March 2011- The North American steel market continued to grow during the fourth quarter, driven largely by strong demand from emerging markets and rising raw materials costs. During the quarter, analysts witnessed further M&A market improvement over the same period last year, driven by increased contributions from strategic and financial investors. Domestically, the number of U.S. transactions improved during the period, increasing 44 percent over the same period last year.

For the sixth quarter in a row, the United States economy showed continued economic growth, with increased consumer spending playing a significant role, as the economy expanded at a seasonally adjusted annual rate of 3.2 percent. China's gross domestic product grew 9.8 percent in the fourth quarter from the same period last year, as it surpassed Japan to become the world’s second largest economy.

U.S. steel exports jumped 29.3 percent to 12 million tons in 2010 despite a 0.1 percent dip in December volume. Steel exports rose in all markets except Africa and Asia, where the drop was due primarily to a decline in exports to China. Stainless steel accounted for 5.1 percent of exports, compared to just 2.0 percent of total industry shipments, while alloy steel represented 17.0 percent of exports, compared with just over 4.0 percent of domestic shipments. During the quarter, steel producers’ utilization rate decreased to an average of 68.5 percent from 71.0 percent in the prior quarter. Domestic crude steel production increased to 21.8 million tons during the fourth quarter, an increase of 10.6 percent from 19.7 million tons during the same period last year. HRC pricing increased by $100 per ton or 16.7 percent from the previous quarter’s levels. Prices increased from $600 per ton at the end of the third quarter to $700 per ton at the end of the fourth quarter. CRC prices rose to $820 per ton from $710 per ton. Hot-dipped galvanized prices increased to $915 per ton, an increase of 15.1 percent from the prior quarter. OCTG prices decreased 2.6 percent to $1,677 per ton from $1,721 at the end of the third quarter. Industry experts expect prices to increase in the first quarter of 2011, amid a tight raw material supply chain and improving order rates.

Scrap prices increased quarter-over-quarter, as #1 HMS scrap climbed to $290 per ton from $260 per ton in the third quarter. Analysts expect scrap prices to continue to rise in the first quarter as severe winter weather pressures available supply.

Nonferrous metal prices increased during the fourth quarter, led by copper and zinc. As inventories declined, aluminum pricing increased 5.7 percent from $1.05 per pound at the end of the third quarter to $1.11 per pound ($2,228 per metric ton) at the end of the fourth quarter. The price increase in aluminum was driven primarily by a global improvement in the automotive and construction sectors. Copper prices increased 21.1 percent from $3.65 per pound at the end of the third quarter to $4.42 per pound at the end of the fourth quarter. Strong demand from China has largely contributed to current prices, while copper inventories continue to decline. Nickel prices increased 6.6 percent to $11.31 per pound at the end of the fourth quarter from $10.61 per pound at the end of the third quarter. Nickel price improvement was driven largely by improved demand and continued concerns of production capacity. Zinc prices increased 11.1 percent from the third quarter, increasing from $0.99 per pound to $1.10 per pound at the end of the fourth quarter. Zinc prices were lifted higher, in part by stronger demand, rising costs and tighter availability. Titanium prices improved during the period, closing at $11.31 per pound at the end of the fourth quarter. Prices were driven higher by improving demand from the aerospace industry and inventory restocking. A recovery in the titanium metal market which has only recently commenced and demand for feed-stocks for the welding electrode market in 2011 are expected to further pressure producers to raise production levels.

Merger and acquisition activity improved during the fourth quarter, as compared to the same period last year, with several notable transactions occurring in the metals and mining sectors. The fourth quarter witnessed 13 domestic transactions, an increase compared to 9 transactions announced during the same period last year.

In November, Insteel Industries, Inc. (Insteel) announced the acquisition of certain assets of Ivy Steel & Wire, Inc. (Ivy), for approximately $51.1 million. Under the terms of the purchase agreement, Insteel acquired, among other assets, certain of Ivy's inventories and its production facilities located in Hazleton, Pennsylvania; Jacksonville, Florida; Kingman, Arizona; and St. Joseph, Missouri in addition to the production equipment located at its Houston, Texas facility for $37.6 million of cash and a $13.5 million secured subordinated note payable to Ivy over five years.

In November, Metals USA Holdings Corp. (Metals USA) announced an agreement to purchase an affiliate of Eagle Steel Products, Inc. (Eagle) which will be named Ohio River Metal Services, Inc. (ORMS). Eagle and ORMS operate a first class flat rolled metal service center providing high quality processing and warehousing services to a broad range of customers.

In December, Samuel, Son & Co. Ltd. (Samuel) acquired AP Specialty Metals (AP). AP processes and ships stainless sheet, bar and plate, and aluminum sheet from a 48,000-square-foot facility that includes a 60-inch-wide cut-to-length line, a 60-inch-wide coil-to-coil sheet polisher and a 60-inch-wide sheet-to-sheet polishing line. AP will be selling Samuel's full range of carbon, stainless and aluminum products and will also be opening a facility in the Tampa/Orlando area in the near future.

