Bethlehem Steel Corporation
For Immediate Release

WASHINGTON, D.C., May 14, 2001 — Despite the difficult market conditions facing the North American steel industry, demand for its products has grown 40 percent since 1990, the chairman of the American Iron and Steel Institute said this morning.

In his "State of the Industry" address to the 108th General Meeting of the American Iron and Steel Institute, Duane R. Dunham, also chairman, president and chief executive officer of Bethlehem Steel, said, that the dramatic growth in market consumption for steel products has led the Institute to embark on an aggressive five-year plan.

"The North American steel industry is looking to grow steel consumption by another 25 percent or by about 15 million annually over the next five years," Mr. Dunham said. "That goal is attainable by expanding traditional markets, establishing growth markets and developing innovative applications. We, as an industry, have made significant gains in our major consuming markets, including those as sophisticated as automotive and as diverse as construction, as well as convincing other end users that Steel is the Material of Choice."

The strides, Mr. Dunham said, have been in traditional markets like automotive, where steel produces cost and weight savings, and construction, where demand and applications continue to grow. New markets continue to be pursued such as residential steel framing and roofing as well as utility distribution poles. "The steel industry has been working mightily and with urgency to make Steel The Material of Choice," the AISI chairman said.

However, the industry's ability to move more quickly with new market development is being hampered by "the crisis, turmoil and uncertainty within and surrounding the industry. Despite the tremendous innovation and investment over the past two decades, the North American steel industry is getting hammered by forces that lie outside the NAFTA region and which are beyond its control," Mr. Dunham said.

Citing excess global steel capacity -- as much as 275 million metric tons -- and serious structural problems and market-distorting practices offshore," the industry has suffered through "a three-year tidal wave of dumped, subsidized and disruptive steel imports into North America," he said. The crisis has resulted in "a record number of bankruptcies, record low steel prices, scores of facility shutdowns, the loss of thousands of good jobs, reduced shipments, large financial losses, a lack of access to capital and unprecedented market instability, " Mr. Dunham said.

A broad consensus now exists across the steel industry in North America that more effective trade policies are required. "In the United States, this has translated in virtually the entire steel-producing community supporting a Presidentially initiated steel Section 201 case to achieve a sustained period of import stability and address long-term structural problems. Among the North American producers, we all support additional steps to help prevent the next crisis by reducing world steel overcapacity and eliminating and countering more effectively offshore market-distorting practices," said Mr. Dunham.

"We are urging, as NAFTA partners, that U.S. legislators in particular address issues needed to stop making the NAFTA region the world's steel dumping ground," he said.

AISI 2001 GENERAL MEETING
STATE OF THE STEEL INDUSTRY
CHAIRMAN'S LUNCHEON
Duane R. Dunham
Chairman, AISI, and Chairman, Bethlehem Steel
MONDAY, MAY 14, 2001

Good afternoon. As the current chairman of the American Iron and Steel Institute, I have the privilege, if you can call it that, of delivering the annual State of the Steel Industry Address. I question the use of the word privilege based on the depressed and depressing circumstances facing many of us in this room.

As we gather here in Washington, D.C., the hotbed of ideas and influence, I think each of us hopes that some ideas generated here will positively influence the state of the steel industry. Because we need all the help we can get.

I have been working in the steel industry for 36 years. We've all seen ups and downs faced in this business. Many of us lived through the massive restructuring of the steel industry in the early and mid-1980's.

• And, when we thought we had seen and lived it all, along came the Asian Flu in mid-1998 that knocked the bottom out of our industry.
• And, unfortunately, we haven't seen the bottom since. It's funny — everyone thought the Asian Flu was over. Unfortunately, we know better.

Now, I don't want to dwell on the unfortunate facts that all of us know all too well — that:

• Despite reinvesting $60 Billion since the 1980's in new technology
• Despite achieving operating efficiencies only dreamed about as recently as a decade ago
• Despite the dramatic growth of steel consumption, which by the way is up 40 percent since 1990 (who said steel's time has passed?),

• With 19 North American steel companies that have filed for Chapter 11 since the crisis began, and rumors abounding that more will follow suit as the year progresses.
• With prices at their lowest levels in more than 20 years while energy costs are at their highest.
• It's little wonder that the industry is awash in red ink, and more is on the way.

We all know the harsh realities of the marketplace. They are staring at us each and every day. However, not wanting to be the luncheon speaker known for making people sick to their stomachs, I want to return to a statement I made just a minute ago — that the nation's consumption of steel is up 40 percent since 1990.

