion metric tons in 2006. China represented, by far, the leading producer, followedSAMPLE by Japan - NOTand the forUS. DISTRIBUTION

• The US was a net importer of steel mill products in 2011 with a trade deficit of 13.7 million metric tons. Imports of low-cost steel from China have risen dramatically in recent years – particularly due to the country's excess capacity of steel production.

• In 2011, three of the leading suppliers of steel mill products to the US were Luxembourg-based ArcelorMittal, Nucor, and US Steel.

Steel Mill Products: United States

INDUSTRY OVERVIEW Market Size & Trends

US consumption of steel mill products declined from 132 million metric tons in 2006 to 106 million metric tons in 2011. The steel industry is highly cyclical, and plays a vital role in the US economy. Demand for steel mill products was volatile between 2001 and 2006, rising one year and falling the next. The industry experienced decreased steel mill product procurement between 2007 and 2009, when the steel industry was affected by the recession that began in December 2007. Weak consumer confidence, combined with sharp drops in both residential construction and motor vehicle production, lowered US demand for steel mill products. In response to the slowdown in the country’s economy, exacerbated and epitomized by the bankruptcies and bailouts of General Motors and Chrysler, the steel industry recorded the steepest declines in 2009, with demand falling just over 40% from the previous year.

However, in the second half of 2009 and the first half of 2010, household spending increased and the outlook for residential fixed investment improved slightly. Such gains, along with a sharp rise in motor vehicle production, allowed both consumption and shipments of steel mill products to begin a recovery in 2010. The recovery continued in 2011, with demand rising at double-digit rates.

Chart 1 | United States: Steel Mill Product Demand Trends, 2001-2011 mil 130.0 SAMPLE - NOT for DISTRIBUTION % metric tons 110.0

90.0

70.0

50.0

30.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 mil metric tons 111.4 114.9 109.6 126.3 115.8 131.6 116.6 106.2 62.7 86.4 106.0 YoY%Δ 3.1 -4.6 15.2 -8.3 13.6 -11.4 -8.9 -41.0 37.8 22.7 Source: The Freedonia Group, Inc.

Steel Mill Products: United States

Product Segmentation

Steel is defined as a combination of iron and a small amount of carbon (less than 2%). Steel mill products are manufactured either by forging or rolling into forms such as: • slabs • rods • tubing • ingots • plates • wire • blooms • bars • sheets • billets • pipe • strips

Steel mill products can be segmented by type into three categories: carbon steel, alloy steel, and stainless steel.

Chart 2 | United States: Steel Mill Product Demand by Type, 2011 (106 million metric tons)

Stainless Steel 2% Carbon Steel 94% Alloy Steel 4%

Source: The Freedonia Group, Inc.

Carbon Steel. Consumption of carbon steel in the US declined from 123 million metric tons in 2006SAMPLE to 99.4 million - metricNOT tons for in DISTRIBUTION2011. Because carbon steel accounts for the vast majority of steel mill product demand, it is not surprising that overall growth in the consumption of steel typically reflects trends in this segment. Carbon steel, which relies on carbon content for structure, can be transformed into a wide variety of products for a number of uses (eg, wire, body panels, gears, axels) in markets such as machinery, automotive, and construction. Losses in this segment were a result of declines in such key markets during the historical period.

Carbon steel is divided into low-, medium-, high-, and ultra high-carbon based on the

Steel Mill Products: United States level of carbon in the product. Low-carbon steel, containing up to 0.3% carbon by weight, is inherently easier to cold-form due to its soft and ductile nature. When strength is not a primary consideration, low-carbon steels are optimal choices due to their inexpensive and easy-to-handle nature. The range of carbon in medium-carbon steel is 0.3% to 0.6%, while high-carbon steel contains 0.6% to 1.0% carbon. Ultra high-carbon steel ranges from 1.0% to 2.0% carbon. Higher-carbon steels are stronger, yet more brittle than lower-carbon steels. Higher-carbon steels also typically have a high wear- resistance due to superior surface hardness.

Alloy Steel. US demand for alloy steel totaled 4.6 million metric tons in 2011, a decline from 6.3 million metric tons in 2006. A steel alloy is an iron and carbon mixture that contains minimum quantities of alloying elements such as manganese, silicon, vanadium, copper, chromium, nickel, molybdenum, and tungsten. Such alloying elements provide benefits such as chemical resistance and additional strength. For example, high-strength low-alloy (HSLA) steel, which has low levels of carbon, is more resistant to corrosion than most carbon steel.

