Ron MaciejowskiVice President Sales

The Worthington Steel Company

Materials Update

Brian NorrisVice President Marketing

Sandvik Coromant

Roundtable

Steel At WorkSteel At Work

Presented by: Ron MaciejowskiExecutive Vice President andVice President of Sales

• Brief summary on Worthington Industries• Current market update• Worthington Steel risk management presentation• Scrap update and how if affects you• Wrap up

Worthington Industries Topics for Today

• Steel processing business founded in 1955 by John H. McConnell– Pressure cylinders purchased in 1971– Dietrich metal framing purchased in 1996

• Headquartered in Columbus, Ohio• John P. McConnell, Chairman and CEO• Public company listed NYSE:WOR• Golden Rule-based operating philosophy• 6,400 employees in 18 states and 11 countries

Worthington Industries Steel At Work

• Leader in safety management and injury prevention; company-wide goal of zero accidents and injuries

• Named one of “America’s Safest Companies” by Occupational Hazards magazine-2008

• Named to Fortune’s “100 Best Companies to Work For” list four times

• Named 30 Best Performing Stocks of the Past 30 Years by Money magazine-2003

• Named to Fortune’s “Most Admired” list three times

Worthington Industries Steel At Work

Worthington Steel

Steel At Work

From Construction to Lawn and Garden

• America’s largest independent processor of flat-rolled steel

• Purchased PSM in 2006 and entered the stainless steel market

• FY 2011 est: $1.4 billion in sales

• More than 1,000 customers in a variety of industries

• Operate as partners with customers and suppliersFacilities: 9

Employees: 1,000

Dietrich Metal Framing

Steel At Work

Steel at Work in the Construction Industry• Largest manufacturer of steel framing

in the U.S.• Products include steel studs, floor

joists, roof trusses and metal accessories

• Recently introduced with ClarkWestern, the new ProSTUD™ drywall framing system, the industry’s next generation of drywall framing technology

• Over 4,100 customers• FY 2010: $331 million in sales

Facilities: 14

Employees: 1,200

Worthington Cylinders

Steel At Work

The Broadest and the Best

• World’s leading supplier of pressure cylinders• Facilities in Austria, Portugal, Canada, the

Czech Republic and the U.S.• Over 2,300 customers in 70 countries• Products include: LPG, refrigerant, industrial

gas, Balloon Time® helium balloon kits, Pro- grade® hand torches

• FY 2010: $468 million in sales• Recently expanded product offering through

the acquisitions of Piper Metal Forming Corporation and Structure Composites IndustriesFacilities: 10

Employees: 1,800

Worthington Steelpac

Steel At Work

Custom Shipping Solutions• Designs and manufactures custom

steel crates, rack and pallets for shipping and handling product

• Uses include automotive, lawn & garden, retail, food and recreational industries

• Superior alternative to wood or plastic

Facilities: 3

Employees: 85

Gerstenslager

Steel At Work

Automotive Past Model Stamping• Leading supplier of current and past

model automotive body panel stampings

• Services include: stamping, blanking, painting, die management, warehousing and distribution

• Manages more than 3,000 finished good part numbers and 11,000 dies for past and current-year automotive manufacturersFacilities: 2

Employees: 500

Worthington Industries

Steel At Work

Joint Ventures• WAVE, ceiling grid systems, partner Armstrong

World Industries• TWB, laser-welded blanks for automotive, partner

Thyssen Krupp• WSP, steel processing, partner U.S. Steel• Spartan, steel processing, partner Severstal North

America• Serviacero Worthington, steel processing, partner

Serviacero Planos• LEFCO Worthington, steel packaging, partner

LEFCO Industries• Samuel Steel Pickling, steel processing, partner

Samuel Manu- TechFacilities: 24

Employees: 1,300

Worthington Industries Steel At Work

• 65 locations• 18 States• 11 Countries

• Announced price increases in the market are now at $42.50/cwt. ($850/ton).

• Pricing in November was $26/cwt. ($520/ton)• Much of the pricing is driven by input cost and not

demand.• No. 1 Busheling Scrap Chicago is about $485/mt.• Iron ore and coke are also up significantly

Worthington Industries Current Market Conditions

• As previously mentioned, raw materials are up• Auto builds are expected to be up about 10% to 12%

from 11.6 million to 13 million units• Construction for commercial and residential is expected

to increase about 10% from very low levels• Mills will do what they need to do to make money even

with capacity in the 75% range

Worthington Industries Drivers for Higher Prices

Worthington Industries Average Monthly CRU

Worthington Industries Future Settled Price

Worthington Industries Imports

Steel At WorkScrap and Steel: Increased Focus,

Changing Dynamics

Scrap as a Leading Indicator Historical Perspective

CRU Midwest HR Monitor Price & Selected AMM Scrap Grades Monthly Average Price (Moved Forward 1 Month)

January 2003 - July 2010

0

200

400

600

800

1000

1200

Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

$/to

n

CRU - HR - Midwest - Monitor Price

#1 Busheling Composite + 1 Month

Shredded Auto Scrap Composite + 1 Month

Suggests a “preemptive price increase” anticipating higher scrap costs.

Scrap as a Leading Indicator Scrap is Hot

• News and pricing data more readily available than ever before (American Metal Market, blogs, Wall Street Journal!).

• Establishment of scrap surcharge in finished product pricing structure (flat rolled and structural).

