CUSTOMER SATISFACTION SURVEY By JOHN JACOBSON, Jacobson & Associates

20 October 2008 — METAL CENTER NEWS

JACOBSONCUSTOMER SATISFACTION SURVEY

Steel mill customers are growing increasingly dissatisfied with steel prices that seem far too high.

MillCustomers

Feel the Pain of High Steel

Prices

TTODAY’S HIGH STEEL PRICES havecreated a wave of dissatisfactionamong steel buyers. Throughout2008, mill customers—includingservice centers and end-users—cited high prices and tight avail-ability as the areas where millsmost need to improve.

According to the latest datafrom Jacobson & Associates, whichconducts a continuous census sur-vey of steel mill customers (seeMethodology on page 22), thenumber dissatisfied with pricesspiked to 42 percent in the June-Ph

oto

cour

tesy

SSA

B

CUSTOMER SATISFACTION SURVEY

August 2008 period (see Chart 2).This is the highest level of pricedissatisfaction since the JacobsonSurvey began in 1994.

Recent tight market conditionshave shifted the focus of customersmore towards price and availabili-ty and lessened their focus onquality and other considerations.

Mills rated the highest by theircustomers in the past year include:North Star Bluescope, SSAB NorthAmerican, Nucor Marion, HannaSteel, Nucor Berkeley and AK

Specialty Steel (see Chart 1).High levels of dissatisfaction

may pose risks to the future healthof North American steel mills.When markets soften, customersmay well shift their business to themills they feel treated them mostfairly when the market was tight.Mills with particularly high levelsof customer price dissatisfactionrun the greatest risk of getting hurtwhen the steel cycle turns down.

The higher the price theycharge, the greater the threat ofsubstitution facing North Amer-ican steel producers. High pricesprompt customers to seek outalternatives in the form ofimported steel or another materi-al that can substitute for steel.Historically, steel industry down-turns have been exacerbated bycustomers making product sub-stitutions. While customers maynot have options when marketsare tight, they tend to remem-ber how well—or poorly—theywere treated when pricing powershifts their way.

Most people in the steel indus-try understand all too well thatthey operate in a cyclical business.While mills have been able to selleverything they can make for sometime now, this will not last. At

METAL CENTER NEWS — October 2008 21

Forty-two percent of mill customersconsider price to be the performanceattribute most in need of improvement, upfrom the five-year average of 32 percent.

�

SERVICE CENTERSNorth Star BluescopeThe TechsUSS Mon Valley

WorksUSS-POSCOArcelorMittal DofascoNucor DecaturNucor CrawfordsvilleArcelorMittal

RiverdaleNucor ArkansasSeverstal Sparrows

PointUSS MidwestAK Steel

END-USERSThe TechsGallatinUSS-POSCONucor DecaturNorth Star BlueScopeNucor ArkansasSteel DynamicsSeverstal Sparrows

PointSeverstal WarrenArcelorMittal IH EastAK SteelArcelorMittal Dofasco

SERVICE CENTERSSDI Roanoke Nucor AuburnGerdau IowaNucor NebraskaCascade SteelNucor JacksonCMC Steel TexasNucor TexasNucor UtahGerdau Jackson

END-USERSNucor MarionNucor AuburnNucor TexasNucor NebraskaGerdau CharlotteGerdau WhitbyGerdau KentuckyNucor SeattleSDI RoanokeNucor Utah

SERVICE CENTERSSSAB North

AmericanEvraz CanadaNucor HertfordNucor TuscaloosaEvraz Claymont

END-USERSSSAB North

AmericanNucor HertfordNucor Tuscaloosa

CHART 3

Overall Customer Satisfaction

Note: Data covers period from Sept. 1, 2007, through Aug. 31, 2008. Customers use a 10-point scale to measure their level of satisfaction with supplier quality, delivery, price,service and overall performance, where 10 is “Very Satisfied” and 1 is “Very Dissatisfied.”