Stainless Steel. Consumption of stainless steel reached 2.0 million metric tons in 2011, a decrease from 2.5 million metric tons in 2006. Stainless steel is a low-carbon steel containing at least 10.5% chromium by weight. Chromium, which imparts the stainless property, reacts with oxygen in the air to form a strong surface that prevents further oxygen fromSAMPLE rusting the surface. - NOT Useful for characteristics DISTRIBUTION of stainless steel include corrosion, fire, and heat resistance; aesthetic appearance; strength-to-weight advantages; ease of fabrication and maintenance; toughness; and long-term value (based on low life-cycle costs). Furthermore, stainless steel is 100% recyclable (ie, it can be re-melted and reused).

Steel Mill Products: United States

Market Segmentation

Steel mill products are procured by a wide range of consumers in a number of markets, including service centers and distributors, construction, and automotive. Companies that consume steel either purchase the goods directly from steel mills, or buy the products from service centers and distributors. Substitutes for steel include less expensive nonmetallic materials (such as unreinforced plastics, concrete, and wood) and more expensive metals that feature performance or weight advantages (eg, aluminum and high performance composites).

Chart 3 | United States: Steel Mill Product Demand by Market, 2011 (106 million metric tons)

Other 43% Service Centers & Distributors 23%

Automotive Construction 16% 18%

Source: The Freedonia Group, Inc.

Service Center & Distributors. Demand for steel mill products in the service center and distributor market totaled 24.7 million metric tons in 2011, down from 36.2 million metric tons in 2006. The economic downturn and tighter credit restrictions, which led to difficulties inSAMPLE borrowing money - NOT to replenish for DISTRIBUTION inventories, adversely affected companies in this market. Service centers and distributors acquire products from primary metal manufacturers and then process the metals to meet customer specifications. The metal service center industry is fragmented, with approximately 1,200 companies across North America. Because such centers specifically invest in the necessary technology, equipment, and inventory to process the metals, the companies are able to deliver the products to end users in a more efficient manner than the end user could achieve by dealing directly with steel mills. Processing operations available at service centers include grinding, cutting, welding, and bending.

Steel Mill Products: United States

Construction. Steel mill product consumption in the construction market declined from 25.2 million metric tons in 2006 to 19.0 million metric tons in 2011. In construction, steel is used in a wide variety of building projects (eg, tunnels, bridge deck plates, and suspension cables), as well as in other construction applications such as concrete reinforcement.

Between 2006 and 2009, demand in the construction market was supported by rising nonresidential US Construction Expenditures (billion dollars) building activity in the industrial and transportation 1225

sectors, as well as nonbuilding construction. 1025

Economic stimulus funding was invested in 825 2006 07 08 09 10 2011 nonbuilding projects such as transportation and sewer and water during the historical period, boosting steel requirements. However, steep drops in residential construction between 2007 and 2009 offset the gains from nonresidential and nonbuilding construction activity, despite the increased prevalence of steel framing in the residential sector. In comparison to wooden frames, steel-framed houses are more resistant to fires, hurricanes, earthquakes, and other disasters, as steel frames do not require treatment for insects, termites, and mold.

Automotive. The automotive market consumed 17.2 million metric tons of steel mill products in 2011, down from 18.7 million metric tons in 2006. Losses in this market were due to a sharp US Motor Vehicle Production (million units) reduction in domesticSAMPLE light vehicle - manufacturingNOT for DISTRIBUTION. For 12 instance, the number of automobiles produced in the 8

US declined from 4.4 million units in 2006 to 3.1 4 million units in 2011, with the steepest drop in 2006 07 08 09 10 2011 shipments occurring during the 2008-2009 period.

The automotive market uses a variety of steel such as galvanized, galvannealed, and cold- and hot-rolled types. Applications for steel in this market include motor vehicle bodies, axles, engines, wheels, and transmissions. In many uses, steel competes with

Steel Mill Products: United States

lighter materials (such as aluminum and plastics), which motor vehicle manufacturers are increasingly purchasing to lower automobile weight and improve fuel efficiency.

Other Steel Markets. Steel mill product consumption in all other markets, as an aggregate, declined from 51.5 million metric tons in 2006 to 45.1 million metric tons in 2011. This segment includes containers, machinery, aerospace and other transportation equipment, as well as consumer goods (eg, household appliances, razors, cutlery).