• Increasingly cited in pricing discussion/negotiation.

The Future of the Scrap Market The Export Effect

The export scrap that nobody talks about.• Scrap that was once cleaned, reclaimed and separated is

now sold as exported scrap.

• Scrap that once required extra preparation is now sold (or has been sold) as exported scrap.

• Traditional stockpiles and some traditional sources of obsolete scrap may be headed toward extinction.

The Future of Industrial Scrap Secondary Markets

Emerging secondary markets have an affect on prime scrap availability.• Pup coils

As more material that was once thrown into a scrap dumpster finds a market abroad, a portion of the prime scrap market is removed from the domestic supply chain.• Pricing often based on “AMM market price +/- $XX/GT” just like scrap.

• Prices available FOB plant just like scrap.

• Weak dollar makes material attractive just like scrap.

• Heads and tails • Distressed material

Steel At WorkPrice Risk Management

Worthington is pleased to offer the ability to match your purchasing price mechanism with your sales pricing mechanism.

Manufacturing businesses face many challenges, not the least of which is raw material price volatility. As we have experienced over the past few years, steel prices fluctuate dramatically. If you can’t pass added costs on to your customer in a timely manner, your margins could be destroyed.

Worthington’s experience, knowledge and financial strength allow us to tailor your purchasing price mechanism so that your manufacturing margins are maintained, regardless of steel price changes.

Price Risk Management What Is It?

Purpose of Risk Management• Match supply with demand• Diminish speculation• Reduce earnings volatility

Criteria for Price Risk• All supply and demand components must have:

1. Price – Value and Mechanism (Fixed, Index)2. Quantity – Firm quantity commitment3. Delivery – Firm delivery commitment

FIX MARGIN

FIXED PRICE TO CUSTOMER

RESULTS

Price Risk Management What Is It?

1. PhysicalA. Mirrored agreement – customer and purchase agreement are

mirrored• Price, Quantity and Delivery match• Can be used for firm or index agreements

B. Forward Buy – Purchase physical material and store for customer release in future• Typically 3-6 months in length• Must charge customer for cost of capital, interest and storage

2. Financial Hedge - used in absence of physical• Utilizes a third party hedge provider• Can be 1-18 months in length, starting at 20 tons per month• (Detailed further in next slides)

Price Risk Management Fixed Price Mechanisms

FINANCIAL HEDGE PROVIDES FIXED PRICE TO CUSTOMER BY UTILIZING THIRD PARTY

STEEL PRODUCER CUSTOMER

HEDGE PROVIDER

Physical Steel Process Steel

WS Pays HR CRU Customer Pays Fixed

WS Pays Fixed

Hedge Provider Pays CRU

CRU Cash flows cancel out resulting in fixed price supply

Finished Product

Fixed Price

End Customer

Fixed Margin for WS from Customer Fixed Margin for WS

Customer to End Customer

HR CRU

Fixed

Steel Mill B

Price Risk Management What Is It?

1. Mirror with a mill agreement• Typically allows quantity options• Place orders at mill lead-times

2. Financial Hedge• Quantity fixed in total• Sizes, grades, type determined at mill lead-times• Must be HR or CR based pricing• Financial obligation to broker• Indication, prices are not held for long period of time

3. Forward Buy• Item level usage fixed at time of order• Consumes capital/Increases inventory• Difficult to manage/reserve steel

Price Risk Management Fixed Price Options

• What’s the catch?– We need a firm quantity and timing commitment to offer a firm price.

• I don’t know how much steel I’ll need next year. Does that mean I cannot geta fixed price?– We can fix the price on an amount you are confident to use and discuss

alternatives for the remainder of your needs. Ask specific questions, “How confident are you that you will purchase 90% of your estimated annual usage?”

• Do I have to take the same amount each month?– No, but you have to determine the tonnage each month at the time of quote.

• Can I change the exact sizes/products that I need?– Yes, your last chance to change your product mix is at our normal purchasing and

production lead-time.

• What if I don’t take the amount I committed to?– You will be responsible for the difference between your fixed price and the current

spot price on the shortage.– Ex. Fixed price of $700, spot price of $650, 100 tons short

– ($700 - $650) = $50, $50 * 100 tons = $5000 owed to Worthington

Price Risk Management FAQs

FAQ’s• What if I need more steel? Can I get it and what’s my price?

– As long as you communicate your need outside the current lead-time, you can buy more steel at the current market price.

• If there are slight differences in monthly shipments (over/under agreement), when will the balance be reconciled?– This is a point we can discuss; however, reconciliations must be made (at a

minimum) each quarter.

• How small or large of a quantity can I get at a fixed price?– Within our typical quantity limitations, prices can be fixed for as little as 20 tons

per month. There are practically no limits on how large of a quantity can be fixed.

• Can you give me a number and I’ll get back to you next week?– Let’s establish a practical and mutually agreeable target that allows you to

maintain your margins. I will work with our Price Risk Management group to achieve that target.

• How can Worthington offer fixed prices when the mills cannot?– There are a number of techniques we use to fix prices depending on your

requirements.

Price Risk Management FAQs

• Raw Materials are more of a driver for pricing than in the past

• We are very focused on how we deal with our scrap• We believe it is in the buyers best interest not to

speculate• One thing we know for sure – we do not know the future

Worthington Industries Wrap Up