In November, Timken Co. (Timken) announced it acquired substantially all of the assets of City Scrap and Salvage Co. (City Scrap) in Akron, Ohio. City Scrap, which employs 30 people, has a longstanding relationship with Timken, supplying them for more than 15 years as a local source of the ferrous scrap needed for its steelmaking operations.

In November, Tyco International Ltd. (Tyco) announced that it completed the sale of a 51 percent stake in its Electrical and Metal Products business to Clayton, Dubilier & Rice, LLC. Under terms of the transaction, Tyco will receive total cash proceeds of approximately $720.0 million. The Electrical and Metal Products business will operate as a standalone entity under the name Atkore International (Atkore). The business designs, manufactures and sells galvanized steel tubes and pipes, electrical conduit, armored wire and cable, metal framing systems and building components serving a wide range of construction, electrical, fire, security, and mechanical applications.

In recent months the metals industry has seen a strong comeback in M&A activity, driven by opportunities to vertically integrate and service centers that are looking to improve scale and product diversity. As the 2011 outlook for the metals industry remains healthy, analysts expect industry consolidation to continue as market participants look to hedge against raw material volatility and increase exposure to organic growth markets.

Steel Pricing and Demand

• Domestic ferrous prices increased during the fourth quarter of 2010, as order entry and backlogs continued to improve. HRC prices increased 16.7 percent, or $100 per ton, to $700 per ton during the fourth quarter. Steel bar increased 6.3 percent during the quarter, from $635 per ton to $670 per ton, in response to continued strength in the automotive market. OCTG decreased 2.6 percent from the end of the third quarter. In addition, cold-rolled sheet and hot-dipped galvanized prices increased 15.5 percent and 15.1 percent respectively during the quarter with hot-dipped galvanized rising from $795 ton to $915 per ton and cold-rolled sheet rising from $710 to $820.

• Scrap prices increased quarter-over-quarter, as #1 HMS scrap climbed to $290 per ton from $260 per ton in the third quarter. Analysts expect scrap prices to rise in the first quarter as severe winter continues to pressures available supply.

Nonferrous Metals Pricing and Demand

• Nonferrous metal prices increased during the fourth quarter, led by copper and zinc, which increased by 21.1 percent and 11.1 percent, respectively. Aluminum prices also increased markedly throughout the quarter, while titanium strengthened on improving demand from the airline industry.

Copper

• Copper prices increased 21.1 percent to $4.42 per pound at the end of the fourth quarter, up from $3.65 per pound at the end of the third quarter. Strong demand from China has largely contributed to current prices, while copper inventories continue to decline.

• Demand from China and emerging economies are expected to be a significant driver of prices going forward. Analysts believe that the urbanization of the developing world led by China will continue to energize the copper market, bringing it into deficit beginning in early 2011.

Nickel

• Nickel prices increased 6.6 percent during the quarter, climbing to $11.31 per pound at the end of the fourth quarter from $10.61 per pound at the end of the third quarter. Nickel prices improved throughout the fourth quarter due to improved demand and continued concerns of production capacity.

• Industry experts believe that increased nickel supply from the reopening of mothballed mines will add pressure to a weak stainless steel outlook in 2011.

Titanium

• Titanium prices improved during the period, closing at $11.31 per pound at the end of the fourth quarter. Prices were driven higher by improving demand from the aerospace industry and inventory restocking.

• A recovery in the titanium metal market which has only recently commenced and demand for feedstocks for the welding electrode market are expected to pressure titanium producers to raise production levels in 2011.

Zinc

• Zinc prices increased 11.1 percent from the prior quarter, improving to $1.10 per pound from $0.99 per pound at the end of the third quarter. Zinc prices were lifted higher, in part by stronger demand, rising costs and tighter availability.

• Industry experts believe increased zinc production has led to ample stocks which are expected to keep zinc prices muted in 2011.

Mergers & Acquisitions

• The fourth quarter witnessed 13 domestic transactions, an increase compared to 9 transactions announced during the same period last year.

• In November, Metals USA Holdings Corp. (Metals USA) announced an agreement to purchase an affiliate of Eagle Steel Products, Inc. (Eagle) which will be named Ohio River Metal Services, Inc. (ORMS). Eagle and ORMS operate a first class flat rolled metal service center providing high quality processing and warehousing services to a broad range of customers.

• In December, Samuel, Son & Co. Ltd. (Samuel) acquired AP Specialty Metals (AP). AP processes and ships stainless sheet, bar and plate, and aluminum sheet from a 48,000-square-foot facility that includes a 60-inch-wide cut-to-length line, a 60-inch-wide coil-to-coil sheet polisher and a 60-inch-wide sheet-tosheet polishing line. AP will be selling Samuel's full range of carbon, stainless and aluminum products and will also be opening a facility in the Tampa/Orlando area in the near future.

• In November, Timken Co. (Timken) announced it acquired substantially all of the assets of City Scrap and Salvage Co. (City Scrap) in Akron, Ohio. City Scrap, which employs 30 people, has a longstanding relationship with Timken, supplying them for more than 15 years as a local source of the ferrous scrap needed for its steelmaking operations.