That piece of good news — and we all could use more good news these days — is embodied in the theme of this year's General Meeting — Leading Through Innovation. Through Leadership and through Innovation, the staff of AISI and many of its members have met with key decision-makers and convinced them that Steel Is the Material of Choice.

Last May, the AISI Board of Directors adopted an aggressive five-year business plan to grow steel consumption by another 25 percent or by about 15 million tons annually. That was another affirmation of the efforts under way for the past 10 or so years that are aimed at:

1. Market Growth (size of the market) and,
2. Market Share (how much of that market growth is being enjoyed by North American steel producers).

Consistent with the 5 year / 25 percent goal have been efforts over the past decade that have already been fruitful. We, as an industry, have made significant gains in our major consuming markets, including those as sophisticated as automotive and as diverse as construction, as well as convincing other end users that Steel is the Material of Choice.

For automotive, our work has resulted in steel maintaining its position as the Material of Choice while lowering auto weight by 36 percent. The Ultralight Steel Autobody, known as ULSAB, has revolutionized the North American approach to automobile design and production.

Several new technologies have come out of the ULSAB design such as hydroforming, tailor-welded blanks and high-strength steels.

ULSAB research has been extended to closures and suspensions. The Ultralight Steel Auto Closures, or ULSAC, program includes doors, decklids and trunks.

• The ULSAC consortium fabricated a steel door that is 22 to 42 percent lighter in weight. This "frameless" door meets or exceeds a range of performance requirements without adding cost or compromising safety or structural performance.
• General Motors, Ford and DaimlerChrysler have all expressed interest in the ULSAC door panel. We are also applying the same design concepts to the automotive suspension system that produced a 30 percent cost savings with no loss of safety or structural integrity when compared to an aluminum-intensive suspension system.

With these successes over the last few years, it would be easy for the industry to sit back and breathe a sign of relief. But, instead, we are continuing to look for additional opportunities to once again prove that Steel is The Material of Choice.

• In January 2002, we plan to launch the ULSAB-Advanced Vehicle Concept, which utilizes high-strength and advanced high-strength steels, along with advanced manufacturing technologies to help automakers meet the very stringent crash requirements anticipated in 2004.

ULSAB-AVC is a steel design by Porsche Engineering to create the "super car." It has been greeted enthusiastically by the automotive design committee.

• In fact, the PNGV technical oversight group has suggested that the Big Three in North America needs to again look at the role of steel in their Super Car design to take full advantage of steel's versatility and durability.

And automobiles are not the only vehicles benefiting from steel's advantages. Right now, AISI, Ford and the U.S. Army are involved in a partnership to create a prototype for lightweight, steel-intensive military vehicles.

The ULSAB technologies are cost-effective and good for the environment. If applied to all vehicles sold in the U.S. today, the Ultralight Steel design concepts would save about 2.4 Billion gallons of gasoline.

• Valued at $4 Billion and reduce carbon dioxide emissions by 28 Billion tons annually. So the adoption of these leading-edge technologies also has energy and environmental benefits.

Automotive is not the only market with which the steel industry is working closely. In construction, which is the largest steel market, we have been equally proactive — again emphasizing steel's versatility that make it The Material of Choice for commercial construction, residential roofing and framing, utility pole and bridge markets.

The commercial framing market has increased 10 percent overall in less than two years. Commercial use of light-gauge steel framing is growing at a rate of 10 percent per year, largely through projects such as the construction of low-rise, generally five or six story hotels and health-care assisted living facilities for our nation's seniors.

Partnerships and other creative ways to communicate our message and market our products are keys to capturing some of these markets.

• For roofing — suppliers, producers, roofing manufacturers and contractors have banded together to form the Metal Roofing Alliance. Its target audience is roofing contractors who are involved in the re-roofing of 13 million homes annually.
• So far, 80,000 sales leads have been generated that will result in significant year-to-year increases.

Another partnership serving the construction industry is the North American Steel Framing Alliance of NASFA. This alliance is focused on the residential framing market, which is huge and growing. Total shipments of light-gauge steel framing used in residential construction is now about 200,000 tons, doubling the demand in just the past two years. We are just beginning to get a serious foothold in this market.

The Framing Alliance has also had success with floor joists, which grew almost 100 percent from 1998 to 1999. Steel use in walls was also up 33 percent.