SAMPLE - NOT for DISTRIBUTION

Steel Mill Products: United States

Technology

Technologies relating to the production of steel include basic oxygen furnaces (BOFs), which are used by integrated steel producers to convert raw iron ore into pig iron and then into steel; and electric arc furnaces (EAFs), which are used primarily by "minimills" to produce steel from scrap. The BOF process melts molten iron and steel scrap together, which is then poured into a ladle and rolled into a sheet or plate. During the EAF steel-making process, scrap from motor vehicles, household appliances, and industrial waste is melted, purified, and mixed with chemicals before being cooled, reheated, and rolled into beams. Approximately 1.1 metric tons of scrap and scrap substitutes are necessary to produce one metric ton of steel. The recycled content of steel produced via the BOF and EAF methods is approximately 25% and 90%, respectively.

EAF technology has steadily increased its penetration of the US steelmaking industry in recent years, as it represents the least costly method. The proportion of US steel (in volume terms) produced via the EAF method rose from 43% in 2006 to an estimated 62% in 2011, at the expense of the BOF method. EAF's share is expected to continue to increase going forward as minimills move toward higher-end products through the addition of raw iron ore to scrap metal and additives.

Other steelmaking technologies include research into lowering energy consumption and producing steel in SAMPLEways that are more- NOT environmentally for DISTRIBUTION friendly. In particular, the US steel industry is funding research and development of technologies to reduce or eliminate carbon dioxide emissions. For instance, the American Iron and Steel Institute is researching two new projects: molten oxide electrolysis (MOE) and hydrogen flash smelting. The MOE process is carbon-free, and can be used to produce other metals such as aluminum, magnesium, lithium, sodium, and rare-earths. Hydrogen flash smelting involves the production of iron using hydrogen and fine iron oxide concentrates in a suspension reduction process that reduces carbon dioxide emissions.

Steel Mill Products: United States

Environmental & Regulatory Factors

The production of steel brings with it environmental risks, which derive from complex processes that require extreme temperatures, high-pressure gases, and the use of more than 3,000 chemicals. Some of the most serious risks encompass toxic air emissions, wastewater, and solid wastes. Thus, companies involved in steel production must comply with major environmental and worker safety rules, such as the Clean Air Act, Clean Water Act, and rules administered by the Occupational Safety and Health Administration. Air emissions are the most important environmental issue in the steel industry because such emissions are generated at every stage of the process. For example, there are concerns regarding the air emissions of fine particles, volatile organic compounds, and nitrogen oxide. In addition, the industry is a major producer of greenhouse gas emissions.

Government regulations that tightened fuel efficiency requirements for motor vehicles will boost demand for more advanced materials such as high-strength steels that lower the weight of the vehicle to improve fuel economy. The National Highway Traffic Safety Administration’s Corporate Average Fuel Economy (CAFE) standards, which regulate the fuel economy of passenger vehicles sold in the US, continue to call for increased vehicle energy efficiency. In November 2011, the government announced new fuel efficiency standards that will increase the fuel economy requirements of light vehicles to an overall industry average of 40.1 miles per gallon (mpg) by model year 2021, and 49.6 mpg by modelSAMPLE year 2025. - NOT for DISTRIBUTION

In addition to steel's 100% recyclability, byproducts from its manufacture can be used in the production of other goods, (such as steel scrap used in EAF technology). Slags, which are added during the steelmaking process to remove impurities, account for approximately 90% of byproducts. Slags are used as construction aggregates (as an additive in cement or concrete), and as an aid in reducing carbon dioxide emissions in cement production. Other recyclable byproducts include gases, dusts, and sludge, which are all reused in the steelmaking process. Steel's relatively high reclamation rate,

Steel Mill Products: United States

or its percentage of recycled content, is attractive to consumers in the construction industry aiming for Leadership in Energy and Environmental Design (LEED) certification. The US Green Building Council's LEED standards promote the use of materials with high recycled contents.

Steel companies are working to use waste gases from blast furnaces as renewable energy to generate electricity and process steam. In 2010, AK Steel, which manufactures cold-rolled steel products in Middletown, Ohio, received a $30 million grant from the US Department of Energy to construct a combined-cycle power generation plant to capture and process its waste gas. Currently, half of the waste energy from blast furnace gas is burned and released into the atmosphere. AK Steel partnered with Air Products and Chemicals, of Allentown, Pennsylvania to complete the $315-million project by 2015. ArcelorMittal received a similar award from the Department of Energy in 2009, and, as of June 2012, is developing its gas flare capture project at its steel mill in Chicago, Illinois.

