SFSA 2009 Forecast

Roy RouxChairman – SFSA Marketing Committee

2008 SFSA Annual Meeting

Industry ForecastSegment (tons) (tons) (%) (tons) (%)

Railroad 650,627 592,070 -9 532,863 -10Mining 155,870 168,340 8 185,174 10Construction 116,424 121,081 4 124,713 3Trucks 20,736 18,662 -10 20,529 10

Valves 44,100 48,510 10 52,391 8Pumps 12,679 13,693 8 15,062 10Oil Field 25,960 28,556 10 31,412 10Military 11,556 12,712 10 14,873 17

Other Markets 79,924 83,121 4 83,121 0

Total 1,117,875 1,086,745 3 1,060,137 -2

Business Impact Factors2009

• Subprime lending and banking crisis causing financial uncertainty.

• High energy and materials prices driving strong demand for steel containing capital goods. It is causing consumer inflation and pain.

• Transportation and infrastructure investment likely to add to demand in future.

• Slowing growth in global economy may result in lower prices and activity.

• Exchange rate favors US producers.

Moody’s Aaa Bond Yield

U.S. Dollar vs. Brazilian Real

U.S. Dollar vs. Euro

U.S. Dollar vs. Chinese Yaun

-40.0-30.0-20.0-10.0

0.010.020.030.040.050.060.070.0

Jan-0

0Ja

n-01

Jan-0

2Ja

n-03

Jan-0

4Ja

n-05

Jan-0

6Ja

n-07

Book

Ship

Backlog

SFSA Trend Cards 2008

Steel Casting Capacity

0

500

1000

1500

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3000

1970 1975 1980 1985 1990 1995 2000 2005 2010

Year

Thou

sand

Ton

s

production capacity

SFSA Forecast and Trend Results

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

2002 2003 2004 2005 2006 2007 2008

YoY

% c

hang

e

trendsforecast

• Railroad industry– 2007 estimated 651,000 tons– 2008 projected 592,000 tons– 2009 forecast 533,000 tons

• Railcar deliveries– 2007 actual 63,200 units– 2008 projected 51,500 units– 2009 forecast 41,000 units

• Unsettled market and US economic slowdown• Carloads are flat • Cost of steel makes some buyers wait for better pricing

Railroad Forecast

-10%

Freight Cars

0

5000

10000

15000

20000

25000

30000

35000

40000

Oct-95 Jul-98 Apr-01 Jan-04 Oct-06 Jul-09

OrdersDeliveries

Mining Forecast

• Mining castings– 2007 estimated 156,000 tons– 2008 projected 168,000 tons– 2009 forecast 185,000 tons

• Global commodity demand up providing support for high prices

• Weak dollar makes US competitive• Equipment purchases have long lead

times - capacity constrained

+10%

Copper Prices

Nickel Prices

Coal Prices

U.S. Monthly Coal Production

US Coal ProductionFrom www.nma.org

1020

1040

1060

1080

1100

1120

1140

1160

1180

2000 2001 2002 2003 2004 2005 2006 2007

Year

Coa

l (m

illio

n sh

ort t

ons)

Construction Forecast

• Construction equipment– 2007 estimated 116,000 tons– 2008 projected 121,000 tons– 2009 forecast 125,000 tons

• US market down but exports with weak dollar and global demand will support increase in orders

• Infrastructure investment will require equipment

+3%

Truck Forecast

• Trucks Class 8– 2007 estimated 21,000 tons– 2008 projected 19,000 tons– 2009 forecast 20,500 tons

• Truck deliveries in NA– 2007 estimated 205,000 units– 2008 projected 180,000 units– 2009 forecast 200,000 units

• New coming emission regulations should spur demand

+10%

Frei

ghtlin

er

Ster

ling

Mac

k

Inte

rnat

iona

l

Kenw

orth

Pete

rbilt

Volv

o

Wes

tern

Sta

r

Oth

er

0

5000

10000

15000

20000

25000

MANUFACTURER

HEAVY DUTY TRUCK SALES 07 vs 08

1 Jan ~ 30 Jun 07 1 Jan ~ 30 Jun 08

UN

ITS

SOLD

Valve Forecast

• Valve industry– 2007 estimated 44,000 tons– 2008 projected 48,500 tons– 2009 forecast 52,000 tons

• Complex valves are returning to US for making

• More specialty alloy products

+8%

Total Valve Shipments

0

500

1000

1500

20002500

3000

3500

4000

450019

95

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

$ in

mill

ions

From Valve Manufacturers Association

Pump Forecast • Pump industry

– 2007 estimated 12,500 tons– 2008 projected 13,500 tons– 2009 forecast 15,000 tons

• Work is returning from overseas• Pipeline construction increasing demand• Nuclear international business strong

+10%

Oil Field Forecast

• Oil field equipment– 2007 estimated 26,000 tons– 2008 projected 28,500 tons– 2009 forecast 31,500 tons

• Price of oil remains high stimulating exploration

• There may be changes in policy that will allow more exploration

+10%

Crude Oil PricesFrom eia.doe.gov

Oil Prices Spot

0

20

40

60

80

100

120

140

1/3/

97

1/3/

98

1/3/

99

1/3/

00

1/3/

01

1/3/

02

1/3/

03

1/3/

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1/3/

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1/3/

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1/3/

08

all countriesUnited States

US and Canada Rig CountFrom Baker Hughes

Baker Hughes NA Rig Count

0

500

1000

1500

2000

2500

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

CanadaUS

Military Forecast

Worn out equipment and export sales should stimulate demand

+17%

Other Market Forecast

• Other markets– 2007 estimated 80,000 tons– 2008 projected 83,000 tons– 2009 forecast 83,000 tons

0%

Forecast Summary

• All segments except railroad and other forecast good growth

• Railroad decline impacts total forecast

1,087,000 tons2008

1,060,000 tons2009

-2%

SFSA 2009 Forecast

Roy RouxChairman – SFSA Marketing

Committee2008 SFSA Annual Meeting