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EGS COMMODITY REVIEW February 26, 2007 Steven Call Commodities Steel Non-Ferris Metals Stampings - PowerPoint PPT Presentation


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EGS COMMODITY REVIEW February 26, 2007 Steven Call Commodities Steel Non-Ferris Metals Stampings. Steel Market Update. USA Market Industry consolidation continues The big four Mittal-Arcelor, US Steel, Nucor & AK controls 80% of the market New business model seen recently

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EGS COMMODITY REVIEW

February 26, 2007

Steven Call

Commodities

Steel

Non-Ferris Metals

Stampings


Steel market update
Steel Market Update

USA Market

  • Industry consolidation continues

    • The big four Mittal-Arcelor, US Steel, Nucor & AK controls 80% of the market

  • New business model seen recently

    • Esmark – a distributor – purchased two mills and a galvanizer

  • Current Q1 prices down 17% from 2006 Q4 high

    • Inventories have increased with automotive and housing markets soft

    • Capacity at 84%

  • Future forecast uncertain – steel producers trying to reduce capacity to retain pricing

  • US government continues to be protective with imported steel

Top 4 Suppliers Control 80% of Market


Steel market update1
Steel Market Update

Global Market

  • General

    • Global consolidation continues

      • Mittal (Europe): MMK (Russia) / Sicartsa (Mexico) / Worthington (USA)

      • Tata (India) : Corus (EU)

      • Nucor (US): Harris (Canada)

  • China

    • Internal steel users see a 39% cost advantage compared to NA manufacturers

    • Pricing and supply have increased 1Q07 with higher iron ore costs

    • Capacity near 100% - China remains a net importer of steel and scrap

  • Mexico

    • Maintains US pricing

    • Net importer of steel

  • Europe

    • Now a price leader pulling in imports


Steel market summary
Steel Market Summary

Summary

  • Global steel demand increasing

    • 3.74% CAGR

  • Production increasing in developing regions

    • Brazil, China, Eastern Europe and India are expanding production

  • Consolidations to continue

  • Potential destabilizing effects exist

    • China

      • Supply / demand balance

      • Raw material costs

      • Inflation

    • USA

      • Weakening Currency

    • Eastern Europe

      • Oil & Gas Market

15% Demand Growth next 5 years

CIS, Brazil & India Will be the Dominant Low-Cost Source of Steel

China’s Demand Growth Expected to Balance Supply Expansion


Lamination duo core market update
Lamination/Duo-Core Market Update

Energy Star Transformer – Duo-Core Launch

  • Three suppliers

    • Lakeview / Electro-core / Tempel

  • Cores consist of a material blend of

    • M-4 GO $2.23 / lb 6 Month Lead Time

    • M-12 NGO $1.22 / lb 4 Month Lead Time

  • Material Status

    • M-4

      • 12 Suppliers worldwide – limited spot tons available

      • AK & Allegany – North America – sold out until 2009

    • M-12

      • About 15 suppliers worldwide – very limited spot tons available

      • AK & Allegany – sold out until 2009


Steel commodity overview
Steel Commodity Overview

  • Market Opportunities

    • Leverage global sourcing options

    • Use long term agreements for price stabilization

    • Align stamping moves to Mexico with the steel team to ensure flat roll supply

    • Improve overall logistics costs through supply stream management


Steel supplier overview
Steel Supplier Overview

  • Opportunities

    • US Steel - renegotiate if spot drops below market

      • Current contract is below market – continue to monitor spot market

    • All distributor costs - evaluate for more cost effective ways to manage the buy

      • Utilize long term agreements or purchasing direct

    • Sorrel and Busheling

      • Review if logistic costs can be reduced

    • Inventory turns

      • Obsolete or sell excessive stock to distributors


Steel projects
Steel Projects

  • Distributor Steel – Purchase price savings

    • Resource distributor steel direct from the mill – US Steel

      • US Steel will maintain the galvanizing and shipping adders that are part of the .063” contract

      • Steel will be purchased at spot and be included in the next long term agreement

  • Sorel -– Logistics and purchase price savings

    • New supplier to ship FOB South Milwaukee with a cost reduction

      • Savings includes

        • Purchase Price ($5)

        • Shipping ($28K)



Raw metals commodity overview
Raw Metals Commodity Overview

  • Issues

    • Price volatility day-to-day

    • Market volatility driven by Hedge Funds

  • Opportunities

    • Continue hedging program for zinc, aluminum and copper

    • Review contracts for long term

      opportunities


Raw material supplier overview
Raw Material Supplier Overview

  • Issues

    • Limited domestic supply base

    • Payment terms not at 5th 3rd prox across all suppliers

    • 2 suppliers for aluminum

      • Wabash Alloys, Custom Alloy Light Metal

    • 4 suppliers for zinc can service EGS

      • Allied Metals, Ritchey, Imperial Zinc, Eastern Alloys

  • Opportunities

    • Extend payment terms for all suppliers


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