SAMPLE - NOT for DISTRIBUTION

Steel Mill Products: United States

Global Crude Steel Production

In 2011, global crude steel production reached 1.5 billion metric tons, an increase from 1.2 billion metric tons in 2006. Many steel producers have been increasing capacity and production, in part to meet heightened demand in developing nations, such as those in the Asia/Pacific region. In addition, many steel-producing countries are recovering from the recent global economic crisis. China was, by far, the leading producer of crude steel in 2011, with shipments of 683 million metric tons, an increase from 421 million metric tons in 2006. Other leading steel-producing countries were Japan and the US, with 2011 production of 108 million metric tons and 86.2 million metric tons, respectively; however, both countries experienced losses in the historical period. US crude steel production in 2011 represented a decrease from the 98.6 million metric tons produced in 2006.

Chart 4 | Steel Mill Product Manufacture by Country, 2011 (1.5 billion metric tons)

Other US 41% 6%

Japan China 7% 46%

Source: The Freedonia Group, Inc.

Over the historicalSAMPLE period, the global - NOT steel industry for DISTRIBUTION experienced a wave of consolidation activity. Such mergers were pursued in order to expand geographic reach and size, eliminate competitors, and gain access to additional raw materials and technology. For example, Tata Steel (India) acquired Corus (UK) in 2006. In the same year, Arcelor (Luxembourg) acquired Mittal Steel (Netherlands) to become ArcelorMittal. Additionally, in 2011, Japan's Nippon Steel and Sumitomo Metal Industries announced a merger (planned for October 2012) that will create the world's second largest steel producer, behind ArcelorMittal.

Steel Mill Products: United States

Trade

In 2011, the US was a net importer of steel with a trade deficit of 13.7 million metric tons, a decrease from 32.3 million metric tons in 2006. Among the leading suppliers of steel mill products to the US were Canada, Brazil, Mexico, South Korea, Japan, and China. Imports of low-cost steel from China have risen dramatically over the past few years – particularly due to the country's overcapacity of steel production – causing concern within the US steel industry. As global demand for steel weakened due to the global financial crisis, tensions rose between the US and China over the dumping of certain steel products. In fact, anti-dumping cases were filed against China in 2009, and the controversy continues as of August 2012. For instance, in May 2012, to offset lower prices of Chinese exports, the US Commerce Department voted to create anti-dumping duties for high-pressure steel cylinders from China.

Exports of US steel mill products rose from 8.8 million metric tons in 2006 to 12.2 million metric tons in 2011. In 2011, carbon and alloy products combined represented 95% of US exports, with stainless steel representing the remaining 5%. Canada and Mexico accounted for the vast majority of steel exports due to their close proximity to the US, which reduces shipping costs, and due to the North American Free Trade Agreement. Other export destinations included countries in the European Union and China.

Chart 5 | United States: Steel Mill Product Trade (million metric tons) 45 Imports SAMPLE41.1 - NOT for DISTRIBUTION 40 35 Imports 30 25.9 25 20 Exports 15 Exports 12.2 8.8 10 5 0 2006 2011

Source: The Freedonia Group, Inc.

Steel Mill Products: United States

DEMAND FORECASTS Market Environment

The US steel industry is impacted by numerous variables, many of which are beyond the direct control of manufacturers. To 2016, increases in the country’s gross domestic product, population, and construction activity will bolster steel mill product consumption; construction expenditures, for instance, are forecast to $1.4 trillion in 2016, representing annual growth of 10%. In addition, the production of motor vehicles, machinery, and other durable goods that contain steel will rise as the economy recovers, providing further support for the steel industry. Automobile production, for example, is forecast to rise 8.9% annually to 4.7 million units in 2016. For 2012, industry leaders Nucor and ArcelorMittal project stronger steel demand in the US automotive, heavy equipment, and energy markets. Nucor, however, predicts that consumer confidence and spending will remain inconsistent until employment levels improve.

International trends also impact the industry as trade plays a large role, not only in shipments of steel, but also in pricing. As steel imports increase, prices for steel mill products generally decrease. Other factors that influence consumption of steel mill products include energy costs, environmental regulation, technological developments, and competition from alternative materials such as aluminum and plastics.

Table 1 | United States: Key Indicators for Steel Mill Product Demand (billion dollars) CAGR % Item SAMPLE - NOT for 2006DISTRIBUTION 2011 2016 11/06 16/11

Gross Domestic Product 13377 15094 18700 2.4 4.4 Resident Population (million) 298.4 311.6 326.4 0.9 0.9 Unemployed Civilian Labor Force (million) 7.0 13.7 10.0 14.4 -6.1

Durable Goods Shipments 2435 2373 2925 -0.5 4.3 Metal Product Shipments 526.7 586.7 695.5 2.2 3.5 Machinery Shipments 307.0 331.3 405.0 1.5 4.1 Construction Expenditures 1211.0 825.9 1355.0 -7.4 10.4 Automobile Production (thousand units) 4365 3085 4730 -6.7 8.9

Source: The Freedonia Group, Inc.

