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Mark L. Parr, Managing Director and Equity Research Analyst, and Philip Gibbs, Equity Research Analyst at KeyBanc Capital Markets Inc., Interview with The Wall Street Transcript: EAF Steel Producers Expected to Outperform Other Types of Steel Producers

67 WALL STREET, New York - April 15, 2013 - The Wall Street Transcript has just published its Metals and Mining Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Precious Metals, Global Iron Ore Production, Emerging Market Infrastructure Construction, Midcap and Small-Cap Consolidation Activity

Companies include: United States Steel Corp. (X), Nucor Corporation (NUE), Allegheny Technologies Inc. (ATI), Cliffs Natural Resources Inc. (CLF), Walter Energy, Inc. (WLT), GrafTech International Ltd. (GTI), Steel Dynamics Inc. (STLD), Commercial Metals Co. (CMC), Reliance Steel & Aluminum Co. (RS), Worthington Industries, Inc. (WOR), Olympic Steel Inc. (ZEUS), Thomson S.A. (TMS), Haynes International Inc. (HAYN), Kaiser Aluminum Corporation (KALU) and many more.

In the following excerpt from the Metals and Mining Report, an expert analyst discusses the outlook for the sector for investors:

TWST: You are positive on the electric arc furnace steel producers. On what factors is your positive thesis based?

Mr. Parr: We have had a fairly subdued outlook as far as domestic economic recovery, and this certainly has been limiting pricing power for the domestic steel producers. However, we also see some changes to the underlying raw material environment that could meaningfully enhance the relative cost advantage between the EAF mills and the blast furnace/BOF mills unfolding over the next 12 to 18 months.

Mr. Gibbs: Against a backdrop of muted U.S. economic growth, our positive thesis on the U.S. electric arc furnace steel producers is a relative one. We see greater metal spread expansion opportunities for the EAF mills versus blast furnace/BOF mills and steel distributors, respectively. Our point of differentiation is that we're not looking for higher steel prices moving forward, whether that be in flat rolled products or bar products. However, we are looking for ferrous scrap costs, the primary input into electric arc furnace steel production, to move down more than steel prices over the next 12 to 18 months.

This is based on our view that the U.S. market for prime ferrous scrap materials and substitutes will begin moving into a net long position versus a historically net short or net import position, based on increasing U.S. production of scrap substitutes like direct reduced iron, or DRI. This potential supply-side pressure is really just beginning and should be more of a theme over the next three to five years.

Other pressures to U.S. ferrous scrap prices include weaker U.S. ferrous scrap export volume momentum, which we've really seen emerge in the last six to 12 months after a 10-year compounded growth rate almost of 10%, and weaker global iron ore prices from emerging oversupply, which act as somewhat of a derivative to scrap prices...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.