• In November, Tyco International Ltd. (Tyco) announced that it completed the sale of a 51 percent stake in its Electrical and Metal Products business to Clayton, Dubilier & Rice, LLC. Under terms of the transaction, Tyco will receive total cash proceeds of approximately $720.0 million. The Electrical and Metal Products business will operate as a standalone entity under the name Atkore International (Atkore). The business designs, manufactures and sells galvanized steel tubes and pipes, electrical conduit, armored wire and cable, metal framing systems and building components serving a wide range of construction, electrical, fire, security, and mechanical applications.

Equity Markets

• The Houlihan Lokey Metals Index increased by 17.0 percent during the fourth quarter. All segments experienced positive returns. The largest increase, attributable to the Scrap Processors segment, was 32.8 percent.

• The Dow Jones Industrial Average, Russell 2000 and S&P 500 increased by 7.3 percent, 15.9 percent and 10.2 percent respectively during the quarter. The Houlihan Lokey International Producer Index also climbed 12.2 percent during the quarter.

Production, Shipments and Imports

• In the fourth quarter, the U.S. imported 5.3 million tons of steel, a decrease of 21.0 percent from 6.7 million tons in the third quarter and an increase of 19.9 percent from the same period last year. This decrease in imports was driven by U.S. consumers purchasing cheaper steel domestically.

• Steel mills shipped 7.1 million tons in December 2010, an 8.6 percent increase from the 6.5 million tons shipped in the previous month, and a 17.8 percent increase from the 6.0 million tons shipped in December 2009.

• Domestic steel producers’ utilization rate decreased to an average of 68.5 percent in the fourth quarter of 2010. Domestic crude steel production increased to 21.8 million tons during the fourth quarter, an increase of 10.6 percent from 19.7 million tons during the same period last year.

Ferrous Pricing

• Domestic ferrous prices increased during the fourth quarter of 2011, largely driven by strong demand from emerging markets and rising raw materials costs. Domestic crude steel production increased to 21.8 million tons during the fourth quarter, an increase of 10.6 percent from 19.7 million tons during the same period last year. U.S. steel exports jumped 29.3 percent to 12 million tons during 2010 despite a 0.1 percent dip in December volume.

• HRC prices increased 16.7 percent, or $100 per ton, to $700 per ton during the fourth quarter. Steel bar increased 6.3 percent during the quarter, from $635 per ton to $670 per ton, in response to continued strong demand in the automotive market. OCTG decreased 2.6 percent from the end of the third quarter. In addition, cold-rolled sheet and hot-dipped galvanized prices increased 15.5 percent and 15.1 percent respectively during the quarter with hot-dipped galvanized rising from $795 ton to $915 per ton and cold-rolled sheet rising from $710 to $820.

• Scrap prices increased quarter-over-quarter, as #1 HMS scrap climbed to $290 per ton from $260 per ton in the third quarter. Analysts expect scrap prices to continue to rise in the first quarter as severe winter weather pressures available supply.

Nonferrous Pricing

• Nonferrous metal prices increased during the fourth quarter, led by copper and zinc, which increased by 21.1 percent and 11.1 percent, respectively. Aluminum prices also increased markedly throughout the quarter, while titanium strengthened on improving demand from the aerospace industry.

• Aluminum pricing increased 5.7 percent during the quarter, from $1.05 per pound at the end of the third quarter to $1.11 per pound ($2,228 per metric ton) at the end of the fourth quarter. The price increase in aluminum was driven primarily thanks to a global pick up in the automotive and construction sectors.

• Copper prices increased 21.1 percent to $4.42 per pound at the end of the fourth quarter, up from $3.65 per pound at the end of the third quarter. Strong demand from China has largely contributed to current prices, while copper inventories continue to decline.

• Nickel prices increased 6.6 percent during the quarter, climbing to $11.31 per pound at the end of the fourth quarter from $10.61 per pound at the end of the third quarter. Nickel prices improved throughout the fourth quarter due to greater demand and continued concerns of production capacity.

• Titanium prices improved during the period, closing at $11.31 per pound at the end of the fourth quarter. Prices were driven higher by improving demand from the aerospace industry and inventory restocking. A recovery in the titanium metal market which has only recently commenced and demand for feedstocks for the welding electrode market are expected to pressure titanium producers to raise production levels in 2011.

Production, Shipments and Imports

• In the fourth quarter, the U.S. imported 5.3 million tons of steel, a decrease of 21.0 percent from 6.7 million tons in the third quarter and an increase of 19.9 percent from the same period last year. This decrease in imports was driven by U.S. consumers purchasing cheaper steel domestically.

• Steel mills shipped 7.1 million tons in December 2010, an 8.6 percent increase from the 6.5 million tons shipped in the previous month, and a 17.8 percent increase from the 6.0 million tons shipped in December 2009.

• Domestic steel producers’ utilization rate decreased to an average of 68.5 percent in the fourth quarter of 2010. Domestic crude steel production increased to 21.8 million tons during the fourth quarter, an increase of 10.6 percent from 19.7 million tons during the same period last year.