Steel Mill Products: United States

Product Forecasts

To 2016, recoveries in motor vehicle production, durable goods shipments, and residential building construction will drive consumption of steel mill products in the US to 133 million metric tons. Although the recession that began in December 2007 deeply affected manufacturing activity in the US, growth will return as the economy slowly recovers. All three product segments are forecast to experience strong annual growth to 2016, rebounding from the declines of the historical period.

Table 2 | United States: Steel Mill Product Demand by Type (million metric tons) CAGR % Item 2006 2011 2016 11/06 16/11

Steel Mill Product Demand 131.6 106.0 132.5 -4.2 4.6 Carbon Steel 122.8 99.4 123.5 -4.1 4.4 Alloy Steel 6.3 4.6 6.6 -6.1 7.5 Stainless Steel 2.5 2.0 2.4 -4.4 3.7

net imports 32.3 17.0 26.5 -- -- Steel Mill Product Shipments 99.3 89.0 106.0 -2.2 3.6

Source: The Freedonia Group, Inc.

Carbon Steel. US demand for carbon steel is projected to rise 4.4% annually to 124 million metric tons in 2016. Rebounds in building and nonbuilding construction expenditures will fuel segment growth. Additional support will come from a recovering motor vehicle industry, which uses low- to medium-carbon steels for automotive parts. Carbon steel's relatively low cost, superior wear resistance, and high surface hardness, particularly in highSAMPLE-carbon types, -provides NOT suppliersfor DISTRIBUTION a firm foothold in key markets. Low- carbon steel will remain attractive to consumers, due to the material's ability to machine and weld more easily than the more brittle high-carbon steel. However, competition from stainless and alloy steels will restrain segment advances in applications such as oil and gas exploration, where drilling in corrosive environments requires companies to employ more heat-resistant steels.

Alloy Steel. Alloy steel consumption in the US is forecast to reach 6.6 million metric tons in 2016, representing annual growth of 7.5%. A recovery in motor vehicle

Steel Mill Products: United States

production, as well as the increased use of HSLA steel to lower vehicle weight without reducing strength, will spur growth. Gains in machinery manufacturing, another major application, will also boost advances. Alloy steel will remain an important component of military and commercial shipping vessels, tanks, and aircraft; and jet engines continue to be manufactured using nickel alloy steels. In addition, a rebounding construction industry will drive consumption of alloy steel, which, like carbon steel, will remain an important building material. Less costly than aluminum, HSLA steel is attractive to builders who need a structural material stronger than carbon steel. In response to this growing demand for lighter and stronger steels in the automotive and construction industries, suppliers such as US Steel are intensifying their focus on valued-added alloy steels.

Stainless Steel. US consumption of stainless steel is expected to reach 2.4 million metric tons in 2016, up 3.7% annually. The metal's advantages over carbon steel, such as long-term value, a favorable strength-to-weight ratio, and greater durability and corrosion resistance, will support demand growth. An expected rebound in motor vehicle production will boost the use of stainless steel in components such as exhaust systems. In addition, rising residential construction activity and aerospace equipment production will drive consumption. For instance, Universal Stainless & Alloy Products, a Pennsylvania-based manufacturer of stainless and other specialty steels, reported significant sales increases to the aerospace, petrochemical, and power generation markets between 2010 and 2011. Retail sales of household appliances, SAMPLE - NOT for DISTRIBUTION such as ovens and kitchen sinks will further boost demand, as will expansions in chemical processing, food production, and pharmaceutical manufacturing. However, the higher price of stainless steel, compared to carbon steel, will limit further growth.

Steel Mill Products: United States

Market Forecasts

Demand for steel mill products in the US will rise to 133 million metric tons in 2016, fueled by increased production of durable goods that utilize steel, such as automobiles, pipes, and aerospace equipment. Energy efficiency and environmental concerns, in particular, will support the use of steel mill products as motor vehicle and building materials. However, going forward, steel mill product suppliers will face competition from alternative materials such as plastic and aluminum that offer price or performance advantages. For instance, high performance composites will slowly gain share on steel; despite higher installation costs, their savings in maintenance make high performance composites a viable alternative to less expensive steel.

Table 3 | United States: Steel Mill Product Demand by Market (million metric tons) CAGR % Item 2006 2011 2016 11/06 16/11

Steel Mill Product Demand 131.6 106.0 132.5 -4.2 4.6 Service Centers & Distributors 36.2 24.7 31.2 -7.4 4.8 Construction 25.2 19.0 25.4 -5.5 6.0 Automotive 18.7 17.2 20.5 -1.7 3.6 Other 51.5 45.1 55.4 -2.6 4.2

Source: The Freedonia Group, Inc.

