ECONOMIC CONSULTING SERVICES, LLC

BEFORE THE UNITED STATES INTERNATIONAL TRADE COMMISSION

IN THE MATTER OF

C O L D - R O L L E D S T E E L PRODUCTS FROM BRAZIL, CHINA, INDIA, JAPAN, K O R E A , RUSSIA, AND THE UNITED KINGDOM

Inv. No. 701-TA-540-544 and 731-TA-1283-1287, 1289-1290

EXHIBITS TO TESTIMONY OF JIM DOUGAN

VICE PRESIDENT ECONOMIC CONSULTING S E R V I C E S , L L C

May 24, 2016

Washington, D.C.

2 5 0 . 0 0 0

Subject Import Volume Declined Well Before the Petition Was Filed

October 2014:

2013 2014 2015

Source Staff Report at Table IV-11

When Subject Imports Peaked in 2014, U.S. Producers 1

Shipments Were Still 18 Times Greater than Subject Import Volumes

CO c

35,000,000

30,000,000

25,000.000

20,000.000

a i5.ooo.ooo

10,000,000

5.000,000

i U.S. Producers

Nonsubject Imports

l Subject Imports

Source Staff Report at Table C-2 2013 2014 2015

16,000,000

14,000,000

12,000,000

10,000,000

CO c

£> 8,000,000 c ro 3

a 6,000,000

4,000,000

2,000,000

In the Merchant Market, U.S. Producers 1 Shipments Still Dwarfed Subject Imports

i U.S. Producers

Nonsubject Imports

i Subject Imports

Source Staff Report at Table C-1 2013 2014 2015

Inventories of U.S.-Produced Cold-Rolled Steel Were Far Greater than Inventories of Subject Imports

Inventories of Subject Imports Were Miniscule Relative to Merchant Market Consumption

• Inventories of Subject Imports

• Merchant Market Consumption

! ,

2013 2014 2015

Source Staff Report at Table C-1. Table II-5. and Table VII-35.

5

U.S. Producers' Prices Increased as Subject Import Volumes Rose

Sources: Staff Report at Tables V-4, V-5, and V-6; U.S. Census Bureau Official Import Statistics.

U.S. Producers' Prices vs. Hot-Rolled Coil

Sources: Staff Repor ta t Tables V-4. V-5, and V-6: SBB/Platts.

U.S. Producers' Prices vs. Scrap 120

Sources: Staff Report at Tables V-4. V-5. and V-6; SBB/Platts.

<*> to « « *r * * T * iii itt m iii

0 0 0 0 0 0 0 0 0 0 0 0

Sources: Stalf Reportat Tables V-4, V-5. and V-6; SBB/Platts.

U.S. Producers' Prices vs. Coal 120

U.S. Producers' Financial Statements Acknowledge the Importance of Raw Materials in Pricing

• Nucor: "Our contracts include a method of adjusting prices on a periodic basis to reflect changes in the market pricing for steel and/or scrap."

- Nucor, 2015 Annual Report at 23

• AK Steel: "In 2015, approximately 58% of our shipments to contract customers allowed price adjustments during the contract period. Changes in steel prices indices trigger contract price adjustments for about one-fourth of our shipments to contract customers. When adjustments occur, the resulting adjustments typically occur at three- or six-month intervals. In certain circumstances, we adjust contract prices if particular raw material price changes exceed agreed-upon parameters."

- AK Steel, Form 10K 2015 at 2

8

120

U.S. Producers' Prices: Spread Over Hot-Rolled Coil

—•—Product 1 - • - Product 2 Product 3 - « - H R C

a 8 § § § § § §

o o o o o o o o c r

Sources: Staff Repona t Tables V-4 V-5, and V-6: SBB'Plat ts

U.S. Producers' Prices: Spread Over Scrap

Scrap

S 8 R (N t- <M o

o o o o Sources: Staff Report at Tables V-4, V-5, and V-6: SBB/Platts

U.S. Producers' Merchant Market Business Outperformed Their Total Business Throughout the POI

Operating Income as a Percent of Net Sales

2013 2014 2015

Merchant Market 0.7% 3.8% 0.6%

Total Business -1.1% 2.1% -0.8%

Sources: Staff Report at Table C-1 and Table C-2.

10

U.S. Producers Performed Best in the Second Half of 2014

Operating Income as a Percent of Net Sales

2013 1 s t Half 2014

2 n d Half 2014

2015

Merchant Market 0.7% 1.8% 5.8% 0.6%

Total Business -1.1% -0.8% 4.7% -0.8%

Sources: Preliminary Phase Staff Report at Tables C-1 and C-2; Staff Report at Tables C-1 and C-2.

11

U.S. Producers Earned More Profit in 2nd Half 2014 Than in 2013 and 1st Half 2014 Combined

$ 3 0 0 , 0 0 0 Data Labels in $1,000s

Exports to the U.S. are an Insignificant Share of Subject Producers* Shipments

2013 2014 2015

Sources: Staff Reportat Table VII-35, Foreign Producers'Questionnaires.

2016 (Proj.)

2017 (Proj.)

Exports to the United States

i Exports to all other markets

Home market commercial shipments

i Home market internal consumption/transfers

13

140

Cold-Rolled Steel Prices Have Been Increasing Worldwide Since The End Of 2015

120

100

o o II

80

fe­l l )

a E ai u 0)

Q 60 x •a

•USCRC Germany CRC •France CRC •Spain CRC •Japan CRC Brazil CRC

40

20

Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 Source CRU Data

14