Steel Manufacturers AssociationAnnual Board of Directors MeetingSteel Manufacturers AssociationAnnual Board of Directors Meeting

Presented by

The David J. Joseph CompanyFebruary 14 - 16, 2007

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The David J. Joseph Company Corporate LocationsThe David J. Joseph Company Corporate Locations

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Brokerage Offices and Mill Services LocationsBrokerage Offices and Mill Services LocationsWashington

Oregon

CaliforniaIdaho

Montana

Nevada

Wyoming

Utah

ArizonaNew Mexico

Colorado

North Dakota

South Dakota

Nebraska

Kansas

Oklahoma

Texas

Louisiana

Arkansas

Missouri

Iowa

Minnesota

Wisconsin

IllinoisIndiana

Michigan

Ohio

Kentucky

Tennessee

MississippiAlabama

Florida

Georgia

South Carolina

North Carolina

Virginia

West Virginia

Pennsylvania

MD

New York

Maine

VT

NH

MA

CT

DE

NJ

Ferrous Brokerage Offices

Mill Services Sites 1/2007

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The David J. Joseph Company Processing RegionsThe David J. Joseph Company Processing Regions

1/2007

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Busheling vs. Shredded CompositesBusheling vs. Shredded Composites

sww2a

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450

03 04 05 06 07

Do

llars

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ss T

on

-50

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150

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450D

olla

rs Per G

ross Ton

Busheling vs. Shredded Composites

Busheling

shredded

Shredded

Bush vs. Shred

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Steel EconomySteel Economy

► Historically, U.S. GDP below 2.89% has resulted in a contraction in steel usage

► In the 4th quarter of 2006, producers reduced production to react to build up of inventories

► U.S. demand for raw materials to produce steel declined► Impact on domestic commodity prices► Export market helped determine domestic prices and acted as pricing

floor

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0

2

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J2003

F M A M J J A S O N D J2004

F M A M J J A S O N D J2005

F M A M J J A S O N D J2006

F M A M J J A S O N D

Mill

ions

of

Net

Ton

s

Steel Service Center Inventories2003 - 2006

Tight supplies rising steel prices double orders inventory build.Inventories at Service Centers rose 23% from April 2004 to April 2005, then declined by 18% by year end. Inventories rose 22% from Jan-Oct 2006 before declining slightly in November.

Tight supplies rising steel prices double orders inventory build.Inventories at Service Centers rose 23% from April 2004 to April 2005, then declined by 18% by year end. Inventories rose 22% from Jan-Oct 2006 before declining slightly in November.

SmewsStats/SVC INV

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Significant growth in demand was met by developing new supplies and by re-orienting to domestic markets scrap previously exported.Significant growth in demand was met by developing new supplies and by re-orienting to domestic markets scrap previously exported.

Millions NT

Est.

1991 2001 2002 2003 2004 2005 2006

46 64 65 63 69 66 70 Domestic Demand

10 8 10 12 13 15 14 Export

56 72 75 75 82 81 84 Total Demand

54 62 64 65 67 67 67 Domestic Scrap Production

<1 1 <1 <1 <1 <1 <1 Domestic Pig & DRI

2 9 11 10 15 13 17 Import Scrap, Pig & DRI

0 0 0 0 0 0 0 Balance

Market Clears

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FRD Major Currencies Dollar Index vs. ScrapFRD Major Currencies Dollar Index vs. Scrap

frb1

FRB Major Currencies Dollar Index and IA Shredded Composite

75

85

95

105

115

125

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07

FR

B M

ajor

Cur

renc

ies

Dol

lar

Inde

x 19

73 =

100

30

60

90

120

150

180

210

240

270

300

330Iron A

ge Shredded C

omposite

U.S. DollarFRB Index(left axis)

IA Shredded Composite(right axis)

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Shredder Capacity + Planned AdditionsShredder Capacity + Planned Additions

Shredder operations and capacity has increased nearly 25% Shredder operations and capacity has increased nearly 25% since the early 2000’s. Announced new shredders and since the early 2000’s. Announced new shredders and planned increases to existing operations will add planned increases to existing operations will add approximately 240,000 tpm of shredding capacity in the next approximately 240,000 tpm of shredding capacity in the next couple of years.couple of years.

Normal # Shredders Production

2002 – 04 205 1.7 M/tons per month2006 208 2.1 M/tons per month

Planned:New 14 180,000Incremental 3 60,000

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Advanced TechnologiesAdvanced Technologies

Eddy Current

Sandflo

Gamma Metrics

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Residue Pricing ChartResidue Pricing Chart

45.00

55.00

65.00

75.00

85.00

95.00

105.00

Jan2004

Mar May Jul Sep Nov Jan2005

Mar May Jul Sep Nov Jan2006

Mar May Jul Sep Nov Jan2007

Cen

ts p

er P

ound

AMM NF Auto Shred Twitch (90% Alum)

Platts US Auto Shreds/Twitch

Platts US LG Auto Shreds

ALUMINUM AUTO SHREDAmerican Metal Market & Platts Metals Week

2004 - 2007

Notes: AMM Secondary Smelter prices are first effective, high side.Platts prices are monthly averages of high side prices.

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TransportationTransportation

► Throughout scrap industry, significant investments continue to be made in transportation assets

► Increasingly becoming a part of “total investment capital” versus an outsourced service

► Transportation shortages have been a primary driver of market volatility

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Metal Management Alter Trading PSCMar 2006 – Morris Bros. Feb 2006 – Max Phillips & Sons Jan 2007 – Akron RecyclingMay 2006 – Omni-E. Chicago Jul 2006 – Becker I & M

Sep 2006 – Gopher State Scrap & Metal EMRSchnitzer Steel Jan 2007 – Samuels Recycling May 2006 – Southern Recycling

Aug 2006 – Advanced Recycling Jun 2006 – Camden Iron & Metal Carolina Recycling Oct 2006 – Great Western I&M

OmniSource Mar 2006 – Columbia Steel & Metal Mar 2006 – K&F Industries Sep 2006 – merging w/Atlantic Scrap Proc River Metals RecyclingJan 2007 – Mervis I & M Oct 2006 – Tri-State ServicesJan 2007 – Capital City Shredders Cycle Systems

Dec 2006 – Gem City Iron Trademark Metals RecyclingCommercial Metals Mar 2006 – Recycling Center of Palm Beach

Jun 2006 – Yonack I & M Smorgon Steel Oct 2006 – Scrap-All. Inc.Dec 2006 – Industrial Metal Recyclers

Gerdau Ameristeel Texas Port RecyclingJan 2006 – Porter Bros. Ferrous Processing & Trading Feb 2006 – Northwest RecyclingMar 2006 – Fargo I & M Jan 2007 – M. Weingold & Co.

Selected Current Scrap ConsolidationsSelected Current Scrap Consolidations

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Scrap FuturesScrap Futures

► Primary reasons it hasn’t (won’t ?) occur:► Traded products must be universally acceptable

►Ferrous scrap qualities / traits vary from region to region► Liquidity requirement

►Speculators need a liquid financial market ►Credit-worthiness of market participants►Private nature of scrap industry limits the availability of financial information

► Regionalization►Ferrous scrap more freight sensitive than many other commodities (i.e., low value

to weight ratio)►Physical attributes / qualities of scrap vary from region to region

► Price Discovery Mechanism►There must be a Buyer / Seller of last resort (inventory must be held)