Service Center & Distributors. Consumption of steel mill products by service centers and distributors is expected to expand 4.8% per annum to 31.2 million metric tons in 2016. Economic recovery and a loosening of the credit market, enabling service centers and distributorsSAMPLE to restock - theirNOT inventories, for DISTRIBUTION will drive segment gains. In addition, rising overall construction activity, and motor vehicle and other durable goods production, will further support growth. Advances will also be fueled by the ability of a steel service center to supply various steel types designed for specific purposes, as well as by the additional benefits steel service centers and distributors provide to customers, such as requiring a lower number of finishing operations. Leading metal service center companies in the US include Reliance Steel & Aluminum and Metals USA; both of which recorded sales increases in 2010 and 2011 following a low point in 2009. According to Reliance Steel & Aluminum, in 2011 the company recorded its fastest

Steel Mill Products: United States sales growth in the agricultural and mining equipment and oil and gas industries.

Construction. Demand for steel mill products in the construction market is forecast to increase to 25.4 million metric tons in 2016, representing annual growth of 6.0%. A rebound in new residential building construction expenditures, as well as gains in nonbuilding construction, will boost steel consumption. To 2016, new residential building and nonbuilding expenditures are projected to rise at a 15% and 5.3% annual rate, respectively.

Advances for steel fiber used to reinforce concrete will be fueled by the increasing use of such products as a replacement for welded-wire mesh. In addition, growing awareness of the benefits of metal roofing (including that made from steel) in both residential and nonresidential building applications will bolster segment demand. Government infrastructure investment will also continue to support demand in the segment. For instance, in July 2012 the US House and Senate passed legislation that authorizes $120 billion in federal highway, rail, and transit program spending for 27 months. In the nonresidential building market, the growing trend for "greener" construction (ie, buildings constructed for energy efficiency, often from more environment-friendly materials) will support demand for steel products. Many commercial and institutional building projects are increasingly seeking LEED certification through the use of materials, such as steel, made from recycled components. SAMPLE - NOT for DISTRIBUTION

Automotive. Demand for steel mill products in the automotive market is expected to reach 20.5 million metric tons in 2016, representing annual growth of 3.6%. An increase in the number of light vehicles in use, as well as rebounds in light vehicle production and retail sales will support gains in this segment. Stricter fuel economy standards will boost the use of advanced, lightweight, high-strength steel as a way for manufacturers to produce lighter weight and more fuel efficient automobiles. ArcelorMittal, for example, is investing in light ultra-high strength steels for the automotive market.

Steel Mill Products: United States

Further segment growth over the forecast period will be restrained by competition from other lightweight materials such as aluminum and reinforced plastics. In addition, gains will be limited by an acceleration in the production of smaller, more fuel efficient automobiles that require less steel on a per vehicle basis.

Other Steel Markets. Steel mill product consumption in all other markets, as an aggregate, is expected to advance 4.2% per annum to 55.4 million metric tons in 2016. Continued interest in wind power will aid production of steel for use in wind turbines. For instance, in 2011 the US Department of Energy approved a $102-million loan to Record Hill Wind for the construction of a 50.6 megawatt wind power plant near Roxbury, Maine. The project will consist of 22 new wind turbines. Rising aerospace equipment and machinery production will also boost steel shipments. Containers will remain the leading subsegment; however, competition from containers produced from materials such as plastic and aluminum will negatively impact demand.

SAMPLE - NOT for DISTRIBUTION

Steel Mill Products: United States

INDUSTRY STRUCTURE Industry Composition

The US steel industry is highly competitive and, in 2011, consisted of about 60 companies producing steel at over 100 facilities and employing approximately 151,000. The majority of US steel plants are located in the eastern half of the country. Producers can be segmented into two types: integrated mills, which employ BOFs, and minimills (or specialty mills), which utilize EAF technology. Although minimills usually require lower capital expenditures, such producers are subject to fluctuations in scrap prices. Both types of steel producers play a significant role in steelmaking, producing a variety of alloyed and specialty metals.