• Helping close the sale so to speak is SteelXpert, a software program that enables material takeoffs and cost estimates for residential steel framing projects. SteelXpert saves time and money for new steel builders.

The industry is also pursuing the steel utility distribution pole market identified as high growth by the AISI five-year plan. Each year, four million wood poles need to be replaced.

• The potential market is another one million tons of steel. Using market research, AISI was able to ascertain that the utility pole market never envisioned that steel could offer many more benefits than wood.
• With an aggressive technology transfer agenda and a comprehensive communications program, the utility pole market has grown by 300 percent in just three years.

The bridge market, a traditional consumer of steel, has seen gains in steel consumption, thanks to the use of a coordinated effort led by AISI to promote High Performance Steel bridges.

• The U.S. Navy has renewed its contract with AISI, providing additional funding to research advanced welding techniques.
• Likewise, for short span bridges, new design software is being used by more than 1,000 owners and design engineers. And, we are also promoting hollow structural shapes to specifiers, architects, engineers and designers as another way to incorporate steel into a variety of building applications.

Due to the current crisis in the steel industry, some of our market development efforts incorporated into the five-year plan will lose some of their momentum this year. With revenue by producers down in 2001 because of bankruptcies, there clearly is not enough money to keep all aspects of all projects on schedule.

• However, we, in the steel industry, are masters of cost reduction and we will pursue these innovative new market ideas wherever possible this year — with an eye toward getting back on the five-year schedule, hopefully, in 2002.

I think you will agree with me that the steel industry has been working mightily and with urgency to make Steel, The Material of Choice. Many of our efforts have been successful, and others will just take a little longer to be fully funded to bring them to reality.

I also think you will agree with me that our five-year plan, and much of the groundwork laid in the 1990's, really does support this meeting's theme of Leading Through Innovation.

Our ability, however, to bring some of these innovative and leading-edge projects to conclusion is a reflection of the crisis, turmoil and uncertainty within and surrounding the industry.

Despite the tremendous innovation and investment over the past two decades, the North American steel industry is getting hammered by forces that lie outside the NAFTA region and which are beyond its control. These forces are massive excess global steel capacity — as much as 275 million metric tons — and serious structural problems and market-distorting practices offshore.

The result has been a three-year tidal wave of dumped, subsidized and disruptive steel imports into North America, which has caused a record number of bankruptcies, record low steel prices, scores of facility shutdowns, the loss of thousands of good jobs, reduced shipments, large financial losses, a lack of access to capital and unprecedented market instability.

A broad consensus now exists across the steel industry in North America that more effective trade policies are required. In the United States, this has translated in virtually the entire steel-producing community supporting a Presidentially initiated steel Section 201 case to achieve a sustained period of import stability and address long-term structural problems.

This last point is particularly important to NAFTA steel producers. We all support additional steps to help prevent the next crisis by reducing world steel overcapacity and eliminating and countering more effectively offshore market-distorting practices.

I'd like to make an important statement on solidarity. The viewpoint of needing more effective trade policies in not limited to the United States. Just as the Mexican and Canadian producers have participated and supported the Institute's efforts with market development, our neighbors to the north and south of the United States are standing firmly behind the U.S. producers in calling for more effective trade remedies to address the import situation and the long-term structural issues outside of the NAFTA region. And, we thank you for your support.

As an example of solidarity, this afternoon, John Mayberry of Dofasco in Canada, Guillermo Vogel of TAMSA in Mexico and I will participate in an Interparliamentary Exchange on Steel Trade on Capitol Hill. We are urging, as NAFTA partners, that U.S. legislators in particular address issues needed to stop making the NAFTA region the world's steel dumping ground.

In addition to the unstable and unsettling trade issues, the industry is faced with intense competition that will best be met through consolidation.

• Steelmakers in Europe and Japan have merged to improve their results and the delivery of their products and services.

If the North American steel industry is to survive by becoming truly competitive on an international basis, then consolidation should and must occur. It won't be an easy road to travel, but we have to reinvent ourselves if we want to survive.

And that survival will, I believe, bring with it rewards. Through the efforts of AISI and its members, the demand for steel will, over the long haul, continue to grow as we pursue innovative new uses. We are an industry that is constantly changing in response to customer and market demands. More change is on the horizon. However, change can produce an industry that is as strong as its product — steel.

Leading the change within our industry is the American Iron and Steel Institute and some of its committees.

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