2. CMC – Business Model
Vertical Integration
Product Diversification
Global Geographic Dispersion
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3. Current Market Conditions & Outlook
Global Liquidity Crisis has Frozen the Steel Markets
Vicious Downward Spiral of Confidence
Supply, Including Inventories, Exceeds Apparent (or
Willing) Demand
Major Focus is Inventory Reduction and Cash
Generation
Major Steel Production Cutbacks, 30-50%
Depending on Markets
Sharp Price Declines Appear to be Easing
Project Delays, Cancellations More Frequent
Contract Cancellations, Market Claims, Price
Renegotiations at Unprecedented Levels
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4. North America
Ferrous Scrap Prices, After Free Falling ($480/LT
Drop July – November), Now Stabilizing
Ferrous Scrap Flows Dramatic Slowing
– Low Prices Impact Collection
– Winter Approaching
U.S. Steel Mills Driving Down Inventories – Major
Announced Production Cutbacks
– Year End Impact
Rebar Fabrication Backlogs Declining
Many Small Jobs (200-700 Tons) Being Bid But
Larger Jobs are Scarce
Service Centers Living Hand-to-Mouth; Buying
from Mills’ Inventories
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5. North America
Rebar Imports Well Down
– Only 20,000 MT Imported in November
– Only 79,000 MT/Month Average YTD 2008
Latest Turkish Offers Approximately US
$500/MT Houston Not Attractive
– Long Lead Times
– Must Commit to Larger Quantities
– Volatility Scrap / Domestic Rebar Prices
– Credit / Working Capital Constraints
Strengthening US$ and Low Freight Rates Not
Attracting Imports
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6. North America
OCTG Imports Starting to Decline
Raw Materials
– Some Weaker
– Some OK
Copper Prices – Always a Bell Weather
– At $1.60 - $1.70 Per Pound
– Reflects Lower Demand
China Starting to Buy Nonferrous Scrap Again –
Positive Sign
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7. Europe / Middle East
Mill Production Cutbacks and Inventory
Reduction Programs Will Continue into 2009
Large Inventories Unsold Rebar in Middle East
Markets
Polish Government Stimulus Package and EU
Funds for Infrastructure a Positive for 2009
Many Governments are Focusing on
Infrastructure Spending in 2009 Which Will
Benefit Long Steel Products
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8. China
Reversal of Former Strategy to Control Overheating
Economy / Inflation
Target 8-9% GDP in 2009
Fiscal Stimulus
– US $590 Billion Infrastructure Spending
– Focus Major Infrastructure Projects, Rail, Ports,
Highways
– Focus Public Housing
– Lowering Taxes (Including Income Taxes?)
– Reducing Export Taxes
Monetary
– Rapidly Cutting Interest Rates, Latest by 1.08%
– Providing More Export Subsidies
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– Currency Now Depreciating to US$ (6.83-6.85)
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December 4, 2008
9. China
Steel Mills Cut Back Production 30-50%
Long Products Demand and Prices Improving
Slightly – Flat Products Remain Weak
Steel Mills Starting to Buy Imported Scrap
Spot Iron Ore Prices now $70-73/MT (Bottom Mid
November at $65/MT)
Chinese Mills Only Buying on Spot Market – No One
Buys at Benchmark (Contract) Prices
Large Inventory of Iron Ore at Ports (60-70 Million
MT) Likely to Take One to Two Quarters to be
Significantly Reduced
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10. Summary – What Will Break the Cycle?
Global Government Intervention Programs
Must be Effective
Credit / Liquidity Issues to Ease
Restoration of Confidence
Demand to Exceed Production Cutbacks /
Inventory Reductions
Clear Direction and Action from New U.S.
President / Administration
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11. Summary – What Will Break the Cycle?
Possible Capital / Infrastructure Stimulus
in the U.S.
China’s Impact Will be Critical
– Infrastructure Spending
– Stimulus to Domestic Consumption
– Limited Steel Exports
– Positive Signs After Chinese New Year
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12. Investor Information
Non-GAAP Financial Measures
and Regulation G
This written and verbal presentation may use financial
statement measures considered non-GAAP financial measures
by the Securities and Exchange Commission (SEC).
In compliance with the SEC’s Regulation G, we have
provided on our web site at
www.cmc.com
a reconciliation to the most comparable GAAP measure and
other information that may be of interest to investors.
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13. Forward-Looking Statements
This written and verbal presentation may contain forward-looking
statements regarding the outlook for the Company's financial results
including net earnings, product pricing and demand, production rates,
interest rates, inventory levels, impact of acquisitions and general market
conditions. These forward-looking statements generally can be identified by
phrases such as the company or its management “expect,” “anticipates,”
“believe,” “ought,” “should,” “likely,” “appears,” “projected,” “forecast,”
“outlook,” “will” or other words or phrases of similar impact. There is
inherent risk and uncertainty in any forward-looking statements. Variances
will occur and some could be materially different from management's
current opinion. Developments that could impact the Company's
expectations include solvency of financial institutions and their ability or
willingness to lend, extent of government intervention and its effect on
capital markets, construction activity, difficulties or delays in the execution
of construction contracts resulting in cost overruns or contract disputes,
metals pricing over which the Company exerts little influence, interest rate
changes, increased capacity and product availability from competing steel
minimills and other steel suppliers including import quantities and pricing,
court decisions, industry consolidation or changes in production capacity or
utilization, the ability to integrate acquisitions into operations; global
factors including political and military uncertainties, credit availability,
currency fluctuations, energy and supply prices and decisions by
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governments impacting the level of steel imports and pace of overall
4th Annual
economic activity, particularly China.
Global Steel CEO Forum
December 4, 2008