The US iron and steel industry has undergone a restructuring during the past half decade or so in the face of numerous problems including aggressive foreign competition, pricing weakness, high fixed costs, and overcapacity. Such difficulties combined to bring about a severe crisis in the US steel industry in the late 1990s and early 2000s, which included bankruptcies of more than 30 domestic steel producers between 1998 and 2005, including leaders such as LTV Steel and Bethlehem Steel. Contributing to rising costs, countries less affected by the global recession, such as China, have rapidly increased steel production and driven up prices for iron ore and other raw materials. Furthermore, leaders in the US steel industry recognize the threat of oversupply and cheaper imports from China. Such factors, combined with low domestic demand,SAMPLE have continued - NOTto plague for the DISTRIBUTIONUS steel industry. For instance, RG Steel, which operated one of the largest steelmaking facilities in the US, filed for bankruptcy in May 2012.

In 2011, three of the leading suppliers of steel mill products to the US market were ArcelorMittal (Luxembourg), Nucor, and US Steel. Other major suppliers included Baosteel (China), POSCO (South Korea), Nippon Steel (Japan), JFE Holdings (Japan), Jiangsu Shagang (China), and Tata Steel (India).

Steel Mill Products: United States

Industry Leaders

ArcelorMittal (NYSE:MT & LUX:MT) ArcelorMittal International North America 19, Avenue de la Liberté 1 South Dearborn Street, 13th Floor L-2930 Luxembourg Chicago, IL 60603 Grand Duchy of Luxembourg USA +352-4792-1 +1-312-899-3500 www.arcelormittal.com

ArcelorMittal, the world's largest manufacturer of steel, was a leading supplier of steel mill products to the US market in 2011. The company recorded worldwide sales of $94.0 billion, including US sales of $16.5 billion, and employed 261,000.

ArcelorMittal competes in the US steel mill product industry through its Flat Carbon Americas segment and Long Carbon Americas and Europe segment. In January 2011, ArcelorMittal's stainless steel segment became a separate company, Aperam, which operates facilities in Europe and Brazil. In 2011, ArcelorMittal produced 91.9 million metric tons of crude steel, and had global steel shipments of 85.8 million metric tons. The company is vertically integrated, with upstream activities that include iron ore and coal mining, and the production of coke. Downstream activities in the Flat Carbon Americas segment, which recorded 2011 sales of $21.0 billion, include the manufacture of slabs, hot- and cold-rolled coil, coated steel products, and plates. Steel mill products manufactured in the Long Carbon Americas and Europe segment include wire rod, rebars, billets, blooms, pipes, tubes, sheet piles, rails, and ingots. In 2011, the Long Carbon Americas andSAMPLE Europe segment - NOT posted for sales DISTRIBUTION of $25.2 billion.

ArcelorMittal’s steel products are used in industries such as construction, machinery, transportation, appliances, packaging, and oil and gas. ArcelorMittal is also involved in research and development projects such as its S-in-motion program, which utilizes advanced high-strength steels for automobiles that provide mass reduction and sustainability while maintaining safety. The company has also developed MAGNELIS, a metallic coated steel that provides superior resistance to corrosion in harsh environments.

Steel Mill Products: United States

Nucor Corporation (NYSE:NUE) 1915 Rexford Road Charlotte, NC 28211 USA +1-704-366-7000 www.nucor.com

Nucor, a manufacturer of steel and steel products, was one of the leading suppliers of steel mill products to the US in 2011. The company had total sales of $20.0 billion in 2011, and employed 20,800.

Nucor participates in the US steel mill product industry via its Steel Mills and Steel Products segments. According to the company, Nucor is the largest recycler in North America – recycling 19.7 million tons of scrap steel in 2011 – and primarily uses scrap steel in the manufacture of its products. In the Steel Mills segment, which recorded sales of $14.0 million in 2011, Nucor manufactures hot- and cold-rolled sheet steel, plate steel, structural steel, and bar steel, using EAF technology. The Steel Products segment, which had sales of $3.4 million in 2011, manufactures steel joints, girders, deck, fabricated concrete reinforcing steel, wire, fasteners, steel grating, and steel framing, among other products. In 2008, Nucor acquired David J. Joseph (DJJ) scrap processing, which provides ferrous scrap for the Steel Mills segment. As of December 2011, DJJ operated 60 scrap yards with a combined processing capacity of just under 5 million tons of scrap annually. SAMPLE - NOT for DISTRIBUTION Across the US, Nucor operates 13 bar mills, 4 sheet mills, 2 structural mills, 2 plate mills, and 2 beam mills. The combined production capacity of the bar mills is approximately 9.1 million tons per year. The company's total steel production reached 19.6 million tons in 2011, representing a 7% increase from the previous year. Nucor's steel shipments to outside customers totaled 16.8 million tons in 2011, up 6% from 2010. In April 2010, Nucor acquired a 50% interest in NuMit, a joint venture with Mitsui & Co, for approximately $221 million. NuMit maintains 100% ownership of Steel Technologies, which operates 25 sheet processing facilities in North America.

