Steel Market Report

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Steel Market Report

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Steel Market Report - Fall 2009

Up, Down, Up ...

Prices Up more than a 100% in early/mid 2008.
Down 50% with a collapse in late 2008 through the spring of this year.
Up again as U.S steel mills moved aggressively to increase prices.

Since June 2009, domestic producers Nucor, U.S.Steel, Arcerlor/Mittal, et al, have implemented or announced increases totaling well over $200 per ton on all flat rolled products. Steel consumers (Aegis included) are asking themselves - "How is it possible that prices can be rising when demand is so weak?" The key issues supporting the run up are:

1. After many months of "destocking", running inventories down to historic lows, service centers and many OEMs have been purchasing again to replenish their stocks. This gives the appearance of improved demand.

2. Steel mills shuttered so much capacity in the downturn (nearly 60% by some accounts), that they are currently unable to fulfill the orders they are seeing as the result of item # 1. This has pushed lead times out to 60 days or more vs. 15 to 20 days earlier this year. Once again, the appearance of improved demand.

3. The mills are bringing furnaces back up at many locations, however, it takes more than just a "flip of a switch" to restart these facilities, thus lead times push out making demand seem greater.

4. That old culprit, scrap steel, is rearing its head again, with prices for this key steelmaking input jumping as well.

Where we go from here in anyone’s guess. There is as much economic evidence to suggest prices should stop rising and perhaps even decline as there is to suggest certain steel-consuming sectors are improving, and prices might continue a slow, gradual rise. It really is that difficult to predict. Here are some factors to consider that support or refute future increases:

1.Steel mills are gradually bringing up idled facilities just as their order books MIGHT begin to soften. End result—prices could go down.

2. Automotive and certain other steel consuming segments are seeing improved order books. Whether this is a short lived “bump” due to "Cash for Clunkers", or a sustained, slow recovery is anyone’s guess. End result—prices could go up, stay flat, or go down.

3. American Recovery and Reinvestment Act (a.k.a. Stimulus Bill) spending will finally manifest itself in promised construction projects, increasing demand for steel products. Of course, that money has been so slow to “hit the streets” that no one should hold their breath for a huge boom. End result—prices could go up, could stay flat, could go down.

You get the picture.

The good news for all Aegis fabricators is that, as the result of our integration into MiTek, we are part of an organization that is not afraid to aggressively pursue all options, domestic and foreign, to ensure the lowest steel price possible for our customers. In doing so, we can hopefully give you a little “peace of mind” that together, we will weather the ups and downs of this crazy, global steel market.

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