TOP SHEET MILLS TOP BAR/STRUCTURAL MILLS TOP PLATE MILLS

The LeadersTOP-RATED MILLS

BY PRODUCT CATEGORY

SHEET—North Star BluescopePLATE—SSAB North AmericanBAR/STRUCTURALS—Nucor MarionTUBE—Hanna SteelBEAMS—Nucor BerkeleySTAINLESS SHEET—AK Specialty

Steels

Where Do MillsNeed Most

Improvement?PERFORMANCE 2008 5-YEARATTRIBUTE AVG.Price 42% 32%Delivery 25% 28%Inventory Availability 18% 14%Service & Attitude 17% 18%Quality 7% 12%Rolling Schedule 7% 5%Communication 4% 5%Web site 2% 2%Lead Times 7% 2%

CHART 2CHART 1

CUSTOMER SATISFACTION SURVEY

some point, negotiating power will shiftback towards customers, who will belooking for the best deal to meet theirneeds—with our without NorthAmerican steel. Customer satisfactionand market development efforts by thesteel industry are as important now, evenwith prices near record levels, as at any

time. It is truly in the long-term interestof steel producers to satisfy customersthroughout the steel/economic cycle.

Customer commentsWhere do steel suppliers need the

most improvement? This sampling ofcustomer comments from June throughAugust reveals the widespread dissatis-faction with current steel price levels andmill pricing policies:

� “Get surcharges under control.”� “They are all taking advantage of us

[on price].”� “Mills need to do more contract

pricing.”� “Consolidation has not resulted in

more price stability as expected.”� “Adequate floor stock, more advance

notice of price increases.”� “Provide firm, competitive pricing—

current pricing is forcing bridge design-ers to look at other materials.”

� “Prices are excessive, they have gonebeyond greedy and will hurt the nation.”

� “Price and availability—it is difficultto get any plate these days because ofheavy military priorities.”

� “Pricing needs to level off.”� “We have had a price increase for five

months in a row!”� “Surcharges are unpredictable—they

won’t give us more than a month notice.”� “Pricing is on a month-to-month

basis, and we never know what it will bein 60 to 90 days when they deliver.”

� “They need to feel my pain as pricesrise monthly, and then drop suddenly.”

� “Meet promised availability anddelivery dates.”

� “Maintaining the quality; it seemsthat when the mills are full and arerolling steel at increasing numbers, qual-ity tends to take a back seat.”

� “People in customer service do nothave the power to fight for us to get oursteel on time.”

� “They all got fat and forgot aboutcustomer service.”

� “Be better partners with service cen-ters as prices fluctuate.”

MethodologyJacobson & Associates conducts a

continuous census survey of morethan 2,000 major steel customers inthe United States and Canada, includ-ing service centers and end-users. TheJacobson Survey stands as an objec-tive, third-party measure of steel cus-tomers’ satisfaction with their millsuppliers. Customers use a 10-pointscale to measure their level of satisfac-tion with supplier quality, delivery,price, service, inside sales, outsidesales and overall performance.Jacobson producers separate reportson sheet producers, plate producers,minimill producers, stainless sheetproducers, tube producers and beamproducers. This article is based onsurvey data for the 12 months endingAug. 31, 2008.

SHEET PRODUCERSSteel DynamicsArcelorMittal ClevelandWorthington SteelArcelorMittal Burns

HarborUSS CanadaArcelorMittal DofascoAK SteelSeverstal Sparrows PointArcelorMittal RiverdaleNucor DecaturUSS MidwestUSS Mon Valley

BAR/STRUCTURALSCMC South CarolinaGerdau MinnesotaCMC AlabamaKentucky ElectricNucor KankakeeNucor MarionBayou SteelNucor NebraskaGerdau CharlotteGerdau WhitbySDI RoanokeGerdau Cambridge

CHART 4

Most Improved MillsOVERALL CUSTOMER SATISFACTION BY

PRODUCT CATEGORY

Customer Loyalty

CHART 5

TOP-RATED SHEET PRODUCERSArcelorMittal IH WestUSS Midwest WorksArcelorMittal HennepinThe TechsUSS Granite CityArcelorMittal Burns HarborUSS Great LakesCSIArcelorMittal WeirtonSteel Dynamics

TOP-RATED PLATE PRODUCERSArcelorMittal CoatesvilleNucor HertfordSSAB North American

TOP-RATED BAR/STRUCTURALS PRODUCERSGerdau CambridgeKentucky ElectricGerdau JacksonNucor NebraskaGerdau KentuckyNucor SeattleGerdau CharlotteGerdau IowaCMC Steel TexasNucor Utah

BioJohn Jacobson is president of

Jacobson & Associates, Lake Forest, Ill.The Jacobson Survey has been measuringsteel customer satisfaction since 1992.Additional information on Jacobson &Associates is available at www.jacobson-steel.com or by calling 847-735-7250.

22 October 2008 — METAL CENTER NEWS