Steel Mill Products: United States

United States Steel Corporation (NYSE:X) 600 Grant Street Pittsburgh, PA 15219 USA +1-412-433-1121 www.ussteel.com

US Steel, an integrated producer of flat-rolled and tubular steel products, was one of the leading suppliers of steel mill products to the US market in 2011. The company had worldwide sales of $19.9 billion in 2011, including sales of $15.6 billion in North America, and employed 43,000.

US Steel is active in the US steel mill product industry through its Flat-rolled Products and Tubular Products segments. According to the company, US Steel is the largest integrated steel producer headquartered in North America. The Flat-rolled segment, which recorded sales of $12.4 billion in 2011, produces slabs, rounds, strip mill plates, and sheets. The segment primarily serves customers in the service center, transportation, construction, container, appliance, and electrical markets. Operations in the Tubular Products segment, which posted 2011 sales of $3.0 billion, include the manufacture of seamless and electric resistance welded steel casing and tubing, as well as standard and line pipe and mechanical tubing. The Tubular Products segment sells to customers in the oil, gas, and petrochemical industries. Company shipments in 2011 totaled 22.3 million tons, including 15.5 million tons in the Flat-rolled Products segment, and 1.8 million tonsSAMPLE in the Tubular - ProductsNOT for segment. DISTRIBUTION Specific products offered by US Steel include ACRYZINC sheet steel, which includes a clear organic resin surface treatment applied over a galvanized coating to provide enhanced corrosion resistance. US Steel's ACRYLUME and GALVALUME coated sheets also offer corrosion resistance, and are used in green building construction.

US Steel operates facilities in the US, Canada, Mexico, Brazil, and Slovakia. The company also participates in the industry through a number of joint ventures with companies such as Kobe Steel (Japan), POSCO, and ArcelorMittal.

Steel Mill Products: United States

Additional Companies Cited

AK Steel Holding Corporation (NYSE:AKS) www.aksteel.com Aperam SA (AMS:APAM) www.aperam.com Baosteel Group Corporation Limited www.baosteel.com Danieli Corus Technical Services BV www.danieli-corus.com JFE Holdings Incorporated (TSE:5411) www.jfe-holdings.co.jp Jiangsu Shagang Group Company Limited www.sha-steel.com Metals USA Holdings Corporation (NYSE:MUSA) www.metalsusa.com Mitsui & Company Limited (TSE:8031) www.mitsui.com Nippon Steel Corporation (TSE:5401) www.nsc.co.jp POSCO (NYSE:PKX & KRX:005490) www.posco.com Reliance Steel & Aluminum Company (NYSE:RS) www.rsac.com RG Steel LLC www.rg-steel.com Sumitomo Metal Industries Limited (TSE:5405) www.sumitomometals.co.jp Tata Steel Limited (BSE:500470 & NSE:TATASTEEL) www.tatasteel.com Universal Stainless & Alloy Products Inc (NASDAQ:USAP) www.univstainless.com

SAMPLE - NOT for DISTRIBUTION

Steel Mill Products: United States

RESOURCES The Freedonia Group, Inc www.freedoniagroup.com Related Industry Studies 2811 Metal Powders, December 2011 see study contents 2734 World Refractories, March 2011 see study contents 2704 Refractories, December 2010 see study contents 2533 Metal Finishing Chemicals, July 2009 see study contents Related Focus Reports Steel Pipe: United States see report contents Construction Expenditures: United States see report contents Metal Stampings: United States see report contents Refractories: United States see report contents Freedonia Custom Research, Inc see capabilities

Trade Publications Metal Center News www.metalcenternews.com Steel Times International www.steeltimesint.com

Agencies and Associations American Institute for International Steel (AIIS) www.aiis.org American Iron and Steel Institute (AISI) www.steel.org Association for Iron and Steel Technology (AIST) www.aist.org National Highway Traffic Safety Administration (NHTSA) www.nhtsa.gov Occupational Safety and Health Administration (OSHA) www.osha.gov Steel Manufacturers Association www.steelnet.org United States Census Bureau www.census.gov United States Geological Survey (USGS) www.usgs.gov United States Green Building Council www.usgbc.org United States InternationalSAMPLE Trade - Administration NOT for DISTRIBUTION www.trade.gov World Steel Association www.worldsteel.org

Environmental Impact. Please consider the environment before printing this report. Freedonia Focus Report collections feature environmentally friendly products distributed entirely via electronic channels.